--~"y-..~--"--I-- -- GAO .--l-.-” __...----- --.-----------_ IMPACT AID Most School Construction Requests Are Unfunded and Outdated ” 1417 llllllllRRRR United States General Accounting Office Washington, D.C. 20648 Human Resources Division B-237176 July 12,199O The Honorable Edward M. Kennedy Chairman, Committee on Labor and Human Resources United States Senate The Honorable Larry Pressler United States Senate The Hawkins-Stafford Elementary and Secondary School Improvement Amendments of 1988 directed us to review the federal school construc- tion program for school districts affected by federal activities. This pro- gram (authorized by P.L. 81-815) provides federal funds for constructing and renovating schools in districts that educate “federally connected” children, such as those whose parents live and/or work on military installations and Indian reservations. These funds are used to provide classrooms and classroom equipment to qualifying school dis- tricts. The Department of Education determines applicant eligibility, cal- culates the federal share of construction project costs,’ and awards grants to school districts. The Congress funded almost all eligible requests for school construction assistance between 1950 (when the program began) and 1967. However, since 1967, federal appropriations have been insufficient to fund the estimated federal share of all construction projects in federally impacted school districts. The continuing shortfall has resulted in a substantial backlog of eligible unfunded projects in districts with federally con- nected enrollment increases,2 nontaxable federal property, children residing on Indian land, and Indian land. The Department ranks, for funding purposes, these unfunded projects in priority order based, in part, on the number of federally connected children eligible for payment in the school district. As agreed with your offices, we determined (1) the gap between the eli- gible requests for school construction funds and the amount of available Public Law 81-815 funds and (2) whether the Department’s criterion for ranking unfunded projects is equitable. ‘For example, the federal share of school construction costs to certain eligible school districts is the product of the number of federally connected children eligible for payment and the state’s average per pupil cost of school construction. 2”Enrollment” is referred to by the Department as “membership.” If state law does not define mem- bership, the Department defines it as the number of children listed on a school district’s current enrollment records. Page 1 GAO/HRD-90-90 Impact Aid School Construction B237176 Department records show that as of fiscal year 1988, the estimated Results of Our funding gap was about $200 million. This figure, however, is misleading Analysis because it includes the estimated federal costs of projects in school dis- tricts that may no longer be eligible for the program, as well as the costs of projects that are no longer needed by the districts. This figure also includes project cost estimates that have not been revised to reflect increased school construction costs. Therefore, the actual amount of the gap is unknown because the Department does not regularly reconfirm applicants’ eligibility nor revise outdated funding estimates. The Department’s criteria for (1) computing priority numbers (scores) of eligible projects for funding purposes and (2) ranking projects are equi- table, but the Department does not periodically reevaluate these scores once projects are ranked on waiting lists. Priority scores reflect feder- ally connected enrollments and school construction needs when districts applied for assistance; however, most project requests are at least 12 years old. These project scores may be outdated and invalid because for many of the projects we reviewed, the school districts subsequently completed their projects without federal assistance. In addition, feder- ally connected enrollments have declined in some districts. Thus, since the Department does not periodically reevaluate project priority scores to reflect this kind of information, it cannot provide the Congress with an accurate ranking of federally impacted schools with current school construction needs. The law requires that those school districts that qualify for assistance based on federally connected enrollment increases receive payments based on the average state per pupil construction costs near the time of application. Because of increased construction costs, such school dis- tricts with projects that have been waiting for federal payments for many years will receive a smaller share of total construction costs than they would have received had they been funded promptly. We recommend that the Congress amend Public Law 81-815 to require Recommendation to that school construction payments to eligible school districts with feder- the Congress ally connected enrollment increases (those eligible under section 5) be based on average state per pupil construction costs in the year these projects are funded. (See p. 20.) Page 2 GAO/liRD-90-90 Impact Aid School Construction I&237176 the Secretary of tary require school districts to apply annually for school construction Education assistance so that project requests reflect (1) school districts’ current enrollments of federally connected children and school construction needs and (2) the current estimate of the federal share of school con- struction costs. (See p. 20.) Matter for thereby reduce the backlog of unfunded projects, the Congress may Consideration by the want to consider authorizing the Secretary of Education to distribute Congress available appropriations among a greater number of higher-priority projects. This could be accomplished by reducing on a pro-rata basis funds awarded to school districts with the greatest school construction needs. (See p. 20.) Agency Comments tion to the Congress. However, it said that our recommendation to the Secretary, requiring annual school construction applications, may also require a legislative change to implement, The Department raised several concerns about the (1) disposition of cur- rently unfunded projects if an annual process was instituted and (2) the administrative burden that such a process may place on school districts. The National Association of Federally Impacted Schools had similar comments about this recommendation. Both the Department and the association disagreed with our suggestion to distribute limited program funds on a pro-rata basis. These and other comments along with our evaluation are included on pages 20-25 of this report. We made changes to the text where appropriate. We are sending copies of this report to the Secretary of Education, appropriate congressional committees, the National Association of Fed- erally Impacted Schools, and other interested parties. Please call me on Page 8 GAO/HRD-90-90 Impact Aid School Conrtructlon (202) 275-1793 if you or your staff have any questions about this report. Other major contributors are listed in appendix VIII. u Franklin Frazier Director, Education and Employment Issues Page 4 GAO/HlUMO-90 Impact Aid School Cmstruction Page 6 GAO/HR.D-90.90 impact Aid School Conrtruction Contents Letter Appendix I Impact Aid: Most Background Scope and Methodology School Construction Most Eligible Projects Are Unfunded RequestsAre Department Practices Lead to Outdated Funding 17 Priorities and Construction Estimates Unfunded and Project Payments to Some School Districts Can Cover a 18 Outdated Smaller Share of Total Costs When Funding Delays Occur Alternative for Funding More Projects 19 Conclusions 19 Recommendation to the Congress 20 Recommendation to the Secretary of Education 20 Matter for Consideration by the Congress 20 Agency Comments and Our Evaluation 20 Appendix II 25 26 Public Law 81-815 Section Section 6 8 25 Eligibility Categories Section 9 25 Section 10 26 Section 14(A) 26 Section 14(B) 26 Section 14(C) 26 Section 16 27 Appendix III 28 GAO Sample of School Construction Projects Waiting for Department of Education Assistance (Fiscal Year 1988) Page 0 GAO/HRD-90-90 Impact Aid School Conetruction Contents Appendix IV 30 Description of GAO’s Sampling Eligible Projects 30 Data Collection Methods and Sample Disposition 30 Sampling and Data Collection Methods Appendix V 32 Comments From the Department of Education Appendix VI 40 Comments From the National Association of Federally Impacted Schools Appendix VII 46 Major Contributors to This Report Tables Table I. 1: Age of Unfunded Projects in School Districts 16 With Federally Connected Enrollment Increases and Nontaxable Federal Property (Fiscal Year 1988) Table 1.2: Age of Unfunded Projects in School Districts 17 With Indian Land and Children Residing on Indian Land (Fiscal Year 1988) Table III. 1: Sample Projects in Districts With Federally 28 Connected Enrollment Increases and Nontaxable Federal Property Table 111.2:Sample Projects in School Districts With 29 Indian Land and Children Residing on Indian Land Table IV. 1: Disposition of Sampled Projects by Priority 31 List Figures Figure I. 1: Appropriations Have Declined Significantly 11 Page 7 GAO/HRD-90-90 Impact Aid School Construction Figure 1.2: Department of Education’s Process for 13 Evaluating a School Construction Request Figure 1.3: Appropriations Fall Short of Eligible Requests 16 Figure 1.4: Greatest Proportion of Funds Requested by 16 Indian-Impacted School Districts Page 8 GAO/HRDftO4O Impact Aid School Construction Page 9 GAO/H&D99-99 Impact Aid School Construction Appendix I Impact Aid: Most School Construction Requests Are Unfunded md Outdakd Public Law 81-815 was enacted to provide federal assistance to school Background districts that, after World War II, became responsible for educating the children of people who settled in communities to work on federal instal- lations or for federal contractors. The program was designed to compen- sate school districts for (1) the cost of sudden increases in enrollments caused by federal activities in the community and (2) lost local revenues resulting from the nontaxable federal property supporting these activi- ties and projects.’ Public Law 81-815 authorizes payments, for the federal share of urgently needed classrooms and classroom equipment, to school districts in several categories. The Congress appropriates funding each year for one or more of these categories. In the absence of specific appropriation language, the Department first funds projects in districts that l have school facilities destroyed or damaged by major disasters; . experience a temporary increase of at least 6 percent or 1,500 federally connected children for at least 1 year, but not more than 6 years; or . are unable to use state and local funds to provide school facilities for federally connected children because of legal or other reasons. Generally, all eligible requests in the program categories discussed above are funded each year. The Department uses the remaining appro- priations to fund as many eligible projects as possible in school districts that l contain at least 33-l/3 percent Indian land and/or that educate children residing on Indian land that make up at least 33-l/3 percent of the total enrollment; l experience an increase of at least 6 percent or 1,500 federally connected children, whichever is less, over a 4-year period; or . contain at least 33-l/3 percent nontaxable federal property (for example, national parks, military bases, and federally subsidized public housing) and that have at least 33-l/3 percent of their enrollment “unhoused” (the number of children over the capacity of the school facility). See appendix II for a detailed description of these provisions. ‘Property taxes are the primary source of local funds for constructing, operating, and maintaining schools. Page 10 GAO/HRD-90-90 Impact Aid School Construction Impact Al& Most &ho01 Conatructlon Requeata Are Unfunded and Outdated Between fiscal years 1961 and 1967, annual appropriations for the school construction program ranged from about $24 million to $266 million and generally met all eligible project requests each year. Since 1967, however, appropriations have decreased substantially (see fig. 1.1). For example, the fiscal year 1967 appropriation was $62.9 million,2 but declined in fiscal year 1968 to $22.9 million and by 1970 to about $16 million. During fiscal years 1984-88, appropriations ranged from $20 million to $23 million, while project requests totaled over $200 million each year.3 Figure 1.1:Appropriation8 Have Declined Significantly 100 Dollara In Mllllonm m (10 50 40 a0 20 10 1961 m4 lw7 1070 lw3 1076 Is79 1882 1986 lQ88 PIsad Yara How School Construction In its report on Senate bill S. 2317 (which subsequently became P.L. 81- Projects Are Ranked 816), the House Committee on Education and Labor recognized that appropriation shortfalls could arise because, for example, actual con- struction costs sometimes vary from estimates. The law therefore requires the Department to rank eligible unfunded projects on the basis of urgency of need when funding shortfalls occur. To comply with this requirement, the Department maintains two lists of eligible unfunded ‘Public Law 90-218 froze obligations and expenditures at $24.1 million. ““Project requests” are referred to by the Department as “pre-applications.” Page 11 GAO/IiIUM&BO Impact Aid School Construction Appendix I Impact Al& Most 8chool Cmnetruction Requesta Are Unfunded and Outdated projects. One list includes projects in school districts with federally con- nected enrollment increases and nontaxable federal property, and the other list includes projects in districts with Indian land and children residing on Indian land. Projects on each list are arranged in priority order, beginning with the school district with the greatest need for school construction. To determine relative need, the Department calcu- lates a priority number for each project. The project priority number is the sum of the percentage of (1) federally connected children eligible for payment and (2) unhoused children enrolled in the district (limited to not more than twice the first percentage). When appropriations become available, the Department obligates funds beginning with the highest priority projects and continues down each list as far as available funds permit. The Department validates these projects’ priority numbers by determining (1) the current number of fed- erally connected children in each school district and (2) whether there is still a need for school construction4 A project generally retains its orig- inal priority number until appropriations become available to fund it, but its position on the list may change from year to year as new unfunded projects with higher priority numbers are added (see fig. 1.2). 41f eligibility, school construction need, and funding priority are confirmed, school districts submit a second form, called the application. It provides the Department with construction budget and envi- ronmental impact information. Page 12 GAO/HRJI-SO-90 Impact Aid School Construction Appendix I Impact Aid: Moot School Construction Reqneota Are Unfunded and Outdated Figure 1.2: Department of Education’8 Proceaa for Evaluating a School Construction Request Meets Eligibility Does Not Meet Eligibility 4 Requirements Requirements 1 Project Scored Using a Mathematical Formula Unfunded Projects From Previous Years Held by the Department New Projects and Previous Unfunded Projects Put in Rank Order by Score I 1 1 Score High Enough Score Not High Enough to to Be Funded With Current Be Funded With Current _I( Appropriation Appropriation 1 1 1 Project Is a Project Is a Previously New Request Unfunded Request I + School District Eligibility Reevaluated I 1 I I 1 I No Longer Meets / I Eligibility Requirements J Page 13 GAO/HRlNO-90 Impact Aid School Construction Appendix I Impact Aid: Most &hool Construction Requests Are Unfknded and Outdated We focused our review on projects that compete for limited federal Scopeand appropriations from districts with federally connected enrollment Methodology increases, nontaxable federal property, Indian land, and children residing on Indian land. For these projects we assessed (1) the gap between eligible requests for school construction assistance and the amount of program funds available and (2) the Department’s procedures for determining the order of funding. To do this, we selected a system- atic random sample of (1) 24 projects from the Department’s fiscal year 1988 list of 74 eligible unfunded projects in Indian-impacted districts and (2) 34 projects from its fiscal year 1988 list of 104 unfunded projects in districts with federally connected enrollment increases and nontaxable federal property. This resulted in a total sample of 68 of the 178 eligible unfunded projects on the Department’s two lists. We identi- fied, for each project in our sample, l the relative priority as of fiscal year 1988; . the date the project request was filed; 9 a description of the project; . the estimated federal share of the project’s cost determined by the Department of Education at the time the project request was filed; and l the current status of each project. (See app. III.) For all projects in our sample, we collected data for the first four items above from Department records. We collected information about the cur- rent status of our sampled projects by interviewing school district offi- cials over the telephone. Some of the school districts we contacted had more than one eligible project in our sample. Some data were not avail- able on 18 projects because, for example, the Department of Education had lost the project file or the school district was unable to provide any information about the project given its age. (See app. IV for a detailed explanation of our sampling methodology.) We reviewed the legislative history of Public Law 81-816 and inter- viewed Department officials about (1) the program’s eligibility and pri- ority-setting criteria and (2) the Department’s process for reevaluating projects waiting for funding. We also discussed the program with the executive director of the National Association of Federally Impacted Schools-a nonprofit association of federally impacted schools-and other education professionals. We conducted this review during the period September 1988 to December 1989 in accordance with generally accepted government auditing standards. Page 14 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid! Most School Construction RequestaArc Unfunded and Outdated As of fiscal year 1988, appropriation shortfalls had created a backlog of Most Eligible Projects 178 eligible unfunded construction projects in school districts with fed- Are Unfunded erally connected enrollment increases, nontaxable federal property, Indian land, and children residing on Indian land. On the basis of Department records, total estimated federal payments for these projects could be about $216 million (see fig. 1.3). Figure 1.3:Appropriations Fall Short of Eligible Requests Ddlrn In Mlillonr i/A- -=--. --.-, 259 -\\ -\ 225 '. 290 175 150 125 100 7s so -_.. -. . --..-_ - 1904 1995 1995 1987 1955 flsoal Yoaln - Eligible Project Requests I - - I Appropriations Note: The dollar amounts of eligible requests include unfunded requests from previous years. The Department retains eligible requests on priority lists until appropriations are sufficient to fund them Unfunded school construction requests from districts with Indian land and children residing on Indian land made up the greatest proportion of the backlog (see fig. 1.4). Page 16 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Al& Most School Construction Requests Are Unf’unded and Outdated Figure 1.4: Greatest Proportion of Funds ReqUeBted by Indian-impacted School Etilmalad Projocl Rquosts (Dollars In Milllora) Districts 925 36 01 L A i. A 1984 1985 1986 1987 1988 Flocal Ym Enrollment Increases and Nontaxable Federal Property Indian Land and Children Residing on Indian Land Over 65 percent of the 178 school construction projects on the two lists, as of fiscal year 1988, have been waiting for funding for over 12 years- 15 projects have been unfunded since 1967. In fiscal years 1983- 88, school construction program appropriations annually funded about 3 or 4 projects on each priority list. About 79 percent of the unfunded projects in districts with federally connected enrollment increases and nontaxable federal property were determined eligible for program funds over 12 years ago (see table 1.1). Table 1.1:Age of Unfunded Projects in School Districts With Federally Years on Connected Enrollment increases and Year of project request waiting list Project8 Percent Nontaxable Federal Property (Fiscal Year 1983-88 o-5 17 16.3 1988) 1977-82 6-11 5 4.8 1967-76 12-21 82 78.9 i Total 104 100.0 Page 10 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Al& Most School Cmatruction Request8 Are Unfunded and Outdated Similarly, more than half of the projects in Indian-impacted school dis- tricts were determined eligible for federal assistance over 12 years ago (see table 1.2). Table 1.2: Age of Unfunded Projects in School Districts With Indian Land and Year8 on Chlidren Residing on Indian Land (Fiscal Year of project request waiting list Projects Percent Year 1988) 1983-88 O-5 13 17.6 1977-82 6-11 21 28.4 1967-76 12-21 40 54.0 Total 74 100.0 The Department ranks requests for school construction projects based Department Practices on urgency of need. It calculates urgency of need by determining the Lead to Outdated percentage of federally connected children eligible for payment and the Funding Priorities and percentage of unhoused children in a school district; the Department uses the sum of these percentages as the priority ranking number. This Construction method for initially determining urgency of need appears to be equi- Estimates table. However, the Department does not regularly reevaluate the pro- ject priorities of all unfunded projects. Department officials said that they have insufficient resources to do so. In addition, the Department does not obtain current information on the federal share of project costs until sufficient appropriations are available to fund the projects. Thus, information on the number of federally connected children and the esti- mated costs of many eligible projects that remain unfunded from year to year are often outdated when the Department develops budget esti- mates for the Congress and identifies projects to be funded. . As of August 1989, we found that school districts that submitted 20 of the 58 projects in our sample had already completed the projects (see app. III). Eighteen of the 20 projects had been completed without federal assistance.” School district officials said that 50 percent or more of the funds used to complete the projects came from the following sources: local (14 projects) and state (3 projects). State and local sources equally provided funding for 1 project. l School district officials that submitted 8 of the 20 completed projects said they currently do not need federal construction assistance. Officials in districts that submitted 11 of the projects told us they continue to need assistance, but for projects other than those covered by the existing project requests. For example, a Texas school district applied in “School district officials could not recall the funding source(s) for 2 of the 20 projects. Page 17 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid: Most School Construction Requesta Are Unfunded and Outdated 1971 for federal construction funds to build an elementary school. An official of the district said that the district built this project in 1972 with local funds and that funds are no longer needed for that project. How- ever, because of the number of federally connected children enrolled in the school district, the official said that federal assistance is now needed to build an addition to an overcrowded junior high school, but that the district has not applied for federal funds. For 10 of the projects we reviewed, the school districts are probably eli- gible for less aid, if any, than indicated on the Department’s priority lists. Officials in school districts that submitted five of these projects indicated that they currently have fewer federally connected children enrolled than when the districts applied for federal funds. For example, a superintendent in a Missouri school district believes that his district does not have enough federally connected children to currently qualify for school construction assistance. The munitions factories that pro- vided employment for the parents of these children and that enabled the district to qualify for federal aid have closed since the district applied for the program in 1967. Furthermore, the Department’s estimates for unfunded construction projects in districts with Indian land, children residing on Indian land, and nontaxable federal property are understated because they reflect estimated costs in the year of application. Such projects, if funded, are funded at their current costs. For example, in 1976, an Arizona school district requested $6.6 million to construct a high school. The Depart- ment funded the project in 1982. Between 1976 and 1982, school con- struction costs rose about 1 percent each month, yet the Department continued to include the 1976 figure in its estimate of unfunded projects. When the Department funded the project, the federal share of the total cost was about $9 million-60 percent greater than the estimate. The law requires that federal payments to school districts with federally Project Payments to connected enrollment increases be based on a percentage of the state’s SomeSchool Districts average per pupil cost of school construction in the second year of the 4- Can Cover a Smaller year period covered by the project request. For example, federal pay- ments would be based on 1982 costs if the increase period was 1981-84. Share of Total Costs In periods of full funding-when project requests are funded shortly When Funding Delays after they are received-the amounts requested would most likely Occur * approximate current construction costs. However, because of funding shortfalls, 28 of the 34 projects we reviewed in this category have been Page 18 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid: Most School Construction Requerrta Are Unfimded and Outdated waiting to be funded for 12 years or more. During this time, school con- struction costs have increased substantially. If these projects are subse- quently funded, the districts will receive federal payments that will cover a significantly smaller portion of the projects’ total costs than they would have received if they had been funded sooner. In contrast, as discussed on page 18, projects in Indian-impacted districts and those affected by nontaxable federal property are funded at current costs and, thus, would receive federal construction payments that reflect increased construction costs regardless of funding delays. Public Law 81-816 requires the current method used by the Department fIlternative for to calculate federal school construction payments and does not authorize Funding More Projects any other method for calculating payments or distributing funds. When appropriations have been insufficient to fund all projects, this method has provided assistance to no more than the three or four unfunded projects with the highest priority rankings on each priority list. Thus, the current method fully funds those school districts with the greatest need, leaving no funds to assist other districts with eligible projects that have lower priorities. Distributing funds for eligible construction projects on a pro-rata basis could provide more school districts with at least some federal assistance. Such allocations could be made, for example, to those projects above a certain needs threshold determined by the Department. Available funds could be allocated based on the percentage of funds these applicants would have received if appropriations had been sufficient to fully fund the federal share of their projects. While there is a gap between the Department’s estimate of eligible Conclusions unfunded school construction project requests and available appropria- tions-some $200 million as of fiscal year 1988-the Congress and the Department lack accurate information on the actual amount of the shortfall. The authorizing legislation requires the Department to vali- date school districts’ eligibility, priority rank, and project payments when appropriations are available to fund their projects. However, because the Department does not regularly validate this information for all unfunded projects, the Department lacks current data about esti- mated project costs, relative project priorities, and applicants’ school construction needs. As a result, the Congress and the Department do not have accurate information when making funding and other decisions affecting the program. Page 19 GAO/IiRD40-99 Impact Aid School Con&ruction Appendix I Impact Aid: Most School Construction Requesta Are Unfunded and Outdated The law requires the Department to compute project payments to dis- tricts with federally connected enrollment increases on the basis of the state average per pupil construction costs near the time the district applied for assistance. If these projects are funded many years after the Department determined that they were eligible and construction costs have risen, the federal funds the school districts receive will cover a smaller share of the total costs than if the projects had been promptly funded. Given the drastically reduced funding available for the school construc- tion program, the Congress may want to reassess how assistance is allo- cated for school construction and examine an alternative approach for assisting eligible federally impacted school districts. We recommend that the Congress amend Public Law 8 l-8 15 to require Recommendation to that all federal payments to eligible school districts with federally con- the Congress nected enrollment increases (those eligible under section 6) be calculated on the basis of state average per pupil school construction costs in the year a project is funded. We recommend that the Secretary of Education require school districts Recommendation to to apply annually for school construction assistance to ensure that pro- the Secretary of ject requests reflect school districts’ current enrollments of federally connected children and estimated school construction costs. Education Federal funds are limited in relationship to the current backlog of eli- Matter for gible unfunded projects. For this reason, the Congress may want to Consideration by the explore an alternative way to meet the school construction needs of fed- Congress erally impacted school districts. Such an approach could involve allo- cating on a pro-rata basis a portion of the federal share of project costs of districts above a certain needs threshold when program appropria- tions are insufficient to fully fund all eligible projects. The Department of Education and the National Association of Federally Agency Comments and Impacted Schools provided comments on a draft of this report. Our anal- Our Evaluation ysis of their comments follows. We also made technical changes to the report, where appropriate, to reflect the comments and information provided. Page 20 GAO/Hl?IMKbSO Impact Aid School Construction Appendix I Impact Aid: Most School Ckmstruction Requeata Are Unfunded and Outdated Department of Education The Department of Education characterized our draft report as a useful document for the 1993 reauthorization of Public Law 81-816. The Department said that our recommendations to the Secretary of Educa- tion and matter for congressional consideration (1) highlight issues that need to be addressed and (2) may require substantial revisions to the law and its implementing regulations. The following summarizes the Department’s major comments on our draft report and our evaluation. (See app, V for the complete text of the Department’s comments.) Comment 1 The Department said that (1) our recommendation to the Congress, regarding the use of current-year construction costs, did not distinguish between the basis for payments for projects eligible under sections 6 and 14 and (2) some kinds of assistance under section 6 are already based on current-year costs. We believe that we adequately explained the difference between sec- tions 6 and 14 school construction payments on pages 2, 18, and 19. However, to clarify the action we believe should be taken, we revised our recommendation to the Congress to specify that the change is needed to section 5 of the legislation (see p. 20). Comment 2 The Department agreed that unfunded school construction projects should not be on its priority lists for long periods of time, but questions whether it has the authority to require school districts to annually apply. The Department said that legislative changes to sections 5 and 9 may be needed to implement our recommendation. We believe that section 6 of Public Law 81-815 does not need to be revised to require school districts to annually submit construction pro- ject requests. Although section 5 describes the eligibility criteria and how payments are to be determined and children counted, it does not require the Department to retain eligible project requests until they are approved for payment. That is, section 5 does not state or imply that an eligible project request (pre-application) constitutes a right to payment. However, if the Secretary continues to believe that he lacks the authority to implement our recommendation, he should ask the Congress for clarification and, if necessary, the authority. Comment 3 The Department is also concerned about the disposition of projects cur- rently on its priority lists and whether they should be funded before an annual application process is instituted. Page 21 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid: Most School Construction Requests Are Unfunded and Outdated We believe that as many eligible projects as possible should be funded before the Department implements an annual application process. School districts whose projects the Department is unable to fund should be notified that their requests can not be funded and invited to apply in the following year, using updated costs and other more current information. Comment 4 The Department is also concerned about the administrative burden on school districts to annually apply for assistance when their needs remain unchanged and unfunded. School districts whose needs, pupil counts, and construction costs remain unchanged would probably be the least burdened by an annual application process. Such a district could review a copy of the applica- tion submitted the previous year, certify that the information has not changed, and request that the Department consider the application for current-year funding. However, we believe that school districts’ con- struction needs do not remain unchanged from year to year, as the Department said. For example, on the basis of our interviews with school district officials, we found that at least 15 of the 58 construction projects in our sample were completed-without federal school con- struction assistance-within 1 to 5 years after the districts submitted their project requests to the Department. The Department and the Congress should have the most current infor- mation about the school districts’ construction needs before they make funding decisions. These districts probably apply annually for opera- tions and maintenance aid under Public Law 81-874-companion legis- lation to the school construction program. Some of the information developed by the school districts for the Public Law 81-874 program- in particular, federally connected enrollments-could be used to com- plete school construction project requests. In any case, we believe that the need to update critical data concerning a district’s eligibility, federal payment, and priority rank outweighs any resulting administrative burden. Comment 6 The Department disagreed with our suggestion that the Congress con- sider authorizing the Department to distribute limited construction funds to school districts on a pro-rata basis. It said that such pro-rating (1) would make it difficult for school districts to award construction contracts and complete their projects with uncertain future funding and (2) could prevent school districts in subsequent years from qualifying for assistance to complete their projects. Page 22 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid: Most School Construction Requests Are Uufimded aud Outdated We agree that pro-rating construction funds would not provide school districts their full federal share-as currently provided by Public Law 81-816. However, several school districts that did not receive the federal funds they requested subsequently completed their projects without any federal assistance. Some federal assistance-provided through pro- rating payments- would have helped to defray the cost of construction in these cases, and pro-rating would have spread the limited federal resources to a greater number of school districts that requested such assistance under sections 6 and 14. We disagree that pro-rating payments would be inconsistent with our other recommendations. When appropriations are insufficient to fully fund all eligible projects, pro-rated payments would be considered the full federal payment at that time-not partial payments. This would be consistent with how the Department pro-rates payments under Public Law 81-874, through which aid is provided to federally impacted school districts for operations and maintenance. Under this program, the Department does not compensate school districts in subsequent years for the funding lost by pro-rating payments during a previous year. In addition, under Public Law 81-874, eligible school districts annually apply for assistance. National Association of The association represents school districts throughout the United States that educate federally connected children. The association reviewed a Federally Impacted draft of this report, and its comments are included in appendix VI and Schools summarized below. Comment 1 The association said that the draft report failed to address the objec- tives as stated in the 1988 Hawkins-Stafford Amendments because we did not identify the school construction needs of federally affected school districts. As we began our evaluation, we agreed with staff members from the offices of the Senate Committee on Labor and Human Resources, Sub- committee on Education, Arts and the Humanities, and with Senator Larry Pressler to limit the scope of our study to determining (1) the gap between eligible requests to the Department of Education for school con- struction funds and the amount of available Public Law 81-816 funds and (2) whether the process the Department uses for determining which projects to fund is equitable (see p. 1). We did not attempt to survey the more than 2,600 federally impacted school districts concerning their school construction needs. Page 23 GAO/HRD-90-90 Impact Aid School Construction Appendix I Impact Aid: Most School Conatmction Requests Are Uufuuded and Outdated Comment 2 The association expressed concern about the focus of our recommenda- tion to the Congress to amend Public Law 81-816 to require that all fed- eral payments be based on school construction costs in the year projects are funded. This concern is similar to the Department’s and is addressed on page 21. Comment 3 The association, in commenting on our recommendation to the Secretary of Education to require school districts to annually reapply for construc- tion assistance, agreed that a reevaluation process is necessary. How- ever, the association suggested that school districts, whose eligible applications are unfunded in a current year, be required to update and, if necessary, revise their applications every 2 to 3 years. We state that (1) school construction costs increase from year to year and (2) districts’ construction needs and enrollment profiles change over time (see pp. 17-18). We found that 18 of the 68 projects in our sample were completed without federal assistance. Eight of the 18 projects were completed within 1 year after applying to the Department for assis- tance. Therefore, we continue to believe that the Department should require school districts to annually apply for Public Law 81-816 assis- tance to better ensure that funding decisions are based on current infor- mation and cost estimates. Comment 4 Regarding our suggestion that the Congress consider alternative ways to distribute the limited school construction funds, the association believes that a pro-rata distribution would not allow eligible school districts to build the minimum school facilities they need and would result in “less than minimum school facilities.” We recognize that a pro-rated payment would provide school districts less than the current law defines as the federal share. However, as we state on page 17, some districts have constructed their facilities without the federal assistance they requested under Public Law 81-816. A pro- rated payment would have helped to defray some of the construction costs these districts incurred. Pro-rating also would result in some fed- eral financial assistance to a greater number of school districts than is now the case. Page 24 GAO/HRD90-90 Impact Aid School Construction * Appendix II Public Law 81-815 Eligibility Categories This appendix describes the major sections of the federal school con- struction program authorized by Public Law 81-816. The Department of Education provides assistance to school districts that meet the following criteria: For school districts to receive federal assistance, this section requires Section 5 that they have an increase over a 4-year period in at least one of the following kinds of federally connected children: (1) those whose parents live and work on federal property, (2) those whose parents live or work on fezal property, and (3) those whose attendance in the district results from other federal activities, such as activities by a federal con- tractor. As specified by law, school districts must have an increase of . at least 20 children whose parents live and/or work on federal property, representing at least 6 percent of the district’s average daily member- ship during the year before the beginning of the 4-year period or an increase of 1,600 of these children, whichever is less, and/or . at least 20 children whose enrollment results from federal activities car- ried on either directly or through a contractor, representing at least 10 percent of the district’s average daily membership during the year before the beginning of the 4-year period or an increase of 2,600 of these children, whichever is less. This section authorizes the Department of Education to provide addi- Section 8 tional payments to school districts eligible under section 6 if they are unable to finance the nonfederal share of the cost of their projects or if the districts are unable to complete the projects because an emergency (for example, flood or fire) has affected either the work on the project or the districts’ ability to finance the nonfederal share. The Congress has not appropriated funds for this section since 1967. This section requires school districts to have an enrollment increase of Section 9 the type described in section 6 for at least 1 year, but not more than 6 years. Y Page 26 GAO/l-IRD-90-90 Impact Aid School Construction Appendix II Public Law 81-916 Eligibility Categories This section requires the Department of Education to provide school Section 10 facilities for federally connected children when state or local laws pre- clude the expenditure of state and local funds for providing school facil- ities on federal property. For school districts to receive federal assistance, this section requires Section 14(A) that . (1) the number of children that reside on Indian lands represent at least 33-l/3 percent of a school district’s total enrollment, (2) Indian lands constitute at least 33-l/3 percent of the school district, or (3) a school district educate at least 100 children who reside on Indian land outside of the school district; . the tax-exempt status of Indian land substantially and continually impairs the school district from financing needed school facilities; . the school district make a reasonable tax effort to raise funds for financing school facilities and take advantage of state and other sources of financial assistance for this purpose; and l the school district have insufficient funds available from all sources to provide classrooms and classroom equipment for 33-l/3 percent of its enrollment. For school districts to receive federal assistance, this section requires Section 14(B) that l (1) the number of children that reside on Indian lands represent 10 per- cent of the total enrollment in the school district, (2) Indian lands consti- tute 10 percent of the school district, or (3) the school district educates at least 100 children who reside on Indian land outside of the school district and l the tax-exempt status of Indian land substantially and continually impair the school district from financing needed school facilities. Since 1970, Public Law 81-816 has required that assistance for sections 14(a) and 14(b) be given priority at least equal to that given for section 10. For school districts to receive federal assistance, this section requires Section 14(C) that Page 26 GAO/HRD-90-90 Impact Aid School Construction Appendix II Public Law 81-816 Eliglbillty Categories l (1) the number of unhoused children in the school district represent at least 33-l/3 percent of its total enrollment or (2) federal property con- stitutes at least 33-l/3 percent of the school district,’ . the nontaxable status of federal property within the district substan- tially and continually impairs the district’s ability to finance school facilities, l the school district make a reasonable tax effort to raise funds for school facilities and take advantage of state and other sources of assistance for this purpose, and . the school district have insufficient funds from all other sources to pro- vide classrooms and classroom equipment for at least 33-l/3 percent of its enrollment. This section authorizes the Department of Education to replace or Section 16 restore school facilities destroyed or seriously damaged by major disas- ters. The Department can provide assistance once the school district has exhausted all other funding sources. Funds for this purpose are also available to eligible school districts under section 7 of Public Law 81-874, which provides assistance to federally impacted schools for operations and maintenance. ‘The term “unhoused children” refers to the number of children over the capacity of the school facility. Page 27 GAO/HRD-99-90 Impact Aid School Construction , Appendix III .- GAO Sample of School Construction Projects Waiting for Department of Education Assistance (Fisti Year 1988) Table 111.1:Sample Project8 In Dlrtrlcts Wlth Federally Connected Enrollment Increases and Nontaxable Federal Property Estlmated Department Application federal prlorlty file date ProJect description payment Project status0 03 . 3/l 7107 New elementary school $1,438,000 Subsequently withdrawn 06 5/29/07 New elementary school 3,000,000 Federally funded 09 .. _ .._ ._ .-..-..._ 5/l/04 New elementary school 1,262,OOO No work started 12 6/25/69 New elementary school 3,689,OOO Completed in 1971 15 .. 613103 Remodel and add to elementary school; convert middle . . .- . ..-._. school to high school 113,000 Partially completed 18 ^ -.-.- ___-- 6/l 8169 Addition to elementary school 120,000 Unknown 21 6124169 New elementary school 127,000 Partially completed 24. -._.._.... -- 1972 Unknown-DGrtment lost file 2,024,OOO Unknown 27 3/l 2169 Educational equipment; new lockers 57,000 Completed in 1973 30 -..._.....~. 6/0/70 Unknown-project description missing 85,000 Unknown 33 36 . _........ 11/17/70 -- .-6/, gl68 lOclassroom addition 44,000 Completed in 1972 Unknown-project description missing 145,000 Unknown 39 6124160 New elementary and hinh schools 130,000 Completed in 1986 42 6125169 New middle school 287,000 Completed in 1974 4s .. _.. - .--.-LA 4/l 2176 New elementarv schools: multiouroose rooms I II 115.000 Comoleted in 1976 48. ---. 12/29/71 Junior high school addition 121,000 Completed in 1973 51 ~~. .._ -.--A. 5/23/68 Unknown-project description missing 35,000 Unknown 54 . _.._-~ -..-. 612317 1 New elementary school 39,000 Completed in 1972 57 210174 Unknown-project description missing 41,000 Unknown 66 ~. . ..&A-... 6/l 0169 10 classrooms and librarv facilities 60,000 Completed in 1970 63 _..._-... _ .”..__.__ 616169 - -_--- Remodel school lunch facilities 20,000 Partially completed 66. ‘. 3120169 Junior high school cafeteria 41 classrooms, and ,_.... -... ..~ ..- .___-___ vocational education shops 492,000 Completed in 1970 69 - ._...-. ----__I6/l 9170 School addition 56,000 Completed in 1972 72 .. 1979 Unknown-Department lost file 2,085,OOO Unknown 75 3121169 Learning center and 5 classrooms 58,000 No work started 78 6124103 New roof, floor, and gym divider 200,000 Partially completed 81 6/I 3167 New elementary school 130,000 Completed in 1968 84 .~ . 2/l 6167 New elementary school 56,000 Completed in 1968 87 6126167 Facilities and equipment for 4 schools 87,000 Partially completed 90 2/l 4167 Addition to elementary school 69,000 Completed in 1967 93 612 l/60 New junior high school 409,000 Partially completed 96 1968 Unknown-Department lost file 785,000 Unknown 99 12/l 3168 Unknown-project description missing 546,000 Unknown -- 102 4/ 1S/69 Home economics classrooms, offices, adult-education Y center, equipment 16,000 Completed in 1971 Wnless indicated, the Department of Education did not provide funds for these projects. Source: Department of Education data and GAO telephone interviews with school district officials Page 28 GAO/HRD-90-90 Impact Aid School Construction Appendix Ill GAO Sample of School Construction ProJecta Wattlng for Department of Education Assistance (Fiscal Year 1998) Table 111.2:Samole Proiectr In School Districts Wlth Indian Land and Children Residlna on Indian Land Estimated Department Application federal priority file date Project description payment Project statusa 03 0/20/79 New hiah school $3.500.000 No work started 06 1213l/00 New high school 14,550,000 Federally funded 09 4126176 New elementary school 882,000 Completed in 1988 12 6/l O/85 New school (grades K-12) 4,000,000 No work started 15 5/l 5106 New hiah school 15,835.OOO No work started 18 4121175 Elementary school classrooms, cafeteria, offices 1,139,ooo Completed in 1986 21 4120175 Elementary school addition 1,426,OOO Partially completed 24 716104 New elementary school 164,000 Completed in 1989 27 614It34 New hiah school 1,500,000 Subseauentlv withdrawn 30 0/l/75 Cultural center and 5 classrooms 916,000 No work started 33 6127175 3 elementary classrooms; special education room 90,000 No work started 36 4/l 7175 New elementarv school 872,000 Completed in 1982 39 3/20/70 Renovate junior high and high schools 3,711,ooo Partially completed 42 1975 Unknown-Department lost file 30,000 Unknown 45 6/l O/00 New elementarv school 960.000 No work started 48 612 l/66 Addition-2 classrooms; vocational education shop; art room 219,000 Partially. completed 51 4123175 Remodel high school cafeteria; build elementary school cafeteria and multiouroose room 634,000 Completed in 1976 54 12129171 New elementary school 1,638,OOO No work started 57 1977 Remodel/add to 5 schools 1,660,000 Partially completed 60 8/l 2177 Temporary classrooms: teacher housing, gym, library, and educational eauioment 3,516,OOO Unknown 63 ---.-- 6124160 Vocational education classrooms; teacher housing 107,000 No work started 66 4/l/74 High school vocational education area and kitchen 163,000 No work started ---.--. 69 1973 Unknown-Deoartment lost file 122.000 Unknown 72 1970 Unknown-Department lost file 286:000 Unknown %nless indicated, the Department of Education did not provide funds for these projects. Source: Department of Education data and GAO telephone interviews with school district officials. Page 29 GAO/HlUMW90 Impact Aid School Construction , Appendix IV Description of GAO’s Sampling and Data Collection Methods This appendix describes how GAOselected the projects reviewed and col- lected information about them. The Department of Education maintains two lists of proposed projects Sampling Eligible that are eligible to receive funding under Public Law 81-816-the School Projects Construction Assistance Program for Federally Affected Areas. The first is a list of projects in districts with federally connected enrollment increases and nontaxable federal property. The second is a list of projects in school districts with Indian land and children residing on Indian land. Each list is arranged in order of the priority the Department computes for each project. As of fiscal year 1988, there were (1) 104 projects on the list of districts with enrollment increases and nontaxable federal property and (2) 74 projects on the list of Indian-impacted districts. GAOreviewed every third project on each of these lists- a systematic sample of 34 projects from the first list and 24 projects from the second. To determine when each project was submitted to the Department for Data Collection funding, what each project was, and the estimated federal share of each Methods and Sample project’s cost, we reviewed Department of Education data for 48 of the Disposition 68 projects we sampled. The Department could not locate the file for 6 of the projects sampled. For the 4 remaining projects, we could not dis- tinguish the project we sampled from other projects contained in the Department’s files because the files did not contain descriptions of the projects. Two of the 48 projects that were identified in a Department file were, according to that file, subsequently withdrawn by the school district. To determine the current status of each of the remaining 46 projects, we conducted a standardized telephone interview with officials of the school district responsible for that project.’ The interviews were also designed to collect information about a district’s current construction needs resulting from its federally connected enrollment and/or the amount of federal property within the district. ‘For example, school district officials include superintendents, business managers, and school facili- ties directors. Page i30 GAO/IiRD-90-90 Impact Aid School Construction Appendix IV Dewription of GAO’s Sampling and Data Collection Methods The interviews provided information about the current status of all but 3 of the 46 projects left in our sample. In two instances the school dis- trict had no record of the project. Another district refused to give us any information about a project. We conducted the interviews from June 19 to August 11, 1989. Our review of Department files and our interviews with school district officials provided information about the current status of 46 of the 68 projects we sampled. The projects in the universe and in our sample from each of the lists, as well as the disposition of sampled projects by list, are shown in table IV. 1. Table IV.1: Di8pO8ltiOn of Sampled Project8 by Priority List Project rtatus File District No project status indicated reported No District Univerro Sa;g project departrn;;: provided no Prioritv list size withdrawn p~E#~~ informationb Federal rxoperty/enrollment increase 104 34 1 24 7 2 Indian -~- land/children residing on Indian land 74 24 1 19 3 1 Total 178 58 2 43 10 3 %cludes instances in which the Department could not locate a project file or the file did not specifically identify the project sampled. %cludes instances in which the school district (1) could not recall or had no record of a project or (2) refused to provide any information about a project. Page 31 GAO/HRD-99-90 Impact Aid School Construction Appendix V CkxnmentsFrom the Department of Education’ UNITED STATES DEPARTMENT OF EDUCATION OFFICEOF THE ASSISTANTSECRETARY FORELEMENTARY AND SECONDARY EDUCATION APR271990 Mr. Frank1 in Frazier Director of Education and Employment Issues Human Resources Division United States Qeneral Accounting Office Washington, D.C. 20648 Dear Mr. Frazier: The Secretary has asked that I respond to your request for comments on your draft report, “&pact Aid: Most School re Unfunded and outdated” (QAO/HRD-90- Thank you for providing a copy of your draft report. We have reviewed the report and find it interesting. It should also be a useful source document for the next reauthorization of Public Law 81-816. There are, however, a number of technical inaccuiacies throughout the letter and in Appendices I and II. The necessary corrections have been noted on the enclosed copy of the report. Specific questions and comments by Department of Education reviewing officials have been included as Appendix IV in accordance with the Draft Report format. Thank you for the opportunity to comment. I and members of my staff are prepared to respond if you or your representatives have any questions. John T. MacDonald Assistant Secretary Enclosure Page 3 2 GAO/HRD-90-90 Impact Aid School Ckmstruction APpe- v Commente From the Department of Education APPENDIX VI A number of technical inaccuracies throughout the letter and report have been identified and corrected. Most notable are the reference8 to: (1) "Indian children;" (2) '1enrollment;11 (3) "nontaxable Federal land" as a descriptor for Section 14(c); and (4) an incorrect explanation of the factors that are used in the priority computation. (1) Sections 14(a) and 14(b) of Public Law 81-815 address the needs of llchildren who reside on Indian lands." Children who reside on Indian lands are not necessarily Indian children. Neither P.L. 81-815 nor 34 C.F.R. Part 221 contains a reference to Indian children. (2) Eligibility requirements and determinations of need for minimum school facilities are based on the "membership" rather than llenrollment'l of federally connected children. By statute, the ~lmembership~~of schools is determined __-- in accordance with State law. In the absence of State law, llmembershipll is determined in accordance with the provisions of 34 C.F.R. 221.5(c) which specifies the conditions for using enrollment records to establish membership for purposes of P.L. 81-815. -l- Y Page 33 GAO/HRD-90-90 ImpactAidSchool Construction AppendixV Commente From the Department of Education (3) Nontaxable Federal land is an inaccurate descriptor for section 14(c) because eligibility for a number of P.L. 81-815 sections is based on the impact caused by Federal property. Federal property is defined in 20 U.S.C. fi 635(l). That definition states, in part, "The term 'Federal property' means real property which is owned by the United States or is leased by the United States, and which is not subject to taxation by any State or any political subdivision of a State or by the District of Columbia...." Eligibility under Sections 5 and 9 of P.L. El- 815 is based on children who reside on and/or whose parent works on "Federal property.11 Eligibility under Section 14(c) is based on the extent of such "Federal property" and the school district's inability to finance school facilities because the presence of the Federal property has created a substantial and continuing impairment of the school district's ability to finance needed school construction that contributes to the presence in the school district of inadequately housed children. (4) Because of limitations in the various sections of the law governing the bases for payments to local educational agencies, very few, if any, grants are based on the total Federal membership in a school district. The explanation in the draft report of the priority computation as based on the percentage of II . ..mill. federally connected...children in the districtI (Emphasis added) is incorrect. In fact, the computation is based -2- Page 34 GAO/HRDM-90 Impact Aid School Construction AppendixV Comments From the Department of Education on the number of fedlerallv -ted v for oarment as a percent of total membership, plus the number of unhoused children a8 a percent of total membership, but limited to not more than two times the first percentage, (See 34 C.F.R. 221.51.) It should be stressed that priorities are computed, not @'aesigned.li The report generally does not distinguish between the authorizing sections of the law, either with regard to the eligibility requirements of each, or with regard to the extent of assistance available for the various sections of the Act. Some inaccuracies noted include: (1) the basis for computing a Section 5 entitlement [it is based on the State averaae per pupil construction cost per 20 U.S.C. 635(6)]; (2) a distinction between the eligibility requirements under Sections 14(a), (b), and (c) as specified in P.L. 81-815 and as further defined in the regulations at 34 C.F.R. Part 221; and, (3) Figure 1.2 terminology is inconsistent with the law, the regulations, and published program materials. Other notations on the Draft Report are believed to be self-explanatory. The Recommendation To The Conaress suggests that payments to eligible school districts with federally connected membership be based on school construction costs in the year a project is funded. The recommendation as written is rather broad in that it does not distinguish among the various types of assistance that -3- Page 35 Appendix V Comments From the Department ofEducatIon are available under P.L. 81-815; nor does it seem to acknowledge that some types of P.L. 81-815 assistance (such as section 14) are already based on actual school construction costs. The draft report seems to indicate that a large area of concern is with section 5 assistance, because the Federal share of school construction projects funded under section 5 is the product of the number of federally connected children eligible for payment and the state's average per pupil cost of school construction in the second year of the four-year increase period designated in the preapplication. If this assessment of the draft report conclusions is accurate, perhaps the recommendation should reflect clearer distinctions among the various sections of P.L. 81-515 assistance. For example, one way to implement the recommendation for section 5 might be to change the statutory definition of average per pupil cost (20 KJ.S.C.5 635(6)) so that some other standard besides the second year of the increase period is utilized for calculating construction costs. In the Recommendation To The Secretarv of Education, annual applications are recommended. While the Department agrees that it is not a good result to have unfunded school construction preapplications on priority lists for a long period of time, the Department is limited in what it can do to address the issue under the current statute. Again, implementation of this recommendation may also require legislative changes, particularly to section 5. For example, the membership increase eligibility -4- Page 36 GAO/HRD-90-90 Impact Aid School Construction , : Appendix V CommentsFromthe Department ofEducation requirements and the basis for determining entitlements currently in section 5 (20 U.S.C. 5 635) would clearly need to be revised in order to accommodate the annual submission of new applications for that section. Other portions of the statute, such as section 9, may also need to be revised in order to effect the recommendation. As noted above, the statutory definition of average per pupil cost may also need revision. Several other concerns arise from this recommendation. One concern is what would happen to the current priority lists -- would they be superseded by a new annual application requirement and/or should they be funded before a new requirement is implemented. It is also possible that the statutory and regulatory priority requirements would have to be revised to take the current longstanding preapplications into account. If appropriation levels remain relatively unchanged, several other considerations occur. One concern is that it may be a heavy burden to expect school districts to complete entire new applications annually when their needs remain unchanged and unfunded. Another concern is that while the processing of annual applications would give a more accurate estimate of the total costs of funding all applications in any given year, such a requirement would also be an administrative burden on the Department. This would be particularly true if current appropriation levels are maintained and it is not possible to -5- Page37 GAO/HRD-90-90ImpactAid SchoolConstruction Appendix V CemmentsFremtheDepartment of Education fund all applications. One possible solution that might minimize some of these concerns, but at the same time ensure that the priority lists are not outdated, might be to have an annual modified report of anticipated membership and school facility needs. Finally, the Department does not believe that the Matter For Consideration to give the Department the authority to reduce construction assistance on a pro-rata basis in order to fund a greater number of projects is entirely consistent with the -tithe-. If the draft report's recommendation anticipated the annual submission of new complete preapplications and that more applications would be then annually funded at a reduced rate, it is unclear what would happen to those partially funded projects in subsequent application years. Under the current priority system, it is possible that a partially funded project would not qualify for more construction assistance based on a completely new application. Thus, implementation of the piattcr for Consideration might also require legislative revisions to P.L. 81-815, including the priority requirements. In addition, it has been the Department's experience that many districts qualifying for P.L. 81-815 assistance may not have the resources to finish funding projects on their own. The Department also believes that it would be difficult, if not -6- Page 38 GAO/HRD-99-90 Impact Aid School Construction Appendix V Comments From the Department of Education impossible, for many school districts to award construction contracts without having full funding available. In light of these circumstances, the Department generally does not believe that it would be a good result to have partially funded projects without providing some assurance that Federal assistance would be available when necessary to ensure that projects can also be completed. In conclusion, as noted in the Department's cover letter, we believe that the recommendations in the draft report are useful in highlighting the issues that need to be addressed as the Department moves toward reauthorization of P.L. 81-815 in 1993. This is particularly true in that both the Recommendations to Congress and the Secretary of Education as well as the Matter for Consideration may well require substantial revisions of P.L. 81- 815 and its accompanying regulations. -7- Page 39 GAO/HRD-90-90 Impact Aid School Construction Appendix VI I/ CommentsFrom the National Association of FederallyImpactedSchools The National Aesociation Of Federally Impacted Schoole 815 Task Force Response to The General AoCOUnting Office Study on Impact Aid P.L. 81-815, School Conotruotion Submitted on April 23, 1990 a Page 40 GAO/~m@O Impact Aid School Cmwtruction In Section 6216 of P.L. 100-297, paesed on April 28, 1988, the United States General Accounting Office war authoriaed to conduct a Wtudy of eff6ctivenea8 of publio Law Ol-815e. The parameterm of the study follow: (a) GENERALAUTHORITY.-The Comptroller GOneral 8hall oonduat a thorough study of the need for financial aeei8tanoe for school construction a8 authorized by the Act of September 23, 1950 (Public Law 816, 81et Congrese). The Comptroller General shall prepare and wbmit a report on the l tudy rquired by thi8 section not later than 1 year after the date of enactment of thi8 Act together with 8uoh rrcommondationr, including reGOninIendatiOn8 for much leqielation, as the Comptroller deeme necessary. (b) CONTENTSOF STUDY.-In car inq out the 8tUdy required by subsection (a) of this sect7 on, the Comptroller General 8hall examine a representative 8ample of federally impacted rchool districts of local educational aqoncie8. The Comptroller General shall- (1) identify the numbar of children affected in each 8UCh school district; (2) determine the type of school facility needed for euah 8chool district; and (3) determine the estimated oost involved for building or repairing the school facility in each much dietrict. (cl SPECIAL CONSIDERATIONREQUIRED.-In conducting the l tudy required by this section, the Comptroller General shall give special consideration to- (1) the eligibility criteria U8ed for determining whiizh federally impacted 8ohool district8 are entitled to Federal funde for school construction, (2) the criteria used for setting the prioritie8 for approval of such applications, and (3) the process for reevaluating the needs of previou8ly approved applicants which are on the waiting li8t for fund8 covered under Publio Law 616, Eighty-firet Congrem . The 616 Task Force of the National Association of Federally Impacted Schools (NAFIS) wae formed in October 1967 and ie comprised of varioulr echo01 8uperintendent8 and administrators from across the United States. The purpore of the task force via recommendations ia to improve, streamline and simplify the prooemses by which the Federal government, in an efficient and equitable manner, meets it8 obligations under P.L. 81-815 to the federally connected children served in local educational agenoie8. Theee recommendations call for more federal agency involvement, legislative changes to the law and revisions to Department of Education procedures. Page 41 c Appendix VI Comments From the National Association of Federally Impacted Schools The NAFIS 815 Task Force recently met to discuss the findings of the United States General ACCOUnting Officets Draft Report regarding P.L. 81-815, School Construction. The task force feels that the GAO report: 1. Misses the point of the request for a study. The task force feels that the study was to determine need. The report calls for better record-keeping rather than realizing that the lack of funding is the major problem tacing the program. The study clearly demonstrates unfunded needs, 2. Uses and concentrates on "old" data. The report bases its findings on certain known data only. It does not address current needs nor does it even attempt to determine the unknown needs, 3. DOeS not distinguish between the sections of the law which deal with: (1) eligibility requirements and (2) payment procedures, and 4. Contains certain technical errors which must be corrected. In order to reinforce the enumerated items above, what follows is the task force's in-depth analysis and comments regarding the report. Page 2 reads: "Department records show that as of fiscal year 1988 the estimated funding gap was about $200 million.@@ 1. GAO, in noting such a figure, realizes that funding is the major problem facing 815 currently yet does not Include any recommendations to that end. 2. The task force concurs that the $200 million figure is probably a reflection of the need as documented on the priority lists but the task force does not believe that it is an accurate estimate of actual construction needs. The task force would like to see that Congress ensures funding, in the very least, at this level until all construction needs are met. "The actual amount of the gap is unknown because the Department lacks the authority to periodically reconfirm applicants' eligibility and to revise outdated funding estimatea." 1. The task force questions whether the Department actually does lack the authority to reconfirm eligibility despite the absence of any such wording in the law. 2. The task force also points out that the actual amount of the gap is unknown not only because all applications are not regularly updated but also feels that based on numerous discussions with LEA's that the current application process a dire lack of funds has a chilling effect on the number of those school district8 which do apply for school construction. Page 42 GAO/HRD-90-90 Impact Aid School Construction Comments From the National Association of Federally Impacted Schools Now on pp. 2-3. Paae Z "The law reguiree that those school districta that gualify for assistance' based on federally connected enrollment increase6 and nontaxable federal land receive payments baued on construction costs at the time of application.* 1. The task force view6 this statement as distorted since it appears to be restricted to entitlements under Section 5 only. Projects eligible under Section 5 are funded at construction costs two 8 prior to application. On the other hand, projeo?%igible under Section 14 are based on current construction costs. 2. A clarification on the part of GAO is necessary here to distinguish between the sections of the law. The task force feels that if projects are to be fund* at current construction co&e, the level of appropriations must definitely increase since fewer projecte would be funded. "We recommend that the Congress amend public Law El-815 to require that all school districts' payment be based on costs in the year the project is funded." 1. Since Section 14 payments are already based on current construction costs, the task force deems it necessary to thus significantly amend the requirements under Section 5 in order to implement this GAO recommendation. "TO ensure that the Congress and the Department have accurate information when they make program decisions, we recommend that the Secretary require school district to reapply annually for school construction assistance...18 1. This GAO statement appears to be in conflict with the Federal government's desire to reduce paperwork and lessen the burden to any entity applying for federal funds. The task force recommends that the tena t9?eapply~~ be ckrified by GAO in order to distinguish their (GAO) desire for either a complete annual application or just an update. 3. The task force agrees that some sort of evaluation process be implemented and suggests that every 2-3 yeara, any school district currently on the Department's list update and if necessary revise the application on file. 4. A few questions arise when considering GAO's recommendation: (a) what would happen to those school districts currently on priority list should an annual application be the norm? and (b) to what other source should the school district look to when it does not get Funds through 8151 If local funds were already used and/or unavailable and funding via 815 is not implemented, this may cause the continuation of children to be housed in sub-standard facilities. Y Page 43 GAO/HRDSO-90 Impact Aid School Construction ‘\ Appendix VI Comments Fkom the National Association of Federally Impacted Schools "To provide federal assistance to more eligible school districts and thereby reduce the backlog of unfunded projects, the congress may want to consider authorizing the Secretary of Education to distribute available appropriations among a greater number of higher-priority projects." 1. In response to this statement, task force strongly and vehemently disagrees. The purpose of 815 funds is to build @*minimumschool faci.lities~*. If the practice of proration were implemented - distributing an already limited amount of dollars to more projects - less than minimum school facilities would result. Nowonp.14. Paue 12 The task force believes that the process of random sampling those school districts with projects currently on the Department's priority list, fails to even attempt to ascertain current and unknown construction needs. The sampling was limited to only those known situations and indeed, the actual need may fall far short of the report'8 conclusions. Now on pp.16-17. IWe 15 - JNmnWU GAO's inclusion of charts showing projects on priority list and year of application, alone exhibits the serious underfunding of the program. Nowon p. 17. Ewe 16 - Jm?.mWu The GAO concludes that "funding priorities and construction estimates are outdated". 1. The task force believes that while priorities are not necessarily outdated certainly conetruction may very well be. If Congress were to adequately fund the program - the problem would take care of itself. 2. Section 5 requirements would not be affected by updating priority since this section is funded based on two years @conetruction costs prior to application. This is the manner in which law is written. Nowonp.17. 17 - ADDenBbZLJ Based on interviews conducted by GAO with various school superintendents, few questions arose amongst task force members: 1. Bow were such questions posed to school district officials? Is it a valid to draw the conclusion that there is DG need for minimum facilities? 2. Since school districts met need on own because of the desire to provide a good education, what sources did those school districts use? How did those school districts compensate for the lack of the Federal government to meet funding needs? Page 44 GAO/HRD-90-90 Impact Aid School Construction Appendix VI Commenta From the National Aawciation of Federally Impacted School 3. Although a school dietrict no longer nmdod money to fund a project on the priority list had that aohool di8triot received money wae it aware that this money could be used to fund g~ly facility currently needed? Because the General Accounting Office, through its etudy of P.L. 81-815: 1. Does not address the true problem of the program - the lack of adequate funding, 2. Fails to even attempt to determine the current and unknown construction needs, 3. Does not acknowledge the difference6 between the Sections of Public Law 81-815, and 4. Contains major technical errors, the 81!5 Task Force of the National Association of Federally Impacted Schools requests that further consideration be given to the recommendations made in its original report of September 24, 1988. Page 45 GAO/HRD-90-90 Impact Aid School Construction c Appendix VII Major Contributorsto This Report 1 Human Resources (202)401-8623 Division, William A. Schmidt, Assignment Manager Washington,DC. Karen A. Whiten, Evaluator-in-Charge Clarita A. Mrena, Social Science Analyst Kevin B. Dooley, Social Science Analyst Page 46 GAO/liRDBO-80 Impact Aid School Qmatruction (104eSS)
Impact Aid: Most School Construction Requests Are Unfunded and Outdated
Published by the Government Accountability Office on 1990-07-12.
Below is a raw (and likely hideous) rendition of the original report. (PDF)