oversight

Impact Aid: Most School Construction Requests Are Unfunded and Outdated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)

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               IMPACT AID
               Most School
               Construction Requests
               Are Unfunded and
               Outdated


                                                           ”
                                                  1417
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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)