The U.S. General Accounting Office (GAO) releases reports and testimonies nearly every day. Below are summaries from six reports issued in July and August that are relevant to state and local tech-based economic development objectives. A full list of titles is available from the GAO website at http://www.gao.gov
Telecommuting:
Overview of Potential Barriers Facing Employers
July 2001, GAO-01-926, http://www.gao.gov/new.items/d01926.pdf
Telecommuting, working routinely from remote locations such as at home, is one of the great promises of the New Economy for employers and employees, rural communities and traffic-congested urban areas alike. Telecommuting proponents estimate it has grown approximately 20 percent each year over the past ten years; 9.3 million employees are estimated to telecommute as least once a week
The GAO looked into perceived and potential obstacles to telecommuting. For companies, the GAO found significant barriers involve internal management concerns for the employer "related to (1) assessing whether the employer has the types of positions and employees suitable for a telecommuting program, (2) maintaining security over sensitive company data [and respecting employee privacy] while monitoring the actions of remote workers, and (3) ensuring that telecommuting activities do not adversely affect profits.
The GAO also reports several state and federal laws and regulations potentially contribute as obstacles to telecommuting. Specifically, "concerns involved individual state tax laws that could expose employers and employees to additional state taxes, and the applicability of federal workplace health and safety laws and regulations to telecommuters’ home offices." The issue is complicated more by interstate telecommuters.
The GAO found "several of the laws and regulations cited as potential barriers predate the move toward the more technological and information-based economy in which telecommuting has developed. Thus, their application to telecommuting is evolving and is somewhat unclear at this time."
Technology
Transfer: DOE Has Fewer Partnerships, and They Rely More on Private Funding
July 2001, GAO_01_568, http://www.gao.gov/new.items/d01568.pdf
In 1996, Congress began to phase out $205 million in annual federal funds to support cooperative research and development agreements (CRADAs) negotiated between federal labs and private parties. As a result, the GAO found the Department of Energyy (DOE) has reduced the use of CRADAs by more than 90 percent while increasing the number of agreements fully funded by private partners. DOE has also cut the provision of technical assistance to small businesses by more than 70 percent.
Military
Base Closures: Overview of Economic Recovery, Property Transfer, and Environmental
Cleanup
August 28, 2001, GAO-01-1054T,
http://www.gao.gov/new.items/d011054t.pdf
With the Bush Administration recommending a fifth round of base realignments and closures since 1988, the record of the impact and progress of first four rounds was reviewed by the GAO for the House Committee on Government Reform. The GAO reported that the short-term impact of base closures can be very traumatic economically for affected communities, but long term recovery depended on successful redevelopment of the base and the strength of the regional and national economies. Financial aid is available through the Department of Defense to assist communities through the initial impact.
Of the 62 communities impacted by the first four rounds of major closures and realignments, 69 percent had unemployment rates lower than the national average in 2000. More than one-half had equal or higher average annual per capita income growth rates than the U.S. average rate for 1996-1999.
The GAO found only 37 percent of the 285,900 acres of unneeded base property slated for non-federal use had been transferred, prohibiting some communities and private entities from beginning redevelopment projects. Additionally, many environmental cleanup activities remain, further delaying property transfer. While cleanup efforts have proven costly, the GAO reports only 32 percent of the base closure budgets through FY 2001, when implementation authority expires, has been spent on cleanup. The Department of Defense estimates that an additional $3.4 million – nearly 50 percent of the amount expended to date – will be required to finish cleanup efforts.
Facilities
Location: Agencies Should Pay More Attention to Costs and Rural Development
Act
July 2001, GAO-01-805,
http://www.gao.gov/new.items/d01805.pdf
The local benefits on economic development and economic stability provided by a federal facility are readily apparent when one looks at the Washington D.C. beltway or any of the large federal research or administrative centers. As a result, Congress passed the Rural Development Act of 1972 (RDA) requiring federal agencies to consider locating facilities in rural areas. Given the increasing polarity of economic growth between urban and rural areas and advances in telecommunications technology over the past five years, the issue is even more timely today.
The GAO looked at which agencies had recently selected urban locations other than the District or 10 formerly designated federal regional cities compared to rural areas, whether or not they should have, what lessons the federal government could take from private sector site selection, and which federal functions lend themselves to rural locations.
Regarding the RDA, the GAO concluded there is little evidence that agencies consider RDA requirements when siting new facilities. The GAO found of 115 sites of more than 25,000 sq. ft. that were acquired by federal agencies through FY 1998 -2000, 72 percent were in urban areas. Agencies said they chose urban areas primarily to be close or convenient to agency clients. Reasons for choosing rural areas, when selected, were proximity to established locations or lower real estate costs.
Relocations tended to remain in or near their former locations (mainly urban) while new facilities were equally distributed among rural and urban sites. Rural sites were predominately chosen for facilities involving research and development, supply and storage, automatic data processing, and finance and accounting
Federal agencies said the most common concerns with rural locations were lack of public transportation, distance from other agency facilities, and insufficient infrastructure for high-speed telecommunications.
Private sector companies included in the GAO survey said they tended to select communities over 25,000 residents largely for the skilled labor force. The GAO said other lessons from private sector respondents include taking advantage of local and state economic development incentives and inducements offered to attract major private employment projects and considering lower real estate costs, lower security issues and greater opportunity for future facility expansion.
Trade
Adjustment Assistance: Experiences of Six Trade Impacted Communities
August 2001, GAO-01838,
http://www.gao.gov/new.items/d01838.pdf
The current rapid place of globalization, the replacement of national economies with a more unified free trade market, is taking a toll on many U.S. manufacturing jobs. The local impacts of even a single large plant closing due to federal trade policies can be significant for local economies. As a result, the federal government offers trade adjustment assistance through several different programs. The GAO looked at how these federal efforts have helped six particularly hard-hit communities: Watsonville CA; Coushatta, LA; Owosso, MI; Washington and Chocowinity, NC; El Paso, TX; and Martinsville and Henry County, VA. Unemployment for some of the case study communities rose suddenly to 20-23 percent, overloading local social service capabilities.
While many dislocated workers found new employment, the GAO found it was often at lower wages. Communities were concerned about long-term declines in the local standard of living as a result. Nearly 78 percent of the $85 million these six communities received in federal trade adjustment assistance from several programs during 1995-2000 was for income support. The balance was for training and retraining programs.
Community program administrators commented that income support often did not carry dislocated workers through the full term of a training program, leaving people to either go without income for the final six months of 24-month training programs or abandon the training program. Local leaders also said unstable funding for training, due to uncoordinated federal program payment schedules and processing, resulted in delays in approving and implement training programs.
In addition, the case study participants also said too little assistance was directed toward community economic adjustment assistance. The six communities received $66 million for economic adjustment, with $44.5 million of the total going to El Paso. The GAO found 80 percent of the dislocated workers had a high school education or less, compared to 42 percent of the U.S. workforce, making it difficult for the communities to attract higher-skilled jobs and higher-paying employers.
The report includes several recommendations; including coordinating training programs with the needs of existing local businesses and with local training capabilities; streamlining the procedures of the multiple federal programs to decrease local administrative burden and gaps in funding; directing more effort toward developing and implementing effective community economic adjustment strategies to assist the community into a more positive standing in the New Economy.
Contract
Management: DOD's Profit Policy Provision to Stimulate Innovations Needs Clarification
July 2001, GAO-01-801, http://www.gao.gov/new.items/d01801.pdf
Two years ago, Congress recommended the Department of Defense (DOD) review and modify its profit guidelines to encourage contractors to develop and produce innovative new technologies for weapons systems. DOD complied with a new rule in December 2000, providing a technology incentive for setting profit objectives in defense contract negotiations. In assessing the potential effectiveness of the new rule, the GAO determined the policy was limited for two reasons. First, the policy has limited reach in the R&D arena, where technological innovation is most likely to occur, since most R&D contracts are excluded or do not fall under the profit guidelines. Second, the rule does not provide sufficient guidance for when to apply the incentive. The definition of innovation used by the department is so broad, the GAO concluded, resulting in higher costs to DOD for the same level of effort by its contractors. GAO also questioned how well the technology incentive as written supported DOD’s new system acquisition process.
Canceled
DOD Appropriations: $615 Million of Illegal or Otherwise Improper Adjustments
July 26, 2001, GAO-01-994T,
http://www.gao.gov/new.items/d01697.pdf
Since 1990, federal fixed-term appropriations or contracts have expired after five years. Agencies may request adjustments to these accounts for only specific reasons. GAO testimony before the House Committee on Government Reform that during the 1990s, the Department of Defense requested the Treasury Department make 333 adjustments totaling $26 billion. All other agencies combined, the GAO noted, requested adjustments affecting only 21 accounts totaling $5 million during the same time period.
Looking at just $2.2 billion of large adjustments requested by DOD in FY 2000, the GAO determined 28 percent, or $615 million, should not have been made. The GAO found $146 million of adjustments were made illegally and additional $364 million in adjustments were made improperly. "Generally, these recording errors were discovered when DOD could not pay an invoice because the balance for a contract funding line was already used up. We considered another $105 million to be improper adjustments because there was insufficient documentation to support the adjustments." (p. 7)
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