[Senate Report 104-331]
[From the U.S. Government Publishing Office]
Calendar No. 511
104th Congress Report
SENATE
2d Session 104-331
_______________________________________________________________________
LOCAL EMPOWERMENT AND FLEXIBILITY ACT OF 1996
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
together with
ADDITIONAL AND MINORITY VIEWS
to accompany
S. 88
TO INCREASE THE OVERALL ECONOMY AND EFFICIENCY OF GOVERNMENT OPERATIONS
AND ENABLE MORE EFFICIENT USE OF FEDERAL FUNDING, BY ENABLING LOCAL
GOVERNMENTS AND PRIVATE, NONPROFIT ORGANIZATIONS TO USE AMOUNTS
AVAILABLE UNDER CERTAIN FEDERAL ASSISTANCE PROGRAMS IN ACCORDANCE WITH
APPROVED LOCAL FLEXIBILITY PLANS
July 23, 1996.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
TED STEVENS, Alaska, Chairman
JOHN GLENN, Ohio WILLIAM V. ROTH, Jr., Delaware
SAM NUNN, Georgia WILLIAM S. COHEN, Maine
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DAVID PRYOR, Arkansas PETE V. DOMENICI, New Mexico
JOSEPH I. LIEBERMAN, Connecticut THAD COCHRAN, Mississippi
DANIEL K. AKAKA, Hawaii JOHN McCAIN, Arizona
BYRON L. DORGAN, North Dakota BOB SMITH, New Hampshire
Albert L. McDermott, Staff
Director
John E. Mercer, Counsel
Leonard Weiss, Minority Staff
Director
Michal Sue Prosser, Chief Clerk
C O N T E N T S
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Page
I. Purpose and Summary..............................................1
II. Background and Need for Legislation..............................3
A. Overview.............................................. 3
B. Evolution of Grant Administration..................... 5
C. Flexibility Experience and Examples................... 7
III. Committee Hearing................................................8
IV. Legislative History.............................................11
V. Section-By-Section Analysis.....................................12
VI. Regulatory Impact of Legislation................................18
VII. Cost Estimate of Legislation....................................18
VIII.Additional Views................................................21
IX. Minority Views..................................................24
Calendar No. 511
104th Congress Report
SENATE
2d Session 104-331
_______________________________________________________________________
LOCAL EMPOWERMENT AND FLEXIBILITY ACT OF 1996
_______
July 23, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Stevens, from the Committee on Governmental Affairs, submitted the
following
R E P O R T
together with
ADDITIONAL AND MINORITY VIEWS
[To accompany S. 88]
The Committee on Governmental Affairs, to which was
referred the bill (S. 88) to improve the system of grant
administration, reports favorably thereon and recommends that
the bill do pass.
i. purpose and summary of the legislation
The current system of intergovernmental Federal grants can
be characterized as a piecemeal approach to addressing the
needs of our nation's communities. Each of the various grant
programs tends to treat the need it aims to address as if most
communities had the precisely identical problem calling for a
single, common solution. The standardized set of regulations
surrounding each program do little to encourage creativity in
seeking solutions, with their emphasis on following defined
process, over achieving meaningful results. In reality, though,
not only do the specific needs of New Haven, Connecticut,
differ greatly from the needs of Walla Walla, Washington, and
Kenai, Alaska, but the best approaches to addressing similar
needs may vary significantly. To date, our Federal grant system
has not recognized these differences.
The Local Empowerment and Flexibility Act (S. 88) is
designed to reflect these differences, by creating a mechanism
that fosters intergovernmental communication, recognizes the
efforts of the private sector, facilitates the efficient
expenditure of taxpayer dollars,
and increases the flexibility and integration of Federal
categorical grants. In doing so, it will allow Federal
categorical grants to complement local efforts more
effectively. Rather than forcing communities to attack problems
singly, S. 88 recognizes that effective solutions often require
a comprehensive approach using a blend of tools from several
programs--something presently discouraged by many grant-
specific regulations.
The legislation expands upon successful intergovernmental
partnerships and promotes accountable flexibility in the
implementation of Federal grants. The General Accounting
Office, in ``Community Development: Comprehensive Approaches
Address Multiple Needs but Are Challenging to Implement,''
stated that:
The proliferation of federal programs imposes a
burden on local organizations that attempt to piece
together programs to serve their communities * * *
neighborhood organizations we studied found it
burdensome to manage multiple programs with individual
funding streams, application requirements, and
reporting expectations.
The sole purpose of S. 88 is to ease this burden without
sacrificing accountability for achieving Federal objectives. It
aims to do this in several ways:
1. The legislation encourages local innovation. S. 88
allows state, local or tribal governments or private,
non-profit organizations and consortiums to examine the
sources of financial assistance they receive, develop a
plan of grant integration to avoid duplicative and
inconsistent requirements, and apply for the waiver of
the statutory or regulatory requirements that lead to
this duplication, inconsistency, and inefficiency.
Although state, local, and tribal waivers may be
requested concurrently, S. 88 does not preempt non-
Federal waiver processes. The bill provides for
technical assistance in the development and execution
of plans and gives special consideration to smaller
governments.
2. The legislation permits variation in how grantees
achieve national objectives. The Federal government has
a legitimate role to play by establishing broad
national objectives that bind our nation together. The
bill encourages more efficient ways to achieve these
purposes. S. 88 is not intended to permit flexibility
for the purpose of deviating from national objectives.
3. The legislation requires the review of current
regulations and performance standards associated with
Federal financial assistance programs. S. 88 directs
the Executive Branch to review regulations for
elimination, revision or better coordination. It also
provides for the examination of ways to establish a
uniform application for multiple Federal financial
assistance programs.
4. The legislation promotes greater interagency
communication at the Federal level. S. 88 establishes a
forum for Federal agencies to discuss how multiple
programs originating from separate agencies are
integrated or otherwise coordinated at the State and
local levels.
Known as the Community Empowerment Board (Board),
this forum already exists, through Presidential
directive, to oversee the Empowerment Zones/Enterprise
Communities program. The Board would also review plans
submitted under S. 88 for approval, but any statutory
or regulatory waiver requests would have to be finally
approved by the appropriate Federal agency.
5. The legislation promotes greater public and private
communication. S. 88 requires all plans to be submitted for
review to all levels of State and local government and the
general public before being submitted to the Board.
6. The legislation provides postal equity to Alaska and
Hawaii, States which are not part of the contiguous forty-
eight. S. 88 changes the date of receipt of a grant application
from the date received in Washington to the date postmarked, so
as not to disadvantage remote communities in those States.
II. BACKGROUND AND NEED FOR THE LEGISLATION
A. Overview
A June 1995 report published by the Advisory Commission on
Intergovernmental Relations (ACIR) cites 618 Federal
categorical grants funded in FY95--the largest number of such
grants in history. ACIR reports that the 634 total Federal
grants to state and local governments represent $228 billion in
FY95 outlays.
In his December 5, 1995, testimony before the Committee,
Senator Mark Hatfield, Chairman of the Committee on
Appropriations, stated that non-defense discretionary spending
(the source of most of these grants) represents 18% of the
total Federal budget. He predicted that by the year 2002, this
same category will represent only 13% of the Federal budget.
Two conclusions can be drawn from these figures: (1) State
and local grant recipients continue to be faced with the task
of managing multiple funding streams, each with its own unique
requirements; and (2) the amount of money available to address
the needs for which these grants are targeted is shrinking.
As a result, communities are, more than ever, seeking
efficient and effective means to qualify for, receive, and
implement Federal and other financial assistance programs. As
they seek to integrate multiple funding streams, conflicting
requirements can obstruct potentially productive outcomes. In
its September 7, 1993 report, ``From Red Tape to Results;
Creating a Government that Works Better and Costs Less,'' the
National Performance Review states:
Considered individually, many categorical grant
programs make sense. But together, they often work
against the very purposes for which they were
established * * * Thousands of public employees--at all
levels of government--spend millions of hours writing
regulations, writing and reviewing grant applications,
filling out forms, checking on each other, and avoiding
oversight. In this way, professionals and bureaucrats
siphon money from the program's intended customers:
students, the poor urban residents and others. And
states, and local governments find their money
fragmented into hundreds of tiny pots, each with
different, often contradictory rules, procedures, and
program requirements. (p. 35).
The overly-fragmented nature of the Federal categorical grant
system may not be in the best interests of the individuals it
purports to assist.
In testimony before this Committee, the National Academy of
Public Administration (NAPA) discussed a comprehensive plan of
one community to move welfare recipients to self-sufficiency.
Part of this plan relied indirectly on funding authorized by
the Job Training Partnership Act (JTPA). The JTPA
administration owned computers in a local community college,
and the plan involved training welfare recipients (who were not
JTPA-eligible) on those computers during the evening, when they
would otherwise not be in use. However, JTPA regulation
restricts all use of JTPA resources to JTPA-eligible
individuals. This is but one example among far too many of a
piecemeal approach to a complex problem being derailed by
inflexible restrictions.
As with categorical grants, the characteristics of block
grants can make it more difficult to attain national policy
goals. Block grants, for instance, can also be too restrictive.
They sometimes have too narrow a focus and too many
prescriptive requirements. An analyst for the Center for Budget
and Policy Priorities, quoted in a recent issue of the
periodical ``MBIA Public Policy Issues,'' writes that,
``[f]lexibility and block grants are not synonyms. You can have
an entitlement in which a state has enormous flexibility, and a
block grant program in which a state has very little
flexibility.''
A stark example of the potential inflexibility of block
grants can be seen in the administration of the Community
Development Block Grant (CDBG). According to the 1995 Catalog
of Federal Domestic Assistance, the objective of CDBG is to
``develop viable urban communities, by providing decent housing
and a suitable living environment * * *'' Although it enjoys a
fairly broad purpose, the program has a statutory limit on what
proportion of funds may be spent on public services--no more
than 15%. A grantee in Albany, Georgia, presented a waiver
request to the Community Empowerment Board hoping to use 20% of
its CDBG funds for public services. Albany's request could not
be honored because the 15% cap is a statutory requirement.
Tacoma, Washington, requested permission to use CDBG moneys
to build new housing because existing housing stock was beyond
rehabilitation. Again, this request was denied because of a
statutory restriction banning new home construction.
The Local Empowerment and Flexibility Act would overcome
obstacles like these by combining the flexibility of more
expansive block grants with the accountability of categorical
grants. In the case of the requests in Georgia and Washington
for waivers of CDBG restrictions, for example, this legislation
would enable the Community Empowerment Board to approve a plan
for these waivers and the Secretary of Housing and Urban
Development to grant them under appropriate conditions.
The question is, of course, on whose perspective should be
relied on in adapting Federal financial assistance to the needs
of our citizens. The Committee believes that the best
perspective is that of the individuals who are most directly
affected by the success or failure of programs supported by
federal grants: the providers and recipients of local services.
The specific ideas that derive from firsthand knowledge and
experience at the community level are most likely superior to
even the best generalized strategies that are abstractly
conceived at the national level.
B. Evolution of Intergovernmental Grant Administration
Testimony before this Committee submitted by the Advisory
Commission on Intergovernmental Relations (ACIR) described two
earlier reform efforts which shed light on the purpose of S.
88. The first is the Integrated Grant Administration program of
1972, and the second is the Joint Funding Simplification Act of
1974. Both were attempting to address what, at the time, was
seen as a grave failure in the Federal aid system. However,
long before the 1970's, the categorical grant system was the
subject of much debate.
Nearly 20 years ago, the ACIR issued a report entitled
``Improving Federal Grants Management; The Intergovernmental
Grant System: An Assessment and Proposed Policies'' (February
1977). This was one of several reports which have been released
calling for improvement in our nation's grant system--including
a 1949 Hoover Commission report with a section on Federal-State
relations. While the Local Empowerment and Flexibility Act
addresses a current issue, the issue has been actively
considered for decades. Congress has attempted to address grant
flexibility before, but without success. Legislation in the
late 1960's and early 70's was intended to bring relief to the
headache of grant fragmentation.
In 1968, the Intergovernmental Cooperation Act (P.L. 90-
577) was enacted. It made several improvements to the grant
administration process including improved Federal-State
communication and standardization. Other reforms not included
in the Intergovernmental Cooperation Act were incorporated by
the Office of Management and Budget into the Integrated Grant
Administration Program in 1972. Modernizing the grant
administration process, encouraging greater State involvement
and cutting stifling requirements were at the center of the
program. The Joint Funding Simplification Act of 1974
established in law many of the provisions included in the
Integrated Grant Administration Program. Three years after
passage of even this landmark legislation, in ``Improving
Federal Grants Management,'' ACIR reported that grant
administration faced the same obstacles:
Very little has changed over the years. Even the
extensive reforms initiated in the past decade have not
altered greatly the nature of the complaints. Many of
the fundamental difficulties continue. * * *
Most of the administrative problems associated with
categorical aid arise from the large number of narrow,
distinct programs of assistance--what critics often
call the ``fragmentation'' of Federal aid. Aid
programs, of whatever worth singly, become
objectionable as they proliferate. There are a variety
of complaints: ``red tape,'' ``inflexibility,'' and
others. ``Poor coordination'' is probably the most
common charge.
According to ACIR testimony at the Committee's December 5,
1995 hearing, the Integrated Grant Administration program was
created by the Office of Management and Budget to simplify the
grant process for grantees of more than one Federal assistance
program, so as to coordinate the administration of several
programs as a single project. The ACIR witness stated that when
assessed by OMB and the General Services Administration (GSA),
it was determined that, ``(P)roblems of `turf,' as well as
statutory barriers to program consolidation were seen as
stumbling blocks to agency cooperation.''
However, there was enough success for the House
Subcommittee on Intergovernmental Relations to hold hearings
discussing grant flexibility and specifically, H.R. 11236, the
Joint Funding Simplification Act. Enacted into law in 1974, it
was reauthorized twice before finally being repealed in 1982.
ACIR testified that the act, ``* * * never really got off the
ground.'' A lack of Federal commitment is given as the primary
reason. The Joint Funding Simplification Act authorized Federal
agencies to identify programs suitable for consolidation,
modify requirements and create ``joint management funds'' for
multipurpose projects.
The Intergovernmental Cooperation Act of 1968, Integrated
Grant Administration program of 1972 and the Joint Funding
Simplification Act of 1974 share one thing in common: reliance
on the creativity, resourcefulness and commitment of the
Federal agencies.
Proponents of the Local Empowerment and Flexibility Act
maintain that the role of determining how to consolidate
funding streams most effectively is not best left to the wisdom
of the Federal agencies, the President, or OMB, but to the
State and local grantees. Empowerment at the State and local
level, coupled with a renewed intergovernmental commitment at
the Federal level, is a key ingredient absent in similar reform
measures of the past.
One advance in grant simplification and local flexibility
was actually a management circular (GSA Circular FMC 74-7,
formerly OMB Circular A-102). As reported in ACIR's 1976
report, this circular ``standardized and simplified 15 areas of
grant administration requirements, and placed restraints on
Federal grantor agencies' imposition of `excessive'
requirements.'' (p. 138) Emphasizing performance over process
was one of its major objectives.
An important lesson is to be learned from the experience
various groups had with this and other related circulars. Its
lessons, as stated in the 1976 ACIR report, can be applied
today:
* * * a paramount point that must be understood when
judging experience under the circulars: parties
representing different interests in the grants process
have different kinds of complaints. The public interest
groups stress enforcement failures, whereas Federal
grantor agencies chafe at efforts to standardize or
complain about `unrealistic' interpretations of
circular provisions. This suggests that in the
development of improvements in grant management, the
nature of the grantor-grantee relationship is such that
it will never be possible to completely satisfy both
ends of the grant process. (p. 259)
While the Committee understands that differing experiences
shape perspectives toward S. 88, 20 additional years of
dissatisfaction with the Federal grant process led to a unity
of purpose between the grantor agency and the grantee which was
previously missing. For the most part, grantor agencies would
like the ability to target funds to specialized groups.
Grantees would like it recognized that the way services are
targeted and implemented in one part of the country may differ
from another part of the country.
A series of hearings on Federal grants management reform
before this Committee in 1979 led to unanimous Senate approval
of S. 878, the Federal Assistance Reform Act on December 2,
1980. Grant consolidation was the paramount goal of S. 878.
Like its predecessors, although never enacted into law, S. 878
incorporated consolidation suggestions at the Federal agency
level in order to reform the fragmented system of categorical
grants.
The budget reconciliation in 1993 (P.L. 103-66) created 9
empowerment zones and 95 enterprise communities. In exchange
for a strategic revitalization plan, these distressed
communities could receive tax credits, block grants, and the
removal of some barriers to efficient implementation of Federal
assistance. Waiver requests and strategic plans are reviewed by
the Community Empowerment Board, chaired by the Vice President
and consisting of cabinet and sub-cabinet agencies.
However, some have argued that the program should have
greater waiver authority to afford greater flexibility for
communities. For example, in a letter of December 6, 1995, to
Louisville mayor Jerry Abramson, Assistant HUD Secretary Andrew
Cuomo wrote:
* * * the City of Louisville has asked for 11 waivers
and broad policy changes that the CEB [Community
Empowerment Board] does not have the authority to act
upon because they require statutory changes--meaning
Congress would have to change laws * * * Moreover, the
Administration supports the local Empowerment and
Flexibility Act of 1995. This pending legislation would
permit the CEB to modify statutory requirements which
impede creative solutions to local problems.
C. Flexibility experience and examples
The Clinton Administration has entered into an agreement
that allows Oregon to be exempted from certain regulatory
requirements in exchange for Oregon's commitment to focus its
public resources on a series of planned goals entitled,
``Oregon Benchmarks.'' This agreement has been titled the
``Oregon Option.'' By focusing on specific objectives such as
reducing teen pregnancies or improving immunization rates,
Oregon has begun to highlight regulatory barriers to efficient
intergovernmental service delivery.
Through the establishment of ``The Oregon Option,'' the
State of Oregon has achieved some flexibility with regard to
categorical financial assistance. For example, at one point,
the state was receiving eight different funding streams, each
of which was for enhancing access to immunizations. Each stream
had its own reporting requirements. some required reporting
twice a year, others specified how the money should be spent,
others specified doses. Oregon estimated that it could save
$600,000 in a two-year period if the reporting requirements
could be relaxed. Oregon set a goal to move from a then current
52% child immunization rate to a rate of at least 90% by 1996.
Oregon did see immunization rates improve over 20% as a result
of the added flexibility.
Issues that Oregon would like to address in the future
through the Oregon Option include removing various requirements
that impede comprehensive plans for public assistance. When
Headstart children and non-Headstart are included in the same
program, for example, there is a requirement that food for each
group be stored in separate locations. This is a needlessly
expensive regulation. Also, Oregon recently developed a one-
page form to be filled out by everyone receiving Ryan White
AIDS funds. The Federal government requires a two-page form
with a 17-page set of instructions. Oregon would like to see if
the Oregon Option could provide enough flexibility to defer to
the state form.
The Portland, Oregon, Bureau of Housing and Community
Development expressed interest in applying Community
Development Block Grant dollars to new construction. HUD's HOME
program does allow for new development, but does not begin to
meet the city's need for affordable housing. The city states
that if it were able to integrate HOME and a portion of CDBG
money, a greater number of low and moderate income households
benefitting from these Federal monies would increase. An
Empowerment Zone in Kansas City, Missouri pursued a similar
CDBG waiver but the waiver was denied--because the restriction
is statutory.
The National Conference of State Legislatures has
identified three areas in which it would like to see S. 88 used
to increase flexibility:
1. Pooling of portions of the Drug-Free Schools
education grant (DoED), the Alcohol and Drug Abuse
Block Grant (HHS), and the Office of Juvenile Justice
and Delinquency Prevention grants (DoJ) to create a
targeted anti-drug education program in the public
schools.
2. Pooling various administrative funds for income
support, employment and other social service programs
to create one-stop shops or centralized administrative
functions to streamline overhead.
3. States joining with counties in rural areas to use
portions of the state part of the Community Development
Block Grant program together with DoL job training/
trade adjustment assistance and agriculture retraining
programs to revitalize poor rural communities.
III. COMMITTEE HEARING
At the Committee's hearing on December 5, 1995, Senator
Mark O. Hatfield testified to the need for Federal requirements
to take into account differences found at the State and local
levels:
First as a former governor of Oregon, I experienced
the frustration expressed by many State and local
authorities when Federal policies do not make sense for
their particular communities. Blanket standards from
the Federal government are incapable of taking into
consideration the diversities of each locality.
In expressing concern about the budget deficit, Senator
Hatfield said that fiscal responsibility is contingent upon
both spending cuts and maximizing efficiency. He stated that,
in light of an anticipated reduction in discretionary spending,
the Local Empowerment and Flexibility Act would be an important
tool to optimize the expenditure of federal resources.
Judy A. England-Joseph of the General Accounting Office
(GAO) based her testimony primarily upon the February 1995 GAO
report, ``Community Development: Comprehensive Approaches
Address Multiple Needs but Are Challenging to Implement.'' The
report highlights coordinated efforts to address community
problems: efforts that include citizen participation, technical
support, non-profit involvement and several sources of private,
local, State and Federal financial assistance.
Ms. England-Joseph testified that many experts have
endorsed comprehensive approaches to community needs, but the
GAO report found that many factors hampered success. Community
involvement can be difficult to evoke, and funding streams can
be difficult to manage. Regarding four projects the GAO
examined, she stated:
Overall, the organizations relied on public funding--
for 30-60 percent of their budgets. After obtaining
funds, the organizations faced the challenge of
concurrently managing multiple programs, each with
several separate funding sources; application
requirements; and reporting expectations.
She testified to a traditional lack of coordination among
Federal departments with regard to administering Federal
financial assistance programs. A lack of coordination at the
Federal level has led to increasing burdens on local grantees,
she said.
Ms. England-Joseph's concerns with the legislation include
the need to process waiver requests in a timely manner, monitor
requests that cut across federal agencies, build strong
accountability into the programs included in a flexibility
plan, and determine the resources available to implement S. 88.
John A. Koskinen, Deputy Director for Management, Office of
Management and Budget, testified regarding the Clinton
Administration's support of flexibility in federal funding,
particularly through the efforts of its National Performance
Review. Mr. Koskinen stated that:
While the Administration's efforts to promote
flexibility have proven to be a strong beginning to
devolving power to the local level, they are not
complete answers to the problem. For Federal grant
programs to work, we believe strongly that the
Executive Branch agencies must have the flexibility to
waive statutes and remove barriers that interfere with
communities trying to improve their economic and social
conditions.
He added, however, that the Administration could not
support the bill without changes that include extending review
periods, allowing States to submit plans, excluding certain
statutes, utilizing the Community Empowerment Board, and
ensuring all waiver authority is kept within Federal agencies.
Subsequent to the hearing, Mr. Koskinen asked the
President's Council on Integrity and Efficiency to review the
Administration's redline draft of amendments to S. 88 as
originally introduced. This critique is included in this report
at the request of Senator Glenn. While it is not a critique of
the reported legislation, which is significantly different from
the redline amendments and the original S. 88, it does address
concerns regarding financial management issues involve in local
flexibility.
Susan A. Cameron of the Tillamook County Health Department
testified about her county's and Oregon's recent experiments
with results-driven programs. She stated that in Oregon:
We talk about results: literacy--not dollars spent
for schools or student-teacher ratios; reduced crime--
not prison beds; reduced teen pregnancy rates--not
contraceptives delivered. We talk about accountability
for results and the key idea here is that by being
accountable for results we should not have to face the
red tape and micro-management often imposed by
government when results are vague or completely
invisible.
She offered a recent example that was inspired by a State
program called Oregon Benchmarks. The county had a teen
pregnancy rate of 24 per thousand and wanted to achieve the
Oregon Benchmark of 9 per thousand. To do so, the health
department brought together churches, schools, health clinics
and other interest groups to develop a comprehensive approach.
She testified that such collaboration is also needed among the
variety of federal programs in which the county participates.
Scott Fosler, President of the National Academy of Public
Administration, testified that ``[t]he federal categorical
grants system has grown topsy.'' He cited the 1995 Advisory
Commission on Intergovernmental Relations report which counted
618 categorical programs available to state and local
governments, including 110 education program, over 100 health
care grant programs, 82 social service grant programs and close
to 30 grant programs dealing with community and regional
development. He acknowledged the need for flexibility in the
grant system, saying:
To achieve the highest level of performance, we
should create systems that are capable of continuous
learning and adjustment. Prescriptive systems place too
much emphasis on outmoded ``command-and-control''
models and too little emphasis on flexibility with
accountability for meeting ambitious performance goals
and cross-cutting needs.
Charles Griffiths, Director of Intergovernmental Liaison
for the Advisory Commission on Intergovernmental Relations,
testified on the history of flexibility programs. He enumerated
four ingredients to successful federal aid reforms: holistic
rather than partial solutions, sufficient commitment of time to
allow reform to succeed, flexibility, and avoiding excessive
complexity. He said the Local Empowerment and Flexibility Act
was an opportunity to build on past mistakes.
Among other recommendations, he suggested that S. 88 be
changed to allow for the integration of State and federal
funding streams, include regional governments as eligible
applicants, and allow a flexibility plan to suffice for
individual program applications.
IV. Legislative History
103d Congress
On August 4, 1993, Congressman John Conyers (D-MI)
introduced the Local Flexibility Act of 1993, contain
provisions similar to S. 88. Funding in the areas of health,
nutrition, education, housing, job training and social services
would have been eligible to receive waivers from Federal
statutory and regulatory requirements applicable to these
particular grants. A hearing was held on October 13, 1993, by
the Human Resources and Intergovernmental Affairs Subcommittee
of the House Committee on Government Operations. No further
action occurred on the bill.
On March 16, 1993, the Senate included as part of the S. 4,
the ``National Competitiveness Act of 1993'', and amendment
offered by Senator Hatfield that was similar to Congressman
Conyers's bill. It would have given certain local governments
the opportunity to submit plans requesting flexibility for the
purpose of integrating Federal funds. The amendment passed by a
vote of 100-0, but the underlying legislation was not reported
out of conference.
Congress did allow a great deal of flexibility in the use
of Federal education funds by enacting ``Ed-Flex'', legislation
sponsored by Senator Hatfield. Reauthorization of the
Elementary and Secondary Education Act (P.L. 103-227) permits a
limited number of States, school districts and schools to seek
and obtain the waiver of statutory and regulatory requirements
of certain Federal educational programs, if the waiver is
expected to help improve school effectiveness and academic
achievement. This legislation passed 97-0.
104th Congress
On January 4, 1995, ``The Local Empowerment and Flexibility
Act of 1995'' (S. 88) was introduced by Senator Hatfield, and
cosponsored by Senator Inhofe. It was referred to the Committee
on Governmental Affairs.
On December 5, 1995, the Committee held a hearing on the
bill. The witnesses at the hearing were:
The Honorable Mark O. Hatfield, U.S. Senate;
Ms. Judy A. England-Joseph, Director, Housing and
Community Development, General Accounting Office;
The Honorable John A. Koskinen, Deputy Director for
Management, Office of Management and Budget;
Ms. Susan A. Cameron, Administrator, Tillamook County
Health Department, Tillamook, Oregon;
The Honorable Gail Phillips, Speaker, Alaska House of
Representatives;
Mr. Scott Fosler, President, National Academy of
Public Administration; and
Mr. Charles Griffiths, Director, Intergovernmental
Liaison, Advisory Commission on Intergovernmental
Relations.
On May 16, 1996, the Committee marked up S. 88. Chairman
Stevens offered an amendment in the nature of a substitute, on
behalf of Senator Hatfield, which was adopted by voice vote.
The Committee also adopted by voice vote an amendment by
Senator Akaka, providing that applications for Federal grants
and contracts shall be deemed filed as of the date of postmark.
An Amendment by Senator Levin prohibiting the waiver of
statutory requirements that protect public health, safety and
the environment was tabled by a vote of 5-4, upon a motion by
Chairman Stevens. An amendment by Senator Levin limiting the
commingling of funds among categorical grant programs was also
tabled, by a vote of 6-5, upon a motion by Chairman Stevens.
The Committee then voted to report S. 88 as amended by a vote
of 8-1, with Senators Stevens, Roth, Thompson, Smith, Brown,
Levin, Lieberman, and Akaka voting ``aye'', and Senator Glenn
voting ``no''.
V. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section provides that the Act be cited as the ``Local
Empowerment and Flexibility Act of 1996.''
Section 2. Findings
The current Federal Categorical grant system is focused on
providing financial assistance for targeted needs with numerous
restrictions on how such assistance may be used. These
restrictions ignore the different needs of different
communities and often impede innovative programs for addressing
these needs at the local level. It is ever more critical,
however, that Federal funds promote cooperation, flexibility,
and innovation among all levels of government as well as among
private and public organizations in order to optimize the
attainment of national policy goals.
Section 3. Purposes
The purposes of the Act include (1) enabling the more
efficient and effective use of government resources, (2) de-
emphasizing compliance with federal procedural requirements and
instead emphasizing the successful achievement of policy goals,
(3) enabling State and local governments to adapt Federal
programs to their particular needs, and (4) facilitating
cooperation between government entities and private, non-profit
organizations.
Section 4. Definitions
This section defines terms used throughout the bill.
Subsection (1) defines an ``approved flexibility plan'' as
a plan or part thereof that has been approved by the Community
Empowerment Board under Section 8.
Subsection (2) defines ``Board'' as the Community
Empowerment Board established under Section 5.
Subsection (3) defines ``Director'' as the Director of the
Office of Management and Budget.
Subsection (4) defines an ``eligible applicant'' as a
State, local or tribal government, qualified organization, or
qualified consortium eligible to receive financial assistance
under at least one eligible Federal financial assistance
program (as defined under subsection (5)).
Subsection (5) defines an ``eligible Federal financial
assistance program'' as a domestic assistance program defined
under section 6101(4) of title 31 U.S.C. under which financial
assistance is available either directly or indirectly to an
eligible applicant.
This does not include Federal programs of direct financial
assistance to an individual or to a State in order to provide
financial assistance directly to an individual, as in
entitlement spending.
Subsection (6) defines an ``Empowerment Zone-Eligible
Area'' as any area nominated for designation in 1994 under the
Empowerment Zones and Enterprise Communities Act ruled as
meeting the technical eligibility standards established for
that Federal policy.
Subsection (7) defines a ``flexibility plan'' as a
comprehensive plan or part thereof for the integration and
administration by an eligible applicant of financial assistance
under two or more eligible Federal financial assistance
programs.
Subsection (8) defines ``local government'' as a political
subdivision of a State that is a unit of general local
government as defined under section 6501 of title 31, U.S.C.,
or any combination of such political subdivisions. This term
includes local education agencies.
Subsection (9) defines a ``qualified consortium'' as a
group comprising two or more qualified organizations or State,
local or tribal agencies that receive Federally appropriated
funds.
Subsection (10) defines a `'qualified organization'' as a
private, nonprofit organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986 that is exempt from
taxation under section 501(a) of the Internal Revenue Code of
1986.
Subsection (11) defines ``small government'' as any small
governmental jurisdiction defined in section 601(5) of Title 5,
U.S.C., and tribal governments.
Subsection (12) defines ``State'' as any of the 50 states
or the District of Columbia, Puerto Rico, American Samoa, Guam
or the Virgin Islands.
Subsection (13) defines a ``State legislative official'' as
the majority or minority leader of a chamber of a State
legislature.
Subsection (14) defines ``tribal government'' as the
governing entity of an Indian tribe as defined in the Federally
Recognized Tribe List Act of 1994.
Section 5. Establishment of Community Empowerment Board
The Community Empowerment Board is a council of Cabinet
secretaries and agency heads with a Chair chosen by the
President from among its members. The Board is a forum for
receiving, reviewing, evaluating, and approving flexibility
plans.
Subsection 5(c) describes the functions of the Board. It is
responsible for receiving, reviewing and approving or
disapproving flexibility plans. The Board is the point of
contact for flexibility plan applicants and may direct agencies
to provide, when necessary, technical assistance to applicants.
Along with the Director of OMB, the Board shall monitor the
progress of flexibility plans. This section also provides for
certain regulations to be reviewed and, if needed, revised.
The Board shall evaluate the performance standards and
evaluation criteria of Federal financial assistance programs in
order to establish specific performance and outcome measures to
compare and evaluate the success of the programs and the
success of flexibility plans.
Section 5(d) directs the Director of OMB, working with the
Board, to assist Federal agencies in simplifying the grant
application progress.
Section 6. Application for approval of flexibility plan
Section 6(a) states that an eligible applicant that crafted
a flexibility plan may submit the plan to the Board for review.
In Section 6(b), the contents of an application for
approval of a flexibility plan are described. It must include
written certification from the chief executive of the applicant
that the applicant has the ability, authority, and resources to
implement the proposed flexibility plan. The Board may request
any additional assurances, beyond written certification, that
the applicant possesses such ability, authority and resources.
Written certification is required to help ensure that an entity
does not use S. 88 to supersede another entity's jurisdiction
over eligible Federal financial assistance programs.
The Governor, affected State agencies, State legislature
and other chief executives of affected local or tribal
governments shall have been given opportunities to comment on
the plan and these comments are to be included for the Board to
review. If the applicant responds to these comments, the
responses shall be included in the application.
Written documentation of significant public input must be
included in the plan. Public input shall include comments by
those directly affected by the plan, such as its intended
beneficiaries.
The Board may require any other information necessary.
Section 6(c) describes the contents of the flexibility
plan. Whom the plan will serve, for how long and where must all
be included in the plan. Since the goal a S. 88 is to improve
service delivery, the applicant must lay out the goals and
criteria it will use to measure the flexibility plan's ultimate
performance. If the State has already documented a set of
goals, these must be included in the plan as well as how the
plan can achieve the State goals. Methods to measure
performance and collect and maintain data are to be included.
The plan must explain who is eligible for benefits and
what, exactly, those benefits are. The Board may require any
other descriptive information it needs to approve a plan. The
plan shall also describe the statutory goals and purposes of
each Federal financial assistance program included in the plan.
If, in order to implement a plan, a statutory or regulatory
requirement must be waived, the applicant must list what
waivers are necessary and why. S. 88 provides no authority for
the waiver of State or local requirements. However, if a State
or local waiver is needed to implement a plan, that waiver
shall be included along with a commitment to grant the waiver
from the appropriate State or local entity.
Fiscal control and accountability provisions must be
included to the satisfaction of the Board along with a
description of all non-federal funds needed to carry out the
eligible Federal financial assistance programs included in the
plan.
Section 6(d) spells out the application procedures. The
application (which includes the plan) must be sent to each
State and local government directly affected by the plan at
least 60 days before submitting the plan to the Board. After
the Governor, affected State agency head, State legislature and
local chief executive have a chance to review the plan, they
may within 60 days of receipt, prepare comments, grant or make
commitments to grant State or local waiver requests, and submit
these comments and commitments back to the applicant. The
applicant may then submit the plan to the Board with any
changes it deems necessary based on this response.
Section 6(e) ensures maintenance of the current tribal-
Federal relationship.
Section 6(f) ensures that disapproval of a plan by the
Board does not affect the eligibility of an applicant to
receive federal grants.
Section 6(g) explains that S. 88 may not, in any way,
preempt or supersede State or local law. Current programs
established to administer Federal financial assistance at the
State or local level may not be altered using S. 88 unless
authorized by the entity with jurisdiction over those programs.
If a local school district applies for approval of a
flexibility plan to alter that district's fiscal relationship
with the State education agency, that plan cannot be approved
unless the State education agency approves. If a Governor
submits a flexibility plan which alters the manner in which a
city implements Federal financial assistance of which the city
is a grantee, that plan is not eligible for approval unless the
city agrees.
Section 7. Review and approval of flexibility plans and waiver requests
Section 7(a) states that regardless of how many plans the
Board receives each year, it is required to review only the
first fifty. This allows the possibility that at least one plan
from each State may be reviewed.
Priority is given to Empowerment zone eligible areas
because they have some experience in addressing complex
community needs with comprehensive assistance. The Board shall
also give priority consideration to plans that exhibit
significant State and local support, as indicated by State or
local waivers already included in the plan. The Board may
establish any additional criteria to use to review
applications.
Section 7(b) ensures that an applicant be notified, in
writing, of the Board's receipt of an application for approval.
The Board then has 120 days to approve and disapprove of a plan
unless either the Board requires more information or the
applicant requests additional time to modify its application.
The Board must notify an applicant in writing of its decision
within 15 days of approving or disapproving an application and
must include any reasons for disapproving the application
therein.
Section 7(c) describes the conditions for approval of a
flexibility plan. The Board may approve an application if the
plan improves ``* * * the effectiveness and efficiency of
providing benefits under eligible Federal financial assistance
programs included in the plan * * *'' This provision requires
that the benefits a Federal financial assistance plan provides
prior to a flexibility plan continue to be provided.
Similarly, the Board shall approve a plan if it determines
that the services provided by the eligible Federal financial
assistance programs of the plan, prior to the plan's approval,
would be improved by implementation of the flexibility plan.
Before approval, the applicant shall have considered the effect
implementation of the plan will have on programs not included
in the plan.
To secure Board approval, eligible applicants also must
have developed or be developing data bases, planning, and
evaluation processes for determining whether the implementation
of the plan has been successful. If a plan does not describe
how performance is to be measured, the plan will not be
approved. The goals and purposes of each Federal financial
assistance program included in the plan must be retained as a
condition of plan approval.
The Board may not approve plans that increase spending or
provide assistance to a qualified organization without its
express consent. The Board shall determine how long a plan is
effective, but in no case can such a determination be for a
period exceeding five years.
Finally, if the Board has received at least a commitment to
grant all necessary State or local waivers, and if grant funds
are not used to supplant non-Federal funds or to meet
maintenance-of-effort requirements, a plan may be approved.
Section 7(d) describes the Memoranda of Understanding that
must be reached before final approval of a plan. The applicant
and Board must reach agreement as to the contents of the plan,
the waivers being granted (if any) by the agency head, the
State, local or tribal requirements (if any) being waived, the
total amount of funds provided in the grants the plan includes,
and the criteria upon which the plan will be evaluated.
Section 7(e) discusses the limits on confidentiality
requirements required by the plan. The Board may not impede the
exchange of information needed for the design of or provision
of benefits provided under the plan.
Section 7(f) explains the waiver requirement process. For
purposes of this Act, only statutes that establish Federal
financial assistance programs may be considered for waivers.
Non-grant, or cross-cutting statutes that, by their very nature
affect every Federal financial assistance program, are exempt
from being waived under this Act. The scope of S. 88 is limited
to allow only for the waiver of Federal statutory and
regulatory requirements that are solely part of Federal
financial assistance programs.
If the waiver is necessary for implementation of the plan
and the Board has not disapproved the waiver, the waiver may be
granted by the Federal agency head with jurisdiction over the
program. The duration of the waiver may be established by the
affected agency head.
Waivers may never be granted for requirements that enforce
any Constitutionally, or certain statutorily, secured rights.
Section 8. Implementation of approved flexibility plans
Section 8(a) states that benefits provided by eligible
financial assistance programs in approved plans must be
implemented in accordance with the plan.
Section 8(b) allows the head of Federal agencies to provide
special assistance to support the implementation of a
flexibility plan.
Section 8(c) requires that applicants submit reports and
cooperate in audits of the approved flexibility plan. Approved
applicants must periodically evaluate the plan and its effects
on individuals who receive benefits under the plan, communities
in which those individuals live, and the costs of administering
the Federal financial assistance programs included in the plan.
A report is required shortly after the end of the plan's first
effective year to evaluate the plan and compare its
implementation with criteria included in the contents of the
plan.
The Board shall terminate the plan if its goals are not or
likely will not be met, the approved applicant cannot meet the
necessary commitments, or fraud and/or abuse has been detected.
Similarly, waivers may be revoked if the necessary waiver
criteria are not met or the plan is terminated. In either case,
written notice of revocation must occur.
Section 8(d) requires that a final report be prepared by
the approved applicant to evaluate the successes and
shortcomings of the plan and describe its effect on the
individuals who received benefits under the plan.
Section 8(e) ties the waiver of provisions of grant
agreements to the availability of funds.
Section 9. Technical and other assistance
Section 9(a) authorizes the Board to provide or direct the
provision of technical assistance for the development, design
or implementation of a flexibility plan. Applicants must
describe the flexibility plan being developed and make several
additional assurances to the Board.
Section 9(b) allows special assistance to be provided to
small governments which may lack the resources of larger
communities to create a flexibility plan.
Section 9 (c) and (d) allow Federal agencies to detail or
assign staff to the Board as well as utilize interagency
financing for the purposes of this Act.
Section 10. Reports by Board; Director
Section 10(a) requires the Board to submit to the President
and Congress a list of all statutory and regulatory
requirements which are most frequently waived.
Section 10(b) requires that after repeal of this act, the
Director report on the progress of the responsibilities it was
given in section 5(d) regarding reporting simplification.
Section 10(c) directs the Board, in consultation with the
Director and Federal agencies to report on the effectiveness of
flexibility plans.
Section 11. Repeal
Section 11(a) repeals this bill on September 30, 2001.
Section 11(b) states that after this Act is repealed, its
provisions shall still apply to any plan in effect at that
time.
Section 12. Delivery date of Federal contract, grant, and assistance
applications
Section 12 provides that the Director of OMB shall direct
all Federal agencies to develop policies that deem the postmark
date of applications for Federal contracts, grants, and other
assistance to be the date of application.
vi. regulatory impact of legislation
Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee has
considered the regulatory impact of S. 88. The legislation is
designed to reduce the effect of certain types of Federal
regulations on State and local governments and will have no
adverse impact on the public:
(1) Regulatory Impact--The legislation will impose no
regulations on individuals or businesses;
(2) Economic Impact--The legislation will have no
economic impact on individuals or businesses;
(3) Privacy Impact--The legislation will have no
privacy impact on individuals; and
(4) Paperwork Impact--The legislation does not
require the creation of any additional paperwork from
regulations promulgated pursuant to its provisions.
vii. cost estimate of legislation
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 30, 1996.
Hon. Ted Stevens,
Chairman, Committee on Governmental Affairs, U.S. Senate, Washington,
DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 88, the Local Empowerment and Flexibility Act of
1996, as ordered reported by the Senate Committee on
Governmental Affairs on May 16, 1996. We estimate the enacting
S. 88 would increase the cost to the federal government to
review state and local plans for integrating federal and
nonfederal programs and funding. Depending on the number and
complexity of these plans, the additional cost could be
significant; however, we are unable to estimate the extent of
the increase. Any increase in federal spending would be subject
to the availability of appropriated funds. Because the bill
would not affect direct spending or receipts, pay-as-you-go
procedures would not apply.
Bill purpose. S. 88 would statutorily establish the
Community Empowerment Board; it would be comprised of the heads
of 19 departments and agencies. (The Board has already been
created by the President; S. 88 would require its existence by
statute, and would broaden its role.) The Board would approve
or disapprove state and local plans to integrate and administer
federal and nonfederal programs for a period of up to five
years. S. 88 would prohibit the Board from approving any plan
that would result in an increase in federal spending. The bill
and its provisions would terminate on September 30, 2001.
As part of its plan, a state or locality could request that
an agency waive the requirements of a federal statute or
regulation, thus potentially reducing a regulatory burden while
enhancing its flexibility in administering the consolidated
programs. Agencies would have the authority under S. 88 to
waive any requirement that does not serve to enforce a
constitutional or civil right.
Federal budgetary impact. The President established the
Community Empowerment Board to assist with the implementation
of the Empowerment Zone and Enterprise Communities program
included in the 1993 Omnibus Budget Reconciliation Act (OBRA).
S. 88 would broaden the Board's role and authority to include
proposals to integrate programs in areas other than community
development and allow for the waiver of certain statutory
requirements.
Because the Board could not approve a plan that would
increase federal spending, S. 88 would not affect direct
spending. However, by significantly expanding both the Board's
authority and the number of potential petitioners--the Office
of Management and Budget estimates that about 19,000 local
communities would be eligible--the bill would increase the
costs to the federal government of reviewing plans submitted by
state and local governments. In the budget submitted for fiscal
year 1997, the President requested $1 million for the Board;
that amount would provide the funding for a staff of eight
full-time employees.
Because CBO cannot predict the number of additional plans
that would be submitted for review, or the amount of additional
time needed to review requests for waivers from existing
statutes, we are unable to estimate the extent that costs would
increase under S. 88. Based on the prior experience of the
Community Empowerment Board, we expect that for some agencies,
such as the Departments of Housing and Urban Development and
Health and Human Services, the additional costs could be
significant.
S. 88 also could result in some savings in administrative
costs to the federal government. Enacting the bill encourage
communities to consolidate their efforts related to multiple
federal programs. As a result, having the state or local
government primarily responsible for monitoring and
administering the consolidated program could reduce the need
for some federal administrative activities. But because we do
not know the type or number of plans that would be approved
under S. 88, we cannot estimate the extent of such potential
savings.
Finally, S. 88 also would require that agencies accept
applications for federal contracts, grants, and other
assistance that are postmarked by the application deadline.
Currently, some agencies refuse to accept applications received
beyond this date. Because the provision would only affect the
procedure by which some agencies allocate these funds and not
the amount spent, CBO estimates that it would result in no
significant cost to the federal government.
In sum, we expect that costs would increase under S. 88,
but at this time, CBO cannot estimate the likely level of the
net increase. Funds for any increase would be subject to the
availability of appropriations.
Mandates statement. S. 88 contains no intergovernmental or
private-sector mandates as defined in Public Law 104-4, and
would impose no direct costs on state, local, or tribal
governments. The bill would provide these governments with
additional flexibility in using and consolidating federal
financial assistance. Such flexibility could lead to
significant savings in the administration of some federal grant
programs.
Previous CBO estimate. On May 17, 1996, CBO prepared a cost
estimate for H.R. 2086, the Local Empowerment and Flexibility
Act of 1996, as ordered reported by the House Committee on
Government Reform and Oversight on April 24, 1996. The bills
are very similar, and this estimate is nearly identical to the
estimate provided for H.R. 2086.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are John R.
Righter, for the federal costs, and Theresa Gullo, for the
state and local costs.
Sincerely,
June E. O'Neill, Director.
VIII. ADDITIONAL VIEWS OF SENATOR CARL LEVIN ON S. 88
The purpose of S. 88 is a sound one--to make the hundreds
of federal categorical grant programs which we now have more
responsive to the needs and unique characteristics of the
communities they are intended to serve. We know that from
Washington, we cannot address or anticipate all the
peculiarities found in the various regions of this great
country or even the differences between towns just 15 miles
apart. We create federal programs to meet real needs, but we
know those needs are not the same across-the-board. Lansing,
Michigan, may have a problem with teens in junior high school;
Grand Rapids, Michigan, may be having a more serious problem
with high school students. A federal program for at-risk youth
may be structured in a way to prevent either city from
targeting their grant funds in the way that makes the most
sense. The restrictions we set in our federal programs can
defeat the very purpose of the programs when faced with the
unique features of a local community.
This bill is intended to get around some of those problems
without destroying the important controls we've placed on the
use of federal taxpayer monies. As trustees of the federal
taxpayer dollar, we simply can't give away federal funds
without controls. So we establish programs that have specific
purposes, strict limits on how federal funds can be used,
federal standards that must be met, and auditing and oversight
requirements to avoid waste or fraud. The restrictions are not
imposed to make the work of local communities harder, though
they may have that effect; they're required because we are
trying to be responsible with the taxpayer money we are
spending.
Although the motive for these requirements is a good one,
the outcome can often be frustrating and self-defeating. This
is particularly true, now that there are over 600 categorical
grant programs and any one local community may be administering
several such programs, with similar goals but different
requirements. That's where this bill comes in. It is an attempt
to allow local communities participating in several federal
categorical grant programs to make the best use of federal
taxpayer dollars by consolidating administration and
coordinating service delivery where appropriate.
S. 88, if appropriately amended, would not turn categorical
grant programs into block grants or strip away important
restrictions in categorical grant programs in a wholesale
manner. Rather it is an attempt to allow communities to develop
a plan for the more effective administration of the relevant
categorical grant programs they want to coordinate, identify
the specific problems they have with specific categorical grant
programs in implementing that plan, and then seek from the
appropriate federal agencies waivers of specific regulatory or
statutory provisions that would obstruct the implementation of
the plan.
Because I support the goal of this legislation, and because
as reported by the committee, the waiver authority is limited
to the statutory and regulatory requirements of just the
categorical grant programs themselves, I voted to report S. 88
to the full Senate. However, I also stated at the time that I
could not support its passage in the Senate if several issues
were not addressed. I offered amendments on two of these issues
in Committee but those amendments were tabled.
There are eight outstanding issues that the bill as
reported fails to address and which I believe are essential
before I can support the bill's passage on the floor. I hope
the sponsors of this bill will incorporate these amendments
before the bill is presented to the full Senate. They are as
follows:
1. Clarification that environmental, labor, public
health or safety standards within a categorical grant
program are not subject to waiver.--While the scope of
the statutory waiver in the bill as reported is limited
to just the provisions of the categorical grant
programs themselves, many of the categorical grant
statutes also have important environmental, labor and
public health or safety protections in them that
shouldn't be waived. For example, there are numerous
categorical grant programs embodied in the Clean Air
Act, and under the bill as reported, any provision of
the Clean Air Act could possibly be waived. We need to
be clear that the standards applicable to grant
programs, either because they are in the grant statute
or incorporated by reference, are not waivable.
2. Clarification of the role of the Board and the
agency heads.--Statutory and regulatory waivers should
be approvable only by the head of the agency with
jurisdiction over the relevant categorical grant
program. Similarly, the relevant agency head should be
able to revoke any waivers and should be the party to
enter into the Memorandum of Understanding with the
plan participants. These responsibilities should not
lie with the Community Empowerment Board.
3. No judicial review of any action by the Board.--
The Community Empowerment Board is an interagency body
that serves largely in a coordinating capacity. It
would be inappropriate to have the work of the Board
subject to judicial review. Any judicial review
provisions under the categorical grant programs,
themselves, should remain unaffected.
4. No plan approval if it would result in the use of
funds of a categorical grant program in a manner
inconsistent with the goals or purposes of that
program.--This is a very important requirement. Limited
use of funds between or among categorical grant
programs with similar goals and purposes should be
permitted, but the bill should clearly prohibit the use
of funds for a purpose not in accordance with the
purposes of the categorical grant program. For example,
grant money for an immunization program should not be
able to be used for job training. Local flexibility
should not be an excuse for ignoring or defecting the
federal purpose of these categorical grant programs. In
addition, the bill as reported suggests that the
commingling of funds between or among categorical grant
programs is a precondition or requirement for plan
approval. Not every plan may require such a combination
of funds, and it shouldn't, therefore, be suggested
that it is a necessary element of a flexibility plan.
5. Improving the process for the approval of plans
and resolving the number of plans subject to
approval.--The bill as reported would require a minimum
of 50 plans to be reviewed by the Board each of the 5
years of the statute. A plan could be approved in the
5th year and allowed to continue for an additional 5
years although the statute itself, including the
provisions for evaluation of the plans, would have
expired. A better approach would be to use the first
two years of the five year life of the statute for the
purpose of preparing, reviewing and approving and
unlimited number of flexibility plans, and having a
deadline by which the approved plans are put in effect
for three to five years and then evaluated at the end
of that period.
6. Identify current beneficiaries of categorical
grant programs included in the flexibility plan and the
future beneficiaries if the plan were implemented.--
Each plan should be required to identify the current
beneficiaries of the categorical grant programs
included in the plan, how they will be affected by the
plan, and any new beneficiaries anticipated because of
the plan.
7. A requirement that the plan meet the goals and
purposes of the categorical grant programs contained in
the plan.--Similar to the concern in number 5, above,
an applicant for a flexibility plan should be required
to show that the plan will continue to meet the goals
and purposes of the categorical grant programs
addressed in the plan in a more efficient and effective
way.
8. Some guarantee that the state and local entities
currently involved in each of the categorical grant
program in the plan will continue to serve in the same
capacity under the plan, unless each such entity agrees
to the change proposed in the plan.--States should not
be able to use a plan to usurp a previous funding
source for local community, and a local community
should not be able to change the role of the State,
unless the parties agree to that.
The goal of flexibility in the administration of federal
categorical grant programs is a worthy one. S. 88 is on the
right track to create a demonstration program that could make
that goal a reality. With a number of important changes, I
could support this legislation on the floor of the Senate.
Carl Levin.
IX. MINORITY VIEWS OF SENATOR GLENN ON STEVENS SUBSTITUTE TO S. 88
I cannot support the legislation in its current form. While
the bill incorporates a number of changes that have been
negotiated in a bi-partisan fashion prior to markup, its scope
remains too broad and its ultimate impact largely unknown.
Furthermore, it contradicts the notion of legislative
accountability in our system of government by delegating
authority to the Executive Branch to waive many of our laws
without Congressional approval. This broad shift of authority
to the Executive disrupts the delicate balance of power
intended by our Founding Fathers between the three branches of
government. There are other problems with the legislation, but
this one is the most serious.
I would like to support a bill providing greater State and
local flexibility in the administration of intergovernmental
grant programs. We clearly have too many categorical grant
programs carrying too much redtape. This redtape combined with
the ``stovepipe'' approach by which many of these programs
operate makes it difficult to coordinate the delivery of
services at all levels of government. An accountable, well-
implemented waiver process could improve the administration of
many grant programs as well as encourage innovation in the
delivery of essential public services. However, the waiver
process envisioned by this legislation should be tested first
before being implemented on a more widespread basis.
This is sweeping legislation. It covers hundreds of grant
programs; dozens of laws; and billions of taxpayer dollars. In
an effort to reduce ``one-size-fits-all'' Federal program and
grant requirements, it establishes a generic, ``one-size-fits-
all'' Federal waiver process for all these different programs
and laws without adequate understanding of how they will be
affected by such a process. It is not surprising that we have
such a limited understanding of the bill; we had only one
hearing and we did not hear from a broad range of views at that
hearing. Given its broad scope, I don't think we have truly
explored what the impact of the bill might be, even with the
changes that we have negotiated and incorporated in the
substitute.
My preference would be to enact this legislation on a pilot
basis. We have over 600 different Federal grant programs to
State and local governments, many of which have similar
purposes but also contain conflicting and overlapping
requirements that make program implementation in an integrated
or coordinated way difficult. So the bill's goal of providing
flexibility in order to improve performance in the delivery of
services at the State and local level is a salutary one.
However, rather than tackle the entire intergovernmental grant
system at once, we should focus the scope of the bill on
specific programmatic areas where grant flexibility is most
needed. For example, housing and job training are two areas
most frequently cited by State and local officials as being too
numerous in number of grant programs and overly riddled with
redtape. Bi-partisan proposals to consolidate and streamline
grant programs in these areas have made significant progress
toward enactment in this Congress. The Clinton Administration
has also pushed for greater grant flexibility and
consolidation, approving over 500 regulatory waivers in its
Empowerment Zone/Empowerment Community program and proposing to
consolidate 271 grant programs into 27 performance
partnerships. Therefore, it seems logical that we focus the
bill on these programmatic areas where there is strong
consensus in the Administration, the Congress, and at the State
and local level for greater flexibility, rather than trying to
bite the whole apple all at once. We might also explore ways to
make this bill more of a pilot by narrowing the window of
opportunity during which plans may be submitted and sunsetting
both the plans and the legislation by 2002. Currently, this
bill operates on a 10 year horizon since 5 year plans can still
be approved in the 5th year of the bill.
Section 7(f)(3) is the only section in the bill that
attempts to limit the scope of the bill. It is does this by
prohibiting Federal agencies from approving flexibility plans
that would waive civil rights or disabled rights laws. However,
the bill does not exempt laws protecting the environment,
public health and safety, and labor standards as has been
proposed by the Administration, Senator Levin and myself.
Advocates of the Hatfield bill have suggested that these laws
are cross-cutting in nature and therefore not affected by the
bill since the bill only applies to grant requirements. But I'm
not confident that this is the case, especially since an
amendment to make those exemptions explicit was rejected by the
Majority in Committee markup in a 5 to 4 vote. Such exemptions
are needed and important. For example, in environmental
programs we provide grants to States and localities for
wastewater treatment, for solid waste disposal, and for
underground storage tank cleanup. It is my understanding that
there are certain minimum public health and environmental
standards that the grant recipients are required to follow in
order to receive funding. Those standards could potentially be
waived under flexibility plans authorized by this bill. In the
area of public safety, we have certain requirements for States
and localities to implement seat belt laws or drunk driving
laws as a condition of receiving Federal highway dollars. While
greater flexibility for State and local use of Federal
transportation funds may be desirable in order to better meet
local transportation needs, do we want to set up a process, for
example, whereby structural safety requirements for bridge or
airport construction can be waived? I think not.
Furthermore, the bill is unclear as to whether it would
allow agencies to approve the use of vouchers in existing grant
programs when approving any flexibility plan that requested
such a conversion. Clearly, the purposes of the bill emphasize
flexibility in the administration of Federal grant programs,
but that flexibility is so broadly construed as to provide
substantial leeway to Federal agencies and the Board in
reconfiguring those programs. For example, it is conceivable,
under the authorities of this legislation, that the Department
of Education could approve a flexibility plan that utilizes
Federal education monies for private school vouchers, even
though Federal law currently prohibits such use. This is an
issue of considerable debate and controversy and should be kept
separate from this legislation.
I do not think that Senator Hatfield intends for the kind
of waivers I just described to go through, nor do I think that
most state and local governments would propose these kind of
waivers. Still, when we write legislation, we always have to
look out for the law of unintended consequences and to examine
how to preclude worst-case scenarios from occurring. That
brings me to my other area of major concern: accountability.
In our system of government, the Congress is responsible
for enacting our laws and the Executive Branch is responsible
for implementing them. Those decisions are accountable, either
indirectly through public election of the officials responsible
for making them, or more directly through oversight by the
judiciary. Accountability is shared by each of the three
branches of government through a system of checks and balances.
Under this bill, accountability is transferred from the
Congress to the Executive Branch through a substantial shift in
the delegation of power. The Executive Branch would be granted
the authority to waive numerous Federal laws without any
opportunity for Congress to review those decisions. I had
proposed that any statutory waivers approved by the Executive
Branch must be ratified by the Congress through a ``fast-
track'' legislative process. Unfortunately, this proposal was
rejected, although I maintain that it is still relevant,
particularly if the bill retains its broad scope.
The bill is silent on the issue of accountability through
judicial review and the bill advocates have yet to address this
matter in any form at this point in the debate. In general,
judicial review is used to ensure that Federal agencies
faithfully implement our laws. However, judicial review must be
carefully written and balanced when proposed in legislation.
Otherwise, one may end up with costly and excessive litigation.
It seems to me that an appropriate course of action might be to
prohibit judicial review of the actions of the Community
Empowerment Board (CEB) while allowing judicial review of the
agencies' actions as provided or under existing law. In that
way, we can avoid potentially entangling an entity in the
Executive Office of the President in needless litigation while
ensuring that agency decisions are judicially reviewable, but
only as permitted under existing law so as not to open up any
new causes of action to take agencies to court.
In this bill, accountability issues not only need to be
addressed through ensuring the proper roles of Congress and the
judiciary, but also must be encompassed in the submittal,
review, approval, and evaluation process that flexibility plans
must go through. The legislation does place an emphasis on
performance measurement in the flexibility plan process.
Applicants must demonstrate through specific goals and
performance measures how greater flexibility will allow them to
improve the existing performance of the eligible Federal
financial assistance programs proposed under the flexibility
plan. These provisions are among the strong points of the bill
and have been strengthened at the suggestion of my staff,
although some of these provisions still need further refinement
(See later comments).
Allowing greater public input and comment into the plan
development process is another way to increase accountability
under this legislation. Section 6(b)(4) stipulates that
applicants must include in their applications written
documentation showing that there was significant public input
into the development of the plan, including input from those
who are beneficiaries under the plan as well as from those
directly affected by its implementation. This provision was
inserted at the suggestion of my staff and ensures that plans
go through a thorough public vetting at the State and local
level before coming to the Federal government for review.
However, I also believe that plans should be judged by the
Board and agencies on the level of public input into and
consensus behind a plan. Therefore, similar language should be
adopted under Section 7; otherwise, the Section 6(b)(4)
requirement is meaningless. Furthermore, the plan development
and approval process must also be a public process at the
Federal level as well. Federal agencies should place an
announcement in the Federal Register once a plan has been
received for review, and then make that plan available to any
member of the public at their written request. Unfortunately,
this suggestion was not included in the substitute.
Competition is a third means to ensure accountability. My
staff proposed that applications be submitted to the CEB
between January 1 and March 31 of the calendar year, with the
CEB making final decisions on plan approval by no later than
July 31. The logic behind this concept is that plans would be
reviewed at around the same time, making it easier for the CEB
and agencies to evaluate, compare, and rank similar proposals
against each other and then approve those proposals that are
the best within the pool of applications. Currently, the bill
establishes a ``rolling'' process whereby proposals are
submitted at any time during the calendar year, with the SEB
and agencies then having 120 days to make a decision on plan
approval or denial. This process is more ad hoc than a process
that works on a calendar basis; thus, proposals are less likely
to be evaluated in a competitive fashion.
The final issue concerning accountability deals with how
Federal funds are best protected from possible waste, fraud,
and abuse in the implementation of flexibility plans.
Unfortunately, even with enhanced safeguards and measures we
have initiated through actions of this Committee in the past,
the potential always exists for the mismanagement of taxpayer
dollars. This is true not only on the federal level--and the
Committee held numerous hearings under my Chairmanship exposing
such problems--but at the State and local level as well.
At the one Committee hearing on this bill, I referred to an
investigation that has just been completed in my own home State
of Ohio. In that case, officials of a local community action
agency spent federal anti-poverty funds to lease and purchase
new vehicles, among them a Corvette, for primarily their own
personal use. Another recent audit found that a local entity
was receiving federal money for programs which existed only on
paper. Although both of these schemes were ultimately detected,
it took several years. There was a breakdown at all levels of
government. Audits and inspections that were supposed to be
made on a periodic basis were not. And when they were, they
were insufficient to prevent or detect the ongoing waste and
mismanagement.
It has been my concern that increased flexibility could
potentially result in less accountability. I doubt any of us
want this legislation to fail because of inadequate protections
to guard the public purse. In order to succeed, a truly
intergovernmental framework of cooperation in financial
management and accountability must be realized. This would
entail proper internal fiscal and accounting controls and
objective performance measurements and evaluations. Compliance
with the Single Audit Act and other grant management
requirements is essential. While I do not want to impose
unnecessarily rigid or duplicative requirements on States and
localities--indeed, I would support alternatives that meet
current standards but without the administrative burdens--
neither do I want to totally dispense with them in the name of
flexibility.
At my suggestion, the Deputy Director for Management of the
Office of Management and Budget (OMB) asked the President's
Council on Integrity and Efficiency (PCIE) to review the
Administration's ``redlined'' version of S. 88. This was a
revised draft of Senator Hatfield's original legislation,
reflecting comments and input from other federal agencies,
which OMB presented to the Committee for our consideration as
we moved towards mark-up. The PCIE was tasked specifically to
identify concerns regarding financial management and
accountability issues affecting the use of federal funds and
the achievement of national and local program goals. This
review, which I found most helpful, along with OMB's response,
are attached. It is a good general ``primer'' for anyone
concerned with how to best preserve sound financial management
controls as we proceed to offer State and local interests more
flexibility in administering federal grants.
The bill we have reported out is a different version of S.
88 than the PCIE was asked to examine, and I am glad that it
does incorporate some of the concerns they raised to the
earlier ``redlined'' draft. Nonetheless, the legislation still
falls short of all the protections I feel are necessary to
ensure we will have sufficient financial management and
accountability safeguards. We will need to do more work in this
area. Indeed, I am pleased to note that OMB has pledged its
commitment to address these remaining concerns, both in terms
of supporting specific amendments to strengthen the bill or
through subsequent implementing guidance or instructions.
While scope and accountability are the two major concerns
with this bill, there are other significant issues that are not
resolved or only partly resolved.
At the suggestion of my staff, a number of protections for
State and local governments have been added to the legislation.
The Board is now prohibited from pre-empting or waiving any
State, local, or tribal law or regulation in the approval of
any flexibility plan. In addition, the Board can not override
any existing State or local administrative plan for the
distribution of Federal funds, although this language still
needs further clarification. Finally, the prescriptive
Community Advisory Committee mandate has been removed, leaving
State and local governments the flexibility to design their own
mechanisms for receiving public input in the development of
flexibility plans. However, the bill still contains overly
burdensome reporting requirements for State and local
governments and other applicants. They must submit a report
annually to the Board for each of the 5 years a plan is in
effect. My preference would be to scale this requirement back
to submittal of just an interim report and a final report.
In addition to the concerns that I have raised, both the
Clinton Administration and others have commented about other
problems in the bill that should be corrected. They included
the following:
Strengthen language that ensures Federal funds can
not be made fungible across unrelated grant programs.
Establish agency primacy, rather than the Board, over
entering in MOUs as well as over the revocation of
waivers. Further clarify agency authority over the
granting of waivers.
Provide the President flexibility to appoint other
Executive Branch officials to the CEB.
In the Definitions section, clarify that the
legislation covers only discretionary grant programs
and does not apply to taxation or loan guarantees.
Reconcile the roles of the CEB and OMB in
streamlining grant application paperwork and reporting
requirements.
Clarify that cross-cutting requirements incorporated
by reference in grant programs cannot be waived.
Require applicants to stipulate who may lose benefits
or services under a flexibility plan.
Allow regional or metropolitan planning organizations
to submit plans.
Establish a funding mechanism and/or specific
authorization for the CEB.
Give preference for agency and Board review of plans
submitted under the EZ/EC program.
Prohibit the waiver of matching fund requirements.
Ensure that flexibility plans include performance
measures that are tied to Federal goals as well as
State, local, and tribal goals.
Provide for the development of baseline data so
performance can be properly tracked as plans are being
implemented.
Make plan performance measures consistent with
performance measures established under the Government
Performance Results Act.
Reconcile whether a flexibility plan (or part) can
still go forward even if a waiver request is denied.
Decide whether or not a Federal waiver can be granted
even if State and local waivers are pending or have
been denied.
Set up a process whereby approved flexibility plans
can be amended in the out years as circumstances
dictate (reforms in existing Federal grant programs,
reduction or elimination of funds in those programs,
etc.).
Clarify Board and agency roles in the evaluation
process of approved plans.
Alter the maintenance of effort provisions so as not
discourage applicants from including related State and
local funds as part of any plan.
This long list along with my earlier comments shows that
the bill was marked up prematurely and without adequate
hearings involving affected parties.
The Administration, in a 5/16/96 letter from OMB Deputy
Director for Management John Koskinen to Chairman Stevens (see
attached), asked that the legislation be considered by the
Committee at a later date so that the Administration would have
time to review the substitute for changes it suggested as part
of its ``redline.'' The letter was particularly critical of the
House counterpart to S. 88 for making Federal civil rights,
labor, health, safety, environmental, and educational
protections subject to waiver.
As I stated earlier, I believe that many of these problems
could have been worked out had we had more hearings and greater
time to deliberate within the Committee. While I cannot support
the bill in its current form, it is my intent to work with
Senator Hatfield, the Administration, and others to correct
many of these problems so we can develop bi-partisan
legislation that can overwhelmingly pass the Senate.
John Glenn.
------
Executive Office of the President,
Office of Management and Budget,
Washington, DC, May 16, 1996.
Hon. Ted Stevens
Chairman, Committee on Governmental Affairs, U.S. Senate, Washington,
DC.
Dear Mr. Chairman: As you know, the Administration supports
efforts to encourage innovation and entrepreneurship at the
State and local levels. In a time of declining Federal
resources, the granting of waivers and the providing of
flexible funding streams are two ways to increase the impact of
Federal programs. ``Local Flexibility'' legislation could
become a useful tool to promote greater efficiency and
innovation in intergovernmental service delivery programs.
In Alice Rivlin's April 17, 1996 letter to Chairman Shays
and you, she identified our major concerns with H.R. 2086, the
version of local flexibility approved by the House Subcommittee
on Human Resources and Intergovernmental Relations. The
Administration was deeply troubled by the shift of focus in the
House bill from affording flexibility in Federal assistance
programs to making fundamental statutes, including important
health, safety, labor, educational, financial, environmental,
and civil rights protections subject to waiver.
The amendment in the nature of a substitute, we understand
will be offered by Senator Hatfield at the markup this morning,
is a substantial improvement over the House bill.
Unfortunately, since we only received the draft yesterday
afternoon, neither the Federal agencies responsible for
administering the over six hundred domestic assistance
programs, nor affected States and communities, have had a
chance to review the amendment. Therefore, we cannot support
the substantially revised bill until these parties have an
opportunity to assess whether the legislation as redrafted will
work as intended.
Some of the particular issues the agencies need to review
are the impact of:
The newly defined waiver authority, and in
particular, whether it is sufficiently bounded to
prohibit waiving fundamental cross-cutting statutes;
The elimination of the list of ``exemptions,'' and
whether the bill opens-up to waiver important standards
specified in any of the numerous grant program
statutes;
The new authorities and reporting requirements for
the Director of OMB;
Tthe revised sequence and timing of events
(application, review, approval of plans, development of
the memorandum of understanding, approval of waivers,
etc);
Tthe execution of the MOU by the CEB rather than the
agencies responsible for the grant programs; and
Deletion of the authorization for a revolving fund to
enable agencies to underwrite the cost of the CEB's
coordination, outreach, review of plans, and technical
assistance.
While we appreciate the substantial progress made within
the last several days, we are concerned, that, without more
thoughtful consideration by the responsible agencies and those
affected by their programs, we will act in such haste that we
may create problems that are not intended, but are nonetheless
real. Therefore, we urge the Committee to delay markup to give
those affected by the bill an opportunity to advise whether
this statute will work effectively.
We look forward to working with you to address these
concerns and to develop a bipartisan bill that we can all
support.
Sincerely,
John A. Koskinen.
------
Executive Office of the President,
Office of Management and Budget,
Washington, DC, April 8, 1996.
Hon. June Gibbs Brown,
Vice Chair, President's Council on Integrity and Efficiency, Office of
the Inspector General, Department of Health and Human Services,
Washington, DC.
Dear June: Thank you for the very timely and helpful report
on S. 88, ``The Local Empowerment and Flexibility Act of
1995.'' The report responds to my request that the President's
Council on Integrity and Efficiency (PCIE) review the bill to
identify any concerns regarding financial management and other
accountability issues affecting the use of Federal funds and
the achievement of national and local program goals.
As you know, the Administration believes that such ``Local
Flex'' legislation could help promote greater efficiency and
innovation in intergovernmental service delivery programs.
``Local Flex'' would provide an opportunity for State and local
governments to propose plans to improve coordination of
Federal, State, local, and non-profit funds and services, and
to request waivers from Federal laws and regulations that
hinder the implementation of those plans.
To assist the Congressional Committees considering this
legislation, OMB and the agencies developed a ``redlined''
redraft of the bill, indicating the changes necessary to
accommodate our concerns with the bill as drafted. Your report
concludes that our proposed ``redline'' revisions do indeed
address many concerns that the PCIE had with S. 88 and
recommends that we consider a number of further actions to
clarify the importance of financial management and
accountability. We agree with your suggestions and will address
them as follows:
1. Grants management common rule. Rules implementing
the legislation will require grantees to adhere to the
uniform administrative requirement for grants and
cooperative agreements, know as the grants management
``common rule.''
2. Tribal governments. In recognition of the wide
program consolidation authority already available to
tribes and possible conflicts with the Indian Self-
Determination Act, we will not propose extending S. 88
to tribes.
3. Local flexibility plan goals. We will propose that
the goals in local flexibility plans should be
``specific'' rather than ``general.''
4. Ceasing or reducing services or benefits. We will
suggest that the legislation be modified to require
applicants to ``explain'' the rationale for ceasing or
reducing services or benefits.
5. Role of State governments. We will support changes
in the legislation to clarify that States will have the
opportunity to review, as appropriate, all plans
proposed by local governments.
6. Monitoring and evaluation responsibilities.
Implementing procedures will explore using a
``cognizant Federal agency'' concept to monitor and
evaluate local flexibility plans.
7. Termination of a local flexibility plan. We will
urge that the legislation provide for terminating a
plan for fraud or abuse.
In conclusion, I want to express my appreciation for the
fine work done on this project by Jack Ferris and Tom
Robertson. Their discussions with OMB staff, along with the
observations and suggestions in the PCIE report, will be very
useful when we develop implementing procedures and
instructions.
This has been another in a series of excellent PCIE
projects and we look forward to continuing to work with the
PCIE on similar matters in the future.
Best wishes.
Sincerely,
John A. Koskinen.
------
[From the President's Council on Integrity & Efficiency]
Memorandum for the Honorable John A. Koskinen, Deputy Director for
Management, Office of Management and Budget.
Subject: President's Council on Integrity and Efficiency--Review of
Office of Management and Budget's Draft Amendments to S. 88
``The Local Empowerment and Flexibility Act of 1995.''
This report is in response to your request that the
President's Council on Integrity and Efficiency (PCIE) review
the Office of Management and Budget's (OMB) draft amendments
(hereafter referred to as the redline draft) to S. 88 ``The
Local Empowerment and Flexibility Act of 1995.'' The objective
of the PCIE review of the redline draft dated February 12,
1996, was to identify any concerns that the PCIE had regarding
financial management and other accountability issues affecting
the use of Federal funds and the achievement of national and
local program goals.
The redline draft to S. 88 included several proposed
amendments to the bill. Some of the most significant
amendments:
Revise the review and approval processes. The redline
draft establishes the Community Empowerment Board (CEB)
to approve and monitor local flexibility plans \1\
submitted by State, local and tribal governments. It
also authorizes the CEB to develop criteria to select
proposed plans for detailed review, and extends the
time frames for review to 60 days for State Governors
and 120 days for the CEB.
---------------------------------------------------------------------------
\1\ A local flexibility plan combines funds from Federal, State,
local or tribal governments or private sources to address the service
needs of a community.
---------------------------------------------------------------------------
Increase the role of Federal agencies. The redline
draft requires that all requests for waivers of Federal
requirements be approved by the Federal agencies
responsible for administering the Federal programs
included in a local flexibility plan. It also requires,
as a condition of CEB approval, that each State, local
or tribal government and each qualified organization
that would receive financial assistance under a plan
enter into a memorandum of understanding with the
Federal agencies.
Strengthen audit requirements. The redline draft
requires State, local and tribal governments to submit
audits required under the Single Audit Act of 1984 to
the CEB, a requirement not subject to waiver.
While the redline draft of S. 88 addresses numerous
concerns that the PCIE had with the bill, we have identified
additional revisions that would further ensure accountability
over the use of Federal funds and the achievement of national
and local goals. As summarized below, the PCIE has concerns
about financial management and accountability issues dealing
with the need to: (1) require applicant governments to meet
uniform financial management and accountability standards such
as those found in the grants management common rule; (2)
clarify procedures relative to the application, review and
approval of proposed local flexibility plans; and (3) clarify
procedures for the monitoring and evaluation of operating local
flexibility plans.
The applicant governments should be required to meet uniform financial
management and accountability standards such as those found in
the grants management common rule
The ``Uniform Administrative Requirements for Grants and
Cooperative Agreements to State and Local Governments,''
generally referred to as the grants management common rule,
provides sound financial management and accountability
standards for State, local and tribal governments. Compliance
with the common rule, which sets minimum standards without
being overly prescriptive, should be specifically required of
applicant governments either in the redline draft or in
implementing instructions. (Page 6)
Procedures should be clarified for the application, review and approval
of proposed local flexibility plans
Tribal governments already have wide program consolidation
authority under the ``Indian Self Determination and Education
Assistance Act.'' If OMB intends to propose including tribal
governments under S. 88, the redline draft should: provide
instructions as to how tribal governments are to apply for an
approved local flexibility plan; clarify that S. 88 applies
only to Federal programs not already covered by the Act; and
exempt this Act from waiver in S. 88. (Page 7)
The goals included in proposed local flexibility plans
should be ``specific'' rather than ``general,'' and the CEB
should be required to determine the reasonableness of the goals
during the application review process. (Page 7)
State, local and tribal governments proposing to cease or
reduce services or benefits to groups of individuals under a
local flexibility plan should explain the rationale for this
action, similar to the explanation required in the redline
draft for waivers of Federal requirements. (Page 8)
The role of State governments in the application review
process should be clarified to ensure they have the opportunity
to review, as appropriate, all local flexibility plans proposed
by local governments. (Page 9)
Procedures should be clarified for the monitoring and evaluation of
operating local flexibility plans
The monitoring and evaluation responsibilities of Federal
agencies and State governments should be clarified. Use of the
``cognizant Federal agency'' concept may be particularly
applicable in this situation. (Page 9)
The conditions under which an approved local flexibility
plan can be terminated by the CEB should be expanded to include
fraud and abuse related issues. (Page 10)
OIG recommendations and OMB response
In a draft report to OMB dated March 8, 1996, we made
recommendations (page 11) that addressed the PCIE concerns with
the redline draft. The recommendations were for OMB's
consideration prior to submission of the redline draft to
Congress. We also discussed another issue--the scope of S. 88--
which was also a concern of the PCIE (See Other Matters section
of this report on page 12). While the broad scope of the bill
may not be directly related to financial management and
accountability issues, it may have an impact on the
implementation of the bill and is, therefore, relevant to this
review.
On March 14, 1996, representatives of the Department of
Health and Human Services' Office of Inspector General (HHS/
OIG) and OMB discussed the draft report. The OMB representative
generally agreed with the recommendations, stating that the
issues raised in the draft report point to a need to clarify
the language in the redline draft or in the implementing
instructions which are to be issued after enactment of S. 88.
background
The ``Local Empowerment and Flexibility Act of 1995'' was
introduced on January 4, 1995 by Senator Mark Hatfield as
Senate Bill S. 88. An identical companion bill, H.R. 2086, was
introduced on July 21, 1995 by Congressman Christopher Shays.
The preamble of S. 88 states that it was intended ``to increase
the overall economy and efficiency of government operations and
enable more efficient use of Federal funding, by enabling local
governments and private, nonprofit organizations to use amounts
available under certain Federal assistance programs in
accordance with approved local flexibility plans.''
The S. 88 is substantially similar to a bill introduced in
the 103rd Congress by Congressman John Conyers, H.R. 2856,
``Local Flexibility Act of 1993.'' The bill was then
reintroduced as the ``Local Empowerment and Flexibility Act of
1994,'' and passed the Senate as ``Title XI of H.R. 820,
National Competitiveness Act of 1994.'' The 1994 legislation,
ultimately eliminated in conference, contained most of the
features of the 1993 and 1995 bills, but was a demonstration
program limited to no more than 30 local governments from no
more than 6 States.
The S. 88 and its earlier versions are consistent with the
Administration's goal of increasing State and local flexibility
in administering federally-funded programs. According to the
September 1994 report of the Vice President's National
Performance Review, this goal includes two efforts: the ``top-
down effort'' to ``consolidate a slew of separate Federal
programs so they can provide funds for States and localities in
broader categories,'' and the ``bottom-up effort'' to
``increase State and local authority to spend Federal funds in
the most effective way.''
The current Administration has also made increasing use of
statutory waivers that are available to the States. Under Aid
to Families with Dependent Children (AFDC) and Medicaid, States
may apply to the Secretary of HHS for waivers of statutory and
regulatory requirements to implement approved ``demonstration
projects.'' At present, 37 States are operating their AFDC
programs under statutory waivers and 10 States are operating
their Medicaid programs under statewide waivers. Moreover, the
Administration has substantially shortened the time frame for
considering waiver applications, by completing its review
within 90 days after receipt.
The S. 88 would greatly expand the use of waivers by
allowing localities to design individually tailored ``local
flexibility plans'' to consolidate Federal, State, local and
private, nonprofit grant funds, and to waive statutory
requirements that would impede implementation of such plans. In
formulating the plans, no restriction is placed upon the
particular funding source or program area that was initially
intended for the funds. No restriction is placed upon the
number of localities that may participate. Plans must be
approved by a Federal Governmentwide ``Flexibility Council''
and implementation would be assisted locally by a ``Community
Advisory Committee.'' The bill appears designed to exempt
Medicaid, AFDC, and other ``entitlement'' programs. The Act is
repealed on the date that is 5 years after enactment.
Legislation similar in concept to S. 88, but more limited
in scope, include the ``Goals 2000: Educate America Act,''
Public Law 103-227 (March 31, 1994), and the Empowerment Zone/
Enterprise Community (EZ/EC) program, enacted as Subchapter C
of Title XIII of the ``Omnibus Budget Reconciliation Act (OBRA)
of 1993,'' Public Law 103-66 (August 10, 1993).
Section 311(e) of Goals 2000, creating ``educational
flexibility demonstration programs,'' authorized the Secretary
of Education to select six States for the purpose of delegating
to the States themselves authority to grant waivers of both
State and Federal education statutes and requirements. States
are selected on the basis of applications that must demonstrate
the quality and scope of ``educational flexibility plans,''
designed to foster comprehensive educational reform in the
State.
The EZ/EC program authorizes the Secretaries of Housing and
Urban Development (HUD) and Agriculture to designate 95
``enterprise communities'' and 9 ``empowerment zones,'' each of
which must satisfy rules regarding size and population and be
characterized by ``pervasive poverty, unemployment, and general
distress.'' The law extends significant tax advantages to the
designated areas and provides funding from HHS.
You testified in support of S. 88, with reservations about
certain aspects of the legislation, on December 5, 1995. In
accordance with OMB Circular A-19, OMB has sought and received
Executive agency comments on the bill, and has incorporated
many of the comments in its redline draft to S. 88 dated
February 12, 1996.
objectives of pcie review
This report responds to your request that the PCIE review
accountability issues raised by S. 88 and its implementation.
The objective of the PCIE review of the OMB redline draft of S.
88 was to identify any concerns that the PCIE has regarding
financial management and other accountability issues affecting
the use of Federal funds and the achievement of national and
local program goals.
The HHS/OIG was designated as lead agency for this PCIE
assignment. By memorandum dated February 13, 1996, OMB provided
the HHS/OIG with a copy of its redline draft dated February 12,
1996. The HHS/OIG provided copies to OIGs from the following
Departments: Agriculture, Commerce, Education, HUD, and
Transportation. A copy was also provided the OIG of the
Environmental Protection Agency. The OIGs were asked to comment
on S. 88 and the redline draft.
Comments received from the OIGs were incorporated into a
draft report, which was then provided to the OIGs who had
submitted comments. The information contained in this report
represents a general consensus on the major concerns expressed
by the OIGs.
result of PCIE review
The PCIE believes that the redline draft addresses many of
the PCIE concerns with S. 88. We have identified, however,
additional actions that can be taken to further ensure
accountability over the use of Federal funds and the
achievement of national and local goals. The recommended
actions deal with the need to: (1) require applicant
governments to meet uniform financial management and
accountability standards included in the grants management
common rule; (2) clarify procedures for the application, review
and approval of proposed local flexibility plans; and (3)
clarify procedures for the monitoring and evaluation of
operating local flexibility plans.
uniform financial management and accountability standards
The applicant governments should be required to meet
uniform financial management and accountability standards
included in the ``Uniform Administrative Requirements for
Grants and Cooperative Agreements to State and Local
Governments,'' which is generally referred to as the grants
management common rule. The common rule imposes an acceptable
degree of accountability on governments applying for the plans
without being overly prescriptive.
The grants management common rule was originally issued in
March 1988, and subsequently codified in regulations by Federal
agencies. For example, in HHS the common rule is found in 45
CFR Part 92, while in the Department of Defense, it is found in
32 CFR Part 33. The common rule provides uniform fiscal and
administrative requirements applicable to all types of grants
and cooperative agreements to State, local, and tribal
governments. Uniform minimum requirements for financial
management systems cover financial reporting, accounting
records, internal controls, allowable costs, matching or cost
sharing, source documentation and cash management. The grants
management common rule also incorporates applicable cost
principles (OMB Circular A-87 for State, local, and tribal
governments, and OMB Circular A-122 for private nonprofit
organizations), and includes reports, record retention and
enforcement requirements.
The redline draft (Section 7(c)(8) page 15 line 2) requires
the applicant governments to include in a proposed local
flexibility plan the fiscal control and related accountability
procedures applicable under the plan. However, there is no
mention of any minimum standards for these fiscal controls and
accountability procedures. In discussing this issue, OMB
representatives stated that they have every intention of having
applicant governments comply with the grants management common
rule, and that the rule is covered under Title II, Section
503(b)(2)(c) of the Chief Financial Officers Act of 1990. The
section cited deals with functions of the Deputy Director for
Management (OMB) relating to grant, cooperative agreement, and
assistance management. It does not refer directly to the grants
management common rule.
The PCIE believes that a requirement for applicant
governments to comply with the grants management common rule
needs to be further emphasized. This could be accomplished by
either adding language in the redline draft (Section 7(c)(8)
appears to be a suitable location for such language) or by
emphasizing compliance in the implementing instructions to be
issued after enactment of S. 88.
THE APPLICATION, REVIEW AND APPROVAL OF PROPOSED LOCAL FLEXIBILITY
PLANS
The redline draft revises provisions in S. 88 relative to
the application, review and approval of local flexibility plans
proposed by State, local and tribal governments. The PCIE has
identified additional revisions that would further clarify the
procedures dealing with: (1) tribal governments; (2) goals
included in a local flexibility plan; (3) ceasing or reducing
of services and benefits; and (4) the role of State governments
in the application review process.
Tribal governments
Tribal governments already have wide program consolidation
authority under the ``Indian Self Determination and Education
Assistance Act'' (hereafter referred to as the Act). If OMB
intends to propose including tribal governments under S. 88,
the redline draft needs to be revised.
Although the S. 88 does not include tribal governments, the
redline draft extends eligibility to them. If OMB believes that
tribal governments should be covered under S. 88, the redline
draft should be revised to: (1) provide instructions as to how
tribal governments are to apply for an approval local
flexibility plan as instructions in the redline draft (Section
7(d) page 15 line 15) apply only to proposed local flexibility
plans developed by one or more local governments; (2) clarify
that S. 88 applies only to Federal programs not already covered
by the Act; and (3) exempt the Act from waiver in S. 88.
Local flexibility plan goals
The goals included in local flexibility plans should be
``specific'' rather than ``general,'' and the CEB should be
required to determine the reasonableness of the goals during
the application review process.
The S. 88 requires that the contents of a proposed local
flexibility plan include ``specific'' goals, measurable
performance criteria, and a description of how the plan is
expected to attain the goals. The redline draft makes some
language changes to the bill's provisions regarding goals. One
change is that the plan would no longer be required to contain
``specific'' goals but only ``general'' goals (Section
7(c)(4)(A) page 13 line 17).
The PCIE believes that OMB needs to revisit this issue. It
appears as if this proposed change may not reflect an OMB
intent to eliminate the need for ``specific'' goals in a local
flexibility plan since the redline draft refers to ``specific''
goals in another section (Section 8 (c)(1)(C) page 19 line 21).
In any event, it is our opinion that eliminating the
requirement that applicants include ``specific'' goals in their
local flexibility plans is a mistake. The less specific the
goals are, the harder it will be to meaningfully evaluate the
success of the plans.
As part of the plan approval process, the redline draft
(Section 8(c) page 18 line 20) requires the CEB to determine
that the applicant government has or is developing data bases
for measuring performance. The CEB must also determine that the
plan will more effectively achieve the general goals of each
Federal program included in it. There is no specific
requirement that the CEB determine the reasonableness of the
goals or performance criteria in the plan. The redline draft
requires such a determination only when the CEB is considering
terminating a local flexibility plan (Section 9(c)(3)(A) page
32 lines 15 and 19).
The reasonableness or soundness of goals and performance
criteria should be an important factor in determining whether a
proposed local flexibility plan should be approved, and this
determination should be made part of the approval process. For
the CEB to make a determination of reasonableness, however,
local governments would have to provide some type of baseline
data so that the CEB could compare past achievements under the
Federal programs to anticipated achievements under the local
flexibility plan.
Ceasing or reducing services or benefits
State, local and tribal governments proposing to cease or
reduce services or benefits to groups of individuals under a
local flexibility plan should explain the rationale for this
action, similar to the explanation required in the redline
draft for waivers of Federal requirements.
The S. 88 includes a provision which requires, as a
condition of approval of a plan, a determination that the plan
adequately ensures that individuals and families who receive
benefits under covered Federal financial assistance programs
included in the plan shall continue to receive benefits that
meet the needs intended to be met under the program.
The redline draft deletes this provision of S. 88 (Section
8(c)(1)(G) page 20 line 13), and adds a new provision (Section
7(c)(3)(B) page 13 line 12) which requires that the local
flexibility plan shall identify the group of individuals, by
service needs, economic circumstance, or other defining
factors, who would cease to receive services or benefits under
the plan, or receive fewer services or benefits.
The PCIE recognizes that Federal financial assistance
programs that provide benefits directly to a beneficiary or to
a State as a direct payment to an individual are not eligible
for inclusion in a local flexibility plan. It nevertheless
appears that OMB envisions instances where State, local or
tribal governments can make a conscious decision to cease or
reduce services or benefits to groups of individuals. If this
is OMB's intent, it should consider having applicant
governments explain the rationale behind their decision. We
noted that the redline draft adds a requirements (Section
7(c)(6) page 14 line 20). We believe something similar should
be required when services or benefits are to be halted or
reduced.
Role of State governments
The role of State governments in the application review
process should be clarified to ensure they have the opportunity
to review, as appropriate, all plans proposed by local
governments.
The S. 88 makes it very clear that local governments are
required to submit proposed local flexibility plans to the
State Governor for review. The Governor has 30 days to prepare
comments on the plan, describe any State laws which must be
waived, and forward the application for Federal review. If the
Governor chooses not to comment, the local government can send
the application directly to the Flexibility Council (replaced
in the redline draft by the CEB). The redline draft is not
quite so clear.
The redline draft states that ``proposed local flexibility
plans developed by one or more local government shall be
submitted to directly affected state or local governments for
approval or disapproval at least 60 days prior to submission to
the Board'' (Section 7(d)(1) page 15 line 19). Using the word
``or'' could lead some to interpret that local governments
could opt to bypass the Governor's Office.
The language in the redline draft should be clarified to:
(1) indicate that local governments will, in every case, send
proposed local flexibility plans to their State government or
(2) describe the circumstances under which local governments
are not required to submit proposed plans to their State
government. The redline draft retains the S. 88 provision
allowing local governments to send the applications directly to
the CEB should the Governor fail to comment within a specified
time frame. With this protection, the PCIE envisions that
virtually all proposed plans from local governments should be
first submitted to the State government for review and comment.
monitoring and evaluation of operating local flexibility plans
The monitoring and evaluation responsibilities of the
Federal agencies and State governments should be clarified to
ensure that governments at all levels realize that operating
local flexibility plans are subject to review by Federal
agencies and State governments that have programs in the plans.
Also, the redline draft should be revised to permit the CEB to
terminate local flexibility plans on the basis of fraud and
abuse related issues.
Monitoring and evaluation responsibilities
The monitoring and evaluation responsibilities of Federal
agencies and State governments should be clarified. Use of the
``cognizant Federal agency'' concept may be particularly
applicable in this situation.
The redline draft assigns monitoring responsibility to the
CEB and requires State, local and tribal governments to adhere
to the audit requirements of the Single Audit Act of 1984. The
single audit requirement included in the redline draft,
although a major addition to S. 88, is not a substitute for
management oversight and program reviews by Federal agencies.
Since the bill primarily focuses on approved performance goals
as a measure of program effectiveness, there is a need for a
review of the local government's system to account for
performance measures and program achievement.
The redline draft does not directly address the monitoring
and evaluation roles of the Federal agencies and State
governments. We note, however, that one section of the redline
draft (Section 9(c)(3)(B) page 33, line 8) states that Federal
agencies and State governments shall have a reasonable period
of time to resume administration of Federal programs included
in a local flexibility plan which is terminated by the CEB. The
use of the word resume could be interpreted by some as meaning
that Federal agencies and State governments relinquish
administration of programs while the local flexibility plan is
in effect.
In discussing this issue with an OMB representative, we
were assured that Federal agencies and State governments will
retain their monitoring and evaluation responsibilities. We
believe this needs to be further emphasized. As is the case
with the grants management common rule, this emphasis can be
accomplished by either adding language in the redline draft
(the section dealing with memoranda of understanding seems a
suitable location for such language) or by emphasizing the
roles of the Federal agencies and State governments in
implementing instructions.
Included in the implementing instructions should be details
on how monitoring and evaluation will be conducted at the
Federal level. Several options are available. Since local
flexibility plans may involve several Federal agencies, and may
also move outside of the programmatic safeguards of each
agency, the CEB could assume full responsibility for the
monitoring and evaluation function. Another option would be to
have the CEB request the Federal agency responsible for a
particular program included in the plan to conduct the required
review.
A third option would be for the CEB to adopt the
``cognizant Federal agency approach'' similar to the one now
being used by the Federal Government at colleges, universities
and State and local governments throughout the country. Under
this approach, the CEB would designate a cognizant Federal
agency based on the predominant amount of Federal funds in a
local flexibility plan. That cognizant agency would assume the
Federal role in monitoring and evaluating operating local
flexibility plans in coordination with the CEB.
This option seems ideal for S. 88 since many Federal
programs could be included in a single local flexibility plan.
Adoption of a cognizant agency concept could preclude
duplicative reviews being made by numerous Federal agencies,
and would facilitate the settlement of audits conducted under
the Single Audit Act of 1984. The cognizant agency could ensure
that the government audited has implemented the recommendations
in the audit, and has corrected reported deficiencies.
Termination of a local flexibility plan
The conditions under which an approved local flexibility
plan can be terminated by the CEB should be expanded to include
fraud and abuse related issues.
The redline draft permits the CEB to terminate an approved
local flexibility plan if, after consulting with the Federal
agencies, the CEB determines that: (1) the goals and
performance criteria included in the plan have not been met;
(2) the goals and performance criteria are not sound and that
the program also would not meet goals and criteria that are
sound; and (3) the State, local or tribal government is unable
to meet its commitments. These conditions under which
termination is possible are specific, but not all inclusive. We
believe that the CEB should be specifically authorized to
terminate a local flexibility plan because of fraud or abuse
related issues. This is consistent with a provision in the
March 13, 1996 amendments to H.R. 2086 ``Local Empowerment and
Flexibility Act of 1995.'' The H.R. 2086 was the identical
companion bill to S. 88.
conclusions and recommendations
The OMB redline draft addresses many of the concerns that
the PCIE has with provisions in S. 88 over accountability for
the use of Federal funds and the achievement of national and
local goals. We continue to have concerns about financial
management and accountability issues regarding: compliance with
uniform financial management and accountability standards;
certain procedures dealing with the application, review and
approval of local flexibility plans; and the role of Federal
agencies and State governments in the monitoring and evaluation
of operating local flexibility plans.
We, therefore, recommend that OMB consider the following
actions:
1. Further emphasize the requirement that applicant
governments must comply with the grants management
common rule. This can be accomplished either in the
redline draft or in the implementing instructions.
2. If OMB intends to propose the inclusion of tribal
governments, the redline draft should be revised to:
provide instructions on how tribal governments are to
apply for a local flexibility plan; clarify that S. 88
applies only to those programs not covered by the
``Indian Self Determination and Education Assistance
Act''; and exempt this Act from waiver.
3. Clarify the language in the redline draft to show
that local flexibility plans must include ``specific''
goals, and propose that the CEB specifically review the
reasonableness of the goals included in a plan prior to
approving the plan.
4. Revise the redline draft to require that an
applicant government explain in the local flexibility
plan the rationale for ceasing or reducing services or
benefits to groups of individuals.
5. Clarify the language in the redline draft to: (1)
indicate that local governments will, in every case,
send proposed local flexibility plans to their State
government; or (2) describe the circumstances under
which local governments are not required to submit
proposed plans to their State government.
6. Emphasize that Federal agencies and State
governments retain their monitoring and evaluation
responsibilities for programs included in an operating
local flexibility plan. This can be accomplished either
in the redline draft or in the implementing
instructions.
7. Revise the redline draft to permit the CEB to
terminate a local flexibility plan on the basis of
fraud and abuse related issues.
OMB response to recommendations
On March 14, 1996, representatives of the HHS/OIG and OMB
discussed the draft report. The OMB representative generally
agreed with the recommendations, stating that the issues raised
in the draft report point to a need to clarify the language in
the redline draft or in the implementing instructions which are
to be issued after enactment of S. 88.
other matters
During our review of S. 88 and the redline draft, we became
aware of an issue that, although not directly related to
financial management or accountability, could impact on the
implementation of the bill. The issue relates to the scope of
S. 88, which is very broad, encompassing as it does thousands
of local governments and hundreds of Federal programs with
different goals and objectives. A single local flexibility plan
consist of any number of Federal programs involving any number
of Federal agencies, and there appears to be no limit on the
number of local flexibility plans that can be submitted to the
Flexibility Council (similar in purposes to the CEB established
in the redline draft) for review and approval.
The PCIE believes that effective reviews, particularly at
the Federal level, of proposed local flexibility plans are
essential since the intermingling of Federal funds within a
plan poses an inherent risk that funds could be spent for
purposes other than those intended by individual Federal
program statutes. The PCIE noted, however, that the Flexibility
Council responsible for the reviews at the Federal level was
not funded under S. 88, and was dependent on Federal agencies
for staff to carry out its functions. We were concerned that
the flow of paperwork generated by local governments could
potentially overburden the Federal and State review process,
and could ultimately impact on the success of the bill's
implementation.
We noted that the redline draft made several revisions
which affect the implementation of S. 88. On one hand, the
redline draft broadens the bill's scope by extending
eligibility to State and tribal governments (S. 88 applies only
to local governments), and by redefining the term ``local
government'' to include any combination of political
subdivisions and local education agencies. On the other hand,
the redline draft attempts to facilitate the implementation of
the bill by not only extending the time frames for the
completion of the Federal and State reviews but, more
importantly, by allowing the CEB to be selective in what it
reviews. According to the redline draft (Section 8.(a) page 18
line 1) the CEB shall to the extent practicable accept for
review no fewer than 50 local flexibility plans each year, and
shall develop criteria to govern the factors it will consider
in determining which plans it reviews. The redline draft also
provides $1 million of funding for the CEB in Fiscal Year 1997
and allows for additional funds to be obtained from Federal
agencies for the remaining years of the bill.
The PCIE believes the redline draft strengthens the
implementation provisions of S. 88. We still have two concerns,
however. One concern deals with the effect that the selection
for review process could have on governments that submit
proposed local flexibility plans only to find that their plans
were not subject to a detailed review by the CEB. The other
concern deals with the unlimited number of Federal programs
that could be included in a single local flexibility plan. We
believe that limiting Federal programs in a plan to those with
a common purpose would facilitate the development of the plan,
as the governments could focus on some of the 1,390 Federal
assistance programs included in OMB's ``Catalog of Federal
Domestic Assistance.'' It would also facilitate the evaluation
of the plan. Without a central concept based on the similarity
or program purposes, local governments could combine programs
of very general scope, intermixing highway funds and safe
drinking water programs, for example, thereby making it
extremely difficult to determine whether Federal funds were
used for the purposes intended.
We discussed this matter with an OMB representative and
raised the possibility of initially implementing S. 88 on a
demonstration basis, restricting implementation to a limited
number of governments and Federal programs with a similar
purpose. We pointed out that the Senate took a somewhat similar
approach in 1994 when it passed H.R. 820, ``National
Competitiveness Act of 1994.'' Title XI of this Act (ultimately
eliminated in conference) was a demonstration program limited
to no more than 30 local governments from no more than 6
States.
The OMB representative believed that the redline draft, in
effect, established a demonstration program in that: (1) the
intent is to have the CEB review approximately 50 proposed
local flexibility plans annually (OMB anticipates far fewer
being received in the early years of the bill's
implementation); (2) the bill would expire after 5 years; and
(3) S. 88 requires the U.S. General Accounting Office to
evaluate the bill's implementation. The OMB representative also
indicated that implementing instructions would further narrow
the focus of the bill, and the general objectives of the local
flexibility plans approved under it.
In our opinion, the instructions to be issued after
enactment of S. 88 will be a key factor in the successful
implementation of the bill. Not only should the instructions
further focus the bill and the objectives of the plans, they
should also make it very clear that the intent is to review 50
proposed local flexibility plans annually. Once aware of this,
applicant governments can further coordinate with the CEB and
decide whether they want to spend resources to develop a
proposed local flexibility plan.
Any questions or comments on this final report are welcome.
Please call me or have your staff contact Mr. Thomas D.
Roslewicz, Deputy Inspector General for Audit Services,
Department of Health and Human Services.
June Gibbs Brown, Vice Chair.