    GSA Fleet: Information on the Effect of Donating Cars to
    YouthBuild USA and Potential Benefits to Rural Youthbuild
    Participants (08-DEC-06, GAO-07-153).

    To assist youth who live in high poverty rural areas obtain and
    retain jobs, YouthBuild USA, a national nonprofit organization,
    has proposed providing donated used cars to selected low-income
    youth in rural communities. YouthBuild USA's proposed program
    hinges on receiving donations of used cars from the federal
    government's General Services Administration (GSA). This report
    discusses (1) the effect of donating 1 to 5 percent of selected
    GSA used cars on GSA's fleet vehicle sales operations, (2) what
    studies have shown with respect to the benefits that car
    ownership or access may hold for low-income individuals, and (3)
    what studies of selected low income car ownership programs and
    experiences of these programs have shown with respect to the
    benefits of participant car ownership. In conducting this study,
    GAO examined auction data from GSA, reviewed academic studies on
    the benefits of car access in gaining employment, and interviewed
    officials of six existing low income car ownership programs.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-153
        ACCNO:   A63966
      TITLE:     GSA Fleet: Information on the Effect of Donating Cars to
    YouthBuild USA and Potential Benefits to Rural Youthbuild
    Participants
         DATE:   12/08/2006
      SUBJECT:   Disadvantaged persons
    	     Employment assistance programs
    	     Federal aid to localities
    	     Federal property
    	     Gifts or gratuities
    	     Nonprofit organizations
    	     Program evaluation
    	     Rural economic development
    	     Transportation
    	     Youth
    	     Youth employment programs
    	     Program goals or objectives
    	     GSA Interagency Fleet Management System
    	     Low Income Car Ownership Programs
    	     HUD Youthbuild Program

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    GAO-07-153

         * [1]Report to the Ranking Minority Member, Subcommittee on Financial
           Institutions and Consumer Credit, Committee on Financial Services,
           House of Representatives

              * [2]December 2006

         * [3]GSA FLEET

              * [4]Information on the Effect of Donating Cars to YouthBuild USA
                and Potential Benefits to Rural Youthbuild Participants

         * [5]Contents

              * [6]Results in Brief
              * [7]Background
              * [8]GSA Fleet Would Face Reduced Revenues and Need Legislative
                Authority to Donate Cars

                   * [9]GSA Faces Reductions in Revenues from Donating Cars It
                     Would Normally Auction
                   * [10]GSA Would Need Statutory Authority to Donate Vehicles
                     Directly to YouthBuild USA

              * [11]Available Research Suggests That Car Access Leads to Jobs and
                Other Benefits

                   * [12]Studies Reported Employment Benefits from Car Access
                   * [13]Studies Could Not Be Used to Estimate How Much
                     Youthbuild Participants Would Benefit from Having a Car

              * [14]LICO Programs Report Positive Results, but Limitations
                Restrict Projecting Results to YouthBuild USA's Program

                   * [15]Studies and Experiences of Six LICO Programs Report
                     Positive Results for Participants
                   * [16]Limitations in Studies Do Not Allow for Outcomes to Be
                     Projected to YouthBuild USA's Proposed LICO Program
                   * [17]Differences in Design and Participants the Programs
                     Serve Also Limit Application of Study Results to YouthBuild
                     USA's Proposed Program

              * [18]Agency Comments and Our Evaluation

         * [19]Objectives, Scope, and Methodology
         * [20]Summary of Studies on the Effect of Car Access on Employment
         * [21]Comments from the General Services Administration
         * [22]GAO Contact and Staff Acknowledgments

    Report to the Ranking Minority Member, Subcommittee on Financial
    Institutions and Consumer Credit, Committee on Financial Services, House
    of Representatives

    December 2006

    GSA FLEET

    Information on the Effect of Donating Cars to YouthBuild USA and Potential
    Benefits to Rural Youthbuild Participants

    Contents

    Figures

    December 8, 2006Letter

    The Honorable Bernard Sanders Ranking Minority Member Subcommittee on
    Financial Institutions     and Consumer Credit Committee on Financial
    Services House of Representatives

    Dear Mr. Sanders:

    Youth between the ages of 16 and 24 who live in high poverty areas can
    face significant obstacles to finding employment and receiving job
    training, including low levels of academic achievement, limited work
    experience, and a scarcity of jobs in their communities. In rural
    communities, these youth may face the additional challenge of a lack of
    transportation to get to available job opportunities because of scarce
    public transportation and, according to job training and other social
    service providers, having a car is often a necessity for obtaining and
    keeping a good job. To address this challenge, YouthBuild USA, a national
    nonprofit organization working to increase the number of youth
    transitioning out of poverty, has proposed providing donated vehicles to
    selected low-income youth in rural communities to travel to job training
    sites and to work. YouthBuild USA's proposed Rural Initiative Low Income
    Car Ownership (LICO) program hinges on receiving donations of used cars
    from the federal government's General Services Administration (GSA).

    GSA purchases new vehicles and then leases them to federal agencies
    through its Fleet program. Each year, GSA sells at auction approximately
    40,000 of these vehicles, most of which are 3 to 4 years old. The proceeds
    from these auctions help fund purchases of new vehicles for the Fleet
    program. Under its proposed LICO program, YouthBuild USA is seeking
    donations of 1 to 5 percent of the vehicles GSA auctions off annually,
    which it would then provide to participants in selected rural Youthbuild
    programs. Because GSA's Fleet program is currently self-sustaining and
    YouthBuild USA does not yet have experience operating a LICO program, you
    asked us to report on the implications of YouthBuild USA's proposal.
    Specifically, this report (1) assesses the effect of donating 1 to 5
    percent of selected GSA used cars on GSA's fleet vehicle sales operations,
    (2) describes what studies have shown with respect to the benefits that
    car ownership or access may hold for low-income individuals, and (3)
    describes what studies of selected LICO programs and experiences of these
    programs have shown with respect to the benefits of participant car
    ownership.

    To assess the effect on GSA's fleet vehicle sales operations from donating
    vehicles, we focused our analysis on GSA compact sedans to determine the
    average opportunity cost--the reduction in revenue for each compact sedan
    GSA would donate--and the total reduction in sales revenue GSA would face
    by donating 1 to 5 percent of its used compact sedans (112 to 559 cars) to
    YouthBuild USA's proposed Rural Initiative LICO program. To describe the
    results studies have shown with respect to benefits of car access (that
    is, owning a car or having access to one), we identified and reviewed
    academic studies that had been subject to a peer review and spoke with
    experts. To describe what some LICO programs have shown with respect to
    the benefits of participant car ownership, we identified six LICO programs
    that had been the subjects of external reviews of their programs'
    outcomes. We also met with officials from these LICO programs to learn
    about how their programs operated and how they reported outcomes. Appendix
    I provides additional details on our objectives, scope, and methodology.
    We conducted our work from May 2006 to November 2006 in San Francisco,
    California, and Washington, D.C., in accordance with generally accepted
    government auditing standards.

    Results in Brief

    GSA's annual sales revenue would be reduced by an estimated $600,000 to $3
    million by donating 1 to 5 percent of the compact sedans from its Fleet
    program (112 to 559 cars) to YouthBuild USA each year. GSA receives no
    direct appropriations to operate the Fleet and sustains the program
    through the fees it charges to federal agencies for leasing vehicles and
    the proceeds from selling its used vehicles. GSA currently does not donate
    vehicles from its Fleet program. For GSA Fleet to donate cars directly to
    YouthBuild USA, GSA would need new statutory authority because such direct
    donations would deviate from the existing process for disposing of surplus
    federal property. To recover the reduction in revenues it would face from
    donating vehicles to YouthBuild USA, GSA officials indicated that the
    agency would seek appropriations and consider increasing the leasing rates
    it charges the federal agencies that lease vehicles from it. However, GSA
    would need additional statutory authority to increase its leasing rates to
    recover the costs of a donation program because presently its rates may
    only reflect the costs of operating and replacing its fleet. GSA officials
    also indicated they would consider keeping vehicles longer than the 3 to 5
    years they currently do, which would result in an older fleet with higher
    maintenance costs.

    Taken as a whole, available studies consistently reported that car access
    increases the likelihood that individuals with low incomes (such as rural
    Youthbuild participants) obtained jobs. The research lists several reasons
    as to why having access to a car leads to better chances of finding a job,
    such as the possibility that a car allows an individual to search for a
    job over a wider geographic area. Differences between the individuals who
    were part of these studies and rural Youthbuild participants did not allow
    us to use the studies' results to identify the degree to which
    participants in YouthBuild USA's proposed LICO program would benefit from
    having a car. For example, the individuals in four of the studies analyzed
    were mainly urban welfare recipients who tended to be older, more
    educated, and more likely to be employed than the average participant in
    YouthBuild USA's proposed LICO program.

    Similar to the studies on car access generally, six studies of LICO
    programs and the experiences of officials of these programs indicate that
    participants reaped benefits from owning a car, such as getting and
    retaining jobs, earning higher wages, and spending more time with their
    families. However, the studies themselves also had methodological
    constraints (such as low response rates in surveys of participants) that
    make it difficult to project from their results. For example, a study of
    one program reported that 75 percent of respondents said that they got a
    job that paid higher wages, and 55 percent reported obtaining better
    quality day care for their children as a result of securing a car through
    the program. The officials operating this LICO program noted that
    participants found jobs (and kept them longer) and improved their quality
    of life. However, researchers obtained responses from 38 percent of
    participants in the program, which is too low of a response rate to apply
    the results to all of the program's participants. LICO program officials
    also noted that their programs' designs were different than the YouthBuild
    USA proposal, which could also limit the applicability of the studies'
    outcomes. For example, most LICO programs we reviewed require participants
    to obtain a loan to purchase the car, while YouthBuild USA proposes to
    give cars to participants for a one-time fee of $450. LICO program
    officials believe that the loan aspect of their programs requires
    participants to devote more resources and effort toward obtaining a car
    and, as a consequence, participants become more invested in achieving the
    goals of the programs. LICO program officials also noted that their
    programs provided participants additional support, such as financial
    literacy training and arrangements for covering car repair costs, that is
    not available under YouthBuild's  proposed LICO program.

    We make no recommendations in this report. We provided a draft of this
    report to GSA for its review and comment. GSA found the report to be
    accurate as it pertained to the description of the GSA Fleet program but
    expressed concerns with the potential use of its Fleet for a car donation
    program.

    Background

    GSA purchases about 35,000 to 40,000 vehicles annually for its Fleet
    program and manages an inventory of almost 200,000 vehicles, including
    sedans, passenger vans, trucks (light, medium, and heavy), buses,
    ambulances, alternative fuel vehicles, and limited special purpose
    vehicles. GSA then leases these vehicles to 75 participating federal
    agencies^1 in the United States, Europe, and Puerto Rico.^2 As part of its
    leasing arrangement with these agencies, GSA provides maintenance,
    repairs, fuel, and management of accident claims and gets reimbursed for
    these costs by the participating agencies.^3 As part of a regular
    replacement schedule, GSA sells older vehicles in its fleet. The agency
    uses a nationwide network of commercial auction firms to dispose of and
    sell about 35,000 to 40,000 of its used vehicles annually. Federal
    agencies may dispose of property, such as GSA's vehicles, only in the
    manner authorized by statute. Specifically, GSA auctions vehicles from the
    Fleet program under the "exchange/sale" authority contained in the Federal
    Property and Administrative Services Act (Federal Property Act).^4 Under
    this authority, an executive agency may acquire personal property by
    exchanging or selling similar items and applying the exchange allowance or
    proceeds of sale, in whole or in part

    payment, for the property acquired.^5 GSA uses the sales proceeds from
    these auctions to help purchase new vehicles.^6 Figure 1 illustrates GSA's
    process for leasing and subsequently auctioning vehicles.

    Figure 1: GSA Leasing and Auction Process

    Welfare reform experts contend that transportation is an important element
    in assisting former welfare recipients with finding employment.^7 However,
    they also contend that public transportation is not always convenient or
    accessible and, for some families receiving assistance, driving is the
    best option. To address this issue, several communities started LICO
    programs as highly individualized initiatives designed to meet local
    transportation needs. In 2002, the National Economic Development and Law
    Center documented at least 60 LICO programs across the country serving
    welfare recipients and the working poor by helping with the high costs
    associated with car ownership, including maintenance, repairs, and
    insurance.^8 Typically, these programs rely on older cars received through
    donations from individuals. They employ a number of strategies that
    include making affordable and reliable used vehicles directly available to
    customers or providing low-cost loans to enable individuals to buy
    vehicles. Today, there are over 160 documented programs across the country
    serving the car ownership needs of low-income individuals.

    YouthBuild USA, which to date has not operated its own LICO program, has
    proposed a Rural Initiative LICO program that would rely on 3- to
    4-year-old vehicles donated by GSA to provide affordable and reliable
    transportation for rural youth. YouthBuild USA is a national nonprofit
    organization that provides staff training and technical assistance to the
    nationwide network of almost 200 local Youthbuild programs.^9 The local
    programs serve youth between the ages of 16 and 24 and focus primarily on
    providing training in the building trades. YouthBuild USA is proposing to
    obtain donated vehicles directly from GSA Fleet and provide these vehicles
    to eligible youth so that they can continue in the job training program or
    have reliable transportation to work sites or college after they have
    graduated from the program. Under the proposal, YouthBuild USA will
    identify eligible rural Youthbuild programs and youth at these sites who
    would benefit from a donated vehicle. The program would have several
    requirements for participants, including possession of a valid driver's
    license, eligibility for insurance, good attendance in the Youthbuild
    program, and successful completion of a 6-week car ownership course.
    According to program officials, YouthBuild USA would hold the title of the
    car for 3 years, during which the participant would have to demonstrate a
    good track record for preventative maintenance in order to fully own the
    vehicle. Rural Youthbuild sites participating in the program would have to
    demonstrate financial stability and the capacity to administer and provide
    project oversight on the local level. Figure 2 presents a diagram of the
    proposed YouthBuild USA Rural Initiative LICO program.

    Figure 2: YouthBuild USA's Proposed Rural Initiative LICO Program

    GSA Fleet Would Face Reduced Revenues and Need Legislative Authority to
    Donate Cars

    If GSA were required to donate 1 to 5 percent of its compact sedans to
    YouthBuild USA (112 to 559 cars), its annual sales revenue would be
    reduced by an estimated $600,000 to $3 million. GSA Fleet, which manages
    the agency's program, receives no direct appropriations and depends on the
    sale of these vehicles to sustain its operations. GSA does not currently
    donate Fleet vehicles. Furthermore, it would need new statutory authority
    to be able to donate them directly to YouthBuild USA because this would
    deviate from the existing process for disposing of excess federal
    property. If GSA were required to donate cars directly to YouthBuild USA,
    it would seek an appropriation to recover the reduction in revenues this
    would cause and consider increasing its leasing rates to federal agencies.
    However, GSA would need additional new statutory authority to allow it to
    increase its leasing rates for the purpose of recovering costs associated
    with donating cars.

    GSA Faces Reductions in Revenues from Donating Cars It Would Normally
    Auction

    GSA would face reduced sales revenues of an estimated $600,000 to $3
    million per year if it donated 1 to 5 percent of its used compact sedans
    from its Fleet program (112 to 559 cars) to YouthBuild USA's proposed
    Rural Initiative LICO program rather than sell these cars through selected
    auction houses around the country. From fiscal year 2002 through fiscal
    year 2006 (as of August 2006), GSA, on average, auctioned 11,171 compact
    sedans each year, with a mean sales price of $5,511. GSA officials
    indicated that they base their decision to sell their used cars on a
    combination of factors intended to maximize their revenues. For example,
    they look at the expected sales proceeds of the vehicle based on its age
    and mileage to determine at what point they will get the maximum value for
    selling their used cars. They currently use the following age and mileage
    guidelines for selling their used cars:

    o3 years old and 36,000 or more miles, or

    o4 years old and any miles, or

    oany age and 60,000 or more miles.

    In addition, GSA tracks the resale market to determine the high and low
    points of the market to help decide when to sell and what types of
    vehicles to sell. Finally, they look at events that could affect the used
    car market. For example, Hurricane Katrina increased the demand for used
    vehicles in parts of the country that were not affected by the hurricane.

    If GSA donated to YouthBuild USA 1 percent of the compact sedans it
    normally sells at auctions, this would be about 112 cars with a total
    reduction in estimated sales revenues of about $600,000. If GSA donated 5
    percent of the compact sedans it normally auctions, this would be about
    559 cars with a total reduction in estimated sales revenues of about $3
    million. Figure 3 shows the range of reduction in sales revenue from GSA
    donating 1 to 5 percent of its compact sedans to YouthBuild USA (112 to
    559 cars).

    Figure 3: Estimated Average Annual Reduction in Sales Revenue to GSA Fleet
    from Donating Compact Sedans Normally Sold at Auction

    GSA Fleet, which manages the agency's program, does not receive direct
    appropriations from Congress; therefore, GSA officials indicated that GSA
    Fleet would need to replace the reduction in sales revenues from donating
    cars in order to continue to sustain its operations. Currently, to support
    its Fleet operations, GSA relies on the proceeds of its auction of used
    vehicles and the income it receives from the rates it charges agencies
    that lease vehicles from it. According to GSA officials, in setting its
    leasing rates, it is allowed to include an increment to these rates to
    cover inflation on its current inventory of vehicles, as well as to cover
    the estimated replacement cost of these vehicles to meet the demand of
    agencies that lease from the Fleet program. This increment is known as
    replacement cost pricing. GSA officials indicated that a revolving fund
    sustains the Fleet program, with the revenues it receives from auctioning
    and from leasing vehicles, offsetting the expenditures for operating the
    entire fleet of vehicles.

    GSA Would Need Statutory Authority to Donate Vehicles Directly to
    YouthBuild USA

    In order for GSA to donate cars from its Fleet program directly to
    YouthBuild USA, it would need new statutory authority to deviate from the
    existing process for disposing of surplus federal property.^10 GSA Fleet
    does not participate in this process. Specifically, under the process for
    disposing of surplus federal property, federal agencies must determine if
    any property under their control is excess, or no longer needed, within
    the agency. If this is the case, they must then report this to GSA, which
    first determines if any other federal agency needs the property. If no
    other agency needs it, GSA declares the property to be "surplus" and can
    dispose of it in a number of ways, such as by selling it or destroying it.
    GSA also has authority to donate this property but may not do so directly
    to specific private organizations, such as YouthBuild USA. Instead, it
    must donate the property through state agencies, which, in turn, donate it
    to public agencies or certain nonprofit educational or public health
    institutions or organizations.

    According to GSA officials, if they were given the statutory authority
    explicitly allowing them to donate vehicles from their Fleet program to
    YouthBuild USA, they would likely first seek appropriations to the General
    Supply Fund to make up for the reductions in revenues associated with
    donating the vehicles.^11 In addition, they would consider increasing the
    rates they charge federal agencies to lease vehicles, in order to recover
    this reduction in revenues. However, GSA currently lacks authority to pass
    on the costs of donations to its client agencies. Specifically, the
    Federal Property Act specifies how GSA is to set prices to recover the
    costs of operating the fleet. The pricing formula (through which GSA sets
    its leasing rates) specifies that prices should cover the costs of
    operating the fleet and may include an increment for the cost of replacing
    fleet vehicles and related equipment.^12 Because the costs associated with
    donations of fleet vehicles would not be costs of operating or replacing
    the fleet and related equipment, statutory authority would be needed in
    order to increase the rates GSA charges its client agencies to recover the
    costs of donating cars to YouthBuild USA.

    GSA officials indicated there are different ways they might consider
    raising leasing rates if given authority to do so but also expressed
    concerns about the effect such an increase might ultimately have on the
    viability of the Fleet program. For example, GSA could raise its rates
    only for those agencies that lease compact sedans; this would result in a
    1 percent increase in order to recover the reduction of $600,000 in sales
    revenue. To recover the reductions from donating 5 percent of its compact
    sedans ($3 million in sales revenue), GSA might raise its leasing rates by
    about 5 percent. Another option GSA could pursue would be to raise its
    rates across all agencies that lease vehicles from it, regardless of car
    type. In this case, all agencies that lease vehicles from GSA Fleet (not
    just those leasing compact sedans) would subsidize the vehicle donations.

    GSA officials indicated that if the agency raised its rates too high, this
    could affect the economic viability of the Fleet program. Nothing requires
    federal agencies to lease vehicles from GSA; they can lease from private
    companies if they choose to do so. GSA officials told us that the agency
    is currently less expensive than the private sector in terms of leasing
    rates. GSA officials indicated that, while raising the rate GSA charges to
    lease vehicles in order to recover the reduced sales revenue from donating
    1 to 5 percent of its compact sedans to YouthBuild USA would probably not
    cause the federal agencies to stop leasing from GSA, the officials are
    more concerned that donating vehicles would inspire other nonprofit
    organizations to seek donations from GSA Fleet. According to GSA
    officials, they have received such requests in the past. If GSA were
    required to donate a greater percentage of its Fleet vehicles to nonprofit
    organizations, then GSA's leasing rates could eventually become higher
    than its competitors in the private sector and eventually drive GSA out of
    the leasing business.

    Another option GSA officials cited does not require a legislative change.
    Specifically, GSA officials indicated that it could decrease the amount of
    funds it uses to buy new cars each year. Because GSA would have less sales
    revenue due to donating some of the cars it normally would sell, GSA would
    have less funds to buy new cars. According to GSA officials, to compensate
    for the purchase of fewer new cars, GSA would keep its cars in the Fleet
    program longer than the current 3- to 5-year time period. Furthermore,
    because these cars would be older than GSA's current fleet, they would
    require more maintenance, which would result in higher maintenance costs.
    Due to the prospective nature of a donation program, GSA officials
    indicated that they did not have sufficient information to give a precise
    estimate of the increased maintenance costs GSA would incur. Finally, GSA
    officials indicated that keeping cars longer might mean more downtime for
    some of these cars, which might also result in a reduction of revenues
    from leasing.

    Available Research Suggests That Car Access Leads to Jobs and Other
    Benefits

    Taken as a whole, the seven studies we reviewed consistently indicated
    that owning a car or having access to one increases the likelihood that
    low-income individuals (such as rural Youthbuild participants) get a job
    (see app. II for more information on each of the studies we reviewed).^13
    According to recent research, this is because a car likely allows a person
    to search for a job over a wider geographic area and to work during hours
    when public transit is not available. While each of the studies had some
    methodological limitations, they all produced fairly consistent results on
    the effects of car access on employment and hours worked. Differences
    between the populations in these studies and rural Youthbuild participants
    did not allow us to use the studies' results to identify the degree to
    which participants in YouthBuild USA's LICO program would benefit from
    having a car.

    Studies Reported Employment Benefits from Car Access

    Taken as a whole, the seven studies we examined consistently indicated
    that owning a car or having access to one increased the likelihood that
    someone would get a job. For example, a 2005 study surveyed about 2,000
    urban and rural welfare recipients in Tennessee starting in January
    2001.^14 Researchers interviewed the same people every 6 months and asked
    questions about car access and employment. The study indicated that
    individuals with access to a car increased their chance of finding a job
    and leaving welfare by about 59 percent. Another study obtained data from
    a survey of a random sample of Alameda County, California, residents who
    received welfare benefits in fiscal years 1992 to 1993.^15 Researchers
    surveyed these same individuals again in fiscal years 1994 and 1995 and
    reported that private automobiles were more effective than increased
    public transit in moving participants from welfare to work. Another study
    estimated that owning a car increased the likelihood of being employed by
    about 20 percent.^16

    Three of the seven studies reported that car access led to more work hours
    (the other four studies did not address this issue). For example, one
    study examined the effects of car access on weekly hours worked and
    estimated that access to a car increased the number of hours worked by
    nearly 9 hours per week.^17 Two other studies, focusing on car ownership,
    estimated increases of 5 to 11 hours per week in the number of hours those
    they studied worked.^18

    The literature gives several explanations for these results. For example,
    a car likely allows a person to search for a job over a wider geographic
    area, expanding the number of employment opportunities and the chances he
    or she will find a job. Also, a car likely allows a person to work hours
    that are not traditionally supported by public transit, increasing not
    only the hours he or she can work, but the job openings that may be
    considered.^19

    Studies Could Not Be Used to Estimate How Much Youthbuild Participants
    Would Benefit from Having a Car

    Because there are several major differences between the individuals that
    the researchers studied and those in the rural Youthbuild population, we
    could not extrapolate from this research to identify the degree to which
    the rural YouthBuild USA population would benefit from having a car. For
    example, the studies generally reviewed welfare recipients who tended to
    be older and better educated than the rural Youthbuild population.
    Research has shown that older, more educated individuals are more likely
    to find employment (with or without a car) than younger and less educated
    individuals.

    In addition, four of the studies we reviewed were based on data from
    mainly urban populations, while two others used national data without
    controlling for urban/rural locations. Controlling for differences such as
    urban and rural populations would be necessary to extrapolate from these
    studies for the Youthbuild population because of various differences
    between the two groups. For example, we have reported in the past that
    rural residents generally have fewer public transportation options and
    live in less densely populated areas than urban residents, making them
    more dependent on car access or ownership.^20 Consequently, the effect of
    car access in rural areas may be more difficult to discern and different
    than in urban areas because rural residents have fewer transportation
    options from which to choose. Also, rural unemployment rates are higher on
    average than urban areas; as a result, the effect of increasing car access
    on new employment may be substantially different than in urban areas.
    Consequently, the research that did not distinguish rural and urban
    populations did not allow us to gauge whether the rural YouthBuild USA
    population would experience greater, equal, or lesser benefits than the
    studies reported.

    LICO Programs Report Positive Results, but Limitations Restrict Projecting
    Results to YouthBuild USA's Program

    Six studies of LICO programs, as well as the managers of these programs,
    reported that participants were able to get a job or retain their current
    jobs, received higher wages, and spent more time with their families as a
    result of getting a car through the LICO programs. However, determining
    the extent that Youthbuild participants would benefit from such a program
    is not possible because of limitations in the methodologies of these
    studies, differences between individuals served by these programs compared
    with YouthBuild USA, and differences in the designs of the existing
    programs and the YouthBuild USA proposal. For example, most of the studies
    had low response rates from the participants, which prevented us from
    projecting their results to all participants. In addition, in terms of
    program design, the LICO programs studied are largely loan programs that
    provide additional tools to aid participants, such as financial literacy
    training, whereas YouthBuild USA proposes to donate cars and does not
    envision additional support services. As a result, managers of the
    existing LICO programs believed their participants' outcomes may be
    different than YouthBuild USA's because the loan commitment, the financial
    literacy training, and the low-risk profile of their participants
    altogether increase the likelihood of success.

    Studies and Experiences of Six LICO Programs Report Positive Results for
    Participants

    Six LICO programs that had been subject to an external formal evaluation
    study and officials of these programs reported that participants found
    jobs, retained their current ones, or increased their income as a result
    of obtaining a car through the program. For example, one of the studies
    reported that 60 percent of the participants found a job after getting the
    car, and another study reported that 97 percent of the participants
    surveyed attributed their ability to find a job or retain their current
    one to the car they obtained through the program. With respect to
    increasing participant income, all six of the studies reported gains in
    earnings, and four of the six studies reported that from 72 to 80 percent
    of the LICO program participants secured or reported receiving higher
    wages. These studies reported that participants believed that their
    increased wages were attributable to the vehicle they received from the
    LICO program. Another study reported that the participants experienced
    annual average income increases from nearly $5,500 to $7,900 after getting
    a car. Additionally, officials of the LICO programs told us their
    participants reported that having a dependable and affordable car helped
    them find or retain their jobs, helped them receive higher wages and work
    more hours, or find better jobs.

    The LICO program studies and the LICO officials reported that the program
    participants benefited from an improved quality of life as a result of
    obtaining a car through the LICO programs. According to the studies,
    participants reported that having a car enabled them to improve their
    education and training, find better quality day care for their children,
    and spend more time with their families. One official of a LICO program
    added that participants stated that having a car was a life transforming
    event, increasing their financial stability and allowing them to obtain
    better housing or become homeowners. Other LICO program officials stated
    that participants reported that the car had a positive effect on their
    self-esteem or gave them hope for the future. LICO program studies and
    officials stated that their participants reported that the car they got
    through the program allowed them to shop at discount centers rather than
    nearby more expensive convenience stores.

    Limitations in Studies Do Not Allow for Outcomes to Be Projected to
    YouthBuild USA's Proposed LICO Program

    Limitations in the methodologies in the six studies, such as low survey
    response rates, restrict applying their employment outcomes to the entire
    populations of the LICO programs studied or to participants in YouthBuild
    USA's proposed LICO program. For example, three studies reported positive
    outcomes for participants, but these outcomes were based on low response
    rates from LICO program participants.^21 Specifically, these studies
    reported the following:

    oA study of one LICO program that helps its participants obtain
    low-interest loans to purchase a used car  reported that, among the
    participants surveyed, 75 percent said that they found a job that paid
    higher wages, and 55 percent reported obtaining better quality day care
    for their children as a result of obtaining a car through the program.
    Officials of this LICO program noted that participants found jobs (and
    kept them longer) and improved their quality of life as a result of
    obtaining a car from the LICO program. However, while the study of this
    program attempted to contact the 90 participants, it only received
    responses from 34 participants (38 percent). This raises the possibility
    that the 56 nonrespondents, nearly two-thirds of those in the program, may
    have had different experiences from the 34 who responded.

    oAnother study of a LICO program that relied on data on participants'
    earnings and employment reported that 63 percent retained their jobs for
    12 months after obtaining a car loan. However, data were not available for
    all participants for the time periods of interest to the researchers, and
    the study had to rely on samples of the 511 for whom data were available.
    For example, there were only data on 131 program participants that went
    back a full year before their loans were issued, which raises the
    possibility that those for whom data was not available had different
    outcomes from those for whom data was available.

    oAnother study of a LICO loan program reported that 339 out of 353
    participants surveyed experienced an improved quality of life in that they
    were able to spend more time with their families. However, these 353
    respondents were drawn from a pool of 2,200 that the study authors created
    because they anticipated very high nonresponse rates, which raises the
    possibility that the participants surveyed experienced very different
    outcomes from those that were not surveyed.

    Differences in Design and Participants the Programs Serve Also Limit
    Application of Study Results to YouthBuild USA's Proposed Program

    Officials of the LICO programs studied also told us that differences in
    program design and population served to restrict the extent to which their
    outcomes could be applied to YouthBuild USA's proposed LICO program. One
    of the major differences between the design of the LICO programs studied
    and YouthBuild USA's proposal is that most LICO programs we consulted
    require participants to obtain a loan to purchase the car, while
    YouthBuild USA proposes to give cars to participants for a one-time fee of
    $450. Four of these six programs require participants to obtain a
    low-interest loan to purchase a car, while YouthBuild USA proposes
    donating cars to participants. The other two programs obtain used cars,
    repair them (if necessary), and then sell them to the participants at the
    cost of repairs or at a very low cost. One of these two programs may also
    assist the participants in obtaining a loan,^22 and  the other requires
    the participants to make payments for the purchase of the car. In order to
    qualify for the loans, the programs require participants to have adequate
    income to support car payments and meet creditworthiness standards. Once
    they obtain the car, participants must make the loan payments for the term
    of the loan. Because of these requirements, as well as participants'
    greater reliance on their own resources, officials of these LICO programs
    told us that they believe that their participants have greater incentives
    toward ensuring that they realize the benefits of car ownership than do
    individuals who receive a donated vehicle. Additionally, they believe that
    their participants become more invested in getting jobs and achieving
    other results that are consistent with the programs' goals than would
    participants in a car donation program such as what YouthBuild USA
    proposes.

    These LICO programs provide additional support to their participants, such
    as financial literacy training and car repair assistance, which might also
    limit the application of the studies' results because YouthBuild USA's
    proposal does not presently envision providing such services. Officials of
    these LICO programs stated that, before allowing participants to obtain a
    loan, it was important for them to understand how to budget their money
    and deal with credit responsibly. They indicated that the financial
    literacy training and subsequent counseling was an essential component of
    their programs and tied to the success of participants fulfilling their
    obligations on their loans, as well as getting or keeping their jobs.

    Furthermore, most of the LICO programs implemented various arrangements
    for costs of repairs as part of their programs. For example, two programs
    developed plans to enable participants to cover the costs of minor repairs
    by establishing accounts to which participants make small monthly
    deposits, which they later may use for repair costs. Also, one of these
    programs required participants to contribute a one-time fee of $250 to a
    pool that could later be used to cover the costs of major repairs above
    $700. Additionally, an official of one LICO program told us that it
    addressed the issue of budgeting for repair costs by securing favorable
    rates in advance at specific auto shops and requiring participants to go
    to these specific vendors for repairs.

    Finally, similar to the studies we reviewed related to car access in
    general, the differences between the populations served by these LICO
    programs and those YouthBuild USA proposes to serve also might limit the
    extent to which the outcomes of these LICO programs could be applied to
    YouthBuild USA's proposal. Our reviews of the participants' profiles of
    the LICO programs studied found that more than half of the participants
    were single women in their mid-20s to 30s, with children, and with some
    education beyond high school. In contrast, participants in YouthBuild
    USA's LICO program would primarily be men between the ages of 16 and 24
    who would have not completed high school upon entering the Youthbuild
    program. Officials of the LICO programs believed that the demographics of
    a LICO program can influence the programs' outcomes. For example, these
    officials indicated that participants who have responsibilities, such as
    those with children, are more likely to have a lower risk profile and be
    motivated toward getting a job and reaching other goals consistent with
    those of the LICO programs.

    Agency Comments and Our Evaluation

    We provided GSA a draft of this report for its review and comment. In a
    letter from the Assistant Commissioner for the Office of Vehicle
    Acquisition and Leasing Services (see app. III), GSA described our report
    as accurate as it pertains to our description of the GSA Fleet program.
    GSA expressed concerns with the potential use of its Fleet for a car
    donation program--namely, that the revenue lost would require direct
    appropriations from the Congress or cost increases to its customer
    agencies in the form of higher lease rates, potentially affecting the
    viability of the GSA Fleet program. Additionally, GSA stated a concern
    that creating a donation program to YouthBuild USA could lead other
    organizations to seek donated vehicles as well.

    GSA also stated that the report does not clearly address the question as
    to why YouthBuild USA should receive donated GSA vehicles over other
    worthy charitable organizations. In our review, we focused on the effect
    of donating 1 to 5 percent of selected GSA cars on GSA's fleet vehicle
    sales operations and the potential benefits to rural Youthbuild
    participants from such donations. We did not, however, evaluate the merits
    of providing vehicles to other charitable organizations.

    GSA officials also provided a number of technical clarifications to our
    report, which we have incorporated, as appropriate.

    We are sending copies of this report to the Chairman of the Subcommittee
    on Financial Institutions and Consumer Credit of the House Committee on
    Financial Services and other interested congressional committees. We also
    are sending copies to the Administrator of GSA. We also will make copies
    available to others upon request. In addition, the report will be
    available at no charge on the GAO Web site at [23]h  ttp://www.gao.gov.

    me at (202) 512-8678 or shearw@gao.gov. Contact points for our
    Offices of Congressional Relations and Public Affairs may be found on the
    last page of this report. GAO staff who made major contributions to the
    report are listed in appendix IV.

    Sincerely yours,

    William B. Shear
    Director, Financial Markets
         and Community Investment

    Appendix I
    Objectives, Scope, and Methodology

    The objectives of this report were to (1) assess the effect of donating 1
    to 5 percent of selected General Services Administration (GSA) used cars
    on GSA's fleet vehicle sales operations, (2) describe what studies have
    shown with respect to the benefits that car ownership or access may hold
    for low-income individuals, and (3) describe what studies of selected Low
    Income Car Ownership (LICO) programs and experiences of these programs
    have shown with respect to the benefits of participant car ownership.

    To assess the effect on GSA's fleet vehicle sales operations from donating
    vehicles, we obtained data from GSA on the total number of compact sedans
    its Fleet program sold and the average sales proceeds for these vehicles
    for fiscal years 2001 through 2005 and for 2006 (up to August 2006). We
    focused our analysis on GSA compact sedans sales because this is the type
    of vehicle YouthBuild USA officials told us that they would primarily need
    for their proposed Rural Initiative LICO program. We used GSA's data from
    fiscal years 2002 through 2006 to calculate the average opportunity
    cost--the reduction in revenue for each compact sedan GSA would
    donate--and the total reduction in sales revenue GSA would face by
    donating 1 to 5 percent of its compact sedans.^1 To determine how much GSA
    might increase the rate it charges federal agencies that lease compact
    sedans from it (in order to recover the reduction in sales revenues from
    donating 1 to 5 percent of its compact sedans), we obtained data from GSA
    on the number of compact sedans it currently leases and revenues it
    receives from leasing these vehicles. This data allowed us to calculate
    the amount (percentages) GSA would need to increase the rate it charges
    federal agencies to make up the reduction in sales revenues from donating
    1 to 5 percent of its compact sedans. We obtained written descriptions on
    GSA's computer systems and procedures for ensuring that the agency has
    verified Fleet transactions. In addition, the agency provided us with a
    written description of how GSA Fleet handles any discrepancies found in
    the data in its system. Based on this information, we determined that the
    data that GSA provided to us were sufficiently reliable for the purposes
    of this report. In addition, we obtained information on the options the
    agency might pursue to make up for the reduction in revenues from
    interviews with GSA officials. To determine the legal issues that would be
    involved in a car donation program, we reviewed the legislation that
    establishes GSA's authority to operate the Fleet program and for it to set
    prices to recover its program costs. We also reviewed the legislation that
    established the General Supply Fund and the purposes for which the fund
    can be used and discussed these and related legal issues with officials
    from GSA's General Counsel.

    To describe what studies have shown with respect to the benefits that car
    ownership or access may hold for low-income individuals, we conducted a
    literature search of relevant studies, reviewed a list of studies from the
    Web site of the National Economic Development and Law Center (NEDLC), and
    interviewed two individuals who had conducted research on this issue.
    Based on these efforts, we identified a large body of research on car
    access and employment. We limited our review to seven studies that used
    more sophisticated economic models that distinguished between car access
    and several other factors that could affect the likelihood that an
    individual found a job, such as education, age, and gender.^2 Our review
    of these seven studies included an analysis of study methodologies, the
    individuals that were studied, study results with respect to car access
    and employment, and study limitations. In order to address the issue of
    the extent to which the results of these studies could be applied to
    YouthBuild USA's proposed LICO program, we compared the individuals
    reviewed in these studies with rural Youthbuild participants. For a more
    detailed summary of our review of these seven studies, see appendix II.

    To determine what studies of selected LICO programs have shown with
    respect to the benefits of participants' car ownership, we spoke with
    experts in the field of LICO programs about the nature and extent of
    existing studies of LICO programs. These experts identified several LICO
    programs that had been subject to an independent evaluation of their
    outcomes. Additionally, to identify other LICO programs that had been
    subject to an independent evaluation and were located in rural areas, we
    reviewed about 140 LICO programs listed on the NEDLC Internet Web site^3
    and contacted those LICO programs on the NEDLC listing that appeared to be
    located in rural and mixed rural-urban areas.^4 From our discussions with
    the experts and contacts with the LICO programs, we identified and
    selected the following six LICO programs that had been subject to an
    independent evaluation:

    oGood Wheels, Augusta, Maine

    oGood News Garage, Burlington, Vermont

    oWest CAP JumpStart, Glenwood City, Wisconsin

    oNew Leaf Services, Inc., Decatur, Georgia^5

    oWays to Work, Inc., Milwaukee, Wisconsin

    oWorking Wheels, Seattle, Washington

    Three of these programs were located in rural areas, two in urban areas,
    and one in a mixed rural-urban area. Four of the six LICO programs were
    loan programs, one was a car-donation and car-sales program, and the other
    was a car sales program. We obtained and analyzed copies of the studies
    for the six LICO programs in order to identify the reported outcomes and
    potential limitations with these studies. Where possible, we reviewed
    information from the LICO program Web sites to obtain information on how
    these programs operate, what types of individuals they serve, and how many
    cars they provide to their participants. We also interviewed LICO program
    officials about their studies to gain a better understanding of the
    reported outcomes and limitations with the studies. During these
    interviews, we also obtained more background information about the LICO
    programs' designs, populations served, and challenges the officials faced
    in running these LICO programs. We also obtained the views of LICO program
    officials on the extent to which they believe their programs' reported
    outcomes could be applied to participants in YouthBuild USA's proposed
    LICO program.

    We conducted our work from May 2006 to November 2006 in San Francisco,
    California, and Washington, D.C., in accordance with generally accepted
    government auditing standards.

    [This page is intentionally left blank]

    Appendix II
    Summary of Studies on the Effect of Car Access on Employment

    ^aLogit analysis is a regression technique used to address outcomes where
    there are two possible categories, such as employed or not employed. The
    multinomial logit is an extension of the logit method to cases where there
    are more than two outcomes.

    ^b"Heckman selection" models are a regression technique used to address
    concerns about obtaining biased estimates in cases where an outcome is not
    observed unless a given event occurs. For example, hours and wages are not
    observed unless someone is employed. Therefore, nonworkers given greater
    access to jobs may not have the same outcome as someone who is already
    employed.

    ^aThe two-stage least squares model is a regression technique used to
    address concerns about simultaneity bias. For example, the concern that
    car access may result from having a job rather than the job resulting from
    car access.

    ^aAlthough "car access" is not specifically mentioned in this study, the
    public transportation "barrier" would be removed by "car access."

    ^bLogit analysis is a regression technique used to address outcomes where
    there are two possible categories, such as employed or not employed. The
    multinomial logit is an extension of the logit method to cases where there
    are more than two outcomes.

    ^aLogit analysis is a regression technique used to address outcomes where
    there are two possible categories, such as employed or not employed. The
    multinomial logit is an extension of the logit method to cases where there
    are more than two outcomes.

    ^aLogit analysis is a regression technique used to address outcomes where
    there are two possible categories, such as employed or not employed. The
    multinomial logit is an extension of the logit method to cases where there
    are more than two outcomes.

    ^aA linear probability model is a regression technique that is used to
    estimate the probability that someone is in one of two categories--for
    example, employed or not employed. This approach is less desirable for
    categorical outcomes than logit analysis because the latter has more
    desirable statistical characteristics that increase the precision of
    regression estimates.

    Appendix III
    Comments from the General Services Administration

    Appendix IV
    GAO Contact and Staff Acknowledgments

    William B. Shear, (202) 512-8678, or shearw@gao.gov

    In addition to the individual named above, Bill MacBlane, Assistant
    Director; Harold J. Brumm Jr.; Martin H. De Alteriis; Tami Gurley; Marc M.
    Molino; Elizabeth A. Olivarez; Jose R. Pena; Diana Pietrowiak; David M.
    Pittman; Paul G. Thompson; and James D. Vitarello made key contributions
    to this report.

    (250294)

    www.gao.gov/cgi-bin/getrpt?GAO-07-153 .

    To view the full product, including the scope
    and methodology, click on the link above.

    For more information, contact William B. Shear at (202) 512-8678 or
    shearw@gao.gov.

    Highlights of [27]GAO-07-153 , a report to the Ranking Minority Member,
    Subcommittee on Financial Institutions and Consumer Credit, Committee on
    Financial Services, House of Representatives

    December 2006

    GSA FLEET

    Information on the Effect of Donating Cars to YouthBuild USA and Potential
    Benefits to Rural Youthbuild Participants

    To assist youth who live in high poverty rural areas obtain and retain
    jobs, YouthBuild USA, a national nonprofit organization, has proposed
    providing donated used cars to selected low-income youth in rural
    communities. YouthBuild USA's proposed program hinges on receiving
    donations of used cars from the federal government's General Services
    Administration (GSA). This report discusses (1) the effect of donating 1
    to 5 percent of selected GSA used cars on GSA's fleet vehicle sales
    operations, (2) what studies have shown with respect to the benefits that
    car ownership or access may hold for low-income individuals, and (3) what
    studies of selected low income car ownership programs and experiences of
    these programs have shown with respect to the benefits of participant car
    ownership.

    In conducting this study, GAO examined auction data from GSA, reviewed
    academic studies on the benefits of car access in gaining employment, and
    interviewed officials of six existing low income car ownership programs.

    [28]What GAO Recommends

    GAO is making no recommendations in this report.

    GAO provided a draft of this report to GSA for its review and comment. GSA
    stated that our report is accurate but expressed concerns with the use of
    its Fleet vehicles for car donations.

    If GSA annually donated 1 to 5 percent of the compact sedans available for
    auction from its Fleet program (112 to 559 cars), its annual sales revenue
    would be reduced by $600,000 to $3 million (see fig.). To donate cars
    directly to YouthBuild USA, GSA would need new statutory authority to
    deviate from the existing process for disposing of surplus federal
    property. If it were given this authority, GSA would likely first seek
    appropriations to recover the loss in sales revenue from the donations but
    would also consider increasing its leasing rates for compact sedans.
    However, GSA would also require new legislative authority to increase its
    rates for this purpose because the current statute governing its Fleet
    program does not allow it to pass on these costs to the agencies that
    lease vehicles from it.

    The seven studies GAO reviewed consistently found that owning a car or
    having access to one increases the likelihood that low-income individuals
    (such as rural Youthbuild participants) find a job. One reason for this is
    that a car allows a person to search for a job over a wider geographic
    area. Differences between the populations in these studies and rural
    Youthbuild participants did not allow GAO to use this research to identify
    the degree to which participants in YouthBuild USA's proposed program
    would benefit from having a car.

    Six studies of low income car ownership programs and the experiences of
    those operating the programs indicated that participants got and retained
    jobs, earned higher wages, and spent more time with their families as a
    result of owning a car. However, it is difficult to project the results of
    these studies to rural Youthbuild participants because of limitations in
    the methodologies of the studies, differences between individuals served
    by the programs and YouthBuild USA, and differences in the designs of the
    existing programs and the YouthBuild USA proposal.

    Estimated Average Annual Reduction in Sales Revenue to GSA Fleet from
    Donating Compact Sedans Normally Sold at Auction

    References

    Visible links
    27. http://www.gao.gov/cgi-bin/getrpt?GAO-07-153
    *** End of document. ***