Action Is Needed to Address the Federal Government’s Fiscal Future The Nation’s Fiscal Health An Annual Report to Congress March 2020

March 2020 | GAO-20-403SP
UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE
Action Is Needed to Address the
Federal Government’s Fiscal Future
The Nation’s Fiscal Health
An Annual Report to Congress
March 2020
Highlights
Highlights of GAO-20-403SP
The nation faces serious economic,
security, and social challenges that
require difficult policy choices in the
near term in setting national priorities
and charting a path forward for
economic growth. This will influence
the level of federal spending and how
the government obtains needed
resources. At the same time, the
federal government is highly
leveraged in debt by historical norms.
Significant Changes to the
Government’s Fiscal Condition
in Fiscal Year 2019
The Federal Government Is on
an Unsustainable Fiscal Path
GAO, CBO, and 2019 Financial
Report projections all show that,
absent policy changes, debt grows
faster than GDP; this is an
unsustainable path.
GAO projects that net interest will
exceed:
• Medicare spending as a share of
GDP in 2041,
• Social Security spending as a
share of GDP in 2044, and
• Total Discretionary spending as a
share of GDP in 2049.
An Annual Report to Congress
The Nation’s Fiscal Health
Action Is Needed to Address the Federal Government’s
Fiscal Future
A broad plan is needed to put the federal government on a sustainable long-term
fiscal path and ensure that the United States remains in a strong economic position
to meet its security and social needs, as well as to preserve flexibility to address
unforeseen events. This report describes the fiscal condition of the U.S. government
as of the end of fiscal year 2019 and its future unsustainable fiscal path absent
policy changes. It draws on the Fiscal Year 2019 Financial Report of the United
States Government (2019 Financial Report) and GAO’s work, including its audit of
the government’s consolidated financial statements.
According to the 2019 Financial Report, the federal deficit in fiscal year 2019
increased to $984 billion—up from $779 billion in fiscal year 2018. Federal
receipts increased by $134 billion, but that was outweighed by a $339 billion
increase in spending driven by increases in Medicare and Medicaid, Social
Security, defense, and interest on debt held by the public. Debt held by the
public increased from $15.8 trillion (or 77 percent of gross domestic product
(GDP)) at the end of fiscal year 2018 to $16.8 trillion (or 79 percent of GDP) at
the end of fiscal year 2019. By comparison, debt has averaged 46 percent of
GDP since 1946.
While spending on Social Security already exceeds $1 trillion per year, health
care and net interest are expected to grow faster than GDP and be key drivers
of federal spending in the future. Medicare spending is projected to reach $1
trillion per year by 2026, and net interest is projected to hit this milestone by

  1. Over the past 50 years, net interest costs have averaged 2 percent of
    GDP but these costs are projected to increase to 7.2 percent by 2049, when
    they become the largest category of spending.
    Projected Net Interest and Other Spending as Percentage of GDP

View GAO-20-403SP. For more
information, contact Susan J. Irving,
(202) 512-6806 or irvings@gao.gov,
Robert F. Dacey at (202) 512-3406 or
daceyr@gao.gov, and Dawn B. Simpson,
(202) 512-3406 or simpsondb@gao.gov.
The Federal Government Is on
an Unsustainable Fiscal Path
(continued)
Early Action is Important: GAO, the Congressional Budget Office (CBO), and
the 2019 Financial Report state that the longer action is delayed, the greater
the changes will have to be. As shown below, major programs are projected to
face financial challenges in the future.
Fiscal Risks Place Additional
Pressure on the Federal Budget
Fiscal risks are responsibilities,
programs, and activities that may
legally commit or create expectations
for future spending based on current
policy, past practices, or other factors.
Debt Limit Is Not a Control on Debt
The debt limit is a legal limit on the
total amount of federal debt that can be
outstanding at one time. It is not a
control on debt but rather an after-thefact measure that restricts the
Treasury’s authority to borrow to
finance the decisions already enacted
by Congress and the President.
Executive Agencies Have
Opportunities to Contribute
Toward Fiscal Health
Executive actions alone cannot put the
U.S. government on a sustainable fiscal
path, but it is important for agencies to
act as stewards of federal resources. In
prior work, GAO has identified
numerous actions for executive
agencies to contribute toward a
sustainable fiscal future.
Risks are Not Fully Accounted for: The federal government faces certain
fiscal risks that are not fully accounted for in the budget or long-term fiscal
projections, and could lead to future spending increases and higher levels of
debt. Examples include the need to resolve the federal government’s role in the
housing finance market and federal fiscal exposures resulting from natural
disasters. A more complete understanding of fiscal risks can help policymakers
anticipate changes in future spending and enhance oversight of federal
resources.
An Alternative Approach to Managing Debt Is Needed: The debt limit has been
suspended through July 2021. At that time, it will need to be suspended again or
raised. Failure to increase or suspend the debt limit in a timely manner could
undermine the perceived safety of Department of the Treasury (Treasury)
securities, resulting in serious negative consequences for the Treasury market and
increased borrowing costs. The full faith and credit of the United States must be
preserved.
Experts have suggested instituting fiscal rules as an alternative approach to the
debt limit. GAO has identified insights that can inform policy deliberations on the
potential implementation of fiscal rules. Congress could consider this suggestion as
part of a broader plan to put the government on a sustainable fiscal path.
Address
improper
payments
Reducing payments that should not have been made or were made in an
incorrect amount could yield significant savings. Reported improper
payment estimates totaled about $175 billion for fiscal year 2019. Since
fiscal year 2003, cumulative estimates have totaled almost $1.7 trillion.
Narrow
persistent tax
gap
Reducing the gap between taxes owed and those paid could increase tax
collections by billions of dollars annually. The average annual net tax gap
is estimated to be $381 billion (for tax years 2011-2013).
Improve
information
on programs
and fiscal
operations
Decision-making could be improved by ensuring the government’s
financial statements are fully auditable and by increasing attention to tax
expenditures—tax provisions that reduce tax liabilities. Estimated to
collectively reduce tax revenue by approximately $1.3 trillion in fiscal year
2019, tax expenditures are not regularly reviewed and their outcomes are
not measured as closely as spending programs’ outcomes.
Address
duplication,
overlap, and
fragmentation
GAO has identified numerous areas to reduce, eliminate, or better manage
fragmentation, overlap, or duplication; achieve cost savings; or enhance
revenue. Actions taken so far by Congress and executive branch agencies
have resulted in roughly $262 billion financial benefits since fiscal year
2010
Page i GAO-20-403SP The Nation’s Fiscal Health
Letter 1
Significant Changes to the Government’s Fiscal Condition in
Fiscal Year 2019 3
Long-Term Fiscal Projections Show the Federal Government Is on
an Unsustainable Fiscal Path 10
Action Is Needed to Address an Unsustainable Fiscal Path 39
Executive Agencies Have Opportunities to Contribute toward
Fiscal Health 47
Appendix I Objectives, Scope, and Methodology 58
Appendix II Near-Term Opportunities to Contribute Toward Fiscal Health from
Addressing Fragmentation, Overlap, and Duplication 61
Appendix III GAO Contacts and Staff Acknowledgments 63
Tables
Table 1: Receipts, Spending, and Deficit for Fiscal Years 2017–
2019 3
Table 2: Projections for Major Categories of Spending 17
Table 3: Spending and Revenue Changes Needed to Close the
Fiscal Gap over 75 Years 40
Table 4: Types of Fiscal Rules 44
Table 5: Programs and Activities with Estimates of Improper
Payments Exceeding $1 Billion in Fiscal Year 2019 49
Table 6: Examples of Areas with Open Actions with Potential
Financial Benefits of $1 Billion or More 61
Figures
Figure 1: Fiscal Year 2019 Debt Held by the Public and
Intragovernmental Debt 7
Figure 2: Distribution of Ownership of Treasury Securities Held by
the Public as of June 2019 9
Figure 3: Federal Debt Held by the Public 12
Contents
Page ii GAO-20-403SP The Nation’s Fiscal Health
Figure 4: Debt Held by the Public under Projections from GAO,
the Congressional Budget Office (CBO), and the 2019
Financial Report 13
Figure 5: Growth in Major Areas of Federal Spending 18
Figure 6: Federal Spending on Major Health Care Programs
Grows Faster Than GDP 20
Figure 7: Daily Average Number of People Turning 65 22
Figure 8: Projected Net Interest and Other Spending as
Percentage of Gross Domestic Product 25
Figure 9: Pension Benefit Guaranty Corporation’s Net Financial
Position of the Single-Employer and Multiemployer
Programs Combined, Fiscal Years 1990 through 2019 31
Figure 10: Key Dates for Major Programs and Future Debt 39
Figure 11: The Internal Revenue Service (IRS) Average Tax Gap
Estimate for Tax Years 2011–2013 51
Figure 12: Estimated Average Annual Gross Tax Gap by Type of
Noncompliance and Tax, Tax Years 2011-2013 52
Abbreviations
2019 Financial Report Fiscal Year 2019 Financial Report of the
United States Government
BCA Budget Control Act of 2011
CBO Congressional Budget Office
CFO Act Chief Financial Officers Act of 1990
Page iii GAO-20-403SP The Nation’s Fiscal Health
CFO Chief Financial Officer
CMS Centers for Medicare & Medicaid Services
DI Disability Insurance
DOE Department of Energy
DOD Department of Defense
DRRA Disaster Recovery Reform Act of 2018
EU European Union
Fannie Mae Federal National Mortgage Association
FCRA Federal Credit Reform Act of 1990
FEMA Federal Emergency Management Agency
FHA Federal Housing Administration
Freddie Mac Federal Home Loan Mortgage Corporation
GDP gross domestic product
Ginnie Mae Government National Mortgage Association
GSE government-sponsored enterprise
HHS Department of Health and Human Services
IMF International Monetary Fund
IPIA Improper Payments Information Act of 2002
IPERA Improper Payments Elimination and
Recovery Act of 2010
IRS Internal Revenue Service
MACRA Medicare Access and CHIP Reauthorization
Act of 2015
OASI Old-Age and Survivors Insurance
OCO Overseas Contingency Operations
OECD Organization for Economic Co-operation
and Development
OMB Office of Management and Budget
PBGC Pension Benefit Guaranty Corporation
PIIA Payment Integrity Information Act of 2019
PPACA Patient Protection and Affordable Care Act
SSA Social Security Administration
Treasury Department of the Treasury
USPS U.S. Postal Service
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Page 1 GAO-20-403SP The Nation’s Fiscal Health
441 G St. N.W.
Washington, DC 20548
March 12, 2020
The President
The President of the Senate
The Speaker of the House of Representatives
The nation faces serious economic, security, and social challenges that
require Congress and the administration to make difficult, near-term
policy choices in setting national priorities and charting a path forward for
economic growth. These choices will influence the level and composition
of federal spending and how the government obtains needed resources.
Policymakers also face a federal government highly leveraged in debt by
historical norms and on an unsustainable long-term fiscal path caused by
an imbalance between revenue and spending that is built into current law
and policy. Recent legislation intended to promote economic growth and
address other national priorities, such as the law referred to as the Tax
Cuts and Jobs Act,1 the Bipartisan Budget Act of 2019,2 and the fiscal
year 2020 appropriations acts3 have complicated the government’s
overall long-term fiscal outlook and debt burden.
Thus, decisions in the near term to enhance economic growth and
address national priorities need to be accompanied by a forward-looking
fiscal plan to put the federal government on a sustainable long-term path.
A long-term fiscal plan is essential to ensure that the United States
remains in a strong economic position to meet its security and social
needs, as well as to preserve flexibility to address unforeseen events.
This annual report is intended to illuminate the need for such a long-term
fiscal plan by describing the fiscal condition of the U.S. government as of
the end of fiscal year 2019 and its future fiscal path absent policy
1To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the
budget for fiscal year 2018, Pub. L. No. 115-97, 131 Stat. 2054 (2017).
2Pub. L. No. 116-37, 133 Stat. 1049 (2019).
3Consolidated Appropriations Act, 2020, Pub. L. No. 116-93, 133 Stat. 2317 (2019) and
Further Consolidated Appropriations Act, 2020, Pub. L. No. 116-94, 133 Stat. 2534
(2019).
Letter
Page 2 GAO-20-403SP The Nation’s Fiscal Health
changes. This report updates our April 2019 report.4 It draws from the
Fiscal Year 2019 Financial Report of the United States Government
(2019 Financial Report) and our audits of the government’s consolidated
financial statements for fiscal years 2019 and 2018 included in the 2019
Financial Report; from our long-term simulations and those developed by
the Congressional Budget Office (CBO) and contained in the 2019
Financial Report, and from budget information from the Department of the
Treasury (Treasury), Office of Management and Budget (OMB), and
CBO.5
Every year, the Secretary of the Treasury, in coordination with the
Director of OMB, prepares the U.S. government’s financial statements,
which, along with related information, are presented in the Financial
Report of the United States Government (Financial Report).6 We are
responsible for auditing these statements. The 2019 Financial Report
contains information on the federal government’s financial position and
condition, including its costs and revenues.7
In this report, we discuss the federal government’s fiscal condition and
how it changed in fiscal year 2019, the federal government’s
4GAO, The Nation’s Fiscal Health: Action Is Needed to Address the Federal Government’s
Fiscal Future, GAO-19-314SP (Washington, D.C.: Apr. 10, 2019).
5GAO, Financial Audit: Fiscal Years 2019 and 2018 Consolidated Financial Statements of
the U.S. Government, GAO-20-315R (Washington, D.C.: Feb 27, 2020).The consolidated
financial statements of the U.S. government are based on U.S. generally accepted
accounting principles.
6As discussed in the 2019 Financial Report, we were unable to provide an audit opinion
on the federal government’s fiscal year 2019 consolidated financial statements due to
material weaknesses in internal control and uncertainties concerning the sustainability
financial statements. However, with few exceptions, financial statements for the significant
federal entities received unmodified or “clean” opinions. The significant entities that
received a disclaimer of opinion on their fiscal year 2019 financial statements were the
Department of Defense and the Railroad Retirement Board. In addition, the Department of
Housing and Urban Development received a qualified opinion on its fiscal year 2019
financial statements.
7The 2019 Financial Report includes statements of net costs, statements of operations
and changes in net position, reconciliations of the primarily cash-based budget deficit to
operating results and changes in cash balance, balance sheets (assets and liabilities), and
sustainability financial statements, including long-term fiscal projections for the
government as a whole and for social insurance programs (e.g., Social Security and
Medicare). It also contains related unaudited financial information, such as information on
the tax gap, improper payments, and tax expenditures. Also, most federal agencies
prepare audited financial statements that provide more detailed information at the agency
and program level.
Page 3 GAO-20-403SP The Nation’s Fiscal Health
unsustainable long-term outlook, and risks to the government’s fiscal
condition.8 We also discuss actions the federal government can take to
achieve a more sustainable fiscal path as well as potential consequences
of not taking action.9
In fiscal year 2019, the reported federal budget deficit increased for the
fourth consecutive year to $984 billion. The fiscal year 2019 budget deficit
was up from $779 billion for fiscal year 2018 and $666 billion for fiscal
year 2017, as shown in table 1.
Table 1: Receipts, Spending, and Deficit for Fiscal Years 2017–2019
Dollars in billions
Fiscal year
2017
Fiscal year 2018 Fiscal year 2019
Receipts 3,315 3,329 3,462
Spending (3,981) (4,108) (4,447)
Deficit (666) (779) (984)
Source: Financial Reports of the United States Government. | GAO-20-403SP
Note: Fiscal year 2019 receipts and spending do not sum to deficit due to rounding.
Receipts for fiscal year 2019 increased by $134 billion (4 percent) over
fiscal year 2018. This growth is attributable to increasing social insurance
and retirement, individual income tax, customs duties, corporate income
tax, and excise tax receipts. As a share of gross domestic product (GDP),
8For the purposes of this report, fiscal condition is a broad concept using both budget and
financial information. The term “fiscal” is part of fiscal policy, which refers to decisions on
taxes and spending that affect the level, composition, and distribution of national income
and output. The budget process is a major vehicle for determining and implementing fiscal
policy.
9For more information on our objectives, scope, and methodology, see appendix I.
Significant Changes
to the Government’s
Fiscal Condition in
Fiscal Year 2019
Growth in Spending
Outweighed Modest
Revenue Growth
Page 4 GAO-20-403SP The Nation’s Fiscal Health
however, revenues fell slightly to 16.3 percent in fiscal year 2019 from
16.4 percent in fiscal year 2018.
Outlays (spending) increased by $339 billion (8.3 percent) compared to
fiscal year 2018. According to the 2019 Financial Report, this growth was
driven by increases in spending on Medicare and Medicaid, Social
Security, national defense, and interest on debt held by the public.
Medicare and Medicaid spending rose by $62 billion (11 percent) and $20
billion (5 percent), respectively; Social Security spending rose by $57
billion (6 percent); and national defense spending rose by $56 billion (9
percent).
A more complete picture of the government’s fiscal condition emerges
from looking at the Budget of the United States Government and the
Financial Report together. The federal budget is the government’s
primary financial planning and control tool and is largely cash based, with
the deficit or surplus being the difference between receipts (cash received
by the U.S. government) and outlays (largely payments made by the U.S.
government). In the Financial Report, the executive branch provides the
government’s financial position and condition, including its revenues,
costs, assets, and liabilities. In the Financial Report, costs include
amounts incurred but not necessarily paid yet, and revenues include
amounts the government has earned but not necessarily yet received.
Page 5 GAO-20-403SP The Nation’s Fiscal Health
Net cost totaled $5.1 trillion in fiscal year 2019, increasing by $526.8
billion (11.6 percent) compared to fiscal year 2018. Similar to fiscal year
2018, 72 percent of the net cost of the federal government in fiscal year
2019 came from four agencies: the Department of Health and Human
Services (HHS), Social Security Administration (SSA), Department of
Defense (DOD), and Department of Veterans Affairs. Interest on Treasury
securities held by the public represented 8 percent of net cost in fiscal
year 2019.
In any given year, the change in net cost is the combined effect of
offsetting increases and decreases across the government. Changes in
legislation, populations eligible for federal benefits, liability estimates, and
actuarial assumptions can contribute to changes in net cost. Contributors
to the $526.8 billion total increase in net cost in fiscal year 2019 included:
• DOD reported the largest increase among federal agencies: $210.0
billion. $122.2 billion of this total is due to a loss increase from
changes in assumption for benefits liabilities with the remaining
amount due to increases in net costs across DOD’s major programs,
including military operations, readiness, support; procurement; military
personnel; and research and development;
• HHS and SSA net costs increased $79.8 billion and $62.6 billion,
respectively, primarily due to increases in benefit expenses from the
social insurance programs they administer;
• Department of Education net cost increased $74.2 billion, largely due
to updated estimates of subsidy expenses related to its direct loan
programs;
• Department of Veterans Affairs net cost increased $70.7 billion
primarily due to actuarial losses from experience; and
• Net interest costs related to debt held by the public increased $46.3
billion, largely due to an increase in the amount of debt and because
interest rates were higher on average in fiscal year 2018 (although
they remained historically low).10
10Net interest primarily encompasses government interest costs (spending) on federal
debt held by the public, net of certain income recognized from loans and other sources.
According to Treasury, for fiscal year 2019, interest costs on debt held by the public
amounted to $404 billion, and net interest amounted to $376 billion. For fiscal year 2018,
interest costs on debt held by the public amounted to $357 billion, and net interest
amounted to $325 billion.
Net Cost
Net cost shows how much it costs to operate
the federal government. It equals the gross
cost of goods produced and services
rendered by the government minus earned
revenues generated by those goods and
services (e.g., Medicare premiums and
national park entry fees), and is then adjusted
for gains or losses from changes in actuarial
assumptions used to estimate certain
liabilities.
Net Operating Cost
Net operating cost primarily represents the
difference between net cost and tax revenue.
Source: GAO. │ GAO-20-403SP
Page 6 GAO-20-403SP The Nation’s Fiscal Health
Because the increase in net cost in fiscal year 2019 exceeded the $236.7
billion increase in tax and other revenues, net operating cost rose to $1.4
trillion.11 Net operating cost can be thought of as the Financial Report’s
counterpart to the budget deficit.
In the 2019 Financial Report, the federal government reported holding
about $4.0 trillion in assets at the end of fiscal year 2019, an increase
from $3.8 trillion at the end of fiscal year 2018. Most of this increase is
attributable to an increase in net accounts and taxes receivable.12 More
than half of the total reported assets were $1.4 trillion in net loans
receivable—primarily student loans—and about $1.1 trillion in net
property, plant, and equipment. The federal government also has
resources beyond these assets including stewardship assets—such as
national parks—as well as natural resources, the power to tax, and the
ability to set monetary policy.
The 2019 Financial Report also reported total liabilities of $26.9 trillion at
the end of fiscal year 2019, an increase from $25.4 trillion at the end of
fiscal year 2018. Most of this increase is attributable to an increase of
$1.0 trillion in federal debt held by the public and accrued interest. The
largest components of total liabilities were $16.9 trillion in federal debt
securities held by the public and accrued interest and about $8.4 trillion in
federal employee and veteran benefits payable (about $2.6 trillion in
civilian and $5.8 trillion in military and veterans).
11For fiscal year 2019, net operating cost ($1.4 trillion) exceeded the budget deficit ($984
billion) by about $461 billion, primarily due to accrued costs (costs incurred but not
necessarily paid) related to increases in estimated federal employee and veteran benefits
liabilities that are included in net operating cost, but not the budget deficit. Over the past
several fiscal years, the net operating cost has been higher than the budget deficit.
12The increase in taxes receivable is primarily a consequence of the law referred to as the
Tax Cuts and Jobs Act of 2017 providing reduced tax rates for repatriated foreign
earnings, which allowed taxpayers to elect to pay the associated tax on an 8-year
installment schedule.
Page 7 GAO-20-403SP The Nation’s Fiscal Health
Total federal debt rose to $22.8 trillion during fiscal year 2019, an
increase of about $1.2 trillion (6 percent) from fiscal year 2018. Both debt
held by the public and debt held by government accounts (known as
intragovernmental debt) increased (see figure 1). Debt held by the public
increased from about $15.8 trillion to $16.8 trillion, and intragovernmental
debt increased from about $5.8 trillion to $6.0 trillion.
Figure 1: Fiscal Year 2019 Debt Held by the Public and Intragovernmental Debt
Note: Other examples of intragovernmental debt include the Civil Service Retirement and Disability
Fund operated by the Office of Personnel Management and the Department of Defense’s Military
Retirement Fund and Medicare-Eligible Retiree Health Care Fund.
Because debt held by the public grew faster than GDP, CBO estimated
that debt held by the public as a share of GDP rose from about 77
percent at the end of fiscal year 2018 to about 79 percent at the end of
Federal Debt Increased in
Fiscal Year 2019
Federal Deficit
The federal deficit is the amount by which the
government’s spending exceeds its revenues
for a given period, usually a fiscal year.
Federal Debt
Total federal debt is the amount of money that
the federal government owes, either to its
investors (debt held by the public) or to itself
(intragovernmental debt).
Source: GAO. │ GAO-20-403SP
Page 8 GAO-20-403SP The Nation’s Fiscal Health
fiscal year 2019.13 Additionally, debt held by the public increased more
than the reported federal deficit ($984 billion for fiscal year 2019),
primarily because of increases in federal direct student loans and
financing related to mortgage insurance.14
Over the longer term, the structural imbalance between revenue and
spending that is built into current law and policy means debt held by the
public is expected to grow as a share of GDP. Debt held by the public is
reported as a liability on the consolidated financial statements of the U.S.
government. Intragovernmental debt is debt owed by Treasury to another
part of the government. It is an asset to those other federal government
accounts but a liability to Treasury; they offset each other in the
consolidated financial statements. However, when securities from
intragovernmental debt are redeemed, Treasury usually borrows from the
public to finance these redemptions, resulting in that intragovernmental
debt being replaced by debt held by the public.
The combination of the liquidity, depth, and safety of the Treasury market
is unmatched in global markets and has led to a wide range of investor
13GDP is the value of all goods and services produced within the borders of a country in a
given period. The dollar value of debt is difficult to interpret absent some sense of the size
of the economy supporting it. Therefore, the ratio of debt to GDP is used to gauge a
country’s ability to pay its debt. Other factors being equal, increasing GDP lowers the
debt-to-GDP ratio while decreasing GDP raises this ratio. In January 2019 CBO reported
the debt-to-GDP ratio was 77.8 percent in fiscal year 2018, though CBO later updated this
estimate to 77.4 due to revised GDP estimates.
14The Federal Credit Reform Act of 1990 (FCRA) stipulates that the budget record the
estimated net subsidy cost to the federal government of extending or guaranteeing credit.
(See FCRA, codified, as amended, in part at 2 U.S.C. §661c(d).) When the federal
government makes a direct loan, however, the full amount is disbursed, and if the federal
government borrows the cash to be disbursed, then federal debt outstanding grows by the
amount of the loan.
Page 9 GAO-20-403SP The Nation’s Fiscal Health
types in Treasury securities.15 Figure 2 shows the distribution of the
ownership of Treasury securities held by the public as of June 2019.16
Figure 2: Distribution of Ownership of Treasury Securities Held by the Public as of
June 2019
Note: Percentages do not sum to 100 percent due to rounding. Ownership information is estimated
primarily because securities are continually resold among investors. Data are as of June 2019, the
most recent data available at the time of this report.
Domestic investors—consisting of private investors, the Federal Reserve,
and state and local governments—accounted for about 60 percent of
Treasury securities held by the public. International investors accounted
15GAO, Federal Debt Management: Treasury Should Strengthen Policies for Market
Outreach and Analysis to Maintain Broad-Based Demand for Securities, GAO-20-131
(Washington, D.C.: Dec. 5, 2019). In this report, we examined how Treasury monitors and
uses information about the Treasury market to inform its debt issuance strategy. We
recommended Treasury (1) finalize its policy for conducting bilateral market outreach, and
(2) establish a policy for the documentation and assurance of analytical models. Treasury
agreed with these recommendations. Taking these actions could help Treasury ensure its
decisions about issuing debt are based on the best possible information.
16For our analysis of trends in ownership of Treasury securities held by the public, we
analyzed data from the Federal Reserve’s Financial Accounts of the United States. Data
from the Federal Reserve flow of funds report are indirectly based on data in the Treasury
International Capital reporting system. Due to adjustments made before being published
by the Bureau of Economic Analysis and Federal Reserve, these data will vary from the
data as presented in the Treasury International Capital reporting system.
Page 10 GAO-20-403SP The Nation’s Fiscal Health
for the remaining 40 percent. To achieve its goal of financing the
government’s borrowing needs at the lowest cost over time, Treasury
must maintain strong demand from investors. However, as discussed
later in this report, both impasses over the debt limit and the
unsustainable long-term fiscal path could threaten the demand for
securities, making it difficult to attract investors without paying higher
interest rates.
Because neither accrual-based financial statements nor largely cashbased budgets provide a full picture of the government’s fiscal outlook,
international organizations recommend reporting on the long-term
sustainability of the government’s fiscal policy.17 Long-term fiscal
projections by GAO, CBO, and in the 2019 Financial Report show that,
absent policy changes, the federal government continues to face an
unsustainable long-term fiscal path.18 Although each of these long-term
projections uses somewhat different assumptions, their conclusions are
the same: over the long term, the imbalance between spending and
revenue that is built into current law and policy will lead to (1) deficits
exceeding $1 trillion each year beginning in fiscal year 2020 and (2) both
the annual deficit and cumulative total debt held by the public continuing
to grow as shares of GDP.19 This situation—in which debt grows faster
than GDP—means the current federal fiscal path is unsustainable.
Under GAO, CBO, and Financial Report projections, spending for the
major health and retirement programs will increase more rapidly than
GDP in coming decades because of an aging population and projected
continued increases in health care costs per beneficiary. Spending on net
interest is projected to grow more quickly than any other component of
the budget due to growing debt and projected growth in interest rates.
17See International Public Sector Accounting Standards Board, Recommended Practice
Guideline 1: Reporting on the Long-Term Sustainability of an Entity’s Finances (July
2013). The International Monetary Fund also includes fiscal sustainability as one of the
principles in its “Fiscal Transparency Code,” an international standard for disclosure of
information about public finances.
18The 2019 Financial Report’s Statement of Long-Term Fiscal Projections presents, for all
the activities of the federal government, the present value of projected receipts and
noninterest spending under current policy without change, the relationship of these
amounts to projected GDP, and changes in the present value of projected receipts and
noninterest spending from the prior year.
19For more information on these assumptions, see appendix I.
Long-Term Fiscal
Projections Show the
Federal Government
Is on an
Unsustainable Fiscal
Path
Page 11 GAO-20-403SP The Nation’s Fiscal Health
For most of the nation’s history, the debt-to-GDP ratio has increased
during wartime and recessions and decreased during peacetime and
economic expansions (see figure 3). Publicly held debt as a share of GDP
peaked at 106 percent just after World War II (in 1946) but then fell
rapidly. From the 1970s to the present, with the exception of the 1990s
when strong economic growth and a number of fiscal decisions generated
a significant decline, U.S. debt held by the public has generally grown
steadily as a share of GDP. By the end of fiscal year 2019, the debt had
climbed to 79 percent of GDP. By comparison, debt has averaged 46
percent of GDP since 1946. If current trends continue, the debt as a
share of GDP in 2050 will be nearly twice its 1946 level and about four
times its post-World War II average.
When Will Debt Surpass Its Historical
High?
The timing and pace of debt-to-gross
domestic product growth depend on the
underlying assumptions made in fiscal
projections and simulations.
Although they use different assumptions,
GAO, the Congressional Budget Office
(CBO), and the Fiscal Year 2019 Financial
Report of the United States Government
(2019 Financial Report) projections all show
that, absent a change in policy, the debt-toGDP ratio would surpass its historical high of
106 percent within 11 to 14 years.
Source: GAO and GAO analysis of CBO and 2019 Financial
Report data. │ GAO-20-403SP
Page 12 GAO-20-403SP The Nation’s Fiscal Health
Figure 3: Federal Debt Held by the Public
Figure 4 shows that debt held by the public grows substantially as a share
of GDP over time in all the projections and simulations discussed in this
report. CBO’s projections and GAO’s baseline simulation generally
assume current law (e.g., that tax provisions expire as scheduled). Both
CBO’s January 2020 long-term fiscal projections and GAO’s baseline
simulation project future spending based on discretionary spending caps
raised by the Bipartisan Budget Act of 2019. Because this increased
spending is expected to contribute to increased debt, both CBO’s longterm fiscal projections and GAO’s baseline simulation therefore show
greater long-term debt as a share of GDP than last year’s projections.
GAO’s alternative simulation and the 2019 Financial Report projections
draw from historical policy experiences in assuming some current laws
Page 13 GAO-20-403SP The Nation’s Fiscal Health
will change–for example, that some tax provisions scheduled to expire will
be extended. Compared to last year, the 2019 Financial Report
projections show lower debt as a share of GDP over time due to the net
effect of various factors including lower interest rate assumptions. GAO’s
alternative simulation shows moderately higher long-term debt than last
year’s simulation.
Figure 4: Debt Held by the Public under Projections from GAO, the Congressional Budget Office (CBO), and the 2019
Financial Report
Note: GAO’s baseline simulation and CBO’s January 2020 long-term extended baseline projection
begin by using CBO estimates and generally assume current law continues into the future. GAO’s
baseline simulation assumes that revenue remains a constant share of gross domestic product
(GDP). The 2019 Financial Report projections assume that the provisions of the law known as the
Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017), are extended and that individual
income taxes increase gradually as real taxable incomes rise over time, and an increasing share of
total income is taxed at higher tax brackets. GAO’s alternative simulation generally reflects historical
trends, such as the extension of tax provisions scheduled to expire. Each simulation has its own GDP
Page 14 GAO-20-403SP The Nation’s Fiscal Health
projections, which affect the projected debt-to-GDP ratios. See appendix I for additional discussion on
the assumptions made in GAO’s model.
All projections involve some degree of uncertainty; in addition, future
policy decisions about federal spending, revenues, the federal role in the
delivery of health care, and other areas would change the projections.
The debt-to-GDP ratio is sensitive to assumptions about projected health
care costs, interest rates, spending, revenues, and economic growth.20
The projections also do not fully account for fiscal risks or exposures
discussed later in this report, such as disaster response spending.
Both the current fiscal condition and the long-term projections of fiscal
sustainability are driven by the economy and by laws enacted by
Congress and the President. For example, in 2018 CBO estimated that
the 2017 Tax Cuts and Jobs Act would increase the total projected deficit
for the period of fiscal year 2018 to 2028 by $1.9 trillion.21 Additionally,
CBO projected increases in discretionary spending associated with the
Bipartisan Budget Act of 2019 would increase the projected deficit by $1.7
trillion during the period of fiscal year 2020 to 2029.22 Including the
Bipartisan Budget Act of 2019 and reductions in projected revenue
associated with the Further Consolidated Appropriations Act, 2020,
legislative changes between January 2019 and January 2020 increased
the projected 10-year deficit by nearly $2.5 trillion.23
20To illustrate this uncertainty, GAO produces sensitivity analyses that show the effects on
its simulations if selected variables are higher or lower than projected. See
https://www.gao.gov/fiscal-outlook-simulations. Sensitivity analyses related to the
projections in the 2019 Financial Report are included in the Required Supplementary
Information section of the 2019 Financial Report.
21CBO, The Budget and Economic Outlook: 2018 to 2028 (Washington, D.C.: April 2018).
CBO’s estimate takes into account the projected economic feedback from the act.
22The Bipartisan Budget Act of 2019 increased discretionary funding limits for fiscal years
2020 and 2021 from levels previously set under the Budget Control Act of 2011. Because
CBO’s projections assume that discretionary spending will continue at the level of the
2021 funding limits and grow with inflation, the increase in 2020 and 2021 funding limits
resulted in higher projected discretionary spending throughout the 10-year period.
23The Further Consolidated Appropriations Act, 2020, repealed an excise tax on high-cost
employer-sponsored health coverage that was scheduled to take effect in 2022 and an
annual fee on health insurance providers that was scheduled to take effect in 2021, as
well as extending other tax provisions. Because CBO’s projections assume that current
laws continue in the future, repealing these provisions resulted in lower projected
revenues for the years after they were scheduled to take effect.
Page 15 GAO-20-403SP The Nation’s Fiscal Health
Projections of increasing federal debt run counter to a global trend
reported by the International Monetary Fund (IMF). In April 2018, the IMF
reported that overall deficits as a share of GDP among countries with
advanced economies have been falling since 2012. The IMF also
predicted in that report that the debt-to-GDP ratio would fall over the next
five years in most countries with advanced economies.24 In December
2019, the IMF reported that the United States continued to be an
exception to the general trend of declining public sector debt ratios
among advanced economies.25
Recent and projected increases in federal debt also run counter to the
historical trend of decreasing debt-to-GDP ratios during periods of
economic expansion. When the current economic expansion began in
2009, the debt-to-GDP ratio was about 52 percent. By the end of fiscal
year 2019, the debt-to-GDP ratio had risen to 79 percent, an increase of
about 27 percentage points during an expansionary period. According to
CBO, federal deficits in the past have on average been smaller during
times when the unemployment rate was below six percent. However,
GAO, CBO, and the 2019 Financial Report all project higher-thanaverage deficits over the next 10 years despite expectations that
unemployment will remain significantly lower than this threshold.
State and local governments face many of the same long-term fiscal
pressures—such as rising health care costs—as the federal government.
GAO’s most recent simulations suggest that the state and local
government sector could continue to face a gap between revenue and
spending over the next 50 years. Because most state and local
governments are required to balance their operating budgets, they will
most likely need to make policy changes involving some combination of
reduced spending and increased revenue. 26
24International Monetary Fund, Fiscal Monitor: Capitalizing on Good Times (Washington,
D.C.: April 2018).
25M. M. Badia and P. Dudine, “New Data on World Debt: A Dive into Country Numbers”,
IMFBlog, accessed February 18, 2020. http://blogs.imf.org/2019/12/17/new-data-on-worlddebt-a-dive-into-country-numbers/.
26GAO’s simulations assume that the current set of policies in place across state and local
governments and the provision of real government services per capita remain relatively
constant. GAO, State and Local Governments’ Fiscal Outlook: 2019 Update,
GAO-20-269SP (Washington, D.C.: Dec. 19, 2019).
Page 16 GAO-20-403SP The Nation’s Fiscal Health
The unsustainable fiscal path is straining the federal budget and
contributing to growing debt. CBO has reported that rising debt could
constrain policymakers’ ability to support the economy during a downturn.
It could also constrain policymakers from addressing other priorities, such
as national security and the nation’s infrastructure.27 The longer that
action to address this issue is delayed, the more drastic changes will
have to be.
Rising federal debt could have long-term consequences for the economy
because, while federal borrowing can play a role in facilitating a healthy
economy, persistent deficits and rising levels of debt reduce funds
available for investment by the private sector or state and local
governments.
What are federal experts saying about the consequences of high and rising debt?
Fiscal Year 2021 President’s Budget Proposal:
High and rising debt will have serious negative consequences for the budget and the Nation. It slows economic
growth, as the costs of financing the debt crowds out more productive investment and could eventually limit the
federal government’s ability to respond to urgent national security needs, invest in key priorities such as
infrastructure. . .
Congressional Budget Office (CBO):
High debt and large deficits might also create constraints for policymakers as they contemplate making changes to
fiscal policy . . . policymakers could feel restrained from using deficit-financed fiscal policy to respond to unforeseen
events or for other purposes, including to promote economic activity or to further other goals. High debt could also
undermine national security if policymakers felt constrained from increasing national security spending to resolve an
international crisis or to prepare for such a crisis before it began.
Jerome H. Powell, Chair of the Board of Governors of the Federal Reserve System:
Over time, this outlook could restrain fiscal policymakers’ willingness or ability to support economic activity during a
downturn. In addition, I remain concerned that high and rising federal debt can, in the longer term, restrain private
investment and, thereby, reduce productivity and overall economic growth. Putting the federal budget on a
sustainable path would aid the long-term vigor of the U.S. economy and help ensure that policymakers have the
space to use fiscal policy to assist in stabilizing the economy if it weakens.
Fiscal Year 2019 Financial Report of the United States Government (2019 Financial Report):
The timing of policy changes to make fiscal policy sustainable has important implications for the well-being of future
generations. . . Future generations are harmed by a policy delay.
Sources: 2021 President’s Budget, CBO, 2019 Financial Report, and Federal Reserve. | GAO-20-403SP
27The Highway Trust Fund, the major source of federal surface transportation funding, is
increasingly unable to maintain current spending levels for highway and transit programs.
For more information on funding the nation’s surface transportation system, see
GAO-19-157SP, 86.
Page 17 GAO-20-403SP The Nation’s Fiscal Health
According to CBO, high and rising debt could erode confidence in the
U.S. dollar as an international reserve currency, crowd out private
investment, and lead to expectations of higher rates of inflation.28 CBO
has also said that higher levels of debt increase the risk of a fiscal crisis,
in which investors would lose confidence in the U.S. government’s
financial position and interest rates on Treasury securities would increase
abruptly. A fiscal crisis of this nature would have further negative
economic effects and could trigger a global financial crisis.
GAO, CBO, and the 2019 Financial Report all project that spending will
increase more rapidly than revenue, with some major categories of
spending exceeding $1 trillion annually in the coming years (see table 2).
Table 2: Projections for Major Categories of Spending
Fiscal
year
Spending projection
2019 Social Security spending exceeds $1 trillion annually
2026 Medicare and Medicaida spending each exceed $1 trillion annually
2032 Net interest spending exceeds $1 trillion annually
Source: GAO’s alternative simulation and Centers for Medicare & Medicaid Services. | GAO-20-403SP
Note: CBO projects defense discretionary spending will reach $937 billion in 2030. CBO did not report
defense spending projections separately from total discretionary spending in its long-term projections
after 2030.
a
Medicaid spending includes both state and federal spending.
In the long term, most of the increase in federal spending as a share of
GDP is being driven by spending on federal health care programs and net
interest (see figure 5). Net interest, which is a function of the amount of
debt to be financed and the interest rate at which it is financed, acts as a
driver of debt because increased interest costs often lead to additional
borrowing.
28CBO, The 2019 Long-Term Budget Outlook (Washington, D.C.: June 2019). Treasury
market participants GAO surveyed raised similar concerns about the status of the dollar
as an international reserve currency; see GAO-20-131.
Health Care Spending and
Net Interest Remain Key
Drivers of Long-Term
Federal Spending
Page 18 GAO-20-403SP The Nation’s Fiscal Health
Figure 5: Growth in Major Areas of Federal Spending
Note: Data based on GAO’s 2020 alternative simulations. GAO’s simulation holds discretionary
spending and other mandatory spending constant as a share of gross domestic product in the long
term. Health care spending on major federal health care programs consists of Medicare, Medicaid,
the Children’s Health Insurance Program, and federal subsidies for health insurance purchased
through the marketplaces established by the Patient Protection and Affordable Care Act, Pub. L. No.
111-148, 124 Stat. 119 (2010), and related spending.
GAO’s simulations project that in the coming years these two areas will
continue to increase significantly as a share of GDP. In GAO’s alternative
simulation, federal spending on major health care programs is projected
to increase from 5.4 percent of GDP in fiscal year 2019 to 8.5 percent of
GDP in fiscal year 2049. In the same simulation, spending on net interest
increases from 1.8 percent of GDP in fiscal year 2019 to 7.2 percent of
GDP in fiscal year 2049. Similarly, CBO’s January 2020 budget and
economic outlook report projects that increased spending for Medicare,
Page 19 GAO-20-403SP The Nation’s Fiscal Health
Social Security, and net interest will account for more than two-thirds of
the estimated $2.8 trillion increase in total federal spending over the next
10 years.
Although growth in health care spending has slowed recently, total health
care spending (public and private) in the United States continues to grow
faster than the economy. Federal spending for major health care
programs accounts for more than a quarter of total health care spending.
As figure 6 shows, this spending has exceeded the growth of GDP
historically and is projected to continue to do so. Federal health care
programs include Medicare, Medicaid, and the Children’s Health
Insurance Program, along with federal subsidies for health insurance
purchased through the marketplaces established by the Patient
Protection and Affordable Care Act (PPACA) and related spending.29
29Pub. L. No. 111-148, 124 Stat. 119 (2010).
Health Care Spending
Continues to Grow Faster
Than the Economy
Page 20 GAO-20-403SP The Nation’s Fiscal Health
Figure 6: Federal Spending on Major Health Care Programs Grows Faster Than GDP
Note: Cumulative growth in both GDP and federal spending on major health care programs has been
adjusted for inflation. GDP is the value of all goods and services produced in a country in a given
year. Major federal health care programs consist of Medicare, Medicaid, the Children’s Health
Insurance Program, and federal subsidies for health insurance purchased through the marketplaces
established by PPACA and related spending.
CBO notes that growth in Medicare and Medicaid spending were key
contributors to the increase in federal spending in 2019. According to
Treasury, in fiscal year 2019, total outlays (spending) were $651 billion for
Medicare and $409 billion for Medicaid. Treasury estimates that total
spending also increased by about 11 percent for Medicare and about 5
percent for Medicaid between fiscal years 2018 and 2019.30 CBO also
30Because fiscal year 2018 began on a weekend, some spending that would have
otherwise occurred in fiscal year 2018 was instead shifted to fiscal year 2017. When
adjusting for the effects of shifted payments, CBO estimates that Medicare spending
increased by 6.4 percent between fiscal years 2018 and 2019.
Page 21 GAO-20-403SP The Nation’s Fiscal Health
reported that Medicaid spending increased 36 percent from fiscal years
2015 through 2019, largely because of state Medicaid expansions.31 As of
January 2020, 35 states and the District of Columbia expanded eligibility
for their Medicaid programs under PPACA.32
Spending for subsidies for health insurance purchased through the
exchanges established under PPACA rose by about $7 billion (or 13
percent) in 2019. CBO reduced its projections of spending for subsidies
after premiums for 2020 were lower than anticipated, and now projects
that spending for subsidies will fall by about $4 billion in 2020, then grow
roughly 3 percent per year from 2020 to 2030.33
In the long term, growth in federal spending on health care is driven by
increasing enrollment, particularly in Medicare, stemming primarily from
the aging population, and by the increase in health care spending per
beneficiary.
• Aging population. In its 2019 long-term budget outlook report, CBO
projected that, by 2049, 22 percent of the population will be age 65 or
older, compared to 16 percent in 2019. This demographic trend is
driven largely by lower fertility rates and increases in life expectancy.
This trend has been accelerated by the relatively large baby boom
generation, which began turning 65 in 2011 (see figure 7). Medicare
enrollment is expected to increase over the next decade as the
number of people older than 65 increases.
31Under PPACA, states have the option to expand their Medicaid programs to cover nearly
all adults under 65 with incomes up to 133 percent of the federal poverty level.
32Nebraska voted to expand eligibility for Medicaid, but this will not take effect until
October 2020. According to the 2016 National Health Interview Survey, an estimated 5.6
million adults had incomes at or below the income threshold for expanded Medicaid
eligibility but an estimated 3.7 million of these adults lived in states that did not expand
eligibility for their Medicaid programs. The survey estimates also indicated that low-income
adults in expansion states were less likely to report having any unmet medical needs or
financial barriers to health care compared with those in nonexpansion states. See GAO,
Medicaid: Access to Health Care for Low-Income Adults in States with and without
Expanded Eligibility, GAO-18-607 (Washington, D.C.: Sept. 13, 2018).
33Total subsidies depend on (1) the number of enrollees, which is projected to decline
slightly over time; (2) per-beneficiary spending, which is estimated to rise with the costs of
providing health care; and (3) market dynamics, such as changes in participating plans
affecting the benchmark premiums used in establishing the subsidy amount.
Page 22 GAO-20-403SP The Nation’s Fiscal Health
Figure 7: Daily Average Number of People Turning 65
Note: Census data estimates of population are as of July 1 in each year.
• Per beneficiary spending. The amount of money spent on health
care per person historically has risen faster than per capita economic
output and is projected to do so in the future. In its 2019 long-term
budget outlook report, CBO projected that the growth in health care
spending per person will account for about two-thirds of the increase
in spending for the major health care programs as a share of GDP
between 2019 and 2049. During the past several years, health care
spending per person grew more slowly than it has historically, but
CBO and the Medicare Trustees both project that spending per
enrollee in federal health care programs will grow more rapidly over
the coming decade. Various factors can affect per beneficiary
spending, including the emergence of new medical procedures and
treatments.
Increased health care spending for major federal health care programs,
especially Medicare, will continue to place a strain on the federal budget
in both the near and the long term. Under GAO’s alternative simulation,
spending for major federal health care programs is projected to grow from
5.4 percent of GDP in 2019 to 8.5 percent of GDP in 2049. Illustrative
examples of projected growth in federal health care spending include:
Page 23 GAO-20-403SP The Nation’s Fiscal Health
• Medicare. In its January 2020 budget and economic outlook report,
CBO projected that Medicare spending net of offsetting receipts will
reach $1 trillion (3.8 percent of GDP) in 2026. In their April 2019
report, the Medicare Trustees projected that Medicare’s Hospital
Insurance Trust Fund will be depleted by 2026, 3 years earlier than
projected in the 2017 report, with income projected to cover only 89
percent of all hospital-related Medicare spending in that year.34
• Medicaid. The Centers for Medicare and Medicaid Services (CMS)
Office of the Actuary projected that Medicaid spending will total $1
trillion by 2026 (3.7 percent of GDP), of which $624 billion will be
federal spending.35
• Federal subsidies for health insurance. CBO projected in its
January 2020 budget and economic outlook report that costs for
people receiving federal subsidies for health insurance purchased
through the exchanges and related spending under the provisions of
PPACA will rise from $56 billion in 2019 to $71 billion by 2030.
Both GAO’s and the 2019 Financial Report’s simulations show spending
on net interest growing such that over the long term it becomes the
largest category of spending (see figure 8).36 Spending on net interest
means less room in the budget for federal programs to support national
goals and priorities or for tax cuts. Spending on net interest totaled $376
billion in 2019 (8.4 percent of total federal spending), which increased
from $263 billion in 2017. That amount was already larger than spending
on agriculture, transportation, and veterans’ benefits and services
combined. Under GAO’s alternative simulation, spending on net interest
34In their April 2019 report, the Medicare Trustees noted that there is substantial
uncertainty as to the adequacy of future Medicare payment rates under current law. The
report presents alternative projections illustrating higher Medicare spending that would
result if certain statutory Medicare payment provisions were not fully implemented in all
future years. For example, the Trustees project that Medicare spending would equal 6.0
percent of GDP in 2043 under current law, but would equal 6.3 percent of GDP under the
illustrative alternative projections.
35The Department of Health and Human Services, Centers for Medicare & Medicaid
Services (CMS), Office of the Actuary, 2017 Actuarial Report on the Financial Outlook for
Medicaid, (Washington, D.C.: 2018). In this report, the CMS Chief Actuary stated that
projections of health care costs are inherently uncertain. In particular, Medicaid projections
are uncertain because enrollment and costs are very sensitive to economic conditions.
36CBO’s projections in its June 2019 long-term outlook report also show net interest
growing as a percentage of total spending. However, since CBO’s June 2019 extended
baseline projections only go out to 2049, spending on net interest does not quite overtake
Social Security spending in the projection period.
Net Interest Is the Fastest
Growing Category of Federal
Spending
Page 24 GAO-20-403SP The Nation’s Fiscal Health
is projected to continue to grow. As a share of GDP, net interest spending
is expected to surpass
• nondefense discretionary spending in 2030,
• defense discretionary spending in 2033,
• Medicare spending in 2041,
• Social Security spending in 2044, and
• total discretionary spending in 2049.
Page 25 GAO-20-403SP The Nation’s Fiscal Health
Figure 8: Projected Net Interest and Other Spending as Percentage of Gross Domestic Product
GAO, CBO, and the 2019 Financial Report project that net interest will
grow more quickly than any other component of the budget in the long
term. Over the past 50 years, the government’s net interest costs as a
Page 26 GAO-20-403SP The Nation’s Fiscal Health
share of GDP have averaged 2.0 percent. GAO’s alternative simulation
projects that net interest spending will grow from 1.8 percent of GDP in
2019 to 7.2 percent of GDP by 2049 and will continue to grow over the
long term.
Interest spending grows for two main reasons:
• Growing debt. At any positive interest rate, interest payments
increase as the debt grows. Debt will continue to grow if the federal
government continues to both borrow money to finance the deficit and
pay interest on the debt rather than pay down the total principal
outstanding.
• Growth in interest rates. For any given level of debt, a change in
interest rates changes interest costs. Interest rates also have a
compounding effect on the debt, as borrowing to make interest
payments adds to the debt.37
Persistently low interest rates have resulted in lower interest costs for the
government than previously forecast. Both CBO’s and GAO’s long-term
fiscal projections use CBO’s projected interest rates. In its January 2020
Budget and Economic Outlook, CBO lowered its interest rate projections,
estimating that the average interest rate on debt held by the public will
rise from 2.5 percent in fiscal year 2019 to 2.8 percent in fiscal year
2030.38 This projection is lower than CBO’s previous projection that rates
would rise to 3.5 percent in fiscal year 2029.39 The 2019 Financial Report
projections use long-run interest rate assumptions that are consistent with
those in the 2019 Social Security Trustees’ report.40 The 2019 Financial
Report projections assume that the average interest rate over the
37Increasing debt may also lead to higher interest rates; see CBO, The Effect of
Government Debt on Interest Rates (Washington, D.C.: March 2019). However, CBO has
stated that since the trend of increasing interest rates reflects long-term economic trends,
rates would likely increase even at the current debt level.
38CBO, The Budget and Economic Outlook: 2020 to 2030 (Washington, D.C.: January
2020). CBO’s most recent 30-year interest rate projection shows rates rising to 4.2
percent in fiscal year 2049. CBO, The 2019 Long-Term Budget Outlook (Washington,
D.C.: June 2019).
39CBO, The Budget and Economic Outlook: 2019 to 2029 (Washington, D.C.: January
2019).
402019 Financial Report, Note 23.
Page 27 GAO-20-403SP The Nation’s Fiscal Health
projection period will be 4.9 percent, down from the 2018 Financial
Report’s 5.0 percent.
These projections are uncertain and variations in interest rates can result
in significant differences in both projected interest costs and debt in the
long term. For example, under GAO’s alternative simulation, a 1
percentage point increase in overall interest rates throughout the
projection period would result in interest costs in 2049 increasing from 7.2
percent of GDP to 10.8 percent of GDP.41
Interest costs will also depend in part on the outstanding mix of Treasury
securities. Treasury issues securities (e.g., bills, notes, and bonds) in a
wide range of maturities to appeal to a broad range of investors to
support its goal of borrowing at the lowest cost over time.42 Each year,
trillions of dollars of debt mature. Treasury refinances maturing debt by
issuing new debt in its place at the prevailing interest rate. At the end of
fiscal year 2019, 61 percent of the outstanding amount of marketable
Treasury securities held by the public (about $9.9 trillion) was scheduled
to mature in the next 4 years.43 If interest rates are higher, Treasury will
have to refinance these securities at the higher interest rates, adding to
the interest costs of the growing federal debt.
Social Security has remained the bedrock of retirement security—insuring
workers against the loss of income because of retirement, death, or
disability. Social Security provides benefits to about 63 million older
Americans, survivors, dependents, and individuals with disabilities, and
their families. It has helped reduce poverty among its beneficiaries, many
of whom rely on it for the majority of their income.44 According to
41For more information about fiscal simulations’ sensitivity to interest rate assumptions,
see GAO’s sensitivity analyses at https://www.gao.gov/fiscal-outlook-simulations.
42The interest rates associated with the range of maturities of the nominal securities
issued by Treasury creates a “yield curve” which represents the relationship between the
maturity of an asset and its yield (the interest rate paid by Treasury or cost of borrowing).
43Marketable securities are securities that can be resold by whoever owns them. At the
end of fiscal year 2019, 97 percent of the outstanding amount of securities that constitute
debt held by the public was marketable. For more information, see GAO, Financial Audit:
Bureau of the Fiscal Service’s Fiscal Years 2019 and 2018 Schedules of Federal Debt,
GAO-20-117 (Washington, D.C.: Nov. 8, 2019).
44GAO, The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed to
Better Promote Future Retirement Security, GAO-18-111SP (Washington, D.C.: Oct. 18,
2017).
Social Security Is Projected to
Pose Significant Financial
Challenges
Page 28 GAO-20-403SP The Nation’s Fiscal Health
Treasury’s Final Monthly Treasury Statement for fiscal year 2019, Social
Security paid about $1.03 trillion in Old-Age and Survivors Insurance
(OASI) and Disability Insurance (DI) program benefits in fiscal year 2019.
Looking forward, however, demographic factors such as an aging
population and slower labor force growth are straining Social Security
programs and contributing to a gap between program costs and
revenues.
For many years, Social Security’s revenues exceeded program costs and
the programs built up reserves in the two trust funds: one for the OASI
program and one for the DI program. By law, the Social Security trust
funds must invest in interest-bearing federal government securities.45 The
trust funds invested past excess revenues in these federal government
securities, helping to finance other federal programs and reducing the
amount that had to be borrowed from the public.
Starting in 2005 for the DI Trust Fund and in 2010 for the OASI Trust
Fund, this situation reversed: Social Security began paying out more in
benefits than it received in noninterest revenue.46 Absent any changes,
both trust funds are projected to deplete their assets and have insufficient
income to pay benefits in full on a timely basis. In their 2019 annual
report, the Social Security Trustees estimated that the OASI Trust Fund
would deplete its assets by 2034 with income sufficient to pay only 77
percent of scheduled benefits in that year.47 They also estimated that the
DI Trust Fund would deplete its assets by 2052 with income sufficient to
45The Social Security Act requires that trust fund assets be invested in interest-bearing
obligations of the United States or in obligations guaranteed as to both principal and
interest by the United States. We are using the term “federal government securities” to
refer to these obligations. 42 U.S.C. § 401(d).
46According to the Social Security Trustees, in 2016, 2017, and 2018 noninterest income
and total income for the DI Trust Fund exceeded benefit payments due primarily to the
temporary reallocation of the payroll tax rate from OASI to DI for years 2016 through 2018.
This temporary reallocation was authorized in the Bipartisan Budget Act of 2015, Pub. L.
No. 114-74, title VIII, subtit. C, § 833, 129 Stat. 584, 613-14 (2015).
47These projections are from The 2019 Annual Report of the Board of Trustees of the
Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds
and reflect the Trustees’ intermediate assumptions. Because the future is uncertain, the
Trustees use three sets of assumptions to show a range of possible outcomes. The
Trustees’ intermediate assumptions represent the Trustees’ best estimate of the trust
funds’ future financial outlook. The Trustees also present estimates using low cost and
high cost sets of assumptions.
Page 29 GAO-20-403SP The Nation’s Fiscal Health
pay only 91 percent of scheduled benefits in that year.48 Acting soon
would allow any adjustments to be smaller and spread across more
generations of participants. The actions could also be phased in to give
affected individuals time to adjust their retirement planning.
Beyond the spending and revenue trends discussed in the long-term
fiscal projections, the federal government faces certain additional fiscal
exposures or risks that could affect its future fiscal condition and are not
fully accounted for in the GAO, CBO, and 2019 Financial Report fiscal
projections. Fiscal risks are responsibilities, programs, and activities that
may legally commit the federal government to future spending or create
expectations for future spending based on current policy, past practices,
or other factors.49 While the projections in this report estimate future
spending levels based on current spending—including those related to
some of the fiscal risks identified in this section—they do not account for
unforeseen future increases in spending associated with these risks. A
more complete understanding of fiscal risks can help policymakers
anticipate changes in future spending and can enhance oversight of
federal resources. The following are examples of key additional fiscal
risks and exposures that are not fully accounted for in the projections
discussed in this report but could significantly affect the federal
government’s fiscal outlook:
• The Pension Benefit Guaranty Corporation. The Pension Benefit
Guaranty Corporation (PBGC), which insures benefits, up to statutory
limits, in private-sector defined benefit pension plans, faces an
uncertain financial future because of both short-term and long-term
challenges. PBGC’s liabilities exceeded its assets by more than $56
billion as of the end of fiscal year 2019. PBGC’s single-employer
program covers defined benefit pension plans that are generally
sponsored by individual employers, while the multiemployer program
covers defined benefit pension plans created through collective
bargaining agreements generally between labor unions and two or
more employers. The single-employer program, which covered about
24,000 plans in fiscal year 2019, reported a surplus of $8.7 billion at
48In their 2019 report, the Social Security Trustees revised the DI Trust Fund’s estimated
year of depletion from 2032 to 2052. According to the Trustees, the change is mainly due
to fewer DI applications and benefit awards, both of which fell well below levels projected
in last year’s report for 2018.
49See our infographic on federal fiscal risks at
https://www.gao.gov/assets/670/668649.pdf.
Fiscal Exposures Place
Additional Pressure on the
Federal Budget
Page 30 GAO-20-403SP The Nation’s Fiscal Health
the end of fiscal year 2019—an improvement of about $28 billion
since 2014. The multiemployer program, which covered about 1,400
plans in fiscal year 2019, reported a deficit of about $65 billion at the
end of fiscal year 2019, a record negative net position.
PBGC reports that while the financial position of the single-employer
program has improved, the multiemployer program continues to face
solvency challenges in the near future.50 PBGC projects that without
legislative reforms, there is a high likelihood the multiemployer
program will become insolvent during fiscal year 2025 and that
insolvency is a near certainty by the end of fiscal year 2026.51 When
the program becomes insolvent, PBGC financial assistance to
multiemployer plans will be limited to the premiums collected by the
program and insufficient to pay the current level of guaranteed
benefits.52
In addition to these probable losses, PBGC estimated that its
exposure to potential additional future losses for underfunded plans in
both the single and multiemployer programs was nearly $166 billion,
of which the single-employer program accounts for $155 billion of this
amount. Although the single-employer program is currently in surplus,
its financial position is highly sensitive to prevailing economic
conditions and past experience with large claims shows that its
condition can change quickly and precipitously.
50Pension Benefit Guaranty Corporation, Annual Report 2019 (Washington, D.C.: Nov. 15,
2019).
51For more information on Pension Benefit Guaranty Corporation insurance programs, see
GAO, High-Risk Series: Substantial Efforts Needed to Achieve Greater Progress on HighRisk Areas, GAO-19-157SP (Washington, D.C.: Mar. 6, 2019), 267.
52In December 2019, the enactment of the Bipartisan American Miners Act of 2019, Pub.
L. No. 116-94, div. M, 133 Stat. 2534, provided additional funding for future annual
Treasury transfers to the 1974 United Mine Workers of America Pension Plan (included in
PBGC’s multiemployer program). PBGC is currently assessing the effect of the legislation
on its liabilities and contingency disclosures (including the estimated insolvency date for
the multiemployer program).
Page 31 GAO-20-403SP The Nation’s Fiscal Health
Figure 9: Pension Benefit Guaranty Corporation’s Net Financial Position of the Single-Employer and Multiemployer Programs
Combined, Fiscal Years 1990 through 2019
• Housing finance. Federal support of the housing finance market
remains significant despite the fact that the market has largely
recovered since the 2007 to 2009 financial crisis. In 2008, the federal
government placed the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) under conservatorship and entered into preferred stock
purchase agreements with these government-sponsored enterprises
(GSE) to help ensure their financial stability.
Effective September 30, 2019, the agreements under which the GSEs
agreed to pay dividends to the Treasury were modified to permit the
GSEs to retain additional earnings. At the end of fiscal year 2019, the
federal government reported about $112 billion of investments in the
GSEs, which is net of about $98 billion in valuation losses.
The ultimate role of the GSEs could affect the financial condition of
other federal entities, including the Federal Housing Administration
Page 32 GAO-20-403SP The Nation’s Fiscal Health
(FHA), which in the past expanded its lending role in distressed
housing and mortgage markets. In December 2019, the Government
National Mortgage Association (Ginnie Mae) guaranteed the
performance of approximately $2.1 trillion in securities backed by
federally insured mortgages—of which the majority were insured by
FHA and the remainder by other federal entities, such as the
Department of Veterans Affairs. We have reported on the need for
Congress to consider legislation to address the structure of the GSEs
and establish clear, specific, and prioritized goals while considering all
relevant federal entities, such as FHA and Ginnie Mae.53
• The U.S. Postal Service. The U.S. Postal Service (USPS) continues
to be in poor financial condition. USPS cannot fund its current level of
services and financial obligations from its current level of revenues.54
USPS’s net loss of $8.8 billion in fiscal year 2019 marked its 12th
consecutive year of net losses totaling $78 billion. In addition, USPS
has missed $55.4 billion in required funding payments for postal
retiree health and pension benefits through fiscal year 2019, including
$47.2 billion in missed funding payments for retiree health benefits
since fiscal year 2010 and $8.2 billion for pension benefits since fiscal
year 2014. Looking forward, USPS has growing unfunded liabilities
and debt—totaling almost $161 billion at the end of fiscal year 2019.
USPS has stated that it missed these payments to minimize the risk of
running out of cash, citing its precarious financial condition and the
need to cover current and anticipated costs and any contingencies.55
• Military Conflicts. According to DOD, since September 2001,
Congress has appropriated approximately $1.9 trillion to DOD for
Overseas Contingency Operations (OCO), primarily in Iraq and
53GAO, Housing Finance: Prolonged Conservatorships of Fannie Mae and Freddie Mac
Prompt Need for Reform, GAO-19-239 (Washington, D.C.: Jan. 18, 2019). For more
information on resolving the federal role in housing finance, see GAO-19-157SP, 95.
54An obligation is a definite commitment that creates a legal liability of the government to
make a payment for goods and services received or a legal duty that could mature into a
legal liability by virtue of actions beyond the control of the federal government.
55For more information on USPS’s financial viability, see GAO-19-157SP, 99.
Page 33 GAO-20-403SP The Nation’s Fiscal Health
Afghanistan.56 Spending on future military conflicts is not only difficult
to budget for but can also result in enduring costs even after those
conflicts end. Since 2007, we have reported on multiple issues
associated with OCO funds, including DOD’s efforts to transition the
enduring costs of overseas operations to its base budget.57 In January
2017, we recommended that DOD develop a complete and reliable
estimate of enduring costs to report in future budget requests.58 In
April 2018, DOD produced an estimate of the funds that would be
shifted from OCO to the base budget request from fiscal years 2020
through 2023. These amounts ranged from $53 billion to $45.8 billion.
The administration’s fiscal year 2021 budget request includes $69
billion for OCO, consistent with the amount established in the
Bipartisan Budget Act of 2019.59 According to DOD budget
documents, this amount funds not only direct war requirements, but
enduring requirements that will remain after combat operations end,
as well as some base budget requirements. The budget request
further states that after fiscal year 2021—the final year of the
discretionary spending caps in current law—OCO amounts for fiscal
years 2022 and 2023 would be $20 billion in each year, while
proposing the base discretionary funding level be set at $739 billion
for fiscal year 2022 and $755 billion for fiscal year 2023. Future
military conflicts could pose similar fiscal risks and lead to unexpected
increases in DOD spending over time.
56DOD defines “contingency operations” as small-, medium-, or large-scale campaignlevel military operations, including but not limited to support for peacekeeping operations,
foreign disaster relief efforts, noncombatant evacuation operations, and international
disaster relief efforts. In contrast, regular or “base” activities include, for example,
operating support for installations, training and education, and civilian personnel pay,
which are costs that would be incurred, regardless of contingency operations.
Appropriated amounts designated for overseas contingency operations that would
otherwise exceed the annual limits established for defense spending will instead result in
an adjustment to the overall defense spending limit established for a particular fiscal year,
and will not trigger a sequestration, which is an automatic cancellation of budgetary
resources provided by discretionary appropriations or direct spending laws. From 2001 to
2009, overseas contingency amounts were designated for the Global War on Terror.
Since 2009, contingency amounts have been designated for overseas contingency
operations.
57Enduring costs refer to costs that would continue in the absence of contingency
operations.
58GAO, Overseas Contingency Operations: OMB and DOD Should Revise the Criteria for
Determining Eligible Costs and Identify the Costs Likely to Endure Long Term, GAO-17-68
(Washington, D.C.: Jan. 18, 2017).
59Pub. L. No. 116-37, 133 Stat. 1049 (2019).
Page 34 GAO-20-403SP The Nation’s Fiscal Health
Another example of a fiscal exposure facing the nation is the rising
number of natural disasters and increasing state, local, and tribal reliance
on federal disaster assistance. Such assistance can come from federal
responsibilities, programs, and activities, such as the National Flood
Insurance Program, that may legally commit or create the expectation for
future federal spending. Federal agencies can become involved in
responding to a disaster when effective response and recovery are
beyond the capabilities of the state and affected local governments. In
such cases, the Robert T. Stafford Disaster Relief and Emergency
Assistance Act permits the President to declare a major disaster in
response to a request by the governor of a state or territory or by the chief
executive of a tribal government.60 Overall, the number of disaster
declarations has fluctuated over the years, reaching a high of 98 disasters
in fiscal year 2011. There were 61 major disaster declarations in calendar
year 2019.
Since 2005, federal funding for disaster assistance has totaled at least
$460 billion, which consists of obligations for disaster assistance from
2005 through 2014 totaling about $278 billion61 and select appropriations
for disaster assistance from 2015 through 2019 totaling $183 billion.62 In
2019 alone, 14 weather and climate disaster events had losses
exceeding $1 billion each, with total costs of at least $45 billion, according
to the National Oceanic and Atmospheric Administration.
The Disaster Relief Fund is the primary source of federal disaster
assistance for state, local, territorial, and tribal governments when a major
disaster or emergency is declared. Although the Disaster Relief Fund
receives funding through the annual appropriations process, the federal
government does not budget fully for the costs of disaster assistance.
According to Congressional Research Service data, since 1964 more
than 82 percent of overall net appropriations for disaster relief has been
6042 U.S.C. § 5170.
61See GAO, Federal Disaster Assistance: Federal Departments and Agencies Obligated at
Least $277.6 Billion during Fiscal Years 2005 through 2014, GAO-16-797 (Washington,
D.C.: Sept. 22, 2016).
62This total includes, for fiscal years 2015 through 2019, $143 billion in supplemental
appropriations to federal agencies for disaster assistance and approximately $40 billion in
annual appropriations to the Disaster Relief Fund. It does not include other annual
appropriations to federal agencies for disaster assistance.
Natural Disasters and Climate
Change Also Create Fiscal
Exposures
Page 35 GAO-20-403SP The Nation’s Fiscal Health
provided through supplemental appropriations on an ad hoc basis.63
These disaster relief supplemental appropriations, as well as most annual
appropriations to the Disaster Relief Fund, generally do not count toward
existing discretionary budget limits.64
The federal government also owns and operates hundreds of thousands
of facilities and manages millions of acres of land that could be affected
by both natural disasters and a changing climate and represent a
significant federal fiscal exposure. For example, DOD owns and operates
domestic and overseas infrastructure with an estimated replacement
value of about $1 trillion. In September 2018, Hurricane Florence
damaged Camp Lejeune and other Marine Corps facilities in North
Carolina, with a preliminary Marine Corps repair estimate of $3.6 billion.
Disaster costs are projected to increase as extreme weather events
become more frequent and intense because of climate change as
observed and projected by the U.S. Global Change Research Program
and the National Academies of Sciences, Engineering, and Medicine.
OMB has reported that the federal government has spent more than $154
billion on activities related to climate change since 1993—primarily for
technologies to reduce emissions and for scientific research on climate
change impacts.65 OMB’s reporting does not, however, include
information on relevant federal fiscal exposures.
Limiting the federal government’s fiscal exposures to climate change has
been on GAO’s High-Risk List since 2013, in part because of concerns
about the increasing costs of disaster response and recovery efforts.66
For example, as currently structured, the National Flood Insurance
Program’s premiums and dedicated resources are not, over the long
63Congressional Research Service, The Disaster Relief Fund: Overview and Issues,
R45484 (Washington, D.C.: Nov. 22, 2019).
64The Budget Control Act of 2011 allows spending limits to be adjusted upward to
accommodate appropriations for disaster relief. Pub. L. No. 112-25, tit. I, § 101, 125 Stat.
240, 244-45 (2011).
65OMB has reported federal climate change funding in three main categories since 1993—
clean energy technology to reduce emissions; science to better understand climate
change; and international assistance for adaptation, clean energy, and sustainable
landscapes. Most federal funding since 1993 has been dedicated to technology efforts.
See GAO, Climate Change: Analysis of Reported Federal Funding, GAO-18-223
(Washington, D.C.: Apr. 30, 2018).
66GAO-19-157SP, 110.
Page 36 GAO-20-403SP The Nation’s Fiscal Health
term, sufficient to cover expected costs without borrowing from
Treasury.67 As of September 30, 2019, the Federal Emergency
Management Agency (FEMA), which administers the National Flood
Insurance Program, owed about $21 billion to Treasury for money
borrowed to pay claims and other expenses. The amount owed does not
include $16 billion of debt that was canceled in October 2017 by the
Additional Supplemental Appropriations for Disaster Relief Requirements
Act, 2017.68 We have reported that FEMA is unlikely to collect enough in
premiums in the future to repay the National Flood Insurance Program’s
remaining debt.69 Due to its financial challenges, the National Flood
Insurance Program has been on GAO’s High-Risk List since 2006.70
More complete information on programs for which costs are likely to
increase due to climate change, such as disaster assistance, could help
policymakers better understand the long-term effects of decisions and the
trade-offs between spending with long-term benefits, such as resilience
investments, and short-term benefits, such as post-disaster repairs. This
information could also help the federal government develop a
government-wide strategy for addressing climate change that focuses on
reducing federal fiscal exposure.
We have identified a number of ways to reduce the federal fiscal risk
related to natural disasters. For example:
Updating the methodology for major disaster declarations. In
2012, we recommended that FEMA develop and implement an
updated methodology that provides a more comprehensive
assessment of a jurisdiction’s capacity to respond to and recover
67We have suggested an alternative way to record insurance commitments in the budget
such that the federal government’s commitment would be more fully recognized. See
GAO, Fiscal Exposures: Federal Insurance and Other Activities that Transfer Risk or
Losses to the Government, GAO-19-353 (Washington, D.C.: Mar. 27, 2019).
68Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017,
Pub. L. No. 115-72, § 308, 131 Stat. 1224, 1228-29 (2017). For more information on the
National Flood Insurance Program, see GAO-19-157SP, 272.
69GAO, Flood Insurance: Comprehensive Reform Could Improve Solvency and Enhance
Resilience, GAO-17-425 (Washington, D.C.: Apr. 27, 2017).
70GAO-19-157SP, 272.
Page 37 GAO-20-403SP The Nation’s Fiscal Health
from a disaster without federal assistance.71 FEMA has not
implemented our recommendation, but the Disaster Recovery
Reform Act of 2018 (DRRA) requires FEMA to initiate rulemaking
to (1) update the factors considered when evaluating requests for
major disaster declarations, including reviewing how FEMA
estimates the cost of major disaster assistance; and (2) consider
other impacts on the capacity of a jurisdiction to respond to
disasters, by October 2020.72 Until FEMA implements a new
methodology, the agency will not have an accurate assessment of
a jurisdiction’s capabilities and runs the risk of recommending that
the President award Public Assistance to jurisdictions that have
the capacity to respond and recover on their own.
Strengthening resilience efforts. As we reported in October
2019, the federal government could reduce future costs by
investing in climate resilience projects to help communities
prepare for hazards such as sea-level rise.73 However, the federal
government does not have a strategy for prioritizing climateadaptation projects with the most impact. For example, as we
reported in April 2018, OMB reported only minimal funding since
1993 directed specifically at climate resilience projects.74 Instead,
most of the federal government’s efforts to reduce disaster risk are
reactive, and many revolve around disaster recovery. In response
to our 2015 recommendation, a federal interagency body has
created a strategy to help coordinate and align federal hazard
mitigation efforts before and after disasters occur.75 However, no
federal agency, government-wide coordinating body, or other
organizational arrangement has been established to periodically
identify and prioritize climate resilience projects for federal
71GAO, Federal Disaster Assistance: Improved Criteria Needed to Assess a Jurisdiction’s
Capability to Respond and Recover on Its Own, GAO-12-838 (Washington, D.C.: Sept.
12, 2012).
72Pub. L. No. 115-254, div. D, § 1239, 132 Stat. 3186, 3466 (2018).
73GAO, Climate Resilience: A Strategic Investment Approach for High-Priority Projects
Could Help Target Federal Resources, GAO-20-127 (Washington, D.C.: Oct. 23, 2019).
74GAO, Climate Change: Analysis of Reported Federal Funding, GAO-18-223
(Washington, D.C.: Apr. 20, 2018).
75In GAO-15-515 we recommended that the Mitigation Framework Leadership Group
establish an investment strategy to identify, prioritize, and implement federal investments
in disaster resilience.
Page 38 GAO-20-403SP The Nation’s Fiscal Health
investment that have the greatest expected net benefits and
address the most significant climate risks.
Our past work and other sources highlight the importance of
taking a broad, strategic, iterative, and risk-informed approach to
managing this risk.76 The federal government, however, has made
little measurable progress on limiting its fiscal exposure to climate
change.77 Our Disaster Resilience Framework also provides
information that can help federal agencies and policymakers
consider opportunities across the government to promote and
facilitate disaster risk reduction.78
Pre-disaster hazard mitigation. We also found that the bulk of
federal disaster resilience funding provided to states and localities
comes after they have experienced a disaster, particularly a large
or catastrophic disaster.79 The DRRA allows the President to set
aside, with respect to each major disaster, 6 percent of certain
Disaster Relief Fund grants to use for predisaster hazard
mitigation.80 In May 2019, FEMA announced that it is seeking
public comments on the new program. FEMA anticipates issuing
the first Notice of Funding Opportunity for this new program before
the end of 2020. This new grant program will provide additional
funding to make resilience investments before disaster strikes and
could potentially help to reduce future risk.
76For more information on limiting the federal government’s fiscal exposure by better
managing climate change risks, see GAO-19-157SP, 110; GAO-20-317T; Climate
Change: Potential Economic Costs and Opportunities to Reduce Federal Fiscal Exposure,
GAO-20-338T (Washington, D.C.: Dec. 19, 2019).
77In GAO-20-127, we assessed the federal government’s progress since 2017 related to
climate change strategic planning against five criteria and found that the federal
government had not met any of the criteria for removal from the high-risk list.
78GAO, Disaster Resilience Framework: Principles for Analyzing Federal Efforts to
Facilitate and Promote Resilience to Natural Disasters, GAO-20-100SP (Washington,
D.C.: Oct. 23, 2019).
79GAO, An Investment Strategy Could Help the Federal Government Enhance National
Resilience for Future Disasters, GAO-15-515 (Washington, D.C.: July 30, 2015).
80Pub. L. No. 115-254, div. D, § 1234, 132 Stat. at 3461-63.
Page 39 GAO-20-403SP The Nation’s Fiscal Health
Impending financial challenges for major programs and fiscal risks are
both straining the federal budget and contributing to the growing debt.
Sustaining key programs will require changes (see figure 10).81
Figure 10: Key Dates for Major Programs and Future Debt
To change the long-term fiscal path, policymakers will need to consider
policy changes to the entire range of federal activities, both revenue
(including tax expenditures) and spending (entitlement programs, other
mandatory spending, and discretionary spending).82 One way to quantify
the magnitude of the needed policy changes is by calculating the fiscal
gap. The fiscal gap represents the difference between revenue and
program spending (i.e., spending other than interest payments) that
would need to be closed immediately and permanently to hold debt as a
81For more information on the general size, scope, and fiscal sustainability of federal trust
funds and dedicated funds, see GAO, Federal Trust Funds and Other Dedicated Funds:
Fiscal Sustainability Is a Growing Concern for Some Key Funds, GAO-20-156
(Washington, D.C.: Jan. 16, 2020).
82Tax expenditures are provisions of the tax code that reduce taxpayers’ tax liability and
therefore the amount of tax revenue paid to the government. Examples include tax credits,
deductions, exclusions, exemptions, deferrals, and preferential tax rates.
Action Is Needed to
Address an
Unsustainable Fiscal
Path
Page 40 GAO-20-403SP The Nation’s Fiscal Health
share of GDP at the end of a given period the same as at the beginning of
the period.
To close the gap, policymakers would need to reduce program spending,
increase revenue, or, more likely, do both.83 To illustrate this point, table 3
shows what it would take to maintain the debt held by the public as a
share of GDP at the end of the 75-year projection period at its fiscal year
2019 level of 79 percent.
Table 3: Spending and Revenue Changes Needed to Close the Fiscal Gap over 75 Years
Change needed to close fiscal gap over 75 years
Immediate program spending cut (no
revenue increase)
Immediate revenue increase (no
spending cut)
GAO alternative simulation 27.2 percent 37.8 percent
GAO baseline simulation 17.3 percent 21.2 percent
2019 Financial Report projections 17.4 percent 20.3 percent
Source: GAO and GAO analysis of Congressional Budget Office and 2019 Financial Report of the U.S. Government data. | GAO-20-403SP
GAO, CBO, and the 2019 Financial Report all note that the longer action
is delayed, the greater and more drastic the changes will have to be,
placing an additional burden on future generations.
As Congress considers changes in revenue and spending policies to
improve the federal government’s long-term fiscal path, it will also need to
consider alternative approaches for managing the level of debt. As
currently structured, the debt limit is a legal limit on the total amount of
federal debt that can be outstanding at one time. In other words, it only
restricts Treasury’s authority to borrow and finance the decisions already
enacted by Congress and the President. It does not restrict Congress’s
ability to pass spending and revenue legislation that affects the level of
debt, nor does it otherwise constrain fiscal policy. Without legislation to
suspend or raise the debt limit, Treasury cannot continue issuing debt to
finance the decisions already enacted by Congress and the President.84
83Program spending (also referred to as noninterest spending) includes both discretionary
spending and mandatory spending, but does not include spending on interest on debt held
by the public.
84The Bipartisan Budget Act of 2019 has suspended the debt limit through July 31, 2021.
Pub. L. No. 116-37, § 301, 133 Stat. 1049, 1057 (2019).
Debt Limit Is Not a Control
on Debt and Presents
Risks to Treasury
Securities: An Alternative
Approach Is Needed
Page 41 GAO-20-403SP The Nation’s Fiscal Health
Delays in raising the debt limit have occurred in each of the last 9 fiscal
years, resulting in Treasury deviating from its normal cash and debt
management operations and taking extraordinary actions to avoid
exceeding the debt limit, such as suspending investments to some federal
employees’ retirement funds.85 Once all of the extraordinary actions are
exhausted, Treasury may not issue debt without further action from
Congress and could be forced to delay payments until sufficient funds
become available. Treasury could eventually be forced to default on legal
debt obligations. A default would have devastating effects on U.S. and
global economies and the public. It is generally recognized that a default
would prevent the government from honoring all of its obligations to pay
for such things as program benefits; contractual services and supplies;
employees’ salaries, wages, and retirement benefits; and principal on
maturing securities.
One cannot overstate the importance of preserving investors’ confidence
that debt backed by the full faith and credit of the U.S. government will be
honored. The perceived safety of Treasury securities supports broadbased demand for U.S. government debt. Many investors accept low
yields on Treasury securities because they are considered one of the
safest assets in the world. This enables Treasury to keep borrowing costs
low. Failure to increase (or suspend) the debt limit in a timely manner
could undermine investors’ perception of the safety of Treasury securities,
resulting in serious negative consequences for the Treasury market and
increase borrowing costs.
Our work has shown that, in the past, uncertainty around whether the
debt limit would be raised or suspended has increased Treasury’s
borrowing costs, decreased demand for Treasury securities, and
constrained Treasury’s ability to manage its operating cash balance. We
estimated the total increased borrowing costs incurred through
September 30, 2014 on securities issued by Treasury during the 2013
debt limit impasse ranged from roughly $38 million to more than $70
million.86 Investors reported that during this impasse they took the
unprecedented action of systematically avoiding certain Treasury
85Extraordinary actions are actions that Treasury takes as it nears the debt limit to avoid
exceeding the limit. These actions are not part of Treasury’s normal cash and debt
management operations. For more information, see GAO, Debt Limit: Market Response to
Recent Impasses Underscores Need to Consider Alternative Approaches, GAO-15-476
(Washington, D.C.: July 9, 2015).
86GAO-15-476.
Page 42 GAO-20-403SP The Nation’s Fiscal Health
securities—those that matured around the dates when Treasury projected
it would exhaust extraordinary actions. For these securities, interest rates
increased dramatically and liquidity declined in the secondary market,
where securities are traded among investors. In 2019, 48 out of 67 (72
percent) of investors we surveyed reported that they would take similar
action to manage potential market disruptions caused by any future debt
limit impasses.87
We have reported numerous times that the full faith and credit of the
United States must be preserved. We have recommended that Congress
consider alternative approaches to the current debt limit to avoid seriously
disrupting the Treasury market and increasing borrowing costs and to
allow it to better manage the federal government’s level of debt.88
In July 2015, through a forum with experts in the field, we identified three
options that would enable Congress to delegate its borrowing authority,
avoid impasses on the debt limit, and minimize disruptions to the
Treasury securities market:
• Option 1: Link action on the debt limit to the budget resolution.
• Option 2: Provide the administration with the authority to propose a
change in the debt limit that would take effect absent enactment of a
joint resolution of disapproval within a specified time frame.
• Option 3: Delegate broad authority to the administration to borrow as
necessary to fund enacted laws.89
Each of these options has strengths and weaknesses but would maintain
Congressional control and oversight of federal borrowing and better align
decisions about the level of debt with decisions on spending and revenue.
87The survey sample represented the following 10 sectors: commercial banks; brokerdealers; casualty insurance providers; life insurance providers; state and local government
retirement funds; private pension funds; state and local governments; mutual funds and
exchange-traded funds; money market funds; and nonfinancial corporations. For more
information see GAO-20-131.
88See most recently GAO-20-131 and GAO, The Nation’s Fiscal Health: Actions Needed
to Achieve Long-Term Fiscal Sustainability, GAO-19-611T (Washington, D.C.: June 26,
2019).
89More detail about these ideas and a discussion of the advantages and challenges to
each can be found in GAO-15-476.
Page 43 GAO-20-403SP The Nation’s Fiscal Health
We did not endorse a specific option, but we suggested Congress
consider such approaches.
As of March 2020, Congress is considering legislation that, if enacted,
could help avoid impasses on the debt limit. For example, Senate Bill
2765 includes a provision that would automatically adjust the debt limit to
conform to levels established in the budget resolution. It also includes
provisions to require budget resolutions ever 2 years rather than annually
and to allow budget resolutions that meet certain criteria to be considered
in the Senate using expedited procedures. This bill has been reported out
of committee but has not passed the Senate.90
Other legislation has been introduced that, if enacted, could help avoid
impasses on the debt limit, but these bills have not been voted out of
committee. For example, Senate Bill 444 would allow the President to
increase the debt limit unless a joint resolution of disapproval is both
passed by Congress and becomes law,91 and Senate Bill 623 would allow
Treasury to issue debt in excess of the debt limit under certain
circumstances.92
A long-term plan is needed to put the government on a sustainable fiscal
path. Such a step would provide a focus on the fiscal impacts of budget
decisions and would help maintain the status of Treasury securities as
one of the safest assets in the world.
As part of this long-term plan, fiscal rules can support efforts to achieve
fiscal sustainability by imposing numerical limits on the budget (known as
targets) to guide fiscal policy. In contrast to the debt limit, fiscal rules are
intended to influence decisions about spending and revenue as they are
made. Fiscal rules have been used at both the national government level
in the United States and other countries, as well as at the supranational
level, such as the European Union (EU), to help promote fiscal
responsibility and sustainability. Congress could consider additional fiscal
90Bipartisan Congressional Budget Reform Act, S. 2765, title II, § 202(e)(5), 116th Cong.
(2019).
91Protect our CREDIT Act, S. 444, 116th Cong. (2019).
92Default Prevention Act, S. 623, 116th Cong. (2019).
Fiscal Rules Can Help
Control Debt
Page 44 GAO-20-403SP The Nation’s Fiscal Health
rules as part of a broader, long-term plan to put the government on a
sustainable fiscal path.93
According to experts at the International Monetary Fund (IMF) and the
Organization for Economic Co-operation and Development (OECD),
several types or combinations of fiscal rules have the potential to
contribute to fiscal sustainability (see table 4).
Table 4: Types of Fiscal Rules
Type of rulea Description
Budget balance rule Constrains deficit levels and specifies that the debt-to-gross
domestic product (GDP) ratio converges to a defined finite
level.
Debt rule Sets an explicit limit or target for debt held by the public as a
share of GDP.
Revenue rule Sets ceilings or floors on revenues and aims to increase
revenue collection or prevent excessive tax burdens.
Expenditure rule Limits spending, typically in absolute terms or growth rates and
occasionally as a percent of GDP.
Source: GAO analysis of the Organization for Economic Co-operation and Development (OECD) and International Monetary Fund
(IMF) reports. | GAO-20-403SP
a
Types of rules are identified by the OECD and IMF. OECD researchers identified an additional type
of rule, but we chose to highlight the four rules that both organizations have in common.
Governments can use a combination of fiscal rules to address
shortcomings of any one individual rule. According to the IMF, as of 2015,
more than 70 countries had combined two or more fiscal rules, and most
countries that use fiscal rules today have more than one in place. For
example, at the supranational level, the EU’s stability and growth pact
combines an expenditure rule, budget balance rule, and a debt rule (e.g.,
debt-to-GDP), which are designed to ensure that countries in the EU
pursue sound public finances and coordinate their fiscal policies. The pact
permits sanctions against member states that fail to comply with these
fiscal rules. In recent years, however, several EU nations have struggled
to meet the targets set forth in the agreement.
Economic literature notes that governments have designed mechanisms
to enhance the flexibility or enforceability of fiscal rules. For example:
93At the request of the Chairman of the Senate Budget Committee and Ranking Member
of the House Budget Committee, we are examining the design, implementation, and
enforcement of fiscal rules and targets in other countries.
Other Countries’ Experiences
with Fiscal Rules
Page 45 GAO-20-403SP The Nation’s Fiscal Health
• Many fiscal rules include escape clauses, which allow for a level of
flexibility in responding to fiscal risks or unexpected events like
recessions or natural disasters.
• Other fiscal rules include features such as independent fiscal councils,
which are institutions that can help formulate and implement sound
fiscal policy, and constitutional mandates, which codify the rule in a
country’s constitution with the intent of making it more difficult to
reverse or abandon.
• Some countries choose to use automatic correction mechanisms,
which are designed to trigger automatically to respond to past
deviations from a rule.
International economic organizations have found that fiscal rules can be
associated with successful efforts to stabilize debt. However, empirical
evidence on national fiscal rules suggests that while fiscal rules may
improve balance sheets, the correlation is weaker between fiscal rules
and reductions in the debt-to-GDP ratio. U.S. state and local governments
have also used fiscal rules.
In general, observers and budget experts have noted that success
depends on effective enforcement of fiscal rules and sustained
commitment by both policymakers and the public. Experts believe that, if
governments try to subvert fiscal rules through creative accounting, it
could undermine credibility or transparency.
The federal government has previously enacted fiscal rules in the form of
laws that constrain and enforce fiscal policy decisions. These experiences
illustrate the challenge in designing rules that are both achievable and
effective in addressing the key drivers of the nation’s growing debt. For
example, the Statutory Pay-As-You-Go Act of 2010 prohibits the net
effect of new direct spending and revenue laws from increasing the deficit
but does not control discretionary spending or the growth in spending
resulting from previously enacted laws.94 In addition, the Budget Control
Act of 2011 (BCA) imposes caps on annual discretionary spending
through 2021, although the caps exclude emergencies and overseas
contingency operations.95 However, since 2013 Congress and the
President have enacted legislation that resulted in raised discretionary
94Pub. L. No. 111-139, 124 Stat. 8 (2010).
95Pub. L. No. 112-25, 125 Stat. 240 (2011).
The Federal Government’s
Experience with Fiscal Rules
Page 46 GAO-20-403SP The Nation’s Fiscal Health
spending caps every year and have not reached agreement on required
deficit reductions.96 A number of other previously enacted fiscal rules
similarly placed limits on the deficit and spending but are no longer in
effect.
The federal government’s experience with these fiscal rules provides
insights that can inform fiscal policy deliberations:
• Targeting the right factors. To reduce the deficit and debt
effectively, policymakers will need to examine the factors that have
the greatest impact on the government’s fiscal condition and structure
any fiscal rules and targets to reflect these factors. For example, in
the long term, the spending trajectory is driven by federal spending on
health care programs and on interest on debt held by the public,
which results from previously enacted laws. Since the fiscal gap is
driven by both spending and revenue laws, it is important for future
fiscal rules to target all spending (entitlement programs, other
mandatory spending, and discretionary spending) and revenues.
• Enforcing budget agreements. Budget procedures are more
effective at enforcing deficit reduction agreements than at forcing
Congress to reach those agreements.
• Limiting exemptions. Since the BCA has been in effect, hundreds of
billions of dollars in discretionary budget authority have been provided
in areas that do not count toward BCA spending limits. Specifically,
the BCA allows its spending limits to be adjusted for certain
categories such as emergency appropriations and appropriations for
overseas contingency operations.97 While the government needs
flexibility to address unforeseen events, it is important to design fiscal
rules that can be adhered to absent a crisis.
During the current Congress, legislation has been proposed that, if
enacted, would change the Congressional budget process. Senate Bill
2765 would specify target ratios for debt as a share of GDP and enforce
96For example, the Bipartisan Budget Act of 2019 raised discretionary spending caps for
fiscal years 2020 and 2021.
97For more information on overseas contingency operations spending, see GAO,
Overseas Contingency Operations: Alternatives Identified to the Approach to Fund WarRelated Activities, GAO-19-211 (Washington, D.C.: Jan. 28, 2019).
Page 47 GAO-20-403SP The Nation’s Fiscal Health
these targets through a reconciliation process.98 Specifically, Congress
would set targets in the budget resolution, and CBO would evaluate
adherence to the targets. If CBO determines that deficits as a share of
GDP in the final year of the budget resolution will not be achieved, then
Congress would be required to develop and consider expedited
reconciliation procedures, so the projected deficit as a share of GDP
adheres to the target.99
Changes in spending and revenue to ensure long-term fiscal
sustainability require legislative actions to alter fiscal policies, but in our
prior work we have also identified numerous actions for executive
agencies to contribute toward a sustainable fiscal future. Although
executive actions alone cannot put the U.S. government on a sustainable
fiscal path, it is important for agencies to act as stewards of federal
resources.
Improper payments—payments that should not have been made or that
were made in an incorrect amount100—have consistently been a
98Bipartisan Congressional Budget Reform Act, S. 2765, title I, § 104, 116th Cong. (2019).
99Bipartisan Congressional Budget Reform Act, S. 2765, title IV, § 401, 116th Cong.
(2019).
100Under the Improper Payments Information Act of 2002 (IPIA), as amended, an improper
payment is statutorily defined as any payment that should not have been made or that
was made in an incorrect amount (including overpayments and underpayments) under
statutory, contractual, administrative, or other legally applicable requirements. OMB
guidance also provides that when an agency’s review is unable to discern whether a
payment was proper as a result of insufficient or lack of documentation, this payment must
also be considered an improper payment.
Executive Agencies
Have Opportunities to
Contribute toward
Fiscal Health
Reduce Improper
Payments: Agencies Need
to Curtail Billions in
Improper Payments
Page 48 GAO-20-403SP The Nation’s Fiscal Health
government-wide issue.101 Since fiscal year 2003—when certain agencies
were required by statute to begin reporting estimated improper payments
for certain programs and activities—cumulative improper payment
estimates have totaled almost $1.7 trillion.102
For fiscal year 2019, agencies reported total improper payment estimates
of about $175 billion, compared to about $151 billion for fiscal year 2018.
For example, for fiscal year 2019, the Medicaid program reported an
increase of estimated improper payments in excess of $21 billion. For
fiscal year 2019, 79 programs and activities across 17 agencies reported
improper payment estimates and 22 of those programs and activities
reported improper payment rates estimated at 10 percent or greater. In
addition, 15 programs and activities across 7 agencies reported improper
payment estimates greater than $1 billion (see table 5):
101We have reported improper payments as a material deficiency or material weakness in
internal control in our audit reports on the U.S. government’s consolidated financial
statements since fiscal year 1997. See GAO-20-315R for our audit report on the fiscal
year 2019 statements. Since the conclusion of our audit work, Congress and the President
have enacted the Payment Integrity Information Act of 2019 (PIIA). Pub. L. No. 116-117,
_ Stat. _ (Mar. 2, 2020). This statute repealed IPIA, the Improper Payments Elimination
and Recovery Act of 2010 (IPERA), and the Improper Payments Elimination and Recovery
Improvement Act of 2012; instead, it enacted a new Subchapter in Title 31 of the U.S.
Code that contains enhancements to improper payments law. Enhancements include
more detailed requirements for agency risk assessments and improper payment
estimates, a requirement that OMB report an annual government-wide estimate, and a
process for clearer and more consistent reporting on programs that do not comply with
improper payments criteria. This law also establishes an interagency working group on
payment integrity.
102Not all agencies are subject to IPIA, as amended; the law only applies to departments,
agencies, or instrumentalities in the executive branch of the U.S. government. Prior-year
improper payment estimates have not been adjusted for inflation.
Page 49 GAO-20-403SP The Nation’s Fiscal Health
Table 5: Programs and Activities with Estimates of Improper Payments Exceeding $1 Billion in Fiscal Year 2019
Agency Program(s) and Activities
Department of Health and
Human Services
Medicaid, Medicare Fee-for-Service, Medicare Part C, and Children’s Health Insurance Program
Department of Veterans
Affairs
Community Care, and Purchased Long-Term Services and Support
Social Security
Administration
Old-Age, Survivors, and Disability Insurance; and Supplemental Security Income
Department of the Treasury Earned Income Tax Credit, Additional Child Tax Credit, and American Opportunity Tax Credit
Department of Agriculture Supplemental Nutrition Assistance Program, and National School Lunch Program
Department of Labor Unemployment Insurance
Department of Defense Military Pay
Source: GAO analysis of Office of Management and Budget data and agency financial reports for fiscal year 2019. | GAO-20-403SP
To address the issue of improper payments, agencies should first identify
the root causes of improper payments and then implement internal
controls aimed at both prevention and detection. However, the
government’s ability to understand the scope of the issue is hindered by
incomplete, unreliable, or understated estimates; risk assessments that
may not accurately assess the risk of improper payment; and
noncompliance with criteria listed in the Improper Payments Elimination
and Recovery Act of 2010 (IPERA).103 In addition, certain federal
programs and activities determined by the agencies, OMB, or federal
law104 as risk-susceptible did not report estimates of improper payments
103Pub. L. No. 111-204, § 3, 124 Stat. 2224, 2232 (2010). As noted above, PIIA has
repealed IPERA. PIIA’s provision regarding compliance with improper payments criteria is
codified at 31 U.S.C. § 3353.
104For fiscal year 2019, the Department of Labor reported that it did not report an improper
payment estimate for the National Disaster Workforce Grants program and the
Department of Homeland Security reported that it did not report improper payment
estimates for 10 disaster relief programs. These programs were subject to improper
payment reporting because in fiscal year 2017 or 2018, or both, they received
supplemental appropriations for disaster relief and expended more than $10 million of
such funds in one fiscal year, thus meeting the appropriations’ criteria for determining
programs’ susceptibility to significant improper payments for the purposes of IPIA. See
Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2017, Pub.
L. No. 115-72, div. A, § 305(b), 131 Stat. 1224, 1228 (Oct. 26, 2017), as amended by the
Further Additional Supplemental Appropriations for Disaster Relief Requirements Act,
2018, Pub. L. No. 115-123, div. B, §§21207, 21208(a)(2), (b), 132 Stat. 64, 108 (Feb. 9,
2018).
Page 50 GAO-20-403SP The Nation’s Fiscal Health
for fiscal year 2019, including the Premium Tax Credit and Temporary
Assistance for Needy Families, among others.
In addition, DOD lacks quality assurance procedures to ensure the
completeness and accuracy of the payment populations from which it
develops improper payment estimates.105 Further, various inspectors
general reported their respective agencies had deficiencies related to
compliance with the criteria listed in IPERA.106 Our work has identified a
number of strategies and specific actions agencies can take to reduce
improper payments, which could yield significant savings and help ensure
that taxpayer funds are adequately safeguarded. For example,
• Amendments to the Social Security Act. We have suggested that
Congress consider amending the Social Security Act to explicitly allow
the Social Security Administration to share its full death data with
Treasury’s Do Not Pay working system for data matching.107 As of
February 2020, no relevant legislation has been enacted to amend the
Social Security Act in this manner.
• Improvements to agency estimates. In May 2018, we
recommended OMB develop guidance to help ensure agencies’
estimating processes for identifying improper payments reflect key
risks, for example whether a payee is ineligible for a payment.108 As of
February 2020, OMB has not implemented this recommendation.
105In May 2013, we reported on major deficiencies in DOD’s process for estimating fiscal
year 2012 improper payments in the Defense Finance and Accounting Service
Commercial Pay program, including deficiencies in identifying a complete and accurate
population of payments; see GAO, DOD Financial Management: Significant Improvements
Needed in Effort to Address Improper Payment Requirements, GAO-13-227 (Washington,
D.C.: May 13, 2013). The foundation of reliable statistical sampling estimates is a
complete, accurate, and valid population from which to sample. As of June 2019, DOD’s
efforts to establish and implement key quality assurance procedures to ensure the
completeness and accuracy of sampled populations were still in progress.
106The most recent inspectors general reports on compliance with the criteria listed in
IPERA were issued in 2019 for fiscal year 2018.
107GAO, Improper Payments: Strategy and Additional Actions Needed to Help Ensure
Agencies Use the Do Not Pay Working System as Intended, GAO-17-15 (Washington,
D.C.: Oct. 14, 2016).
108GAO, Improper Payments: Actions and Guidance Could Help Address Issues and
Inconsistencies in Estimation Processes, GAO-18-377 (Washington, D.C.: May 31, 2018).
Page 51 GAO-20-403SP The Nation’s Fiscal Health
The tax gap is the difference between tax amounts that taxpayers owe
and what they actually pay voluntarily and on time (see figure 11). Given
the size of the tax gap, even modest reductions would yield significant
financial benefits and help improve the government’s fiscal condition.
Figure 11: The Internal Revenue Service (IRS) Average Tax Gap Estimate for Tax
Years 2011–2013
Note: IRS released its most recent tax gap estimate in September 2019 for tax years 2011 to 2013.
The tax gap arises when taxpayers, whether intentionally or inadvertently,
fail to (1) accurately report tax liabilities on tax returns (underreporting),
(2) pay taxes due from filed returns (underpayment), or (3) file a required
tax return altogether or on time (nonfiling). Underreporting accounted for
80 percent of the tax gap across tax years 2011 to 2013, as shown in
figure 12.
Address the Persistent Tax
Gap: Opportunities to
Increase Revenues
Require Strategies on
Multiple Fronts
Page 52 GAO-20-403SP The Nation’s Fiscal Health
Figure 12: Estimated Average Annual Gross Tax Gap by Type of Noncompliance
and Tax, Tax Years 2011-2013
Note: Data may not sum to totals because of rounding. Individual income tax includes individual
business income tax. Estate tax underreporting noncompliance is not shown in this graphic because it
represents less than one-half percent of total underreporting noncompliance. Excise tax is not shown
in this graphic because the IRS does not have excise tax underreporting noncompliance or nonfiling
noncompliance estimates, and its estimate for excise tax underpayment noncompliance represents
less than one-half percent of total underpayment noncompliance. In addition, IRS does not have a
corporation income tax estimate for nonfiling noncompliance.
This persistent issue has been on our High-Risk List since its inception in
1990.109 Key factors that contribute to the tax gap include limited thirdparty reporting, challenges with customer service, and tax code
complexity. For example, the extent to which individual taxpayers
accurately report their income is correlated with the extent to which the
income is reported to them and IRS by third parties. Where there is little
or no information reporting, such as with business income, taxpayers tend
to significantly misreport their income.
109For more information on addressing the tax gap, see GAO-19-157SP, 235.
Page 53 GAO-20-403SP The Nation’s Fiscal Health
Reducing the gap will be a challenging task requiring action on multiple
fronts. Our work has identified a number of strategies and specific actions
IRS and Congress can take to reduce the tax gap. For example, we
recommended that IRS develop and document a strategy that outlines
how IRS will use data to update compliance strategies.110 We have also
previously made recommendations to IRS aimed at enhancing taxpayer
services and determining resource allocation strategies for its
enforcement efforts, among others.111 IRS has not yet fully implemented
many of these recommendations. We have also previously suggested
targeted legislative actions such as expanding third-party information
reporting and regulating paid preparers.112
As we reported in October 2019, the federal government has made
significant strides in improving financial management since enactment of
110See GAO, Tax Gap: Multiple Strategies Are Needed to Reduce Noncompliance,
GAO-19-558T (Washington, D.C.: May 9, 2019) and Tax Gap: IRS Needs Specific Goals
and Strategies for Improving Compliance, GAO-18-39 (Washington, D.C.: Oct. 31, 2017).
Likewise, we recommended that IRS develop and document plans to use employment tax
compliance data to estimate the current state of the employment tax portion of the tax
gap. See GAO, Employment Taxes: Timely Use of National Research Program Results
Would Help IRS Improve Compliance and Tax Gap Estimates, GAO-17-371 (Washington,
D.C.: Apr. 18, 2017).
111See GAO, Tax Fraud and Noncompliance: IRS Could Further Leverage the Return
Review Program to Strengthen Tax Enforcement, GAO-18-544 (Washington, D.C.: July
24, 2018); 2016 Filing Season: IRS Improved Telephone Service but Needs to Better
Assist Identity Theft Victims and Prevent Release of Fraudulent Refunds, GAO-17-186
(Washington, D.C.: Jan. 31, 2017); IRS Website: Long-Term Strategy Needed to Improve
Interactive Services, GAO-13-435 (Washington, D.C.: Apr. 16, 2013); 2012 Tax Filing: IRS
Faces Challenges Providing Service to Taxpayers and Could Collect Balances Due More
Effectively, GAO-13-156 (Washington, D.C.: Dec. 18, 2012); and Tax Gap: IRS Could
Significantly Increase Revenues by Better Targeting Enforcement Resources,
GAO-13-151 (Washington, D.C.: Dec. 5, 2012).
112See GAO-14-453; Paid Tax Return Preparers: In a Limited Study, Preparers Made
Significant Errors, GAO-14-467T (Washington, D.C.: Apr. 8, 2014); Tax Gap: IRS Could
Do More to Promote Compliance by Third Parties with Miscellaneous Income Reporting
Requirements, GAO-09-238 (Washington, D.C.: Jan. 28, 2009); and Tax Gap: Actions
That Could Improve Rental Real Estate Reporting Compliance, GAO-08-956 (Washington,
D.C.: Aug. 28, 2008).
Agencies Could Aid Fiscal
Decision-Making by
Providing Improved
Information on Programs
and Fiscal Operations
Page 54 GAO-20-403SP The Nation’s Fiscal Health
the Chief Financial Officers Act of 1990 (CFO Act).113 Substantial
progress has occurred in areas such as improved internal controls,
reliable agency financial statements, and establishment of Chief Financial
Officer (CFO) leadership positions. However, agencies also need to take
action to provide decision makers with additional or improved information
on the performance and costs of policies or programs. In particular,
decision-making could be improved by increasing attention to tax
expenditures and strengthening internal controls over financial reporting.
Increased attention to tax expenditures. Tax expenditures are
provisions of the tax code that reduce taxpayers’ tax liability and therefore
the amount of tax revenue paid to the government. Examples include tax
credits, deductions, exclusions, exemptions, deferrals, and preferential
tax rates. Tax expenditures seek to advance goals that may be similar to
the goals of mandatory or discretionary spending programs. In fiscal year
2019, tax expenditures reduced income tax revenues by approximately
$1.32 trillion based on our calculation summing Treasury estimates for
each tax expenditure.114 According to unaudited information in the 2019
Financial Report, the largest tax expenditure was related to employerprovided health insurance and represented an estimated $202 billion in
reduced income tax revenue in fiscal year 2019.115
Although they are routinely used as a policy tool, tax expenditures are not
regularly reviewed and their outcomes are not measured as closely as
spending programs’ outcomes. In September 2005, we recommended
that OMB take actions to develop a framework for evaluating tax
expenditure performance and to regularly review tax expenditures in
113GAO, Federal Financial Management: Substantial Progress Made since the CFO Act of
1990 and Preliminary Observations on Opportunities for Enhancement, GAO-20-203T
(Washington, D.C.: Oct. 30, 2019).
114The sum of the specific tax expenditure estimates is useful for gauging the general
magnitude of reduced revenue through provisions of the tax code, but aggregate tax
expenditure estimates must be interpreted carefully. Summing revenue loss estimates
does not take into account possible interactions between individual provisions or potential
behavioral responses to changes in these provisions on the part of taxpayers. Additionally,
Treasury’s tax expenditure estimates include the effect of certain tax credits on receipts
only and not the effect of the credits on outlays, which Treasury reports separately, but
does not take into account interactions between individual provisions.
115Employees generally pay no income taxes on their employers’ contributions to their
health insurance premiums. The value of employer-provided health insurance and medical
care expenses is also excluded from Medicare and Social Security payroll taxes, and
Treasury estimated that the payroll tax revenue losses were $136.7 billion in 2019.
Page 55 GAO-20-403SP The Nation’s Fiscal Health
executive branch budget and performance review processes.116 However,
OMB has not reported progress on this action since the President’s fiscal
year 2012 budget.
In July 2016, we recommended that OMB work with agencies to identify
which tax expenditures contribute to agency goals. OMB generally agreed
but had taken no action as of December 2019.117 Absent such analysis,
policymakers have little way of knowing whether these tax provisions
support achieving the intended federal outcomes. Policymakers also lack
information to compare their cost and efficacy with other policy tools.118
Eliminating material weaknesses in internal control over financial
reporting. Eliminating these weaknesses would improve the reliability of
financial information and improve financial decision-making. The U.S.
government’s consolidated financial statements are intended to present
the results of operations and the financial position and condition of the
federal government as if the government were a single enterprise. Since
the federal government began preparing consolidated financial
statements more than 20 years ago, three major impediments have
continued to prevent us from rendering an opinion on the federal
government’s accrual-based consolidated financial statements over this
period: (1) serious financial management problems at DOD, (2) the
federal government’s inability to adequately account for
intragovernmental activity and balances between federal entities, and (3)
weaknesses in the federal government’s process for preparing the
consolidated financial statements.119 Over the years, we have made a
116GAO, Government Performance and Accountability: Tax Expenditures Represent a
Substantial Federal Commitment and Need to Be Reexamined, GAO-05-690
(Washington, D.C.: Sept. 23, 2005).
117GAO, Tax Expenditures: Opportunities Exist to Use Budgeting and Agency
Performance Processes to Increase Oversight, GAO-16-622 (Washington, D.C.: July 7,
2016).
118For more information on our work on tax expenditures, see GAO, Key Issues: Tax
Expenditures, accessed on March 11, 2019,
https://www.gao.gov/key_issues/tax_expenditures/issue_summary.
119Bipartisan legislation has been introduced in both houses that, if enacted, would require
the Congressional budget committees to conduct an annual joint hearing to receive a
presentation from the Comptroller General of the United States regarding our audit of the
financial statements of the U.S. government, and the financial position and condition of the
federal government. As of February 2020, this legislation has not been voted out of
committee. Fiscal State of the Nation Resolution, S. Con. Res. 35, 116th Cong. (2020);
Fiscal State of the Nation Resolution, H. Con. Res. 68, 116th Cong. (2019).
Page 56 GAO-20-403SP The Nation’s Fiscal Health
number of recommendations to OMB, Treasury, and DOD to address
these issues.120 Generally, these entities have taken or plan to take
actions to address these recommendations.
The material weaknesses in internal control underlying these three major
impediments continue to (1) hamper the federal government’s ability to
reliably report a significant portion of its assets, liabilities, costs, and other
related information; (2) affect the federal government’s ability to reliably
measure the full cost, as well as the financial and nonfinancial
performance, of certain programs and activities; (3) impair the federal
government’s ability to adequately safeguard significant assets and
properly record various transactions; and (4) hinder the federal
government from having reliable financial information to operate in an
efficient and effective manner.
There are also a number of other areas where federal financial
management could be enhanced as it relates to the CFO Act. These
areas include modernizing the role of CFOs, preparing government-wide
and agency-level financial management plans, and better linking
performance and cost information for decision-making.121 In February
2020, a bill was introduced in the Senate that would address these and
other areas.122
Since 2011, we have reported on federal programs, agencies, offices,
and initiatives that have duplicative goals or activities as well as
opportunities to achieve greater efficiency and effectiveness that result in
cost savings or enhanced revenue collection. In our nine annual reports
from 2011 through 2019, we presented about 900 actions for executive
branch agencies or Congress to reduce, eliminate, or better manage
fragmentation, overlap, or duplication; achieve cost savings; or enhance
revenue. Actions taken by the executive branch and Congress on these
issues have resulted in roughly $262 billion financial benefits since fiscal
120GAO, Management Report: Improvements Needed in Controls over the Processes
Used to Prepare the U.S. Consolidated Financial Statements, GAO-19-624 (Washington,
D.C.: Sept. 4, 2019). In addition, see GAO, DOD Financial Management – High Risk
Issue, accessed on March 11, 2020,
http://www.gao.gov/key_issues/dod_financial_management/issue_summary. Further,
other auditors have made recommendations to DOD to improve DOD’s financial
management.
121See GAO-20-203T.
122CFO Vision Act of 2020, S. 3287, 116th Cong. (2019).
Continue to Address
Duplication, Overlap, and
Fragmentation: Agencies
Have the Potential to
Achieve Billions in
Financial Benefits for the
Government
Page 57 GAO-20-403SP The Nation’s Fiscal Health
year 2010.123 As of March 2019, about 54 percent of the actions were
fully addressed, about 23 percent were partially addressed, and about 14
percent were not addressed.124 We estimate that tens of billions of dollars
in additional financial benefits are possible by fully implementing our
recommended actions. See appendix II for more information on actions
needed in these areas.
This publication was prepared under the direction of Susan J. Irving,
Senior Advisor to the Comptroller General, Debt and Fiscal Issues, who
may be reached at (202) 512-6806 or irvings@gao.gov; Robert F. Dacey,
Chief Accountant, who may be reached at (202) 512-3406 or
daceyr@gao.gov; and Dawn B. Simpson, Director, Financial
Management and Assurance, who may be reached at (202) 512-3406 or
simpsondb@gao.gov if there are any questions. GAO staff who made key
contributions to this publication are listed in appendix III. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this publication. In addition, this publication will
be available at no charge on GAO’s website at http://www.gao.gov.
Gene. L. Dodaro
Comptroller General of the United States
123The $262 billion includes about $216 billion from 2010 through 2018 and $46 billion
projected to accrue in 2019 or later. In calculating these totals, we relied on individual
estimates from a variety of sources, which considered different time periods and utilized
different data sources, assumptions, and methodologies. These totals represent a rough
estimate of financial benefits and have been rounded down to the nearest $1 billion.
124Nine percent of the actions have been consolidated or other—replaced or subsumed by
new actions based on additional audit work or other relevant information—or closed as not
addressed because the action is no longer relevant due to changing circumstances. For
more information on our work on duplication, overlap, and fragmentation including costsavings and revenue enhancements, see GAO, 2019 Annual Report: Additional
Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Billions in
Financial Benefits, GAO-19-285SP (Washington, D.C.: May 21, 2019) and Duplication &
Cost Savings: Action Tracker, updated on May 21, 2019, https://www.gao.gov/reportstestimonies/action-tracker.
Appendix I: Objectives, Scope, and
Methodology
Page 58 GAO-20-403SP The Nation’s Fiscal Health
This report summarizing the fiscal health of the federal government was
conducted under the authority of the Comptroller General. In this report,
we discuss the federal government’s fiscal condition and how it changed
in fiscal year 2019, the federal government’s unsustainable long-term
outlook, and risks to the government’s fiscal condition. We also discuss
actions the federal government can take to achieve a more sustainable
fiscal path as well as the potential consequences of not taking action.
To summarize the current fiscal condition and how it changed in fiscal
year 2019, we reviewed:
• The Fiscal Year 2019 Financial Report of the United States
Government (2019 Financial Report) prepared by the Secretary of the
Treasury in coordination with the Director of the Office of
Management and Budget,
• Congressional Budget Office (CBO) reports on the effects of
legislation on its projections of the federal deficit, and
• Our prior work on federal debt.
For the federal government’s long-term outlook, we reviewed projections
from CBO’s June 2019 long-term budget outlook report, CBO’s January
2020 budget and economic outlook report, the Statements of Long-Term
Fiscal Projections in the 2019 Financial Report, and our long-term
simulations of federal revenues and spending. Our two simulations are
the extended baseline and the alternative. To conduct our simulations, we
primarily used data from CBO and the Medicare and Social Security
Trustees.
We chose the data and assumptions for our simulations to illustrate the
nation’s potential fiscal path under current law and current policy, and to
complement CBO and 2019 Financial Report projections included in this
report.
• CBO’s baseline (10-year) and extended baseline (30-year) projections
generally reflect current law. For example, CBO assumes current tax
provisions will generally remain unchanged, tax provisions will expire
as scheduled, and provisions of the Patient Protection and Affordable
Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and
Methodology
Page 59 GAO-20-403SP The Nation’s Fiscal Health
Care Act (PPACA)1 and Medicare Access and CHIP Reauthorization
Act of 2015 (MACRA) designed to control health care cost growth will
be achieved and sustained over the long term.2
• GAO’s extended baseline simulation uses CBO’s estimates for the
first 10 years and generally assumes current law continues into the
future. For years beyond the 10th, the simulation assumes that
revenues and discretionary spending remain at their 10th-year levels
as shares of gross domestic product. It also uses health care
spending projections from the Center for Medicare and Medicaid
Services and Social Security spending projections from the Social
Security Trustees.
• GAO’s alternative simulation generally assumes historical and current
policy conditions will continue in the future. For example, the
simulation assumes some tax provisions do not expire as scheduled,
PPACA and MACRA provisions to control health care cost growth are
not sustained, and, in the long term, revenues and discretionary
spending return to their historical averages as shares of gross
domestic product.3
• 2019 Financial Report projections generally assume that current
policy will continue into the future. For example, individual income tax
projections accord with current policy, including the extension of some
expiring tax provisions of the law known as Tax Cuts and Jobs Act.4
Projections also assume PPACA and MACRA cost growth provisions
are sustained and remain effective.
1PPACA, Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and
Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010).
2MACRA, Pub. L. No. 114-10, title I, § 101, 129 Stat. 87, 89 (Apr. 16, 2015).
3GAO’s alternative simulation assumptions draw from the Centers for Medicare and
Medicaid Services Office of the Actuary’s 2019 illustrative alternative assumptions for
health care cost growth. These assumptions assume that Medicare cost containment
measures provided under PPACA and the physician payment rate methodology provided
under MACRA are not sustained over the long term, leading to a substantial increase in
health care costs.
4To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the
budget for fiscal year 2018, Pub. L. No. 115-97, 131 Stat. 2054 (2017).
Appendix I: Objectives, Scope, and
Methodology
Page 60 GAO-20-403SP The Nation’s Fiscal Health
For a more complete description of the assumptions and data for GAO’s
simulations, see https://www.gao.gov/assets/700/698366.pdf.5
To describe the risks to the federal government’s fiscal condition, we
drew from our audit report on the U.S. government’s consolidated
financial statements included in the 2019 Financial Report, our 2019
High-Risk List, our bodies of work in a number of areas, and relevant
laws.
To identify actions the federal government can take to achieve a more
sustainable fiscal path, we reviewed our prior work on the debt limit and
the use of fiscal rules by both the United States and other countries. We
also reviewed our prior reports on improper payments; the tax gap; tax
expenditures; our audit report on the U.S. government’s consolidated
financial statements included in the 2019 Financial Report; and our work
on duplication, overlap, and fragmentation.
We conducted our work from October 2019 to March 2020 in accordance
with all sections of GAO’s Quality Assurance Framework that are relevant
to our objectives. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objectives and to discuss any limitations in our work. We believe
that the information and data obtained, and the analysis conducted,
provide a reasonable basis for any findings and conclusions in this
product.
5A description of CBO’s methodology for its baseline projections is available in CBO, How
CBO Prepares Baseline Budget Projections (Washington, D.C.: February 2018). A
description of the assumptions and data for the 2019 Financial Report projections is
available in the 2019 Financial Report, Note 23.
Appendix II: Near-Term Opportunities to
Contribute Toward Fiscal Health from
Addressing Fragmentation, Overlap, and
Duplication
Page 61 GAO-20-403SP The Nation’s Fiscal Health
Since 2011, we have reported annually on federal programs, agencies,
offices, and initiatives that have duplicative goals or activities as well as
opportunities to achieve greater efficiency and effectiveness that result in
cost savings or enhanced revenue collection.1 We estimate tens of
billions more dollars could be saved by fully implementing our open
actions.2 See table 6 for examples of areas with open actions with
potential financial benefits of $1 billion or more.
Table 6: Examples of Areas with Open Actions with Potential Financial Benefits of $1 Billion or More
Area name and description
(year-number links to Action Tracker)
Mission Potential financial benefitsa
(source)
*Department of Energy’s Treatment of Hanford’s Low-Activity Waste
(2018-17):
The Department of Energy (DOE) may be able to reduce certain risks by
adopting alternative approaches to treating a portion of its low-activity
radioactive waste. (GAO-17-306)
Energy Tens of billions
(GAO)
*Medicaid Demonstration Waivers (2014-21):
Federal spending on Medicaid demonstrations could be reduced if the
Department of Health and Human Services were required to improve the
process for reviewing, approving, and making transparent the basis for
spending limits approved for Medicaid demonstrations. (GAO-08-87,
GAO-13-384)
Health Tens of billions
(Centers for Medicare &
Medicaid Services (CMS) and
GAO)
*Advanced Technology Vehicles Manufacturing Loan Program
(2014-13):
Unless DOE can demonstrate demand for new Advanced Technology
Vehicles Manufacturing loans and viable applications, Congress may wish to
consider rescinding all or part of the remaining credit subsidy appropriations.
(GAO-14-343SP)
Energy Up to $4.3 billion
(DOE)
*Crop Insurance (2013-19):
Congress could consider limiting the subsidy for premiums that an individual
farmer can receive each year from the Federal Crop Insurance program,
reducing the subsidy, or some combination of limiting and reducing these
subsidies and making changes to the program to reduce its delivery costs.
(GAO-17-501, GAO-12-256)
Agriculture Up to $1.4 billion annually
(GAO)
1See GAO’s Duplication and Cost Savings webpage for links to our annual reports:
https://www.gao.gov/duplication/overview.
2In calculating our total estimated realized and potential financial benefits, we relied on
individual estimates from a variety of sources, which considered different time periods and
utilized different data sources, assumptions, and methodologies. These totals represent a
rough estimate of financial benefits. Realized benefits have been rounded down to the
nearest $1 billion. Estimated potential benefits are subject to increased uncertainty,
depending on whether, how, and when they are addressed, and are presented using a
notional statement of magnitude.
Appendix II: Near-Term Opportunities to
Contribute Toward Fiscal Health from
Addressing Fragmentation, Overlap, and
Duplication
Appendix II: Near-Term Opportunities to
Contribute Toward Fiscal Health from
Addressing Fragmentation, Overlap, and
Duplication
Page 62 GAO-20-403SP The Nation’s Fiscal Health
Area name and description
(year-number links to Action Tracker)
Mission Potential financial benefitsa
(source)
Medicare Clinical Laboratory Payments (2019-25):
CMS should take steps to avoid paying more than necessary for clinical
laboratory tests. (GAO-19-67)
Health Over $1 billion, or billions
(GAO)
*Medicare Payments by Place of Service (2016-30):
Medicare could have cost savings if Congress were to equalize the rates
Medicare pays for certain health care services, which often vary depending
on where the service is performed. (GAO-16-189)
Health Billions annually
(GAO)
Department of Energy Environmental Liability (2019-20):
DOE could develop a program-wide strategy to improve decision-making on
cleaning up radioactive and hazardous waste. (GAO-19-28)
Energy Billions
(GAO)
*Internal Revenue Service Enforcement Efforts (2012-44):
Enhancing the Internal Revenue Service enforcement and service
capabilities can help reduce the tax gap between taxes owed and paid by
collecting billions in tax revenue and facilitating voluntary compliance.
(GAO-08-956, GAO-09-238, GAO-11-493, GAO-12176)
General government Billions
(GAO)
Tax Expenditures (2011-17):
Periodic reviews could help identify ineffective tax expenditures and
redundancies in related tax and spending programs, potentially reducing
revenue losses. (GAO-16-622, GAO-15-83)
General government Billions
(GAO)
Legend: * = Legislation is likely to be necessary to fully address all actions in this area.
Source: GAO. | GAO-20-403SP
Note: All estimates of potential financial benefits are dependent on various factors, such as whether
action is taken and how it is taken. Actual benefits may be less, depending on costs associated with
implementing the action, unintended consequences, and the impact of other factors that could and
should be controlled for. The individual estimates in this table should be compared with caution, as
they come from a variety of sources, which consider different time periods and utilize different data
sources, assumptions, and methodologies.
a
GAO developed the notional estimates, which are intended to provide a sense of potential magnitude
of financial benefits. Notional estimates have been developed using broad assumptions about
potential benefits which are rooted in previously identified losses, the overall size of the program,
previous experience with similar reforms, and similar rough indicators of potential benefits. GAO
generally determine the notional label (“millions” vs. “tens of millions” vs. “hundreds of millions”) using
a risk-based approach that takes into account such factors as the possible minimum and maximum
values of the financial benefits estimate (where available), the quality of the data underlying those
values, the certainty of those values, and/or the rigor of the estimation method used.
Appendix III: GAO Contacts and Staff
Acknowledgments
Page 63 GAO-20-403SP The Nation’s Fiscal Health
Susan J. Irving, (202) 512-6806, irvings@gao.gov
Robert F. Dacey, (202) 512-3406, daceyr@gao.gov
Dawn B. Simpson, (202) 512-3406, simpsondb@gao.gov
In addition to the contacts named above, Jason Vassilicos (Assistant
Director), Daniel Paulk (Analyst-in-Charge), Marybeth Acac, Michael
Bechetti, Robert Gebhart, Loren Lipsey, Meredith Moles, and Ardith
Spence made key contributions to this report. Additional assistance in
their areas of expertise was provided by Margaret Adams, Jeff Arkin,
Ellen Arnold-Losey, Kyle Browning, Ricky Cavazos, Nikki Clowers,
Michael Collins, Beryl Davis, Karin Fangman, Elizabeth Field, Maria
Hasan, James Andrew Howard, Richard Geiger, Kathryn Godfrey, Lijia
Guo, Charles Jeszeck, Tracy King, Samantha Lalisan, Janice Latimer,
Emei Li, Thomas J. McCabe, James R. McTigue, Jr., Elizabeth Mixon,
Joseph O’Neill, Alexander Ray, Oliver Richard, Marylynn Sergent, Joseph
Silvestri, Justin Snover, Janet Temko-Blinder, Joseph Thompson, Frank
Todisco, Karen Tremba, Robyn Trotter, Matthew Valenta, Patrick Ward,
Kimberly Washington, Rebecca Rust Williamson, and Charles Young.
Appendix III: GAO Contacts and Staff
Acknowledgments
GAO Contacts
Staff
Acknowledgments
(103868)
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Audit of the United States Marshals Service’s Contract Awarded to The GEO Group, Incorporated to Operate the Robert A. Deyton Detention Facility,

REDACTED FOR PUBLIC RELEASE
LIMITED OFFICIAL USE – PROPRIETARY INFORMATION
Audit of the United States Marshals Service’s
Contract Awarded to The GEO Group, Incorporated
to Operate the Robert A. Deyton Detention Facility,
Lovejoy, Georgia
AUDIT* DIVISION * *
20-085
JULY 2020
REDACTED FOR PUBLIC RELEASE
A redaction was made to the full version of this report for reasons of commercial non-promotion. The
redaction is contained in Appendix 3, The GEO Group’s Response to the Draft Audit Report, and is of the
name of a commercial company.
REDACTED FOR PUBLIC RELEASE

Executive Summary
Audit of the United States Marshals Service’s Contract Awarded to The GEO
Group, Incorporated to Operate the Robert A. Deyton Detention Facility,
Lovejoy, Georgia
Objective
The Department of Justice Office of the Inspector
General conducted an audit of the United States
Marshals Service’s (USMS) Contract Number
ODT-8-C-0005 with The GEO Group, Inc. (GEO), valued
at about $650 million, to provide detention services at
the Robert A. Deyton Detention Facility (Deyton Facility)
in Lovejoy, Georgia. The audit assessed the USMS’s
administration of the contract, and GEO’s performance
and compliance with the terms, conditions, laws, and
regulations applicable to the contract. The assessment
of contractor performance included financial
management, monitoring, reporting, and progress
toward meeting the contract goals and objectives.
Results in Brief
We found that the USMS needs to improve contract
oversight procedures, particularly regarding unmet
staffing levels, processing invoice deductions, and
contract price reduction proposals and the use of
commissary funds. As a result of these weaknesses,
the USMS paid GEO an estimated $3.1 million for staff
services not provided between January 2018 and
December 2019. We also identified weaknesses in the
USMS’s contract with GEO related to defining contract
requirements and establishing staffing requirements.
We found that GEO generally complied with the terms
and conditions of the contract applicable to contract
management, oversight, and monitoring. However,
GEO’s performance did not comply with the contract
terms and law pertaining to mandatory training for
officers transporting detainees. Additionally, we
identified an area of needed improvement related to
detainee safety in the use of bunk beds.
Recommendations
Our report contains 10 recommendations to assist the
USMS in establishing controls to prevent and detect
GEO’s non-compliance with terms and conditions of the
contract.
Audit Results
Our audit focused on Contract Number ODT-8-C-0005,
which is a firm-fixed price contract between the USMS
and GEO for about $650 million. The contract period of
performance is February 2008 to February 2028, if all
option years are exercised.
Staffing Requirements – The USMS did not hold GEO
accountable for its failure to staff facilities as required
by the contract from January 2018 to March 2019. The
contract includes a staffing plan and requires that GEO
maintain a minimum of 90 percent of the plan for
detention security services and 85 percent of the plan
for all other staff categories. The contract permits the
USMS to apply staffing-related invoice deductions. We
found that GEO did not consistently maintain the
90 percent staffing level for detention security services
during the time period of our audit, did not consistently
fill essential positions listed in the contract, and had
numerous positions that were vacant for more than the
120 days specified in the contract. Despite the facility’s
failure to meet these staffing requirements, the USMS
did not issue any invoice deductions during the period
we audited. We estimated that, for the period
January 2018 through December 2019, the USMS could
have taken invoice deductions of more than $3.1 million
for positions that were vacant for more than the
120 days specified in the contract.
Processing of Contract Price Reduction Proposals –
The USMS did not prepare contract price reduction
proposals for the GEO contract in accordance with the
process outlined in the USMS Detention Services
Contract Reduction Manual. In addition, the
Contracting Officer’s Representative did not accurately
calculate the proposed reductions. As a result, the
USMS’s processing of reduction proposals was delayed,
and as of March 24, 2020, USMS did not make decisions
on reductions proposed between May 2019 and
October 2019.
Transportation Officer Training – The USMS did not
ensure that all of GEO’s transportation officers had
completed training courses as required by federal law
for employees of private prisoner transport companies.
Consequently, transportation officers were not fully
i

Executive Summary
Audit of the United States Marshals Service’s Contract Awarded to The GEO
Group, Incorporated to Operate the Robert A. Deyton Detention Facility, Lovejoy,
Georgia
trained, increasing the risk of delays or that a major
accident or other event could occur during detainee
transportation for which the officer is not prepared.
Commissary Fund – The USMS does not have a
procedure for ensuring that substantial excess
commissary funds, as existed at the Deyton Facility, are
used solely to benefit detainees, consistent with the
terms of the contract. Based on the persistent and
significant balance in the facility’s commissary fund
during the period of our audit, we believe that GEO
should have either reduced the price that it charged
detainees for commissary items or more promptly used
the excess funds to purchase items for the benefit of
detainees. The contract also does not specify how
accumulated excess commissary funds will be disposed
at the end of the contract.
Detainee Bunk Beds – The USMS does not have a
policy or standard for the appropriate use of ladders in
facilities that contain bunk beds, and only one of the
four housing units at the Deyton Facility had ladders
installed on bunk beds at the time of our audit. We
further determined that only 2 of the USMS’s 13 private
contract facilities have ladders or steps installed for
bunk beds. As a result, there is an increased risk of
detainee injuries.
Infectious Disease Prevention and Control – At the
conclusion of our audit work, GEO had begun taking
steps in response to the coronavirus pandemic by
implementing policy guidance and changing procedures
at the Deyton Facility. Because these actions occurred
at the conclusion of our audit work, we did not perform
testing sufficient to verify implementation of either the
new policy guidance or the assertions of the Deyton
Facility Administrator regarding the pandemic
preparations and conditions at the facility. On April 29,
2020, the Office of the Inspector General initiated an
oversight review of the USMS response to the
pandemic.
ii

AUDIT OF THE UNITED STATES MARSHALS SERVICE’S
CONTRACT AWARDED TO THE GEO GROUP, INCORPORATED TO
OPERATE THE ROBERT A. DEYTON DETENTION FACILITY,
LOVEJOY, GEORGIA
TABLE OF CONTENTS
INTRODUCTION ……………………………………………………………………………… 1
Background …………………………………………………………………………… 1
United States Marshals Service ……………………………………………. 1
The GEO Group, Incorporated……………………………………………… 2
Robert A. Deyton Detention Facility ………………………………………. 2
Prior OIG Audit of USMS Oversight of a Contract Facility ……………………… 3
OIG Audit Approach …………………………………………………………………. 3
AUDIT RESULTS……………………………………………………………………………… 4
The USMS Did Not Hold the Contractor Accountable for Staffing Shortages .. 4
Processing of Contract Price Reduction Proposals ………………………………. 7
Preparation of Contract Price Reduction Proposals ……………………… 8
Accuracy of Contract Price Reduction Proposals ………………………… 9
Oversight of Commissary Fund ………………………………………………….. 11
Prisoner Transport Compliance with Applicable Regulations ………………… 13
Detainee Bunk Bed Safety Concern …………………………………………….. 14
Infectious Disease Prevention and Control …………………………………….. 16
CONCLUSION AND RECOMMENDATIONS………………………………………………. 19
APPENDIX 1: OBJECTIVES, SCOPE, AND METHODOLOGY ………………………….. 21
APPENDIX 2: THE UNITED STATES MARSHALS SERVICE RESPONSE TO
THE DRAFT AUDIT REPORT ………………………………………………………. 23
APPENDIX 3: THE GEO GROUP’S RESPONSE TO THE DRAFT AUDIT REPORT……. 27
APPENDIX 4: OFFICE OF THE INSPECTOR GENERAL ANALYSIS AND
SUMMARY OF ACTIONS NECESSARY TO CLOSE THE REPORT ………………. 30

AUDIT OF THE UNITED STATES MARSHALS SERVICE’S
CONTRACT AWARDED TO THE GEO GROUP, INCORPORATED TO
OPERATE THE ROBERT A. DEYTON DETENTION FACILITY,
LOVEJOY, GEORGIA
INTRODUCTION
The Department of Justice Office of the Inspector General (OIG) has
completed an audit of the United States Marshals Service’s (USMS) Contract
Number ODT-8-C-0005 with The GEO Group, Inc. (GEO) to provide comprehensive
detention services at the Robert A. Deyton Detention Facility (Deyton Facility) in
Lovejoy, Georgia. This fixed-price contract has a 5-year base period and three 5-
year options.1 If each of the three available 5-year options is exercised, the
contract will end February 19, 2028 and have an estimated value of $650 million.
On December 20, 2017, the USMS exercised the second option for the period of
performance from February 20, 2018 to February 19, 2023. As of April 13, 2020,
USMS payments to GEO totaled approximately $369 million or about 57 percent of
the potential contract value.
Background
United States Marshals Service
The USMS manages the housing, transportation, and care of federal
detainees. The USMS does not own or operate detention facilities but houses
prisoners in: state and local government facilities using intergovernmental
agreements (IGA); Federal Bureau of Prisons (BOP) facilities; and 13 privately
managed detention facilities, including the Deyton Facility. The Deyton Facility
contract was awarded to GEO in early 2008. The facility accommodates 768
detainees, 32 female and 736 male. The USMS contract provides for a fixed
monthly operating price for an average daily population of 614 beds or 80 percent
occupancy. The contract also provides an incremental per diem rate charge if the
number of occupied beds exceeds 614.
In fiscal year (FY) 2019, the USMS Prisoner Operations Division (POD)
managed an average daily detention population of 61,489 detainees of which over
10,000 were housed in the 13 privately managed detention facilities. According to
USMS prisoner operations data for FY 2019, the total average daily detention
population was 41,511 at state and local facilities, 9,575 at BOP facilities, and
10,403 at private detention facilities.
The POD’s mission is to preserve the integrity of the federal judicial process
by establishing national detention policy, national strategies, and programs that
1 A requirements contract provides for filling all actual purchase requirements of designated
government activities for supplies or services during a specified contract period (from one contractor),
with deliveries or performance to be scheduled by placing orders with the contractor. See FAR
Subpart 16.503, Requirements contracts.
1

provide for processing, housing, transportation, and care of federal detainees in a
safe, secure, and cost effective manner. Two POD offices play key roles in
managing detention contracts such as that with the Deyton Facility. The Office of
Detention Services staff include contracting officers who are responsible for
awarding and administering the private detention contracts. The Office of
Detention Standards and Compliance is responsible for monitoring compliance with
federal detention standards.
The Deyton Facility contract is administered by a Contracting Officer (CO)
located at USMS Headquarters within the POD. The CO directs or negotiates any
changes in contract terms and has authority to increase or decrease the contract
amount, modify or extend the period of performance, authorize payment under the
contract, and take formal action for unsatisfactory contractor performance. A
Contracting Officer’s Representative (COR) was designated to assist the CO with
technical monitoring and administration. The COR is a Detention Contract
Administrator located on-site at the facility and is responsible for the continuous,
day-to-day monitoring of the contractor.
The GEO Group, Incorporated
GEO is a Florida-based corporation that specializes in the ownership, leasing
and management of correctional, detention and re-entry facilities; and the provision
of community-based services and youth services in the United States, Australia,
South Africa, and the United Kingdom. GEO’s U.S. Secure Services oversees the
operation and management of approximately 74,500 beds in 65 secure facilities for
the USMS, the BOP, and the U.S. Immigration and Customs Enforcement (ICE), as
well as nine state correctional clients and various county and city jurisdictions. The
USMS contracts with GEO for the management of six detention facilities. According
to GEO’s 2019 annual report, USMS alone accounted for approximately
$273 million, or 11 percent, of GEO’s revenue in 2019. In 2019, GEO earned
$2.48 billion in total revenue.
Robert A. Deyton Detention Facility
The Deyton Facility is a private detention facility owned by Clayton County, a
political subdivision of the State of Georgia, and leased to The GEO Group, Inc. for
a 20-year period beginning April 23, 2007. The detainee population consists of
individuals charged with federal offenses and who are detained while awaiting
hearing, trial, or sentencing. The Deyton Facility contract is a sole-source contract
for comprehensive detention services including: receiving and discharging
detainees, facility security, transportation and outside guard services, healthcare
services, and food services. The contract allows other Department of Justice
components, such as the BOP, and non-Department entities such as ICE, to house
detainees at the facility. As of August 2019, 704 beds were assigned to the USMS
and 64 beds were assigned to ICE. According to GEO, the average length of stay
for a detainee at the Deyton Facility was 28.20 days for the period January 1, 2019,
through December 31, 2019. For USMS detainees, the average length of stay was
34.33 days and for ICE detainees, the average length of stay was 9.76 days.
2

Prior OIG Audit of USMS Oversight of a Contract Facility
In April 2017, the OIG issued an audit report on the USMS’s contract for the
operation of the Leavenworth Detention Center (Leavenworth Center) in
Leavenworth, Kansas.2 The report noted that from March 2006 through January 2017,
despite identifying failures to meet certain contract performance requirements, the
USMS had not proposed or issued any contract price reductions for any of the
15 contract detention facilities in operation at that time. The report concluded that
the USMS had failed to provide sufficient oversight at these detention facilities and
that this resulted in several significant operational issues going unaddressed for an
extended period at the Leavenworth Detention Center. Of particular concern, the
USMS COR was located offsite, had no previous contract oversight experience, and
received no formal guidance and negligible detention-related training. The COR
maintained an infrequent on-site presence at the Leavenworth Center, did not
document the inspection activities performed, and did not develop an inspection
program or monitoring procedures. In response to the OIG’s audit report, the
USMS established an on-site detention contract monitoring program at all private
detention facilities. This resulted in the creation of the Detention Contract
Administrator position.
OIG Audit Approach
The objectives of the audit were to assess the USMS’s administration of the
contract, and GEO’s compliance with the terms, conditions, laws and regulations
applicable to this contract in the areas of contractor performance, and contract
management, oversight, and monitoring. The scope of this audit, unless otherwise
indicated, is the period of contract performance from January 1, 2016, through
December 31, 2019.
To determine whether the USMS adhered to federal regulations during the
administration processes, we reviewed the Federal Acquisition Regulation (FAR) to
identify compliance requirements that were relevant to the audit objectives. We
reviewed the USMS’s procurement files and monitoring reports to determine
whether the USMS’s process for contract oversight met the requirements of the
FAR. We also conducted interviews with key contract personnel from the USMS to
understand the USMS’s contract award and administration processes. To determine
if the USMS and GEO followed staffing requirements, we: evaluated GEO’s
budgeted and actual staffing figures, shift rosters, and the USMS’s contract staffing
provisions; and interviewed facility staff to gain an understanding of the facility’s
staffing levels and conditions.
2 U.S. Department of Justice Office of the Inspector General, Audit of the United States
Marshals Service Contract No. DJJODT7C0002 with CoreCivic, Inc., to Operate the
Leavenworth Detention Center Leavenworth, Kansas, Audit Report 17-22 (April 2017),
(accessed April 1, 2020).
3

AUDIT RESULTS
We found that the USMS needs to improve its contract oversight procedures,
particularly regarding unmet staffing levels, processing contract price reduction
proposals, and the use of commissary funds. As a result of these weaknesses, the
USMS paid GEO what we estimate to be more than $3.1 million for staff services
not provided between January 2018 and December 2019. We also identified
weaknesses in the USMS’s contract with GEO related to the definition of contract
requirements and the establishment of staffing requirements. With regard to
contract management, oversight, and monitoring, GEO generally complied with the
terms and conditions of the contract. However, GEO did not comply with contract
terms and law pertaining to the training of officers transporting detainees.
Additionally, we identified a potential area of improvement related to detainee
safety in the use of bunk beds.
The USMS Did Not Hold the Contractor Accountable for Staffing Shortages
The contract requires that throughout its term GEO maintain the number,
type, and distribution of staff as described in the contract staffing plan. Inadequate
staffing increases risks to inmate safety and facility security. We found that the
USMS did not hold GEO accountable for unmet staffing levels required by the
contract and for vacancies from January 2018 to March 2019. The contract
specifies that staffing levels at the facility shall not fall below a monthly average of
90 percent of full staffing for Detention Security Services, 85 percent for Medical
Services, and 85 percent for all other departments. However, the contract does not
state whether or how a deduction should be calculated when staffing falls below the
required minimum, and we found that the USMS did not seek deductions even
though Detection Security Services fell below the 90 percent staffing level on
multiple occasions during the period covered by our audit. The contract, on the
other hand, does provide that the “failure to fill any individual position within
120 days of the vacancy may result in a deduction from the monthly invoice.”
Despite this provision, we found that the USMS did not issue any invoice deductions
during the period we audited, even though GEO failed to timely fill vacancies. We
determined that, for the period January 2018 through December 2019, the USMS
could have taken invoice deductions of an estimated $3,113,091 for positions that
were vacant for more than 120 days.
As shown below in Figure 1, GEO did not consistently maintain staffing levels
at or above the required 90 percent monthly average for Detention Security
Services from January 2018 to December 2019. We found that GEO did
consistently maintain the required staffing levels for Medical Services and all other
departments.
4


  • Figure 1
    Detention Security Services Monthly Average Staffing
    r– <::……r””
    -………,~ _ _, –
    50%
    55%
    60%
    65%
    70%
    75%
    80%
    85%
    90%
    95%
    100%
    Actual Required
    Jan-18
    Feb-18
    Mar-18
    Apr-18
    May-18
    Jun-18
    Jul-18
    Aug-18
    Sep-18
    Oct-18
    Nov-18
    Dec-18
    Jan-19
    Feb-19
    Mar-19
    Apr-19
    May-19
    Jun-19
    Jul-19
    Aug-19
    Sep-19
    Oct-19
    Nov-19
    Dec-19
    Note: We began the vertical axis at 50 percent rather than 0 to better illustrate the
    variance between the actual and required staffing level percentages.
    Source: OIG Analysis of the Monthly Staffing Reports for the period from January 2018
    through December 2019.
    In addition to not consistently maintaining the required minimum staffing,
    from January 2018 through December 2019, GEO had 90 positions that were
    vacant for more than 120 days, which accounted for what we estimate to be
    $3,113,091 in possible invoice deductions.3 However, the USMS took no deductions
    from GEO’s monthly invoices for its failure to comply with the staffing requirements.
    Although GEO had not consistently met the monthly staffing requirements at
    the Deyton Facility during January 2018 through March 2019, the language of the
    contract does not explicitly state how the USMS should take deductions from
    invoice payments based on the staffing deficiencies. To assess the extent of this
    problem with other USMS detention contracts, we discussed such contract
    requirements with USMS officials and reviewed documents pertaining to more
    recent detention contracts. We determined that the USMS had made efforts in
    more recent contracts to strengthen the language pertaining to penalties for
    staffing deficiencies. For two recent contracts, the strengthened language was
    included in contracts awarded to GEO. However, after GEO expressed concerns
    regarding the language, the contracts were modified to remove the language.
    We discussed the contract staffing requirements concerns with a senior POD
    official. The senior POD official told us the determination of appropriate contract
    language was tied to a concern regarding automatic invoice deductions. The USMS
    3 To calculate the invoice deduction amount we reviewed all monthly staffing reports, from
    January 2018 to December 2019, and identified the individual positions that were vacant for more
    than 120 days. We then multiplied the total length of vacancy by the lowest applicable pay rate for
    each position that was vacant for more than 120 days and totaled those results.
    5

official’s position was that such deductions were necessary only when the noncompliance contributed to a performance deficiency at a facility, such as when
essential positions are not being filled.
The contract staffing plan for the Deyton Facility identifies 106 essential
positions that must be consistently filled each day. Examples of essential positions
include facility manager, case managers, and correctional officers. We selected a
judgmental sample of 147 of the 2,190 security shift rosters at the Deyton Facility
from January 2018 through December 2019 to determine if the essential positions
identified in the staffing plan were filled. The sample was selected to represent the
various shifts and encompass the entire audit period. We found that GEO did not
consistently staff the essential security positions identified in the staffing plan. We
discussed the contract staffing concerns with GEO officials. GEO officials told us
that while it sought to achieve the minimum staffing levels for security, it used
overtime to ensure that essential security posts or locations were covered.
Although the contract provided for the USMS to take price reductions when
essential security positions were not consistently filled, the USMS had completed no
price reductions for the Deyton Facility. While neither the previous nor current
CORs identified for us any specific security incidents at the facility that resulted
from this failure to consistently staff the essential security positions, we note that
inadequate staffing of these essential security positions increases risks to inmate
safety and facility security. We believe it is precisely because of these risks that
the USMS deems these positions to be essential and why the USMS requires that
they be filled. Figure 2 shows a comparison of the required essential security
positions and the actual essential security positions that were staffed for the shift
rosters reviewed from 2018 to 2019.
6

Figure 2
Essential Security Positions Staffed at the Deyton Facility
65
70
75
80
85
90
Number of Positions
60
55
50
1/6/2018
2/6/2018
3/6/2018
4/6/2018
5/6/2018
6/6/2018
7/6/2018
8/6/2018
9/6/2018
10/6/2018
11/6/2018
12/6/2018
1/6/2019
2/6/2019
3/6/2019
4/6/2019
5/6/2019
6/6/2019
7/6/2019
8/6/2019
9/6/2019
10/6/2019
11/6/2019
12/6/2019
Actual Required
Note: We began the vertical axis at 50 positions rather than 0 to better illustrate the variance
between the actual and required positions. This analysis is based on a sample of 147 shift rosters
from January 2018 through December 2019. Shift rosters are documents prepared by GEO to
document the number of employees working on each shift.
Source: OIG Analysis of Security Shift Rosters for the period from January 2018 through
December 2019.
We found that the essential security positions shown in Figure 2 more
consistently tended to be staffed fully when the total facility staffing shown in
Figure 1 approached the required level. Adequate staffing levels are fundamental
to providing a safe and secure environment. The contract also requires that
vacancies be kept to a minimum and be filled timely. We believe that absent
specific contract requirements regarding when invoice deductions should be taken
for non-compliance, GEO may lack incentive to make timely efforts to fill positions.
We recommend that USMS modify the GEO and other detention contracts to specify
when invoice deductions should be taken for not achieving the staffing-related
contract requirements.
Processing of Contract Price Reduction Proposals
While the Deyton Facility contract does not specifically provide for unilateral
price deductions based on unmet staffing requirements, it provides for contract
price reductions based on failure to meet certain performance requirements through
the use of contract modifications. The OIG’s audit of a similar USMS contract for a
detention center in Leavenworth, Kansas found that USMS did not make use of
contract price reductions to hold its contractors accountable. The prior audit
attributed this condition to a lack of continuous USMS monitoring of contract
performance and the COR’s lack of knowledge regarding the USMS Detention
Services Contract Reduction Manual (the Manual). Following the Leavenworth
7

audit, the USMS created the Detention Contract Administrator position at all of its
contract detention facilities to serve as an on-site Contracting Officer’s
Representative (COR).4 Having an on-site COR is intended to provide a consistent
presence and continuous monitoring of contractor performance. The COR is
responsible for preparing contract price reduction proposals in accordance with the
Manual. The Manual provides procedures for determining when a price reduction is
warranted and for preparing reduction proposals.
During the period of our audit, the Deyton Facility COR submitted two
reduction proposals for performance and safety issues related to the facility
correctional staff. We reviewed the preparation and processing of reduction
proposals. As discussed below, the two reduction proposals were not prepared in
accordance with the process outlined in the Manual. In addition, the COR did not
accurately calculate the proposed reductions. Consequently, the processing was
delayed for the two reduction proposals, and decision on the proposals had not
been made as of March 24, 2020.
Preparation of Contract Price Reduction Proposals
The Manual provides guidance for identifying contractor performance issues.
The COR is responsible for identifying contractor performance issues and
immediately notifying the Contracting Officer (CO) of any performance deficiency.
The CO uses the COR’s description of the performance issue to determine if a
contract price reduction is warranted. If the CO determines a reduction in contract
price is warranted, the COR is responsible for preparing a proposal for the reduction
based on the methodology described in the Manual. The COR then submits the
reduction proposal to the CO for final review and processing.
The Deyton Facility COR prepared and provided price reduction proposals to
the supervisor in the POD Office of Detention and Standards Compliance (ODSC)
before informing the CO of the performance issue or obtaining a determination that
the contract price reductions were warranted. CORs were instructed by senior
ODSC officials that, if the COR thought a contract price reduction was warranted,
the COR should prepare a price reduction proposal and provide it to their ODSC
supervisor for review and processing. As a result, the intended coordination with
the CO as specified in the Manual did not occur. Consequently, as explained below,
the processing of the reduction proposals was delayed because the supervisory
review and processing had to be duplicated by the CO.
The ODSC senior official explained to us that the intent behind processing the
reduction proposal in this manner is to ensure that the support for the proposed
reduction is sufficient. However, this procedure resulted in as much as 12
additional months ODSC spent in processing price reduction proposals. The delay
was caused by the lack of preliminary communication between the COR and the CO
regarding the performance issues, which necessitated additional time for the CO to
determine if a reduction was warranted. Both the COR and CO told us that the lack
4 Throughout the remainder of this discussion, we refer to the Detention Contract
Administrator as the COR.
8

of communication resulted from the USMS organizational structure. The
organizational structure placed the COR within the ODSC. The COR was required to
report issues to the ODSC supervisor instead of the CO, who works in the POD
Office of Detention Services. However, the COR designation letter obligates the
COR to notify the CO immediately of performance issues so that corrective action
can be taken immediately.5 Without effective communication between the COR and
CO regarding performance issues, the CO cannot take timely corrective action on
unsatisfactory performance.
We discussed the communication issues between the CO and COR with a
senior POD official who told us that POD management was aware of the problem
and that POD is considering making changes in how the CO and COR relationship
should function. The senior POD official also told us that POD is in the process of
hiring additional COs to help with the workload and improve the communication.
We recommend that USMS develop and implement a process by which the COR
immediately notifies the CO of any performance failure and, when the CO
determines a reduction in contract price is warranted, the COR prepares a reduction
proposal based on the CO’s determination in accordance with the Manual.
Accuracy of Contract Price Reduction Proposals
We determined that the COR did not calculate the reduction amounts in
accordance with the Manual. We also found that the COR was not trained on the
requirements for preparing contract price reduction proposals in accordance with
the Manual. As a result, the reduction amounts proposed in contract price
reduction proposals were inaccurate and overstated, resulting in a further delay in
the processing of the reduction proposals by the CO.
The Manual provides guidance for making appropriate adjustments to the
contractor’s billings. The contract establishes the following performance areas and
specifies the percentage of the total monthly invoice amount each area represents.
• Health Care – 20 Percent
• Security and Control – 20 Percent
• Food Service – 15 Percent
• Administration and Management – 10 Percent
• Safety and Sanitation – 10 Percent
• Staff and Detainee Communication – 5 Percent
• Workforce Integrity – 2.5 Percent
• Detainee Discrimination – 2.5 Percent
5 The designation letter, issued by the USMS contracting officer in accordance with the FAR,
assigns COR responsibilities and authorizes and requires the performance of duties associated with
contract administration and monitoring contractor performance. The USMS Detention Services
Contract Reduction Manual provides guidance to CORs and other USMS officials in carrying out
responsibilities related to contract reductions.
9
10
For each area, the contract establishes specific performance-based detention
standards that must be met to ensure detainees are housed in a safe, secure, and
humane environment. Within each performance area, the standards represent a
portion of the total value of the performance area. Failure to comply with a
performance area standard is considered a deficiency in the operation of a
correctional facility.
The Manual includes a method for calculating the reduction amount for a
failed performance area standard. Based on discussions with an ODSC senior
official, we understand that the intent of the methodology was to first equally
distribute the assigned performance area value among the standards within that
area. The standard value is then multiplied by the number of standards that were
not met during the month. The resulting percentage is then used to calculate the
reduction from the monthly invoice amount as shown in the following formula.
At times, a single performance area standard may be failed for multiple
reasons. Based on our interpretation of the Manual, when that occurs during a
single invoice period, a reduction can be taken only once for any standard even if
multiple failures for that standard occur. While we confirmed our interpretation of
the Manual with the Chief of the Office of Detention Standards and Compliance, the
Manual does not clearly present these instructions. As a result, the COR did not
calculate the reduction amounts correctly. For example, for one reduction proposal
we reviewed, the COR calculated the reduction amount based on five identified
deficiencies instead of the two failed standards related to those deficiencies.
Consequently, the proposed reduction amount was overstated. We believe this
error occurred because the Manual does not provide clear instruction regarding
reduction calculations.6
To assess the extent of this problem, we reviewed 11 reduction proposals
from several USMS contract facilities that had been submitted but were still in
processing as of January 8, 2020. The 11 proposals included 2 reduction proposals
for the Deyton Facility prepared by 1 COR and 9 reduction proposals pertaining to
other USMS detention contracts prepared by 6 other CORs. The 11 proposals were
prepared from May 2019 to October 2019. We found that for 10 of the 11
reduction proposals, the reduction amounts as calculated by the COR were
overstated. Table 1 shows a comparison of the COR-calculated reduction amounts
and reduction amounts that we re-calculated based on our understanding of the
Performance Area Percentage

Standards within the Performance Area X # Failed Standards X Invoice Amount

6 For example, the Manual states that reduction calculations are to be made only on single
base functional area findings that are relative to the performance failures. However, the Manual does
not define functional area findings or performance failures. Consequently, performance failures were
sometimes considered as functional area findings that were duplicated in the calculations of
reductions.

Manual, which, as noted above, we confirmed with the Chief of the Office of
Detention Standards and Compliance.
Table 1
Comparison of the Reduction Amounts
Contract Number Location Original
Amount
Corrected
Amount
Overstated
Amount
ODT-8-C-0005 Robert A. Deyton Detention Facility $ 666,083 $ 121,688 $ 544,395
ODT-8-C-0005 Robert A. Deyton Detention Facility 840,260 177,517 662,743
ODT-7-C-0002 Leavenworth Detention Center 3,898,752 148,198 3,750,554
ODT-7-C-0002 Leavenworth Detention Center 5,745,554 578,580 5,166,974
15M40019DA3500003 Queens Private Detention Facility 385,011 144,379 240,632
15M40019DA3500003 Queens Private Detention Facility 720,597 40,033 680,564
ODT-9-C-0003 Northeast Ohio Correctional Center 9,973 9,973 0
ODT-9-C-0003 Northeast Ohio Correctional Center 148,507 66,728 81,779
ODT-10-C-0001 West Tennessee Detention Facility 149,026 129,535 19,491
ODT-8-C-0001 Nevada Southern Detention Center 254,784 84,928 169,856
ODT-5-C-0003 Otay Mesa Detention Center 299,966 47,138 252,828
Total: $13,118,513 $1,548,697 $11,569,816
Source: USMS Prisoner Operations Division
We discussed the miscalculations for the Deyton Facility with the COR who
submitted the reduction proposals, the COR supervisor, and an ODSC senior official.
They all agreed that the proposed reduction amounts were not calculated in
accordance with the Manual. The COR supervisor told us that the calculation errors
were missed because the supervisor’s review focused on whether the proposal
sufficiently supported the existence of a performance issue requiring a price
reduction and did not focus on the calculation or the methodology used to
determine the reduction amount. The ODSC senior official told us that other ODSC
staff were responsible for reviewing the reduction amounts in all of the outstanding
reduction proposals to verify that the amounts were calculated in accordance with
the Manual. The ODSC senior official further told us that all of the outstanding
reduction proposals that included amounts that were not calculated in accordance
with the Manual will be corrected and resubmitted. The COR at the Deyton Facility
told us that none of the CORs received training on how to calculate the reduction
amounts associated with the performance failures identified. We recommend that
the USMS confirm that all of the outstanding proposed reduction amounts have
been corrected in accordance with the guidance in the Manual. We also recommend
that the USMS clarify the instructions in the Manual and provide training to both the
CORs and their supervisors on the procedures for calculating the reduction amounts
in accordance with the guidance in the Manual.
Oversight of Commissary Fund
There is no physical commissary at the Deyton Facility, but detainees can
order items that are delivered twice a week to their housing unit. Under this
commissary arrangement, the Deyton Facility sells detainees items such as food,
11

candy, snacks, clothing, and personal care items. The contract requires GEO to
operate the commissary as a privilege to detainees who will have the opportunity to
purchase commissary items at least weekly. Payments by detainees for items that
they purchase fund the commissary account.
According to the contract, revenues earned in excess of those needed for
commissary operations are to be used solely to benefit the detainees at the facility.
The excess revenue accumulates in the commissary fund until GEO identifies
appropriate uses of the funds for the benefit of detainees. The contract does not
specify what those appropriate uses are, but GEO’s policy states that expenditures
of commissary funds require approval by the USMS COR or CO. A POD official told
us that the COR reviews purchases by GEO using the excess revenues to confirm
that they are being used solely to benefit detainees at the facility. A GEO official
told us that the top five items purchased for the benefit of the detainees are:
recreation supplies including board games, puzzles, and basketballs; AM/FM radios;
satellite programming; awards for achievement in cleaning or recreation; and new
movie subscriptions. We reviewed a sample of the commissary account
transactions and verified that the COR reviewed the use of the commissary funds
and that the commissary funds were used for the benefit of detainees at the facility.
As of February 29, 2020, the balance in Deyton’s commissary funds was
approximately $454,075. We reviewed the account balances and level of
expenditures from January 2017 through December 2019 and found that the ending
balances were substantial each year. Table 2 presents the annual deposits and
expenditures during January 2017 through December 2019.
Table 2
Commissary Fund
Year Beginning
Balance
Deposits &
Credits Expenditures Ending
Balance
2017 $ 977,007 $ 132,069 $ 720,799 $ 388,277
2018 388,277 134,306 120,259 402,324
2019 402,324 136,132 101,511 436,945
Total $402,507 $942,569
Note: The expenditures in 2017 were significantly higher because, the USMS was reimbursed
$651,906 to correct an error related to commissary staff payroll that should have been paid
from the commissary fund. In 2018, 47 new televisions were purchased for $57,289,
including installation in housing units for the use of all detainees.
Source: GEO Monthly Inmate Welfare Bank Reconciliation
Based on the persistent and significant balance in the commissary fund, we
believe that GEO should have either reduced the price it charges detainees for
commissary items or more promptly used excess funds to purchase items for the
benefit of the detainees. We therefore recommend that the USMS evaluate how it
can best ensure that excess commissary funds are used to benefit detainees and
that the funds do not accumulate unreasonably.
12

In addition, the Deyton Facility contract does not specify how accumulated
excess commissary funds will be handled at the end of the contract. Thus, it is
unclear whether GEO could seek to retain any excess funds at the end of the
contract. Moreover, if that were the case, such a situation could incentivize GEO to
accumulate the excess commissary funds rather than spend them for the benefit of
detainees. We noted that, on March 29, 2019, the USMS awarded a contract to
GEO for a detention center in Queens, New York. That contract included the
following provision for final disposition of commissary funds at the end of the
contract period: “the accumulated excess commissary revenues will be applied to
the final contract invoice payment.” Under this arrangement, GEO will keep any
excess commissary funds at the end of the contract and reduce the amount of its
invoice to the USMS by a corresponding amount. We found this provision
concerning for three reasons. First, it allows excess commissary funds to be used
to benefit the USMS rather than inmates. Second, it potentially incentivizes the
USMS to allow excessive commissary funds to accumulate rather than ensuring that
GEO is spending them in a timely manner for the benefit of detainees. Third, the
use of excess commissary funds at the end of the contract to fund the cost of USMS
detention operations could potentially raise Anti-Deficiency Act issues. Given these
concerns, we recommend that the USMS include in all of its detention contracts a
legally-appropriate mechanism by which, upon termination of each contract, excess
commissary funds will be used in a manner that is solely for the benefit of
detainees.
Prisoner Transport Compliance with Applicable Regulations
The contract provides that GEO will provide armed guards and transportation
services as required by the USMS to transport detainees to and from the
courthouse, hospitals, medical appointments, other detention and BOP facilities,
and Justice Prisoner and Alien Transportation System sites. Federal law includes
minimum standards for the length and type of training that employees of private
prisoner transport companies must undergo before they can transport prisoners.7
Pre-service training is required by federal law in the areas of use of restraints,
searches of prisoners, use of force, cardiopulmonary resuscitation, map reading,
and defensive driving.
We reviewed transportation officer training records and found that not all of
GEO’s transportation officers had completed training programs in map reading or
defensive driving. Of the 26 officers whose records we reviewed, 19 did not have
evidence of completing map reading training and 11 did not have evidence of
completing defensive driving training. When transportation officers are not properly
trained, there is increased risk that detainee transportation could be delayed or that
an accident or other event could occur and the transportation officer would not be
prepared to handle the situation. We discussed the missing training evidence with
a GEO official who told us map reading training was not included in the training
curriculum at the Deyton Facility. A GEO official also told us that, since 2012, GEO
has used a detention and transportation management system that provides real7 42 U.S.C. § 13726b Federal Regulation of Prisoner Transport Companies, December 21,

  1. 28 CFR Part 97 Standards for Private Entities Providing Prisoner or Detainee Services.
    13

time information necessary for safe and secure operation and tracking of GEO’s
transport missions. A GEO official told us that, because of advances in technology
since 2000, it relies on the Global Positioning System (GPS) ability in each of its
fleet vehicles and the tracking capability of its transportation management system
rather than map reading skills. The GEO official did not provide us any records of
training in the use of GPS or procedures for use in the event of system outages.
We recommend that the USMS ensure that GEO has properly trained all of its
employees involved in the transportation of detainees, completes all training
required by 42 U.S.C. § 13726b and 28 CFR Part 97, and maintains complete
training records including the curriculum and student attendance records. We
further recommend that the USMS put in place adequate controls to ensure that
employees involved in detainee transportation at USMS contract detention facilities
have completed the training required by federal law.
Detainee Bunk Bed Safety Concern
We reviewed detainee grievances for the period of January 2017 through
May 2019 and interviewed detainees to identify any concerns related to safety and
security. During our detainee interviews, we were told about the absence of
ladders for bunk beds and how a detainee had fallen and been injured.
We asked the USMS about the availability of ladders for bunk beds, and the
USMS Audit Liaison told us that the USMS does not have a specific policy or
standard regarding the use of ladders for bunk beds. We also requested data from
the USMS regarding bunk-bed safety and the existence of ladders for other private
detention facilities under contract with the USMS. The USMS provided data
showing that only 2 of the 13 facilities have ladders or steps installed for the bunk
beds.
We observed the bunk beds at the Deyton Facility and found that only one of
the four housing units had ladders installed on the bunk beds. The COR told us that
detainees used makeshift ladders to climb into the top bunks. The COR provided a
photograph that showed an improvised ladder. Figure 3 shows a makeshift ladder
made from a bed sheet tied to the bunk bed along with a telephone book to create
a step.
14

Figure 3
Ladder Made by a Detainee
Source: USMS photograph taken on September 11, 2019
We asked GEO about injury data regarding the use of bunk beds, but the
GEO Health Services Administrator told us that GEO does not track injuries related
to detainees getting in and out of the top bunk beds. Consequently, we were
unable to identify the number of detainees who had been injured. Our review of
grievances at the Deyton Facility found that 15 of 610 detainee complaints filed in
2018 requested that a ladder be installed for the bunk beds to address safety
concerns. In September 2019, we discussed the safety concerns associated with
the lack of ladders with the then-Facility Administrator who agreed with our concern
and took action to resolve the problem by ordering ladders. As of May 21, 2020, a
GEO official told us that the ladder project was complete. Figure 4 shows a new
ladder installed.
15

Figure 4
New Ladder Installed
Source: USMS photograph taken on December 23, 2019
We believe that the absence of ladders for bunk beds creates safety concerns
that the USMS should assess and address. We therefore recommend that the
USMS evaluate bunk bed safety concerns at the 11 detention facilities that do not
have ladders. We also recommend that the USMS create a standard or other
requirement regarding the appropriate use of ladders in contract facilities that
contain bunk beds.
Infectious Disease Prevention and Control
Near the end of our audit the 2019-2020 coronavirus or COVID-19 pandemic
became an area of significant concern, particularly regarding prevention and control
of the pandemic in correction settings. Consequently, we questioned GEO about its
prevention and control efforts in response to the pandemic, and we noted the
following.
Section C.6.8 of the contract, regarding an Infectious Disease Prevention and
Control Program, states: “The Contractor shall have comprehensive infectious
disease prevention and control program in place in accordance with the most recent
CDC [Centers for Disease Control and Prevention] guidelines.” The contract also
states: “The infectious disease program shall be responsive to all current emerging
infectious diseases.” We requested from the USMS documents pertaining to GEO’s
infectious disease prevention and control program. The USMS provided
documentary support, which an official said was provided by the Deyton Facility
Administrator, for the items discussed below.
16

On February 14, 2020, GEO Health Service issued an Interim Reference
Sheet on 2019-Novel Coronavirus (COVID-19) providing GEO’s procedures and links
to CDC reference materials regarding intake medical screening, monitoring of
patients with exposure risk, assessment of patient’s with potential COVID-19
symptoms, isolation of at-risk patients, and infectious disease public health actions.
On February 26, 2020, GEO’s Chief Medical Officer issued to various GEO
managerial officials, including Facility Administrators, a memorandum providing
COVID-19 educational guidance consisting largely of CDC materials.
On February 28, 2020, GEO issued an updated management procedure on
infection control pertaining to COVID-19 and provided information on treatment,
infection control, housing, general prevention recommendations, housekeeping,
notification of staff, transfer and movement of detainees, investigation of contacts,
reporting of cases within GEO, staff issues such as exposure and return to work,
management of visitors, and procurement of personal protective equipment.
Also on February 28, 2020, GEO’s Chief Medical Officer issued a technical
direction memorandum to various GEO managerial officials, including Facility
Administrators. The memorandum relayed COVID-19 guidance from the CDC and
World Health Organization and relayed a GEO patient screening tool required for
use on arriving detainees. Screening consisted primarily of interviewing detainees
regarding contact with infected persons and travel to outbreak areas. Detainees
with such contact or travel were then assessed for fever and other possible
symptoms of COVID-19.
Also on February 28, 2020, GEO implemented a requirement for a COVID-19
emergency plan at each facility and provided each facility with an emergency plan
template. The facilities were given a deadline of March 6, 2020 to complete the
plans.
On February 28, 2020, GEO adopted an updated management policy
regarding COVID-19. The policy stated: “The identification, monitoring, and
treatment of COVID-19 Coronavirus signs and symptoms shall be handled in
accordance with the recommendations of the Centers for Disease Control and
Prevention.” It also referred to American Correctional Association and National
Commission on Correctional Health Care materials.
We discussed with the Deyton Facility Administrator the effect of the
pandemic at the Deyton Facility. The Administrator told us that four GEO staff
members and one detainee had been tested for COVID-19 as of April 23, 2020,
with two staff members and the detainee testing positive for the virus. In response
to the positive tests, the facility implemented a 2-week pause of detainee
movement within the facility. The only detainee movement allowed during the
pause was acceptance of new arrestees. The GEO Facility Administrator stated that
they planned to remain in contact with GEO’s human resource office and comply
with CDC guidelines prior to loosening restrictions at the facility. The Administrator
told us the facility has taken steps to protect detainees at higher risk of infection.
These steps included modification of intake procedures to include virus protocols
17

and use of medical housing for any detainees with COVID-19 related symptoms.
Further, staff screening procedures have been modified so that before entering the
facility staff must answer a questionnaire, have their temperature checked, and
sanitize their hands. The Administrator said that the facility had a stock of medical
supplies with which it could cope initially with an outbreak of the virus. The facility
also had a stock of sanitizing supplies, although the supply of disinfectant wipes
was limited. The Administrator said that the facility had increased its cleaning in all
areas and departments utilizing “clean teams.” Finally, the Administrator said that
the following modifications had been made to Deyton Facility rules:
• The intake process provides for a separate unit where arriving detainees
receive a 14-day observation before being moved to regular housing units.
• Detainees in separate units are not allowed to mix.
• Detainee social visiting is canceled.
• Attorney visits continue, but attorneys are screened via a questionnaire and
temperature check. The legal visiting room configuration is changed to
improve social distancing.
• Detainees have attended town hall meetings regarding sanitation,
coronavirus, and programming alterations.
• The facility issued social distancing recommendations.
We did not perform testing sufficient to verify either implementation of the
policy guidance issued by GEO or the assertions of the Facility Administrator
regarding the pandemic preparations and conditions at the Deyton Facility. On
March 23, 2020, the CDC issued Interim Guidance on Management of Coronavirus
Disease 2019 (COVID-19) in Correctional and Detention Facilities. Because this
guidance was issued after the conclusion of our audit work, we did not inquire of
USMS or GEO regarding the steps taken to implement the guidance.
On April 29, 2020, the Office of the Inspector General notified the USMS that
we were beginning an oversight review of the USMS response to the COVID-19
pandemic.
18

CONCLUSION AND RECOMMENDATIONS
The USMS needs to improve its administration of the contract, particularly
regarding unmet staffing levels, processing contract price reduction proposals, and
the use of commissary funds. Also, the USMS needs to clearly develop and define
contract terms particularly for pricing methodology and enhancements. We further
found that, while GEO generally complied with the terms and conditions of the
contract applicable to contract management, oversight, and monitoring, it did not
comply with the terms and conditions of the contract applicable to transportation
officer training requirements.
We recommend that USMS:

  1. Modify the GEO and other detention contracts to specify when invoice
    deductions should be taken for not achieving the staffing-related contract
    requirements.
  2. Develop and implement a process by which the COR immediately notifies the
    CO of any performance failure and, when the CO determines a reduction in
    contract price is warranted, the COR prepares a reduction proposal based on
    the CO’s determination in accordance with the Detention Services Contract
    Reduction Manual.
  3. Confirm that all of the outstanding proposed reduction amounts have been
    corrected in accordance with the guidance in the Detention Services Contract
    Reduction Manual.
  4. Clarify the instructions in the Detention Services Contract Reduction Manual
    and provide training to both the CORs and their supervisors on the
    procedures for calculating the reduction amounts in accordance with the
    guidance in the Detention Services Contract Reduction Manual.
  5. Evaluate how it can best ensure that excess commissary funds are used to
    benefit detainees and that the funds do not accumulate unreasonably.
  6. Include in all of its detention contracts a legally-appropriate mechanism by
    which, upon termination of each contract, excess commissary funds will be
    used in a manner that is solely for the benefit of detainees.
  7. Ensure that GEO has properly trained all of its employees involved in the
    transportation of detainees, completes all training required by 42 U.S.C. §
    13726b and 28 CFR Part 97, and maintains complete training records
    including the curriculum and student attendance records.
  8. Put in place adequate controls to ensure that employees involved in detainee
    transportation at USMS contract detention facilities have completed the
    training required by federal law.
  9. Evaluate bunk bed safety concerns at the 11 detention facilities that do not
    have ladders.
    19
  10. Create a standard or other requirement regarding the appropriate use of
    ladders in contract facilities that contain bunk beds.
    20

APPENDIX 1
OBJECTIVES, SCOPE, AND METHODOLOGY
Objectives
The objectives of the audit were to assess the U.S. Marshals Service’s
(USMS) administration of the contract, and The GEO Group, Inc.’s (GEO)
compliance with the terms, conditions, laws, and regulations applicable to this
contract in the areas of contractor performance, and financial management,
monitoring, and oversight.
Scope and Methodology
This was an audit of the USMS contract ODT-8-C-0005 with GEO. The scope
of this audit, unless otherwise indicated, is the period of contract performance from
January 2016 through December 2019, and included activities of both the USMS
and GEO. We interviewed USMS and GEO personnel, assessed internal control
procedures, and examined contract award and administration records.
Statement on Compliance with Generally Accepted Government Auditing Standards
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Internal Controls
In this audit, we performed testing of internal controls significant within the
context of our audit objectives. We did not evaluate the internal controls of USMS
and GEO to provide assurance on its internal control structure as a whole. USMS
and GEO’s management are responsible for the establishment and maintenance of
internal controls in accordance with OMB Circular A-123. Because we do not
express an opinion on the USMS and GEO internal control structures as a whole, we
offer this statement solely for the information and use of the USMS and GEO.
Through this testing, we did not identify any deficiencies in USMS’s or GEO’s
internal controls that are significant within the context of the audit objectives and
based upon the audit work performed that we believe would affect USMS’s or GEO’s
ability to effectively and efficiently operate, to correctly state financial and
performance information, and to ensure compliance with laws and regulations.
Compliance with Laws and Regulations
In this audit we tested, as appropriate given our audit objectives and scope,
selected transactions, records, procedures, and practices, to obtain reasonable
assurance that USMS and GEO management complied with federal laws and
21

regulations for which non-compliance, in our judgment, could have a material effect
on the results of our audit. Our audit included examining, on a test basis, USMS
and GEO compliance with the following laws and regulations that could have a
material effect on USMS or GEO operations:
• FAR Subpart 37.603, Performance Standards,
• FAR Subpart 1.602-2, Responsibilities,
• FAR Subpart 42.15, Contractor Performance Information,
• FAR Subpart 46.4, Government Contract Quality Assurance,
• FAR Subpart 52.246-4, Inspection of Services – Fixed Price, and
• 42 U.S.C. § 13726b Federal Regulation of Prisoner Transport
Companies.
This testing included interviewing USMS and GEO personnel and inspection of
training records, labor rates, and oversight procedures. As noted in the Audit
Results section of this report, we found that GEO did not comply with 42 U.S.C. §
13726b Federal Regulation of Prisoner Transport Companies.
Sample-Based Testing
To accomplish our audit objectives, we performed sample-based testing to
determine if essential security positions were consistently filled for each shift
identified in the staffing plan. In this effort, we employed a judgmental sampling
design to obtain broad exposure to numerous facets of the areas we reviewed. This
non-statistical sample design did not allow projection of the test results to the
universe from which the samples were selected.
Computer-Processed Data
During our audit, we obtained information from the Kronos timekeeping
system and the Learning Management System. We did not test the reliability of
those systems as a whole, therefore any findings identified involving information
from those systems were verified with documentation from other sources.
22
APPENDIX 2
THE UNITED STATES MARSHALS SERVICE
RESPONSE TO THE DRAFT AUDIT REPORT
U.S. Department of Justice
United States Marshals Service
Office of Professional Responsibility
Washington, DC 20530-000/
June 25, 2020
TO: Jason R. Malmstrom
Assistant Inspector General for Audit
Office of the Insp:ctor Ge;1al ( Y’
FROM:
Ac
Rona
ting
ld
Ass
Carte
ista
r
nt
(~
Director
~
SUBJECT: Audit Report: Audit of the United States Marshals Service’s
Contract Awarded to the GEO Group, Incorporated to Operate the
Robert A. Deyton Detention Facility, Lovejoy, Georgia
In response to recent correspondence from the Office of the Inspector General regarding
the subject report, attached is the United States Marshals Service’s response to the Formal Draft
Audit report.
Should you have any questions, please contact Krista Eck, External Audit Liaison, at
202-819-43 71.
Attachments
cc: Ferris Polk
Regional Audit Manager
Office of the Inspector General
Bradley Weinsheimer
Associate Deputy Attorney General
Department of Justice
David Metcalf
Counsel to the Deputy Attorney General
Department of Justice
Louise Duhamel
Acting Assistant Director, Audit Liaison Group
Internal Review and Evaluation Office
Justice Management Division
John Kilgallon
Chief of Staff
United States Marshals Service
23
States Marshals Service
Audit of the United States Marshals Service’s Contract Awarded to the GEO Group,
Incorporated to Operate the Robert A. Deyton Detention Facility, Lovejoy, Georgia
Recommendation 1: Modify the GEO and other detention contracts to specify when invoice
deductions should be taken for not achieving the staffing-related contract requirements.
USMS Response (Concur): The United States Marshals Service (USMS) will work with its
existing detention facility contractors to establish mutual agreement on changes to the existing
contract language to specify when staffing-related invoice deductions should be taken. Further,
the USMS will ensure future contract language specifies when such invoice deductions should
occur.
Recommendation 2: Develop and implement a process by which the COR immediately
notifies the CO of any performance failure, and when the CO determines a reduction in
contract price is warranted, the COR prepares a reduction proposal based on the CO’s
determination in accordance with the Detention Service Contract Reduction Manual.
USMS Response (Concur): The USMS will review and update the Standard Operating
Procedures provided to CORs to ensure the processes for communicating and responding to
performance deficiencies are clearly articulated. The USMS will conduct joint training with the
COs and CORs to further ensure all employees understand their responsibilities as they pertain to
the contract reduction process.
Recommendation 3: Confirm that all the outstanding proposed reduction amounts have
been corrected in accordance with the guidance in the Detention Services Contract
Reduction Manual.
USMS Response (Concur): The USMS will review all outstanding proposed reduction amounts
for adherence to the calculation guidance in the Detention Services Contract Reduction Manual
and make corrections as necessary.
Recommendation 4: Clarify the instructions in the Detention Services Contract Manual
and provide training to both the CORs and their supervisors on the procedures for
calculating the reduction amounts in accordance with the guidance in the Detention
Services Contract Reduction Manual.
USMS Response (Concur): The USMS will conduct training on the procedures for calculating
the reduction amount with all COs and CORs assigned to detention contracts, as well as their
immediate supervisors. Further, the USMS will review the Detention Services Contract Manual
to determine if additional clarifications or examples are necessary.
Recommendation S: Evaluate how it can best ensure that excess commissary funds are
used to benefit detainees and that the funds do not accumulate unreasonably.
USMS Response (Concur): The USMS will ensure that the detention facility contractors are
appropriately managing the Detainee Welfare and Commissary Fund. Accordingly, existing
Standard Operating Procedures for the COR will be updated to include procedures for providing
oversight of commissary fund accumulation and usage.
24
6: Include in all of its detention contracts a legally-appropriate
mechanism by which, upon termination of each contract, excess commissary funds will be
used in a manner that is solely for the benefit of detainees.
USMS Response (Concur): The USMS will work with the detention facility contractors to make
changes to the existing contract language to specifically address the disposition of the excess
commissary funds. Any changes will result in a material change to the existing contracts which
will need to be agreed to by the contractor(s). Future detention and detention services contracts
will specifically address the disposition of excess comrniss<l!Y funds.
Recommendation 7: Ensure that GEO has properly trained all of its employees involved in
the transportation of detainees, completes all training required by 42 U.S.C. § 13726b and
28 CFR Part 97, and maintains complete training records including the curriculum and
student attendance records.
USMS Response (Concur): The USMS will continue to monitor and evaluate contractor
compliance with the performance work statement, Federal Performance-Based Detention
Standards, and all applicable local, state and federal laws.
The USMS will add to its monthly vendor performance documentation submission requirement a
training roster request and lesson plan associated with the training to ensure the lessons plans and
training include the requirements contained in 42 U.S.C. § 13726b and 28 CFR Part 97. The
USMS has the right to inspect and test all services called for by the contract, to the extent
practicable at all times and places during the term of the contract. To ensure compliance is met,
the COR already observes on-site court and hospital transportation, detainee inpatient outposts at
a care facility, as well as observing onsite firearm qualification and first aid training for
transportation and correctional staff.
Recommendation 8: Put in place adequate controls to ensure that employees involved in
transportation at USMS contract detention facilities have completed the training required
by federal law.
USMS Response (Concur): The USMS will continue to monitor compliance with the
performance work statement, Federal Performance-Based Detention Standards, USMS policy,
and all applicable local, state, and federal laws. The USMS will continue to evaluate compliance
by assessing facility policy to ensure staff involved in transportation operations are receiving the
appropriate training to meet all required mandates. These reviews will be conducted by the
COR. The USMS will add to its monthly vendor performance documentation submission
requirement a training roster request and lesson plan associated with the training to ensure the
lessons plans and training include the requirements contained in 42 U.S.C. § 13726b and 28 CFR
Part 97.
Recommendation 9: Evaluate bunk bed safety concerns at the 11 detention facilities that do
not have ladders.
USMS Response (Concur): The USMS will evaluate and assess bunk bed safety concerns and
incorporate changes, as necessary, to its private detention facility contract performance work
statements as well as to the appropriate functions under the Federal Performance Based
Detention Standards.
25
10: Create a standard or other requirement regarding the appropriate
use of ladders in contract facilities that contain bunk beds.
USMS Response (Concur): The USMS will assess the layout of the detention facilities with
Which it has an existing contract to ensure compliance with ACA accreditation requirements,
detainee capacity and applicable local, state and federal safety laws. The USMS will evaluate
and assess bunk bed safety concerns and incorporate changes, as necessary, to its private
detention facility contract performance work statements as well as to the appropriate functions
under the Federal Performance Based Detention Standards. The USMS will update the Federal
Performance Based Detention Standards to reference current OSHA guidelines for ladder use
which include guidelines for ascent, descent, composition, and load bearing.
26
APPENDIX 3
THE GEO GROUP’S RESPONSE TO THE DRAFT AUDIT REPORT
18, 2020
U.S. Department of Justice
Office of the Inspector General
Atlanta Regional Audit Office
75 Ted Turner Drive, S.W ., Suite 1130
Atlanta, GA 30303
Dear Regional Officer Manager Polle
The GEO Group, Inc.®
Corporate Headquarters
4955 Technology Way
Boca RolOO, Fbrida 33431
Toi: 561 893 0101
006 301 4436
Fox: 561 999 7635
¼)Wi grog mm com
I write to provide the GEO Group, Inc. ‘s (GEO) comments to your draft report titled
“Audit of the United States Marshals Service’s Contract Awarded to the GEO
Group, Incorporated to Operate the Robert A. Deyton Detention Facility, Lovejoy,
Georgia” dated May 11, 2020. Thank you again for the opportunity to provide
comments to the draft report and providing us with an exit conference on May 13,

  1. As discussed during the telephonic exit conference, we have summarized the
    following areas where we respectfully submit comments. We also respectfully
    enclosed a red-lined version of the most recent draft report. We did this for your
    ease of reference, to quickly identify or highlight the areas where we added
    comments, and to help further explain our responses to these enumerated areas
    below, particularly “Staffing Requirements” and “Transportation Officer Training.”
    I. Staffing Requirements
    GEO acknowledges that during the time period reviewed by the Office oflnspector
    General (OIG), January 1, 2016 through December 31, 2019, there were periods that
    the “on board” staff at the Robert A. Deyton Detention Facility (RADDF) fell below
    the contractual requirement of 90%. However, at all times, all essential posts were
    staffed by existing RADDF staff through the use of oveitime and temporary staffing
    assignments. For the period of January 2018 to March 2019, the salary and benefits
    attributed to the expenditure of these staffing resources pending permenant hire of
    the”on board” staff was approximately $500,000. Thus, GEO’s inability to maintain
    the contracted staffing levels did not result in a $3.1 Million windfall. Rather, GEO
    incmred substantial ove1time costs and over 70,000 in ove1time hours as a result of
    these vacancies. Given the extra expense and potential to lead to prospective
    turnover from existing staff, GEO had every incentive to timely fill these staffing
    vacancies.
    27
    J 8, 2020
    Page 2
    II. Processing of Contract Price Reduction Proposals
    As noted in the “Processing of Contract Price Reduction Proposals” section of the
    draft report, ” … the contract does not specifically provide for unilateral price
    deductions based on unmet staffing requirements, it does provide for contract price
    reductions based upon failure to meet certain performance requirements through the
    use of contract modifications.” As discussed during the exit conference, the GEO
    Group and the United States Marshals Service (USMS) routinely engage in
    discussions regarding GEO’s support to the USMS at the RADDF. As noted above,
    despite having vacant positions, all essential posts are staffed through the use of
    overtime. We believe a process for a “unilateral price deduction” would not be an
    optimal process for an agency’s contracting officer and a government service
    provider to resolve a contract price reduction. While we fully acknowledge the
    USMS authority for a contracting officer to propose and adjudicate a price reduction,
    we respectfully suggest the OIG’s report should reflect that any proposed price
    reduction, authored by a contracting officer’s representative (COR), will be
    reviewed by a USMS contracting officer, and that the contracting officer will
    provide the govennnent-services provider an opportunity to review and provide a
    response to the proposed reduction before a final decision is made.
    III. Transportation Officer Training
    Although the facility training manager misspoke when initially asked about the
    training curriculum and student attendance records, GEO’s regional and facility
    managers confirmed that the training cun-icultun and certificates of
    completion incorporate defensive driving through classroom instruction and actual
    driving skills evaluation. Subsequent to OIG’s visit, GEO provided documents
    reflecting the inclusion of defensive driving in the overall training curriculum. In
    addition, since 2012, GEO uses a detention and transportation management
    system that provides real-time infonnation necessary for safe and secure operation
    and tracking of GEO’s transport missions. Due to advances in technology,
    GEO relies on the Global Positioning System (GPS) ability in each of its
    fleet vehicles and the tracking capability of its transportation management
    system rather than map reading ski11s. GEO provided OIG with printed –
    map copies containing “tum by tum” directions that are provided to the
    transport team with step-by-step navigation to their assigned location as well as
    for all potential routes for use in the event of system outages. In light of the
    docwnentation and responses provided regarding defensive driving, GEO
    respectfully submits that this sub-finding be withdrawn, and the sub-finding
    related to map reading be identified as an area that is largely obsolete. 2
    28
    18, 2020
    Page2
    Further, as it relates to “map reading,” GEO further submits that the up-to-date
    procedures cuITently in place far exceed the Government Guidelines of 2000.
    IV. Commissary Fund
    GEO agrees with the OIG’ s finding that a more robust contractual process should be
    created for executing existing balances of the detainee welfare fund before the
    expiration of a contract. GEO notes however, that there is no circumstance where
    any amount of detainee welfare funds are retained by GEO. At the end of a contract,
    even if the agreement between GEO and the USMS is silent, all detainee welfare
    funds are returned to the USMS.
    V. Detainee Bunk Beds
    As discussed during the exit conference, GEO, at its expense, has acted upon a local
    recommendation from the USMS’s COR, to install ladders to improve egress to the
    top of each bunk bed at the RADDF. This project commenced in late 2019, and was
    completed in May 2020 at GEO’s expense of approximately $20,000 (excluding
    labor and installation). It is also important to note that while GEO acknowledges
    that the bunk bed ladders are an improvement, there is no contractual requirement,
    USMS detention standard, or accreditation standard, that requires these ladders.
    Instead, the ladders are being installed as “above and beyond” the contract’s
    requirements or “best practice.”
    Thank you again for the opportunity to respond to your draft audit report. We respect
    and appreciate your office’s commitment to factual accuracy and careful analysis.
    Please let us know if you have any questions regarding our comments.
    Sincerely,
    DAA/r:/0– MfSD//Lc
    Daniel Ragsdale
    Executive Vice President – Contract Compliance
    The GEO Group, Inc.
    Cc: Blake Davis, SVP GEO
    Amber Martin, EVP GEO
    29

APPENDIX 4
OFFICE OF THE INSPECTOR GENERAL
ANALYSIS AND SUMMARY OF ACTIONS
NECESSARY TO CLOSE THE REPORT
The OIG provided a draft of this audit report to the U.S. Marshals Service (USMS)
and The GEO Group Inc. (GEO). The USMS’s response is incorporated in Appendix 2
and GEO’s response is included as Appendix 3 of this final report. In response to
our audit report, the USMS agreed with our recommendations, and discussed the
actions it will implement in response to our findings. As a result, the status of the
audit report is resolved. GEO did not specifically address our recommendations but
commented on several aspects of the presentation of our report. The following
provides the OIG analysis of the responses and summary of actions necessary to
close the report.
Analysis of The GEO Group Response
While GEO did not address our recommendations specifically, it responded to
our findings in the areas of staffing requirements, processing price reduction
proposals, transportation officer training, the commissary fund, and detainee bunk
beds. We discuss most of GEO’s response when discussing the related
recommendations in the following section. One area of GEO’s response that did not
relate to a recommendation concerned GEO’s discussion of staffing requirements.
Specifically, GEO acknowledged in its response that staffing levels fell below the
contractual requirement but emphasized that essential posts were staffed using
overtime and temporary staffing. As previously discussed in the report, our review
of shift rosters found that the posts were not always fully staffed with the full
complement of essential staff positions. GEO further asserted that salary and
benefit costs amounting to approximately $500,000 related to the use of overtime
and temporary staffing incentivized the timely filling of vacancies. However, as
discussed in the report, we identified 90 individual positions that were vacant for
more than 120 days and calculated an estimated $3.1 million in deductions that the
contract allowed but the USMS did not take. Any extra expenses incurred by GEO
to partially fill essential posts using overtime in lieu of employing the required
personnel are included in the risk accepted under a fixed-price contract. Our report
makes no recommendation regarding the billing deductions not taken.
Recommendations for the USMS:

  1. Modify the GEO and other detention contracts to specify when invoice
    deductions should be taken for not achieving the staffing-related
    contract requirements.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will work with its detention facility contractors to establish
    mutual agreement on changes to the existing contract language to specify
    when staffing-related invoice deductions should be taken. Further, the USMS
    30

will ensure future contract language specifies when such invoice deductions
should occur.
This recommendation can be closed when we receive documentation showing
that USMS contracts have been modified to specify when invoice deductions
should be taken for not achieving the staffing-related contract requirements.

  1. Develop and implement a process by which the COR immediately
    notifies the CO of any performance failure and, when the CO
    determines a reduction in contract price is warranted, the COR
    prepares a reduction proposal based on the CO’s determination in
    accordance with the Detention Services Contract Reduction Manual.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will review and update the Standard Operating Procedures
    provided to CORs to ensure the processes for communicating and responding
    to performance deficiencies are clearly articulated. The USMS stated that it
    will conduct joint training with the COs and CORs to further ensure all
    employees understand their responsibilities as those pertain to the contract
    reduction process.
    GEO neither agreed nor disagreed with our recommendation. In its
    response, GEO stated that a process for a unilateral price deduction would
    not be an optimal method to resolve a price reduction. GEO asserted that
    any proposed price reduction should be presented for discussion with the
    contractor prior to any final decision. The report differentiates between the
    unilateral billing deductions for non-compliance with staffing-related contract
    provisions, and price reductions processed in accordance with the USMS
    Detention Services Contract Reduction Manual, which provides for discussion
    with the contractor. Our Recommendation 1 addresses the need for specific
    contract language to identify when billing deductions should be taken.
    Recommendation 2 addresses internal USMS procedures to accomplish the
    preparation of price reductions and does not suggest that those reductions
    should be made unilaterally.
    This recommendation can be closed when we receive documentation showing
    the USMS has implemented a process by which the COR immediately notifies
    the CO of any performance failure and, when the CO determines a reduction
    in contract price is warranted, the COR prepares a reduction proposal based
    on the CO’s determination in accordance with the Detention Services
    Contract Reduction Manual.
  2. Confirm that all of the outstanding proposed reduction amounts have
    been corrected in accordance with the guidance in the Detention
    Services Contract Reduction Manual.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will review all outstanding proposed reduction amounts
    31

for adherence to the calculation guidance in the Detention Services Contract
Reduction Manual and make corrections as necessary.
This recommendation can be closed when we receive documentation showing
the outstanding proposed reduction amounts have been corrected in
accordance with the guidance in the Detention Services Contract Reduction
Manual.

  1. Clarify the instructions in the Detention Services Contract Reduction
    Manual and provide training to both the CORs and their supervisors
    on the procedures for calculating the reduction amounts in
    accordance with the guidance in the Detention Services Contract
    Reduction Manual.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will conduct training on the procedures for calculating the
    reduction amount with all COs and CORs assigned to detention contracts, as
    well as their immediate supervisors. Further, the USMS will review the
    Detention Services Contract Manual to determine if additional clarifications or
    examples are necessary.
    This recommendation can be closed when we receive documentation showing
    that the instructions in the Detention Services Contract Reduction Manual
    have been clarified and that training has been provided to both the CORs and
    their supervisors on the procedures for calculating the reduction amounts in
    accordance with the guidance in the Detention Services Contract Reduction
    Manual.
  2. Evaluate how it can best ensure that excess commissary funds are
    used to benefit detainees and that the funds do not accumulate
    unreasonably.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will ensure that the detention facility contractors are
    appropriately managing the Detainee Welfare and Commissary Fund.
    Accordingly, existing Standard Operating Procedures for the COR will be
    updated to include procedures for providing oversight of commissary fund
    accumulation and usage.
    This recommendation can be closed when we receive documentation showing
    the Standard Operating Procedures for the COR have been updated to
    include procedures for providing oversight of commissary fund accumulation
    and usage.
    32
  3. Include in all of its detention contracts a legally-appropriate
    mechanism by which, upon termination of each contract, excess
    commissary funds will be used in a manner that is solely for the
    benefit of detainees.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will work with the detention facility contractors to make
    changes to the existing contract language to specifically address the
    disposition of the excess commissary funds. Any changes will result in a
    material change to the existing contracts which will need to be agreed to by
    the contractor(s). Future detention and detention services contracts will
    specifically address the disposition of excess commissary funds.
    GEO neither agreed nor disagreed with our recommendation. In its
    response, GEO stated that it agreed that a more robust contractual process
    should specify how accumulated excess commissary funds will be handled at
    the end of the contract. GEO noted that it would not retain any of the
    commissary funds. Our finding and recommendation do not suggest that
    either GEO or the USMS have any intent to misuse the remaining
    commissary funds. Instead, our discussion addresses the risk presented by
    the lack of any provision in the contract to specify the disposition of the
    remaining commissary funds.
    This recommendation can be closed when we receive documentation showing
    detention contracts have been modified to specifically address the disposition
    of the excess commissary funds and ensure that upon termination of each
    contract, excess commissary funds will be used in a manner that is solely for
    the benefit of detainees.
  4. Ensure that GEO has properly trained all of its employees involved in
    the transportation of detainees, completes all training required by
    42 U.S.C. § 13726b and 28 CFR Part 97, and maintains complete
    training records including the curriculum and student attendance
    records.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will continue to monitor and evaluate contractor
    compliance with the performance work statement, Federal PerformanceBased Detention Standards, and all applicable local, state, and federal laws.
    The USMS also stated that it will add to its required monthly submission of
    vendor performance documentation a training roster request and lesson plan
    associated with the training to ensure the training includes the requirements
    contained in 42 U.S.C. § 13726b and 28 CFR Part 97.
    GEO neither agreed nor disagreed with our recommendation. Our draft
    report contained a statement on page 13 that: “We discussed the missing
    training evidence with a GEO official who told us map reading and defensive
    driving training were not included in the training curriculum at the Deyton
    Facility.” In its response, GEO stated that its training manager was mistaken
    33

in telling us that defensive driving was not included in the training
curriculum. GEO provided documentation that defensive driving was included
in the overall curriculum. However, GEO did not provide any documentation
of completion of the defensive driving training for the 11 transportation
officers identified in our review of training records. We edited the final report
to state that only the map reading training was omitted from the training
curriculum. Our recommendation emphasizes the need for the USMS to
ensure that employees involved in detainee transportation at USMS contract
detention facilities have completed the training required by federal law.
This recommendation can be closed when we receive documentation showing
the USMS has implemented a procedure to ensure that GEO has properly
trained all of its employees involved in the transportation of detainees,
completes all training required by 42 U.S.C. § 13726b and 28 CFR Part 97,
and maintains complete training records including the curriculum and student
attendance records.

  1. Put in place adequate controls to ensure that employees involved in
    detainee transportation at USMS contract detention facilities have
    completed the training required by federal law.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will continue to monitor compliance with the performance
    work statement, Federal Performance-Based Detention Standards, USMS
    policy, and all applicable local, state, and federal laws. The USMS stated that
    it will continue to evaluate compliance by assessing facility policy to ensure
    staff involved in transportation operations are receiving the appropriate
    training to meet all required mandates. The USMS also stated that it will add
    to its required monthly submission of vendor performance documentation a
    training roster request and lesson plan associated with the training to ensure
    the training includes the requirements contained in 42 U.S.C. § 13726b and
    28 CFR Part 97.
    This recommendation can be closed when we receive documentation showing
    the USMS has implemented adequate controls to ensure that employees
    involved in detainee transportation at USMS contract detention facilities have
    completed the training required by federal law.
  2. Evaluate bunk bed safety concerns at the 11 detention facilities that
    do not have ladders.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will evaluate and assess bunk bed safety concerns and
    incorporate changes, as necessary, to its private detention facility contract
    performance work statements as well as to the appropriate functions under
    the Federal Performance-Based Detention Standards.
    This recommendation can be closed when we receive documentation showing
    the USMS has evaluated bunk bed safety concerns and incorporated changes,
    34

as necessary, to its private detention facility contract performance work
statements.

  1. Create a standard or other requirement regarding the appropriate
    use of ladders in contract facilities that contain bunk beds.
    Resolved. The USMS agreed with our recommendation. The USMS stated in
    its response that it will assess the layout of the detention facilities with which
    it has an existing contract to ensure compliance with the American
    Correctional Association accreditation requirements, detainee capacity and
    applicable local, state and federal safety laws. The USMS stated it will
    evaluate and assess bunk-bed safety concerns and incorporate changes, as
    necessary, to its private detention facility contract performance work
    statements as well as to the appropriate functions under the Federal
    Performance-Based Detention Standards. The USMS also stated that it will
    update the Federal Performance-Based Detention Standards to reference
    current Occupational Safety and Health Administration guidelines for ladder
    use, which include guidelines for ascent, descent, composition, and load
    bearing.
    GEO neither agreed nor disagreed with our recommendation. In its
    response, GEO noted that it installed ladders to improve access to the top of
    each bunk bed at an expense of approximately $20,000. GEO stated that
    there was no contractual requirement, detention standard or accreditation
    standard that requires ladders and that ladders were “above and beyond” the
    contract’s requirements. While we recognize there is no explicit contract
    requirement for ladders, there is also no requirement for bunk beds. We
    believe that the contract requirements to eliminate safety hazards and
    ensure that detainees are housed in a safe, secure and humane manner are
    sufficient to support our recommendation for the development of a specific
    standard regarding the appropriate use of ladders for bunk beds. Notably,
    our recommendation does not relate to the Deyton Facility but addresses the
    need for the USMS to evaluate the need for ladders in other facilities.
    This recommendation can be closed when we receive documentation showing
    the USMS has evaluated bunk-bed safety concerns and incorporated changes
    regarding the appropriate use of ladders to its private detention facility
    contract performance work statements as well as to the appropriate functions
    under the Federal Performance-Based Detention Standards.
    35

July 22nd 2020 President Trump and Vice President Biden Polling

As of July 22nd, 2020, it appears as though Trump and Biden are evenly matched. Trump is winning in some places and Biden is winning in the most places. The real question lies in how this will translate into actual votes in November. This is Biden’s race to lose at this point. Some of the indicators do not look good like Pennsylvania, Michigan, Texas, and Wisconsin. Despite Trump’s massive unpopularity, he could still win the election through the electoral college. His tactics of voter repression, attacking mail in ballots, and depressing the vote are bound to work on some level.

The Evil And Wild Voter Fraud A Poem by Anon


Whose Voter Fraud is that? I think I know.
Its owner is quite happy though.
Full of joy like a vivid rainbow,
I watch him laugh. I cry hello.

He gives his Voter Fraud a shake,
And laughs until her belly aches.
The only other sound’s the break,
Of distant waves and birds awake.

The Voter Fraud is evil, wild and deep,
But he has promises to keep,
After cake and lots of sleep.
Sweet dreams come to him cheap.

He rises from his gentle bed,
With thoughts of kittens in his head,
He eats his jam with lots of bread.
Ready for the day ahead.

Convention

by Steven Magallanes

I saw the the Covid-19 commencement of my generation destroyed,
How I mourned the constitution.
Does the constitution make you shiver?
does it?

I cannot help but stop and look at Charlotte congresses.
Do congresses make you shiver?
do they?

I saw the the cunning dinner party of my generation destroyed,
How I mourned the banquet.
Does the banquet make you shiver?
does it?

All that is large is not parties,
parties, by all account is little.
Do parties make you shiver?
do they?

How happy is the safety jamboree!
Never forget the prophylactic and safe jamboree.

I cannot help but stop and look at the Florida fete.
Does the fete make you shiver?
does it?

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