Sneak Preview: GAO Calls on Congress To Revamp ‘10-20-30’ Formula

(The following was excerpted from a recent Thompson Grants 360 article.) The Government Accountability Office (GAO) is encouraging Congress to reevaluate how agencies apply the “10-20-30” formula, should it be required under future annual appropriations laws, to ensure that that federal program allocations best meet the needs of counties nationwide struggling with poverty.

GAO studies have determined that geographic areas with poverty rates of 20% or higher can develop systemic problems that can cause poverty to become entrenched. Congress enacted the 10-20-30 formula into law as part of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5) to help break the cycle of long-term high poverty rates. The formula has been applied to appropriations for certain Rural Development programs overseen by the Department of Agriculture (USDA), and other select programs under the Department of Commerce’s Economic Development Administration (EDA), Department of the Treasury and the Environmental Protection Agency (EPA).

Federal agencies subject to the so-named 10-20-30 formula generally must allocate at least 10% of designated program funds to counties that had poverty rates of at least 20% over the past 30 years (i.e., “persistent-poverty counties”), which are predominantly rural, largely located in the South, and on average had smaller populations and more residents belonging to racial or ethnic minority groups than other counties.

However, GAO, in a recent report, found that the formula has not always increased the proportion of funding awarded to those counties. For example, EDA and Treasury’s Community Development Financial Institutions (CDFI) Fund both awarded at least 10% of designated funds to persistent-poverty counties in federal fiscal years 2017-2020, but they generally had already done so before 2017. In other words, most of their programs subject to the formula already were required to target funds to economically distressed areas.

To complicate matters, EDA and CDFI Fund officials told GAO that verifying that funding allocations met the multiple targeting standards for distressed areas added to administrative burden, explaining that managing and monitoring multiple requirements to target funds to areas with similar characteristics was inefficient and did not increase the proportion of funds awarded to persistent-poverty counties. Complying with the 10-20-30 formula involved time-consuming tasks of matching county-level data for awarded funds to lists of persistent-poverty counties, and required the development of data systems to track investments to these counties, they said.

(The full version of this story has now been made available to all for a limited time here.)

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