Accountability law ignored by recipients of stimulus money

By   /   July 13, 2010  /   3 Comments

By Kevin Lee

SPRINGFIELD  –  Taxpayers are left wondering how more than $1.175 billion in federal stimulus money was used because in hundreds of cases recipients ignored the law and did not report how they spent it.

“Government owes it to its citizens to share how tax dollars are spent. When it is left to journalists, grant recipients and ordinary citizens to report the truth – but not government — transparency suffers. And that is what has happened with this “stimulus” program. The burden of reporting has fallen on those receiving the money – not those giving it out,” said Michael Barnhart, president of Sunshine Review, a national organization promoting greater transparency in government.

Earlier this year, reporters for the Franklin Center for Government and Public Integrity unearthed a host of problems with how stimulus dollars were tracked. The investigation found recipients of millions in tax dollars filled out forms incorrectly – often using incorrect zip codes or congressional districts. This resulted in false information being shared with the public.

The investigation’s findings were widely reported in national media.

Citizens deserve to know how this money is spent and have been denied this right because of lax reporting rules, Barnhart said.

Federal government documents indicate that for the first quarter of 2010, there were nearly 700 instances where “prime” recipients failed to provide their stimulus funding reports by an April deadline.

In 2009, Congress passed and President Barack Obama approved of the $787 billion stimulus package in an attempt to jump-start a national economy undergoing a recession.

Under the stimulus law, formally titled the American Recovery and Reinvestment Act (ARRA), federal agencies distribute funding directly to prime recipients. In turn, prime recipients – which include state agencies, local governments, non-profits, contractors and universities – can then spend the money and/or disburse it among “sub-recipients.”

Prime recipients of the funds are bound by ARRA to disclose to federal agencies how they have spent the money.

But the law lacks teeth, according to Edward Pound, a spokesman for the Recovery Accountability and Transparency Board, which oversees the distribution and reporting of stimulus money.

“(Recipients) are required to comply with the law,” he said. “But there are no direct penalties if they don’t report. That’s why we ask reporters and the general public to use our website and check on the information.”

Barnhart said that is the heart of the problem – it should be government’s role to ensure truthful information is given out on how tax dollars are spent – not just journalists or ordinary citizens. After all, he noted government serves the people – not the other way around.

“Government has an ethical, moral and free-government responsibility to tell citizens how money is being spent. Unfortunately it doesn’t always have a legal obligation to do so. Or in this case, it would appear there isn’t a legal consequence to grant recipients not complying with the law,” he said.

The Recovery Board manages Recovery.gov, which uses reports provided by President Barack Obama’s Office of Management and Budget and federal agencies to track how stimulus funds are being distributed and used.

Sam Rosen-Amy, a fiscal policy analyst with the transparency non-profit group OMB Watch, said right now it’s up to federal agencies to determine how to deal with non-reporters.

“It definitely would be good if Congress gave a little more teeth to the Recovery Act…to spell out more exactly the steps that would lead to losing funding because you’re not reporting it.”

In May, the Obama Administration called for heads of federal departments and agencies to be more diligent in tracking stimulus funding recipients.

The memorandum from the Obama Administration says that agencies and departments should consider action towards non-reporters including “terminating awards; pursuing measures such as suspension and debarment; reclaiming funds; and considering, initiating, and implementing punitive actions.”

But Jerry Brito, a senior research fellow with the Mercatus Center at George Mason University, said the reality is documenting non-reporting takes a backseat to the disbursing of stimulus funds.

“If you believe the reason we have a stimulus is to get as much money pumped into the economy as possible as quickly as possible, then you can’t worry yourself about little things like non-reporting. And if you start dinging people and withholding money for non-reporting, then you are undermining the stimulus and the recovery,” he said.

Brito said the toothless stimulus law and the lack of willingness on the part of Congress means there isn’t much of an incentive for recipients to submit timely reports.

Andrea Mead, a spokewoman at the U.S. Department of Housing and Urban Development, said it’s unlikely her agency would consider terminating stimulus grants.

Mead said the vast majority of ARRA grantees have provided reports to HUD, and most non-reporters had questions that were addressed during follow-ups from the agency.

“For grantees, a lot of the time they’ve gotten government money before, they’ve never had to do this before,” she said. “It was burdensome for a lot of them, so a lot of (the non-reporting) was just a technical assistance piece on our part, working with our grantees to say ‘What’s the problem here?”

Brito said that the reporting process could also create problems with those unfamiliar with government documents.

“The recipients who are tasked with logging on and filling out these recipient reports, oftentimes, they are just small businesses, contractors, and they’re not very sophisticated about (filling out government forms),” he said. “You remember the Phantom Districts mini-scandal? That wasn’t nefarious at all. All that was was recipients who didn’t know what (Congressional) district they were in.”

But Barnhart said it doesn’t matter whether there were nefarious intentions. He said the bottom line is the public was given false information on how tax dollars are spent

Franklin Center reporters earlier this year uncovered that ARRA money was going to dozens of Congressional districts that actually did not exist. It also found money was tagged as going to zip codes that did not exist. This happened because wrong information was submitted by stimulus fund recipients.

Stimulus funds recipients are in the process of preparing and submitting their reports for the second quarter of 2010, which covers April through June. Pound said the Recovery Board would gather information from OMB and federal agencies, with findings posted on Recovery.gov on July 30.

2010 First Quarter Non-Reporting Analysis

The database was constructed using raw data found on Recovery.gov. For the first quarter 2010, there were 685 cases of non-reporting (some recipients did not file reports on multiple awards) totaling $1,175,385,503.39.

The following statistics have been rounded off for readability.

Top 10 non-reporting cases

Non-Reporter Fed. Agency Fund Disburser Unreported amount
Louisiana Division of Administration ED $188.7 million
Habitat for Humanity International, Inc. (Georgia) HUD $137.6 million
Mississippi Department of Education ED $117.8 million
Utah State Office of Education ED $105.5 million
Neighborhood Housing Services of South Florida, Inc. HUD $89.3 million
Utah State Office of Education ED $49.5 million
New Hampshire Department of Education ED $47.4 million
Michigan Office of Drug Control Policy DOJ $41.1 million
Lutheran Charities Association (North Dakota) RHS $31 million
Alabama Department of Transportation DOT $22.2 million

Key: ED = Department of Education; HUD = Department of Housing and Urban Development; DOJ = Department of Justice; RHS = Department of Agriculture, Rural Housing Services; DOT = Department of Transportation.

Mead with HUD said both Habitat for Humanity and the Neighborhood Housing Services of South Florida, Inc. were awarded competitive grants late into the quarter, which may have affected the timing of submitting their reports.

Some other trends:

•The Alabama Department of Transportation was the most frequent non-reporter for the April reporting period, with 15 instances totaling $39.8 million. In all instances, money had been distributed by the U.S. Department of Transportation.

• The state departments of education in Mississippi ($117.8 million), New Hampshire ($47.4 million) and Utah (two instances of non-reporting totaling $155 million) did not report their spending of stimulus funds to the U.S. Department of Education during the April 2010 reporting period.

Todd Hauber, the Associate Superintendent of Business Services with the Utah State Office of Education, said a clerical mishap with the governor’s office led to documents being submitted late.

Utah’s education office notified the U.S. Department of Education and retroactively submitted their ARRA records, but since it was after the federal deadline, the office was still listed as a “non-reporter.”

“Generally speaking the reporting requirements have been challenging,” Hauber said in an e-mail. “Not in that the accountability is not available, but that the particular format and specific data elements are not normally collected in our accounting systems.”

• Some of the nation’s more prestigious universities also failed to report their substantial stimulus awards in a timely fashion. Non-reporters of $500,000 or more are listed below:

Non-Reporter Fed. Agency Fund Disburser Unreported amount
University of Arizona NIH $14.9 million
University of New Jersey Medical School NIH $14.8 million
University of North Carolina, Chapel Hill NIH $14.5 million
University of Mississippi NIH $13.9 million
University of New Mexico Health Science Center NIH $9.5 million
Indiana University NIH $8.3 million
Iowa State University NIH $4.3 million
University of Minnesota, Twin Cities NIH $3.4 million
University of Southern California NSF $1.5 million
Colorado State University NSF $1.5 million
University of Southern California ED $1.3 million
Tuskegee University (Alabama) NIH $1.26 million
University of Southern California NSF $562,000

Key: NIH = Department of Health and Human Services, National Institutes of Health; NSF = National Science Foundation; ED = Department of Education



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