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GAO: States Struggling With Stimulus Funding

By Ed O'Keefe

Most state governments have barely touched their federal economic stimulus money and some state officials have expressed concern that they may not be able to manage the extra money and oversight, according to a report issued today by the Government Accountability Office.

GAO Acting Comptroller General Gene L. Dodaro, who appeared today along with federal, state and local officials at a Senate Homeland Security and Governmental Affairs Committee hearing on the tracking of stimulus money, told senators that the distribution of funds has been held up because most states have yet to reach agreement with the Department of Transportation on specific infrastructure projects. The watchdog agency is tracking progress in the District of Columbia and the 16 states that are set to receive more than two-thirds of economic stimulus funding.

"As of April 16, two of the 16 states had agreements covering more than 50 percent of their states’ apportioned funds, and three states did not have agreement on any projects," according to the GAO report. "While a few, including Mississippi and Iowa had already executed contracts, most of the 16 states were planning to solicit bids in April or May. Thus, states generally had not yet expended significant amounts of Recovery Act funds.”

The White House and other observers have warned that states and cities would not begin to reap potential benefits of the American Recovery and Reinvestment Act for many months. In a letter delivered today to the Senate panel, Vice President Biden painted a rosier picture, noting that more than 2,400 transportation projects have been funded in all 50 states and that more than $75 billion in stimulus funding has already been made available for various projects.

The GAO progress report comes on the heels of an Office of Management and Budget announcement that it will issue new instructions early next month on how federal and state agencies will need to update the Obama administration on stimulus funding. The guidelines will also instruct contractors and subcontractors receiving stimulus funds on how to report their compliance and performance. Such instructions to contractors are critical since lawmakers and good government groups have warned that stimulus-funded procurement spending is ripe for waste or mismanagement.

Perhaps most critically however, the guidance will also reveal the long-awaited standards for measuring job creation or job retention tied to stimulus funding. Lawmakers have already questioned OMB officials on how they plan to track stimulus-funded employment, especially since stimulus-funded projects may only create temporary employment. Federal and state officials have also been awaiting the guidance, according to the GAO report. No matter the measurement, the administration, Congress and critics will use job creation or retention as a leading indicator of the recovery act's success.

While today's letter from Biden provides little new information on stimulus oversight efforts, it's noteworthy that it comes directly from him, said Craig Jennings, a fiscal policy analyst with OMB Watch who is carefully tracking stimulus activities.

"Hands-on responsibility at this high level gives Obama’s rhetoric on transparency more substance," Jennings said.

The GAO report also noted that some state government have cut state auditing or oversight staff amid the economic downturn, limiting their ability to track stimulus funds. While OMB does allow states to use some of the funding for administrative costs, the updated guidance will also outline new ways they can use some stimulus funding for oversight and auditing.

Rep. Edolphus Towns (D-N.Y.) announced plans this week to introduce a bill that provides federal funding for state oversight efforts. Such efforts may be unnecessary once the new guidelines are released, according to OMB spokesman Thomas Gavin.

By Ed O'Keefe  | April 23, 2009; 2:00 PM ET
Categories:  Administration, Oversight  
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