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OMB Issues New Stimulus Guidelines for States

By Ed O'Keefe

Updated 3:18 p.m. ET

The Obama administration announced yesterday that it will allow states to use a small fraction of the economic stimulus funding they receive for oversight or auditing purposes, a decision sought by several states facing serious financial hardship amid the economic downturn.

The Office of Management and Budget said in a memo posted yesterday afternoon that the states can use up to 0.5 percent of the total recovery funds they receive for administrative costs. The White House hopes the new guidance will make it easier and faster for states to get money for the staff and technologies needed to handle the influx of federal cash.

"A majority of Recovery Act dollars are disbursed by the States, who thus play a central role in the prudent, timely, and transparent expenditure of Recovery funds," OMB Director Peter R. Orszag wrote in the memo. The White House noted that Orszag and Vice President Biden have heard from several state officials who greater freedom to spend some of the stimulus money on administrative costs. Several good government groups credit the administration for acting quickly to address concerns expressed by state and local leaders.

The states' need for the new instructions was widely exposed in a recent GAO report that noted several state governments have cut auditing or oversight staff amid the economic downturn, even as they assume responsibility for billions of dollars in federal assistance.

In response to the states' concerns, Rep. Edolphus Towns (D-N.Y.) has proposed legislation that would provide even more federal funding to state governments and offer up the use of the GSA schedules. A spokeswoman said he is reviewing the new OMB guidance to see if it resolves the issues raised by the states.

By Ed O'Keefe  | May 13, 2009; 1:15 PM ET
Categories:  Administration, Oversight  
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