Fine print in Recovery Act gets smaller for state and local governments

A new OMB memo regarding administrative costs has been issued ahead of more substantive guidance due in June. But according to state and local officials, the price for transparency and accountability will be a complex number to figure.

The American Recovery and Reinvestment Act (ARRA) of 2009 set forth to provide monetary aid accompanied by the most transparency and accountability ever witnessed by the American public. The $787 billion package has thus far seen two rounds of guidance from the Office of Management and Budget, telling federal and state governments how to track and report stimulus projects. And a third guidance will be forthcoming this June.

However, incremental steps have trickled from the federal government between major updates to OMB’s guidance to help deal with the most urgent of emerging issues.

On May 11, OMB Director Peter Orszag issued a memorandum (.pdf) concerning an issue getting a lot of attention from local leaders and press from around the country. Administrative costs for tracking and reporting stimulus dollars from the Recovery Act were mounting, but the federal government had not yet specified how states were supposed to pay for such implementation efforts. During a Governing online forum sponsored by SAP, much of the conversation was driven by this and forthcoming OMB guidance.

“One of the big issues facing local leaders is tracking and reporting on Recovery Act funds and transparency in general,” said Scott Pattison, executive director at the National Association of State Budget Officers.

According to the May 11 memo, states are encouraged “to utilize existing flexibilities to recover administrative costs related to carrying out Recovery Act programs and activities in a more timely manner.” Specifically, the memo suggests state and local governments utilize provisions under OMB Circular A-87 where states can recoup Recovery Act administrative costs through the State-wide Cost Allocation Plan (SWCAP). The costs can be included as “centralized services” or as “billed services,” according to the memo.

“Both options provide flexibility for states to recoup the administrative costs related to Recovery Act activities and should be read through carefully,” Mr. Pattison urged.

The options will make it possible for states to get money “more quickly than would be permitted under the traditional SWCAP process…and enable States to obtain the resources necessary for enhancing their administrative capacity to meet Recovery Act responsibilities,” the memo concludes.

Also part of the forum was Laura Chick, Inspector General of Federal Recovery Act Dollars for the State of California and James Creedon, Secretary at the Department of General Services and ARRA Chief Implementation Officer for Pennsylvania. Ms. Chick said she was watching two bills at the federal level, which will provide money in not just administrative costs, but more specifically for oversight costs. “We need dollars specific for oversight to work,” she said.

Ms. Chick also spoke about the need for interdependence and cooperation when mitigating the risk of Recovery Act misuse and waste. “All of us at the state and local levels really need to join hands on this endeavor and work with OMB, GAO, federal inspectors general, US Attorneys, and district attorneys.”

In another piece of the transparency puzzle, May 17 marked the ninetieth day since the signing of the Recovery Act. This is important because ninety days after the signing of the Recovery Act federal agencies had to submit their “plan of attack” for spending stimulus dollars and those reports were made available on Recovery.gov. Twenty-eight agencies receiving Recovery funds have submitted plans to Recovery.gov, including broad goals, information on contract competition and contract types, and details on how the agency will mitigate risk associated with accountability. To see those plans, click here.

Those accountability officers and inspectors general at the front line of the Recovery Act know they sit in a position ripe to change government for the better, but they also know it will be difficult.

California Inspector General Chick said, “I see this as an enormous mandate to rev up the economy, but as a huge opportunity to show the public that we, Government, with a big ‘G’, can do things right. But I say this with my heart in my throat because I’ve been educated by experts who are telling me to count on 7 – 10 percent fraud occuring in this pot of money.”

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