GAO says states need federal help tracking stimulus dollars

States need more guidance from the federal government to properly manage stimulus funds, the Government Accountability Office reported on Thursday.

The watchdog agency recommended that the Office of Management and Budget clarify what portion of the stimulus funds could be spent helping states "ensure accountability and oversight" of the economic recovery program. Many have reduced oversight staff because of budget constraints, and they're concerned about their ability to administer billions of stimulus dollars.

"At a time when states are experiencing cutbacks, state officials expect the Recovery Act to incur new regulations, increase accounting and management workloads, change agency operating procedures, require modifications to information systems, and strain staff capacity, particularly for contract management," Acting Comptroller General Gene Dodaro told the Senate Homeland Security and Governmental Affairs Committee during a Thursday hearing.

OMB plans to release updated stimulus guidance in early May to address concerns raised by GAO and state and local governments, Vice President Joe Biden wrote in an April 23 letter to committee chairman Sen. Joseph Lieberman, I-Conn., and ranking member Sen. Susan Collins, R-Maine. That guidance will give states new flexibilities for covering administrative costs related to the Recovery Act. It also will address other concerns outlined in GAO's report, including the need for guidance on accounting for job creation under stimulus projects and a clearer delineation of the roles and responsibilities of recipients and subrecipients on data collection.

Lieberman said he is committed to giving state and local governments the flexibility to use stimulus funds to help pay for administrative and oversight costs.

State officials told GAO they're worried that they might be held accountable for funds sent directly from federal agencies to local governments, and have asked OMB to notify them when stimulus funds are made available directly to prime recipients that are not state agencies. GAO recommended that OMB do so where there is "statewide interest in this information."

Nearly half the estimated spending programs in the Recovery Act will be administered by nonfederal entities, GAO reported. The watchdog agency is tracking how 16 states and the District of Columbia are managing the stimulus money.

In a response to Dodaro's testimony, Biden said he was working closely with GAO and the committee to ensure the money was being well-spent and that state and local governments were receiving the support they needed.

OMB agreed with the "overall objectives" of GAO's recommendations to further the accountability and transparency of the Recovery Act.

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