Administration goes after noncompliant Recovery Act recipients

Recovery Act recipients that failed to submit spending reports could face stiff punishments, including the loss of stimulus funds, the Obama administration announced on Wednesday evening.

In a memorandum to agency heads, Office of Management and Budget Director Peter R. Orszag directed officials to develop a master list of all noncompliant recipients and to determine the reason they did not file reports. If recipients encountered technical challenges, then agencies are to help them file correctly in the future. But, in cases where the reason for not reporting was more nefarious, the penalty will be harsher, the memo said.

"Noncompliant recipients, including those who are persistently late or negligent in their reporting obligations, are subject to federal action, up to and including the termination of federal funding or the ability to receive federal funds in the future," Orszag wrote.

If the noncompliance appears to be fraudulent, agencies must refer the matter for criminal investigation, he added.

The administration has estimated that about 10 percent of entities that received stimulus contracts, grants or loans failed to file a spending report during the first round of submissions. An additional 15 percent of recipients were tardy, officials said.

"More than 90 percent of all Recovery Act funding recipients reported on the use of their funding," Vice President Joe Biden said in a statement. "While this level is remarkably high for a first-of-its-kind nationwide effort, missing information is unacceptable. We will work to make sure that recipients fully meet their legal obligation to report."

The Recovery Act does not impose specific penalties on entities that fail to report, although members of the House Oversight and Government Reform Committee are considering such a legislative change. But, the chief stimulus watchdog said he plans to make sure noncompliant recipients are identified on Recovery.gov.

"I intend to try and embarrass them by putting them up on my Web site when we get the list and drive accountability that way," said Earl Devaney, chairman of the Recovery Accountability and Transparency Board, during a Thursday morning panel discussion at the National Press Club hosted by Government Executive.

While the stimulus bill does not authorize sanctions for failure to meet reporting requirements, the terms and conditions of certain funding streams and contracts could allow for punishments, said Ed DeSeve, special adviser to the president for the Recovery Act.

Devaney said the noncompliant entities must note their late spending when the next batch of recipient reports is due in January. He does not anticipate creating an interim reporting period.

The addition of those late reports is likely to increase the administration's frequently debated totals of jobs saved or created by the stimulus. Recipients reported in October that they had saved or created more than 640,000 direct jobs through $160 billion in stimulus spending, but media reports have shown instances where jobs were miscounted.

The debate over the 640,000 jobs number appears to have worn on Devaney. "I wish that number would be on page 95 of our Web site," he said.

The former Interior Department inspector general said, "A lot of inaccurate data was in that first round of data and, quite frankly, mistakes were made." Among those mistakes were some reports that attributed spending to nonexistent congressional districts, creating a cause célèbre in Washington and in the media, he said.

Moving forward, the Recovery Act board plans to use a software program that will prevent recipients from typing in a congressional district that does not exist.

But, Devaney noted data always will be subject to human error and, ultimately, the reports are only as "good as people try to make them." Despite the hiccups, he expects that the level of real-time reporting and transparency developed through the Recovery Act will become a model on the government stage for years to come.