The Government Accountability Office today issued a report on the $787 billion stimulus bill called "RECOVERY ACT: As Initial Implementation Unfolds in States and Localities, Continued Attention to Accountability Issues Is Essential."
The GAO study asserts that officials from most of the states surveyed "expressed concerns regarding the lack of Recovery Act funding provided for accountability and oversight. Due to fiscal constraints, many states reported significant declines in the number of oversight staff — limiting their ability to ensure proper implementation and management of Recovery Act funds."
Because the economic downturn has led to "fiscal constraints, many states reported significant declines in the number of oversight staff, limiting their ability to ensure proper implementation and management of Recovery Act funds."
As but one example, Colorado’s state auditor told GAO about the difficulty the state has in conducting oversight of the stimulus finds. The Colorado legislature’s Joint Budget Committee recently cut in half field audit staff for the Colorado Department of Human Services. The Colorado Department of Health Care Policy and Financing has had three controllers in the past four years. Vacancies exist for the positions of internal auditor at the Department of Personnel & Administration, and deputy controller at the Colorado Department of Transportation.
The GAO report’s warning of a lack of oversight echoed criticisms from earlier this week, when the Office of Special Inspector General for the $700 billion Troubled Asset Relief Program Neil Barofsky presented his quarterly report to Congress.
In the report Barofsky calls on the Treasury Department to require all institutions that receive TARP funds to report how they use the money.
“With the exception of Citigroup and Bank of America, Treasury has refused to seek further details on TARP recipients’ use of funds," he writes. “Simply put, the American people have a right to know how their tax dollars are being used.”
The Treasury Department has indicated that it will not follow the Inspector General’s recommendation, he writes, "that all TARP recipients be required to do the following:
"• account for the use of TARP funds
"• set up internal controls to comply with such accounting
"• report periodically to Treasury on the results, with appropriate sworn certifications
"In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the fi nancial system, it is not unreasonable that the public be told how those funds have been used by TARP recipients."
Barofksy’s office conducted some oversight for TARP recipients, he writes, and though the data is still be analyzed, one item became clear in the process: that "Treasury’s arguments that such an accounting was impractical, impossible, or a waste of time because of the inherent fungibility of money were unfounded."
For the Treasury Department’s Capital Assistance Program — the money going to banks after the stress tests — Barofsky condemns Treasury’s plan for applicants to state only how they intend to use CAP funding, as opposed to reporting how they actually use the funds, saying "it is largely meaningless to require an applicant to report on its intended use of funds without setting up a mechanism to monitor its actual use of funds."
Barofsky also stated that aspects of President Obama’s recently announced plan for using taxpayer dollars and private investors to buy toxic (now called “legacy”) assets — the Public-Private Investment Partnership (PPIP), which could cost up to $1 trillion — are “inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.”