STATES NEED FLEXIBILITY TO USE SOME STIMULUS FUNDS

At the fourth in a series of hearings on ways to prevent waste, fraud, abuse, and mismanagement of about $500 billion in spending from the $787 billion ARRA, the committee heard testimony about how state and local governments are proceeding to implement the spending bill designed to create jobs and jump start the economy.

“I am impressed with the extensive planning at all levels of government to meet the Act’s accountability and transparency provisions, and with what appears to be strong cooperation between federal, state and local partners,” Lieberman said. “But the next few months will be the real test as to whether we can ramp up spending quickly enough to jolt the economy the way we intended to. Remember, we are asking all levels of government to do more – and in record time. Therefore, I am committed to giving state and local governments flexibility to use some of the Recovery Act funds to help pay for administrative and oversight costs.”

Collins said, “State and local governments will play a critical role in distributing, spending, and measuring the impact of Recovery Act funds. GAO estimates that state and local programs will receive about $280 billion. As a result, they must prepare themselves to handle the challenge of managing and overseeing these funds—a resource-intensive undertaking. This challenge is further compounded by the fact that many state and local governments are also facing major budget shortfalls that often leave them short-staffed.”

The GAO released a report on state and local implementation that recommended federal officials provide more guidance to states to oversee the millions of dollars coming their way.

Also, Vice President Joe Biden released a letter to Lieberman and Collins praising their oversight work of stimulus spending and stating that the Office of Management and Budget (OMB) will issue updated guidance to states beginning in early May including about flexibilities for using stimulus money for administrative purposes. In addition, the Vice President noted a week- long national on-line forum will take place, beginning Monday, on the www.Recovery.gov on technology solutions to improve the monitoring of Recovery Act funds.

About $60 billion of the $500 billion in spending appropriated by the Recovery Act has been committed so far to put people to work, according to OMB, but the majority of Recovery Act money is still in the pipeline. About $300 billion of the $500 billion in spending will be under the supervision of cash-strapped state and local governments that may be forced to lay off the very personnel needed to oversee Recovery Act spending to avoid the kinds of waste, fraud, abuse or theft that could discredit the program.

Hearing witnesses – Gene L. Dodaro, Acting Comptroller General of the Government Accountability Office; Raymond C. Scheppach, Ph.D., Executive Director of the National Governors Association; Carolyn M. Coleman, Director of Federal Relations for the National League of Cities – echoed one another in voicing the concerns state officials have about the costs of overseeing the Act.

The last hearing held in the series on oversight of stimulus spending occurred in Connecticut on April 7, where Lieberman heard about state implementation challenges.