“Congress has an obligation to make sure that if taxpayer money is going to be spent, that it is done appropriately. Minimizing waste, fraud, and abuse is a nonpartisan endeavor that I am sure we can all agree with.” - Subcommittee Chairman Paul Broun (R-GA)
The House Subcommittee on Investigations and Oversight met on November 30, 2011 to receive an update on accountability, transparency, and performance issues associated with the American Recovery and Reinvestment Act (ARRA). The hearing focused on efforts by agency Inspector General Offices; the Government Accountability Office (GAO); and the Recovery, Accountability, and Transparency Board to monitor ARRA spending.
The subcommittee is chaired by Rep. Paul Broun; Rep. Paul Tonko (D-NY) is the Ranking Member. There were some differences in the tone of their opening statements, though both representatives spoke of the importance of using the ARRA funds wisely. Broun expressed concern about the Department of Energy (DOE) Loan Guarantee Program because of the rushed nature of the Solyndra and Beacon Power loans. Tonko highlighted the fact that other DOE loans may be just as risky, particularly in the nuclear sector, where taxpayers’ financial exposure “dwarfs that of the Solyndra loan.” He went on to add that “just one of these nuclear energy loans is 16 times the size of the award made to Solyndra” while urging the Department to take steps to reevaluate the size of their commitments in the loan guarantee program.
As to the effectiveness of the ARRA legislation, Tonko stated “public investment in innovative technologies and infrastructure not only creates jobs, it lays the foundation for private sector job creation. The American Recovery and Reinvestment Act made a significant difference in stopping the precipitous loss of nearly 800,000 jobs per month that occurred prior to its enactment. Without the Recovery Act, millions more Americans would be facing unemployment and we would be months further behind in the admittedly sluggish economic recovery.”
Broun, however, questioned the effectiveness of the Act in his opening statement as well as in his questions to the witnesses. He noted that “a lot of the work done on accountability has focused on being able to track where money is going and for what purpose. While this is important, evaluations of accountability should also address whether the intended goals of the Act have been met.”
Director of the Natural Resources and Environment Team, Frank Rusco testified on behalf of the GAO to summarize the status of science-related ARRA funding according to their findings as of September 30, 2011. The Department of Commerce, National Aeronautics and Space Administration (NASA), and the National Science Foundation (NSF) had each obligated nearly all of their science-related funding. DOE reported that it had obligated $34.6 billion (98%) and had spent $18.9 billion (54%); the funds for DOE went primarily to the Energy Efficiency and Conservation Block Grant Program, the Loan Guarantee Program, the Office of Environmental Management, and to the Weatherization Assistance Program.
In his testimony, Michael Wood, Executive Director of the Recovery Accountability and Transparency Board, highlighted the activities of the Recovery Board, stating that it achieves transparency of Recovery Act spending through reporting on the use of funds. The Recovery Board also conducts and coordinates oversight of Recovery Act funds to prevent and detect fraud, waste, and mismanagement of funds in an effort to drive accountability.
DOE Inspector General Gregory Friedman gave an overview of his observations of the challenges faced by DOE. He explained that “many departmental programs required extensive advance planning, organizational enhancements, additional staffing, and training at the Federal, state and local levels. A fairly consistent pattern of delays existed in the pace at which Recovery Act funds had been spent by grant and other financial assistance recipients.” He noted difficulties with the DOE’s ability to meet its Recovery Act goals which included quality problems in the work done for the Weatherization Program, Loan Guarantee Program documentation concerns, a lack of instituted policies for ARPA-E, and the need for additional safeguards implemented by the Western Area Power Administration. He also stated that “a combination of massive funding, high expectations, and inadequate infrastructure resulted, at times, in less than optimal performance.” Friedman also told the subcommittee a positive outcome of the DOE’s implementation of the funds was that the Office of Science and its laboratory system were found to have generally complied with Recovery Act requirements, expended funds in a timely manner, and employed sound project management practices.
Commerce Department Inspector General Zinser gave an overview of the implementation of ARRA funds within the Department of Commerce. He testified that since the passage of the Recovery Act, the Department has issued 15 audits and evaluations providing improvements in operational efficiency and has performed over 100 separate training and fraud prevention sessions for about 5,500 program officials and potential grant recipients. As of September 30, 2011, the Department had obligated almost all of the remaining $6.8 billion of Recovery Act funds and disbursed approximately $2.9 billion. In a July 2011 audit report the Department was found to have implemented effective internal controls over its Recovery Act recipient reporting. There were, however, contract system issues resulting in the need for grants and contracts personnel to perform many manual procedures to compensate for these inadequacies. Setting up new programs and the length of time needed to complete construction projects has resulted in some of the Department’s spending being incomplete. Despite this, “the Department’s Recovery Act-funded programs represent a promising mix of new programs and continued vital support of projects that advance the United States’ role as a world leader in science and technology.”
NSF Inspector General Allison Lerner testified that the NSF received $3 billion in ARRA funding which was delegated to three core appropriations accounts: Research and Related Activities, Education and Human Resources, and Major Research Equipment and Facilities Construction. ARRA funds were also designated to provide transparency through reporting requirements, accountability measures, and oversight and the Inspector General’s office received $2 million in ARRA funding to conduct necessary oversight. Though Lerner agreed that the ARRA “came at a time of great need in our nation and with it came great hopes for job growth and economic stability,” she noted that “the ARRA also brought with it significant transparency and accountability requirements that had never been seen before within government.” Her office worked to use the resources to develop and implement an oversight protocol “that combines proactive business-system monitoring with a more traditional audit and investigative approach,” a model, she stated, that was a valuable tool for the NSF.
The final testimony was that of Gail Robinson, Deputy Inspector General of NASA. In her testimony, she stated that NASA primarily used its Recovery Act funding to augment ongoing research and development activities in several program areas including Science (with an emphasis on Earth Science and Astrophysics), Exploration, and Aeronautics Research, as well as to restore buildings at Johnson Space Center that were damaged by Hurricane Ike in 2008. Robinson further noted that NASA had allocated the majority of the funds to ongoing rather than new projects, and that NASA “took proactive steps early in the Recovery Act process to help ensure compliance with the Act’s requirements and as a result NASA has been generally successful in ensuring that its Recovery Act funds were used in accordance with requirements and goals of the Act and OMB’s implementing guidance.”
Following the testimonies, Members had the opportunity to raise questions and concerns to the panel of witnesses. Broun opened this dialogue by asking what happens to ARRA funding in the case when a company declares bankruptcy or if the funds are not used by the OMB required deadlines. The panelists responded that they were unsure of the exact procedure that would take place in either of these cases, though the general assumption was that the funding would go back to the US Treasury. Broun also pressed Robinson regarding the jobs created by the ARRA funding that went to the James Webb Space Telescope; she responded that many of these jobs were contract rather than permanent positions. In response to Broun’s questions about FutureGen programs and tracking funding usage, Zinser stated that there are websites that demonstrate the effectiveness of NOAA environment programs and which analyze the use of ARRA funds for other programs.
Tonko asked Rusco for his reassurance that nuclear projects, which had been considered favorably in the grant process, receive the same tough scrutiny as other loan programs. Rusco and Friedman responded that the reports issued by their respective agencies were accurate with respect to the risks and lack of documentation of the nuclear programs. They agreed with the actions taken by their Departments about these findings in the reports. Lastly, Tonko questioned the reporting requirements for ARRA funding, emphasizing the need for government transparency, but questioning whether or not the reporting requirements were onerous. Rusco responded that improving guidance to agencies would help with the extensive reporting requirements. Friedman also admitted that this is a lesson learned from the stimulus funding. Lerner concurred with the view that the reporting was a burden for the recipients of the funding since recipients need to report data in many reporting systems.
Rep. Larry Bucshon (R-IN) questioned the unemployment rate before and after the passage of the Recovery Act, pointing out that currently the US unemployment rate is still high. He questioned whether the Departments that were issued funding request and actually need those funds. Friedman responded that the funds were used to make significant and necessary changes within DOE; Lerner pointed out that NSF wanted to raise the acceptance rate of funding research projects and that they were able to do so with the Recovery Act funding received. This increased the possibilities for the current science workforce as well as the next generation of scientists.
Rep. Jerry McNerney (D-CA) inquired as to whether the panel felt that the increased checks and balances that were a result of ARRA funding will help reduce fraud and waste in the future. Rusco responded that the extra oversight has uncovered fraud, waste, and abuse and that the agencies have, as a result of these findings, become more careful. This has resulted in the agencies examining and creating better processes for their own oversight for current and future projects. Wood stated that he felt that the enhanced transparency and reporting system was worth the cost. McNerney also pressed the panel regarding any employment impact from the ARRA funding, but the responses he received as to this question were statements about the difficulty of attaining such data.
Rep. Sandy Adams (R-FL) questioned the effect of the ARRA on the US unemployment rate and offered other questions as to her concerns with the bill. Rep. Randy Hultgren (D-IL) inquired whether a study had been done on the effect of ARRA funding to DOE national labs. While a study to those effects has not been performed, Hultgren and the panelists agreed that national labs did benefit from ARRA and use their funding effectively.
While there was much discussion during the hearing about government waste, fraud, and abuse of funding, the panelists did highlight that the ARRA was found to have helped discover these problems and to provide the financial means for agencies to begin correcting the issues they discovered during the investigation and oversight process.
The hearing charter and hearing webcast can be found here.