From the U.S. Government Accountability Office, www.gao.gov

Transcript for: Watchdog Report #20: Update on States’ and Localities’
Uses of Recovery Act Funds

Audio interview by GAO staff with Chris Mihm, Managing Director,
Strategic Issues

Associated Report Number: GAO-10-604

Released on: May 26, 2010


[ Background Music ]

[ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and
information from the Government Accountability Office. It's May 26,
2010. GAO has released its sixth report on the use, oversight, and
impact of Recovery Act funding. A group led by Chris Mihm, Managing
Director in GAO's Strategic Issues team, conducted this latest review.
GAO analyst Jeremy Cluchey sat down with Chris to talk about what they
found.

[ Jeremy Cluchey: ] What aspects of the Recovery Act did GAO examine in
this latest review?

[ Chris Mihm: ] We, as we did in the earlier reports, continued to look
at the programs that were sending out the most money into states and
localities. Those included education programs, additional Medicaid
assistance, transportation programs, weatherization programs; and then
we also began to focus on some smaller programs such as those dealing
with public housing, capital fund, dislocated workers, a worker
investment program, some justice programs, and clean water grants.

[ Jeremy Cluchey: ] And what did GAO find with regard to how states are
using these Recovery Act funds?

[ Chris Mihm: ] There's a couple of things that are important. First is
that the funds continue to go for a variety of essential public purposes
down at the state level. There are teachers that are being employed and
retained because of education money. Houses are beginning to be
increasingly weatherized—there was some concerns in our earlier reports
that the pace of that—that's beginning to pick up a little bit this time
around. We're now seeing 12,000 or so highway projects that are out
there which is good news because that's helping the nations
infrastructure as well as providing employment. On the other hand, one
of the key purposes of the Recovery Act was to help stabilize state and
local budgets. It's having a powerful influence on that but it's not
fully addressing the problems down at the state and local level. States
are very concerned about what happens once the recovery money begins to
end, in a sense the spigot gets turned off. They're very worried about
the cliff effect that could be established. We're looking at how states
are planning for the eventual end of Recovery Act money.

[ Jeremy Cluchey: ] What methods are states using to help try to ensure
the accountability of these Recovery Act funds?

[ Chris Mihm: ] The primary thing they are doing is through the state
auditors and through revisions or a pilot test that's taking place with
a single audit process. What OMB has been working with a variety of
states to put in place a pilot where states auditors would look at
recovery, selected Recovery Act programs, and report much earlier than
they would traditionally report under a single audit after doing testing
on internal controls. The idea here is let's go in, let's look at high
risk programs, let's see if there are some problems, and, to the extent
that we have some concerns or some internal control weaknesses, let's
report those to management right away rather than wait until 9 months
after the end of the fiscal year when we do the state audits.
Preliminary indications and we need to do some more work on this, is
that this pilot is proven successful in identifying some key weaknesses
that program managers at this state level need to take action on early
rather than waiting to the end.

[ Jeremy Cluchey: ] GAO also considered allegations of Recovery Act
wrong doing, fraud, waste, and abuse submitted by the public. Can you
talk a little bit about this process?

[ Chris Mihm: ] Absolutely. On our Web site, gao.gov/recovery, we have a
link to our fraudnet page where citizens that suspect that there is
waste, fraud, abuse, or serious mismanagement on any federal program—but
this is talking particularly about Recovery Act—can report their
concerns and their allegations. We then take an initial look at those in
our fraudnet by our specialists that are really trained in this type of
work and then they make a decision, it's an initial cut as to whether or
not it's something that we should do additional work on. Most often, to
the extent that it's a serious and what we believe credible allegation,
we will refer it over to the Inspectors General in the individual agency
where that allegation would have occurred and then they follow up with
it and do additional investigation from there.

[ Jeremy Cluchey: ] What comment does GAO make in this latest report on
recipient reporting about jobs created or retained by the Recovery Act
funding?

[ Chris Mihm: ] This is now the third round that we're in, and overall
we're finding that the process is beginning in a sense to settle down
and smooth out, that is that both federal agencies and, more
importantly, recipients are getting far more comfortable, far more
understanding of the requirements and the responsibilities to report
under so we're seeing less nonreporting recipients, better data that's
in the system; notwithstanding that there are still some issues, some
significant issues, that need to be addressed in terms of
inconsistencies in the data and data quality. We have a series of
recommendations to OMB and others, and individual agencies as to how
they can continue to make improvement in the reporting process here.
It's going to remain a challenge to make sure that we get good and
complete data.

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[ Narrator: ] To learn more, visit GAO's Web site at gao.gov, and be
sure to tune in to the next edition of GAO's Watchdog Report for more
from the congressional watchdog, the Government Accountability Office.