Collins Center Policy Brief

Improving the Accuracy of Recovery Act Reporting

Introduction

The American Recovery and Reinvestment Act of 2009 (Recovery Act) included an extraordinary commitment to transparency and accountability. It requires the recipients and sub-recipients of federal grants, contracts and loans to provide extensive information on who receives the money, how it is used and where the work is taking place.

The Recovery Act also created the Recovery Accountability and Transparency Board and mandated that it establish a public website to make the information available to the public. The website targets multiple audiences, from knowledgeable and experienced analysts to curious citizens who want to know how stimulus money is being used in their neighborhoods.

Additionally, the Recovery Act required states to be transparent in their spending of stimulus money. Most states, including Florida, responded by creating websites to track the spending within their borders.

The findings in this poloicy brief address the federal reporting systems (not the state reporting systems) and offer ways to improve them.

Why this Matters

The level of transparency and accessibility in tracking what is commonly known as "stimulus funding" is unprecedented in its scope and its commitment to meeting the needs of multiple audiences. The federal website includes details on over 100,000 prime award recipients and an even larger number of sub-recipients and vendors. Overall, the reporting system contains more than 500,000 records.

The reporting process demands a tremendous commitment of time from organizations receiving Recovery Act funds and from federal agencies overseeing the grants, contracts and loans. The effort and the result are nothing short of remarkable, and the system and website are models for future expansion of transparency and accountability for the federal government.

The process is not, however, without flaws. In all, about 7 percent of awards have some type of error and the estimated value of those errors recorded by the federal government is more than $10 billion. To put that to scale, this is greater than the total amount of contracts, grants and loans in all but three states. It is important to note that this amount of money is not actually being misspent. However, the totals shown on the maps and reports on the Recovery.gov website are potentially overstated.

Each quarter, the Recovery.gov website publishes a "Non-Complier" Report. This report is compiled by federal agencies and identifies entities that received Recovery Act awards but did not file the required reports to the federal reporting system.

For the July through September 2010 quarter, there were 370 total awards in the Non-Complier report with a total award amount of $1.1 billion. In theory, that amount should be subtracted from the potential overstatement in the amounts shown in the reports on Recovery.gov. However, an examination of the Non-Complier report found numerous errors where it appeared that some reports were not non-compliant and other reports looked like non-compliant reports but were not listed. Without having access to the information available to the federal agencies in preparing this report, it is not possible to fully reconcile the inconsistencies. For this reason, I believe the best way to characterize the potential error in the reports on Recovery.gov is to say that the awards may be overstated by an amount somewhere between $10.5 billion and $11.6 billion, roughly 4 percent of the $276 billion in stimulus money awarded in grants, contracts and loans.

This type of error is characteristic of the structural problems imbedded in the federal grant-making and contracting process. Because this effort to track spending on such a massive scale is the first of its kind, it is important to document the extent of reporting problems and errors, and to understand their impact, so that future efforts at transparency can benefit from these lessons.

The chairman of the Recovery Board highlighted problems with the lack of standardization in award numbers and made recommendations for improvement. However, while the Recovery Board, the Governmental Accountability Office (GAO) and others have discussed some of these problems, the extent of the reporting errors has not been fully addressed. The purpose of this brief is to document the extent of reporting problems and provide recommendations so that future governmental reporting systems can build on the foundation of the Recovery Act and improve public reporting in the future.

Description of the Problem

A key identifier used in the federal reporting system is the award number. Each federal grant, contract or loan has a unique award number that is used to track the funding and related information. Unfortunately, there are inconsistencies in how the award numbers are recorded. In some cases, misplaced dashes or missing digits can cause the same award to be counted multiple times.

To illustrate, consider the following award from the Federal Emergency Management Agency (FEMA) for Assistance to Firefighters made to the Bethlehem Community Volunteer Fire Department, Inc. in Taylorsville (Alexander County), N.C.

As the example shows, this award has been reported under three different award numbers. The award number on the second row is missing a dash and the award number on the third row is missing a digit. In reality, these are the same award, but the cumulative report lists each one. Although there are procedures in the reporting system to correct this type of error, these either were not used or didn't work properly. The result is that the cumulative national file used to draw the maps, and show the totals on the Recovery.gov website, show this award three times with a total award amount of $6,025,545, or $4 million greater than the actual amount. Because these are cumulative amounts, this type of error affects the total award amount and the total expenditures. The number of jobs is not affected because job totals are not cumulative.

Reporting errors also occur when an award is reported by multiple recipients. For example, the grant award for Weatherization Assistance in Delaware has been reported by two state agencies.

As with the previous example, there are procedures to link awards when the reporting entity changes in order to avoid duplication. Either these procedures were not followed or did not work. The result is that the award totals for Delaware include this award twice.

There are many variations on these patterns. A hazardous waste cleanup award (award number 00T18401) to the CHER-AE Heights Indian Community in Trinidad, Calif., for $200,000 has been reported as both a grant and as a contract, as has a HUD award (award number 062GG002) for $269,153 to a Housing Authority in Sylacauga, Ala. These types of errors can inflate the totals on the Recovery Act maps and reports.

How Big is the Problem?

To determine the potential magnitude of reporting errors, I analyzed the cumulative national summary file of Recovery Act awards (available from the download center on the Recovery.gov website). The cumulative file should contain only two types of reports for prime award recipients: awards for the current quarter and awards for previous reporting quarters that have been reported as final or completed. For purposes of this analysis, awards from previous periods were considered final when either the Final Report field was marked "yes" or the Project Status field was marked "Completed." Awards that were not current or final were considered to be potential errors.

Using this protocol, the magnitude of potential errors based on reports through Sept. 30, 2011, is:

Because of the complexity of the reporting system and the large volume of reports, it is possible that this protocol may miss some errors. Some of the potential errors may be technical mistakes that do not inflate the totals. In most cases, the potential errors detected result in overstatement of the totals in the summary reports and maps on the Recovery.gov website. In spite of these factors, the percentages listed above give an approximation of the magnitude of the problem.

Three types of Recovery Act awards are subject to the federal reporting requirements: contracts, grants and loans. Contracts are primarily awarded by federal agencies and the reports are submitted by the contractors. Grants and loans are awarded to state agencies, local agencies or other entities and are reported by the organizations that receive the grants or loans. All awards are subject to review by the federal agency responsible for the funds.

When errors occur, award recipients can correct some of them, particularly when the error is current. Correction of past errors requires the intervention of the federal agency. While the reporting system includes procedures for correcting past errors, reporting entities and federal agencies have not been effective in identifying past mistakes and using the available reporting tools to correct past mistakes.

The following table shows the magnitude of potential error by type of award.

This analysis indicates that contracts have a substantially higher proportion of potential errors than grants or loans.

Analysis by award type, state and federal agency are shown in the appendices to this paper.

Who are the best and worst among recipients (by state) and among federal agencies?

Overall, based on the total number of awards with potential errors, recipients with the lowest percentage of potential error include those in Iowa, Indiana, New Hampshire, Michigan and Rhode Island. Florida ranks 14^th on this measure.

Recipients with the highest percentage of potential error include those in South Dakota, Pennsylvania, District of Columbia, South Carolina and Alaska.

Based on the dollar amount of awards with potential errors, recipients with the lowest percentage of potential error include those in Rhode Island, Maine, Nebraska, Wyoming and Illinois. Florida ranks 11^th in dollar value of awards with potential errors.

Recipients with the highest percentage of potential error based on award amount include those in South Dakota, Mississippi, Kentucky, Nevada and Alaska.

Among federal agencies, based on the total number of awards, the agencies with the lowest percentage of potential error include: Treasury, The Federal Communications Commission (FCC), The National Endowment for the Arts (NEA), the National Science Foundation (NSF), and Transportation.

Agencies with the highest percentage of potential error include: Defense, Justice, Homeland Security, Interior and the Veterans Administration (VA).

Based on the dollar amount of awards with potential errors, the federal agencies with the lowest percentage of potential error include the Treasury, FCC, NEA, NSF, and Labor.

Agencies with the highest percentage of potential error based on dollar amounts include: Homeland Security, Interior, Defense, State, and VA.

Recommendations:

The Recovery Act has now been in effect for two-and-a-half years. It would not be productive to expend significant resources to correct past errors. However, the accuracy of reported totals could be improved at little cost. Of greater importance is the need to use the lessons learned from the Recovery Act reporting experience to plan for future efforts to improve transparency and accountability by making government information accessible to citizens.

The following recommendations are offered to entities with responsibility for reporting and oversight.

Recovery Board

1. The Chairman of the Recovery Board has highlighted the problem created by the lack of a uniform government-wide numbering system for contracts, grants and loans. His advocacy on this issue should be commended.

It is recommended that the Board continue to advocate within the federal government for this action.

2. The accuracy of Recovery Act reports is an important matter. The Recovery Board views award recipients and federal agencies as being responsible for accuracy. As the entity that oversees the federal reporting system, the Recovery Board should impose a data cleansing protocol when compiling the cumulative reports posted on Recovery.gov.

   It is recommended that the cumulative national summary file be modified to exclude any report where:

• The year and quarter is earlier than the current quarter.
• The final report indicator is "no."
• The project status indicator is not "completed."
• A federal agency has not identified the award as a non-compliant submission on the published Non-Complier report.

Office of Management and Budget

3. The White House Office of Management and Budget (OMB) issues the regulations and instructions for compliance with the reporting requirements of the Recovery Act. OMB has responsibility for the federal agencies' oversight of contracting and grant-making and in their administration of Recovery Act reporting.

   It is recommended that OMB develop performance standards for administration of Recovery Act reporting by federal agencies and report on federal agency performance to the Vice President. Standards should include the number and value of awards with potential errors using a methodology such as the protocol described in this paper.
   

4. The Recovery Board publishes a quarterly report of "non-compliers" on the Recovery.gov website based on information provided by federal agencies. This report understates the magnitude of late or missing reports and contains errors in award numbers and other key data elements similar to the errors in the federal reporting system described in this paper.

   It is recommended that OMB actively monitor the accuracy and completeness of the information provided by federal agencies in the "non-complier" report and require federal agencies to provide accurate and complete information to the Recovery Board for this report.

Congress and Its Oversight Committees

5. Oversight entities that report to the Congress, such as the Governmental Accountability Office (GAO) and the Congressional Budget Office (CBO) have been assigned specific oversight responsibilities in the Recovery Act. GAO produced numerous reports regarding Recovery Act implementation and maintains a website for making its work available to the public.

   It is recommended that the Congress continue to provide funding and direction to the agencies under its jurisdiction to continue to monitor implementation of the Recovery Act and to use the findings from these activities in developing future reporting requirements.

6. Versions of the Digital Accountability and Transparency (DATA) Act have been filed in both the House of Representatives (HR 2146) and the Senate (S 1222). This legislation would incorporate lessons learned from the Recovery Act reporting experience into a new comprehensive federal reporting system and web portal. The legislation includes recommendations by the Recovery Board and many other organizations familiar with issues related to accountability and transparency.

   It is recommended that the Congress finalize consideration and pass this important legislation and send it to the President for signature.

Note: Staff from the Recovery Accountability and Transparency Board and the Office of Management and Budget reviewed an earlier draft of this paper and provided comments. While they do not agree with all of the conclusions and recommendations included in the issue brief, their comments were helpful in providing clarity on some of the issues addressed. Their willingness to comment is greatly appreciated.

Technical Notes and Detailed Appendices

Attached are appendices showing tables based on the state of the award recipient and based on the awarding federal agency. Tables are also shown by type of award.

The maps on Recovery.gov show awards based on the state that is the primary place of performance. Other reports use the state of the primary award recipient. The first series of tables in this report by state are based on the recipient state. The final table in the appendices (Table 10) shows the same information by the state that is the primary place of employment. This most closely corresponds to the data that is shown on the maps on the Recovery.gov website. All of the data is based on data as found in the Cumulative National Summary, Feb.17, 2009, through Sept. 30, 2011, from the Recovery.gov download center as of December 14, 2011 except for the Non-Complier report which is summarized from the Non-Complier report for Quarter 3, 2011 from the Recovery.gov web site.

The tables by federal agency are based on the same source document. However, there is no single data field for the federal agency. There are fields for funding agency, awarding agency and codes for the Treasury Account Symbol (TAS) and the Code of Federal Domestic Agency (CFDA). In some cases, the information in these fields is not consistent. This analysis is based primarily on the Awarding Agency Name and Code with some adjustment for situations where the TAS or CFDA is inconsistent with other funding or awarding agency codes.

The following tables are attached:

Definitions

• Table 1: Recovery Act Total Prime Awards by State of Recipient
• Table 2: Recovery Act Contracts by State of Recipient
• Table 3: Recovery Act Grants by State of Recipient
• Table 4: Recovery Act Loans by State of Recipient
• Table 5: Recovery Act Total Prime Awards by Awarding Federal Agency
• Table 6: Recovery Act Contracts by Awarding Federal Agency
• Table 7: Recovery Act Grants by Awarding Federal Agency
• Table 8: Recovery Act Loans by Awarding Federal Agency
• Table 9: Recovery Act Non-Complier Summary by State
• Table 10: Recovery Act Total Prime Awards by State of Primary Place of Performance