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June 06,2022

Senators ask GAO for detailed information on how $350 billion in relief funds has been used

Washington,
D.C.–Senate
Finance Committee Ranking Member Mike Crapo (R-Idaho) and Senate Homeland
Security and Government Affairs Committee Ranking Member Rob Portman (R-Ohio)
joined all Finance Committee Republicans in requesting the Government and
Accountability Office (GAO) provide a detailed accounting of the $350 billion
of COVID relief funds appropriated to governments of states, localities,
territories and tribes under the American Rescue Plan Act (ARPA).  

From
the letter to GAO:  

“Unfortunately, ARPA, unlike the Coronavirus Aid, Relief,
and Economic Security (CARES) Act, has no meaningful built-in nonpartisan
oversight mechanism that allows for necessary Congressional oversight and there
is lack of transparency on uses of the funds provided to various governments.

… 

“Because
of the lack of information and transparency on uses of and accounting for these
federal funds, we request that the Government Accountability Office (GAO) help
to ensure there is proper oversight of at least $350 billion of ARPA funding
and necessary accountability to Congress and the American people.” 

The
senators ask a series of oversight questions, including:  

• Whether Treasury is using risk assessments and
  monitoring components to ensure efficient and transparent use of taxpayer
  resources, and whether Congress and the American people can verify that
  such controls meet standards;
   
• How Treasury has tracked whether states have satisfied
  the objectionable requirement that funds not constitute a “tax cut,” and
  whether the requirement served any useful purpose;
   
• Information on reporting errors, and whether the
  practice of ignoring such errors adheres to principles of sound federal
  financial management;
   
• What controls have been established to ensure that
  reported expenditures by states and localities abide by the restrictions
  on uses put in place in ARPA;
   
• How has Treasury enforced a legal restriction against a
  government using state and local funds for deposit into pension funds; and
  
   
• How much of the $350 billion allocated by Treasury to
  state and local governments has been recouped to date, and how can
  Congress and the American people monitor any such recoupments?
   

Read
the full list of questions and the letter, signed by all Senate
Finance Committee Republican members, below.

____________________________________
 

Comptroller Dodaro: 

Section 9901 of the American Rescue Plan Act (ARPA; Public
Law No. 117-2) appropriated $350 billion of COVID relief funds to governments
of states, localities, territories and tribes.  Clarity and oversight of
how these funds are being expended, obligated, and administered by the
Department of the Treasury is important and a responsibility of the Senate
Finance Committee, on which we serve.  Unfortunately, ARPA, unlike the
Coronavirus Aid, Relief, and Economic Security (CARES) Act, has no meaningful
built-in nonpartisan oversight mechanism that allows for necessary
Congressional oversight and there is lack of transparency on uses of the funds
provided to various governments. 

Based on several discussions with officials at the
Department of the Treasury (Treasury) regarding obligations, expenditures, and
uses of Coronavirus State and Local Fiscal Recovery Funds (SLFRFs) provided for
in ARPA, there remains insufficient information on details, and reporting that
is publicly available to date, which Treasury appears to take with casual
indifference. Because of the lack of information and transparency on uses of
and accounting for these federal funds, we request that the Government
Accountability Office (GAO) help to ensure there is proper oversight of at
least $350 billion of ARPA funding and necessary accountability to Congress and
the American people.   

We request that GAO promptly engage in review and assessment
of administration of the SLFRFs at the Treasury and address the following:  

• What oversight is Treasury performing on ARPA state and
  local funds, if any, and how can taxpayers learn of any possible Treasury
  oversight actions?
   
• What federal control standards
  apply, or should be applied, to administration of SLFRFs by Treasury, and
  is Treasury applying such controls, properly designing such controls, and
  monitoring of control activities?
   
• Are risk assessments and monitoring components of
  internal controls significant to the objective of the efficient and
  transparent use of taxpayer resources, and are there any means by which
  Congress and the American people can verify that monitoring components and
  internal controls at Treasury meet standards.
   
• Do standards and internal controls related to the
  SLFRFs adhere to those set by the Comptroller General (as in the Standards
  for Internal Control in the Federal Government; the “Green Book”) issued
  in compliance with Sec. 3512 (c) and (d) of Title 31 of the United States
  Code, and with any associated Office of Management and Budget Circular
  (e.g., OMB Circular No. A-123)?
   
• Noting that Treasury has
  released its initial “Interim Reports and Recovery Plan Performance
  Reports – 2021” and that several reports seem to indicate zero obligations
  or expenditures, are reporting requirements established by Treasury,
  especially for small localities, creating undue burdens and
  inefficiencies?
   
• Given that ARPA mistakenly
  sought to have the Executive Branch of the federal government prevent
  states from using SLFRF funds to provide tax cuts deemed by states to be
  beneficial to their citizens, does Treasury’s requirement to have states
  report on whether they have satisfied Treasury’s loose approximation of
  how state tax policies may or may not constitute a “tax cut” serve any
  useful purpose toward the objective of the efficient use of federal
  taxpayer resources?
   
• In Treasury’s Interim Reports
  and Recovery Performance Reports—2021,  there are instances where
  reporting errors are apparent, including cases where a reporting
  government identifies fund uses for which it claims that amounts expended
  exceed amounts obligated.  Treasury officials have indicated no
  desire to request corrections of known reporting errors in the Interim
  Reports, and Treasury’s position appears to be, with respect to the
  errors, to treat errors as bygones to ignore. Would such a practice adhere
  to principles of sound federal financial management and establishment of
  principled internal controls?
   
• In light of reports of SLFRF
  funds being used in states and localities for things seemingly unrelated
  that have nothing to do with responding to the public health emergency
  with respect to the Coronavirus Disease 2019 (COVID-19) or with making
  necessary investments in water, sewer, or broadband infrastructure, what
  controls in Treasury have been established to ensure that reported
  expenditures by states and localities abide by the restrictions on uses put
  in place in ARPA?
   
• Money is fungible across budget
  categories in state, local, territorial, and tribal governments, and some
  SLFRF funds have accrued to general funds (e.g., the general fund of a
  state).  ARPA restricts uses of SLFRF funding by stating that no
  recipient of such funds may use such funds “for deposit into any pension
  fund.”  Given that funds are fungible across budget categories, that
  some SLFRF funds may accrue to general funds of a government, and that
  general funds may be used by governments to fund pensions, how is it
  feasible for Treasury to enforce a legal restriction against a government,
  in effect, using SLFRF funds for deposit into pension funds?  How is
  Treasury enforcing such a restriction in its administration of SLFRF usage? 
  
   
• Noting that ARPA does not
  restrict SLFRF funds from being used by a state or local or territorial
  government for funding of “other post-employment benefits” (OPEBs), and
  that, in addition to massive underfunding of pension obligations in many
  states and localities, state and local governments have, according to some
  reports, more than $1 trillion of net liabilities for OPEBs, how much of
  ARPAs $350 billion of funding for governments of states, localities, and
  territories could flow to bailing out OPEB liabilities of those
  governments?
   
• Noting that ARPA grants Treasury the authority to
  recoup SLFRF funds from state, local, territorial, or tribal governments
  when funds are used in violation of allowable uses, how much of the $350
  billion allocated by Treasury to those governments has been recouped to
  date, and how can Congress and the American people monitor any such
  recoupments?
   

Thank you for your prompt attention to these matters.  

Sincerely,