June 06, 2022
Senators ask GAO for detailed information on how $350 billion in relief funds were used
Washington DC–Senate Finance Committee member Mike Crapo (R-Idaho) and Senate Homeland Security and Governmental Affairs Committee member Rob Portman (R-Ohio) joined all Republicans on the Finance Committee in demanding to the Government and Accountability Office (GAO) to provide a detailed account of the $350 billion in COVID relief funds allocated to state, local, territory, and tribal governments under the American Rescue Plan Act (ARPA).
From the letter to the GAO:
“Unfortunately, ARPA, unlike the CARES (Coronavirus Aid, Relief, and Economic Security Act), does not have a meaningful built-in nonpartisan oversight mechanism that allows for the necessary congressional oversight and there is a lack of transparency on the use of funds provided to various governments.
“Due to the lack of information and transparency on the use and accounting of these federal funds, we are asking that the Government Accountability Office (GAO) help ensure proper oversight of at least $350 billion in federal funding. ARPA and the necessary accountability to Congress and the American people.
Senators ask a series of oversight questions, including:
- Whether the Treasury uses risk assessments and oversight components to ensure efficient and transparent use of taxpayer resources, and whether Congress and the American people can verify that these controls meet standards;
- How did the Treasury verify whether the states met the objectionable requirement that the funds not constitute a “tax reduction” and whether the requirement served any useful purpose;
- Information about reporting errors and whether the practice of ignoring these errors is consistent with the principles of sound federal financial management;
- What controls have been established to ensure that expenditures reported by states and localities adhere to the usage restrictions put in place in ARPA;
- How did the Treasury enforce a legal restriction against a government using state and local funds to deposit into pension funds? and
- How much of the $350 billion allocated by the Treasury to state and local governments has been clawed back to date, and how can Congress and the American people monitor those clawbacks?
Read the full list of questions and the letter, signed by all Republican members of the Senate Finance Committee, below.
Section 9901 of the American Rescue Plan Act (ARPA; Public Law No. 117-2) has earmarked $350 billion in COVID relief funds to state, local, territory and tribal governments. Clarity and oversight of how these funds are spent, committed and administered by the Treasury Department is important and is the responsibility of the Senate Finance Committee, on which we sit. Unfortunately, ARPA, unlike the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), does not have a meaningful built-in non-partisan oversight mechanism that allows for necessary congressional oversight and there is a lack of transparency. on the use of the funds provided to the various governments.
Based on multiple discussions with Department of the Treasury (Treasury) officials regarding the obligations, expenditures, and uses of the State and Local Fiscal Stimulus Funds (SLFRF) provided for in ARPA, there remains insufficient information. on the details and public reports available to date, which the Treasury seems to take with occasional indifference. Due to the lack of information and transparency on the use and accounting of these federal funds, we ask that the Government Accountability Office (GAO) help ensure proper oversight of at least $350 billion in government funding. ‘ARPA and the Necessary Accountability to Congress and the Americans.
We request that the GAO expeditiously review and assess the administration of SLFRFs at Treasury and address the following:
- What oversight does the Treasury exercise over state and local ARPA funds, if any, and how can taxpayers be notified of possible Treasury oversight actions?
- What federal control standards apply, or should be applied, to Treasury’s administration of SLFRFs, and does the Treasury enforce those controls, design those controls properly, and oversee the activities of control ?
- Are the risk assessments and monitoring components of internal controls important to the goal of efficient and transparent use of taxpayer resources, and are there ways in which Congress and the American people can verify that Treasury oversight components and internal controls meet standards.
- Are the standards and internal controls related to the SLFRF consistent with those established by the Comptroller General (such as in the Federal Government Internal Control Standards; the “Green Book”) issued pursuant to Sec. 3512(c) and (d) of Title 31 of the United States Code, and with any associated Office of Management and Budget Circular (eg, OMB Circular No. A-123)?
- Noting that the Treasury has published its first “Interim Reports and Recovery Plan Performance Reports – 2021” and that several reports appear to indicate zero obligation or expenditure, the reporting requirements established by the Treasury, particularly for smaller localities, create undue burdens and inefficiencies?
- Because ARPA wrongly sought to have the executive branch of the federal government prevent states from using SLFRF funds to provide tax reductions deemed by states to be beneficial to their citizens, the Treasury’s requirement to require states to report whether they have satisfied the Treasury’s loose approximation of how state tax policies may or may not constitute a “tax cut” serve a useful purpose toward the purpose of the Treasury. effective use of federal taxpayer resources?
- In the Treasury Interim Reports and Collections Performance Reports – 2021, there are instances where reporting errors are apparent, including instances where a reporting government identifies uses of funds for which it claims the amounts spent exceed the committed amounts. Treasury officials have indicated no desire to seek corrections of known reporting errors in interim reports, and the Treasury’s position on errors appears to be to treat errors as things of the past to be ignored. Would such a practice respect the principles of sound federal financial management and the establishment of principles-based internal controls?
- In light of reports that SLFRF funds are being used in states and localities for seemingly unrelated things that have nothing to do with responding to the public health emergency with regards to coronavirus disease 2019 (COVID-19) or with necessary investments in water, sewer, or broadband infrastructure, what controls have been established within the Treasury to ensure that expenditures reported by states and localities meet the usage restrictions put in place in ARPA?
- The money is fungible across all budget categories of state, local, territorial, and tribal governments, and some SLFRF funds have been accumulated in general funds (eg, a state’s general fund). ARPA restricts the uses of SLFRF funding by stating that no recipient of these funds may use these funds “to deposit into a pension fund.” Given that the funds are fungible across all budget categories, that some SLFRF funds can be allocated to a government’s general funds, and that the general funds can be used by governments to finance pensions, how is it possible for the Treasury to impose a legal restriction on a government, in effect, to use the funds of the SLFRF to deposit them in pension funds? How does the Treasury enforce such a restriction in its administration of the use of the SLFRF?
- Noting that ARPA does not preclude SLFRF funds from being used by any state, local or territorial government to fund “other post-employment benefits” (OPEB), and that, in addition to the massive underfunding of pension obligations in many states and localities, state and local governments have, by some reports, over $1 trillion in net liabilities for OPEBs, what a share of the $350 billion in funding of ARPAs for state, local and territory governments could be used to bail out the OPEB liabilities of those governments?
- Noting that ARPA grants the Treasury the authority to recover SLFRF funds from state, local, territorial or tribal governments when the funds are used in violation of authorized uses, what portion of the $350 billion allocated by the Treasury to such governments has been recovered to date, and how can Congress and the American people monitor such recoveries?
Thank you for your prompt attention to these matters.