Report 2010-601 Summary - December 2010

High Risk Update—American Recovery and Reinvestment Act of 2009:

The California Recovery Task Force and State Agencies Could Do More to Ensure the Accurate Reporting of Recovery Act Jobs

HIGHLIGHTS

Our review of the State's administration of jobs data reporting at the recipient level under the American Recovery and Reinvestment Act of 2009 revealed the following:

  • Of the five state agencies we reviewed that reported recipient-level jobs data, two did not follow federal or state guidance resulting in overstatements of full-time equivalent positions totaling 617.
  • Only one of the agencies we reviewed followed the task force's recommendation to review subrecipients' calculation methodologies and none reviewed supporting documentation to verify the accuracy of the jobs data.
  • Two federal audit agencies and one state audit agency that have reviewed California's administration of jobs data reporting under the Recovery Act have reported errors or concerns in subrecipient data reporting.

RESULTS IN BRIEF

On February 17, 2009, the federal government enacted the American Recovery and Reinvestment Act of 2009 (Recovery Act) to help fight the negative effects of the United States' economic recession. As stated in the Recovery Act, its purposes include preserving and creating jobs; promoting economic recovery; assisting those most affected by the recession; increasing economic efficiency; investing in transportation, environmental protection, and other infrastructure; and stabilizing state and local governmental budgets. According to the federal www.Recovery.gov Web site, the federal government disbursed Recovery Act funding to nonfederal entities (recipient) in the form of a contract, grant, or loan, which in turn distributed funds to subsequent nonfederal entities (subrecipient) to support a project or program for which the recipient received Recovery Act funding.

Our review of the accuracy of the number of jobs created or retained each quarter (jobs data) reported at the recipient level uncovered several errors resulting in the jobs data being overstated by 617 jobs. The Recovery Act mandates that, as a condition of receiving federal funds, recipients must report quarterly on the use of those funds. Information that must be reported includes funds received and spent, and jobs created and retained. To help Recovery Act recipients meet these reporting requirements, both the federal Office of Management and Budget (OMB) and the California Recovery Task Force (task force) issued explicit guidance on how to calculate the jobs data. However, we found that, of the five state agencies we reviewed that reported recipient-level jobs data, two did not follow this guidance. For example, the Water Resources Control Board (Water Board) reported triple the actual number of jobs created and retained by calculating them on a monthly basis and then totaling the three months' data, instead of performing the calculation once at the end of the quarter, as required by the OMB and task force guidance. This error resulted in an overstatement of 71 full-time equivalent positions (FTEs). In addition, the Water Board calculated its jobs data using incorrect months. Specifically, OMB requires that the reporting quarter ending June 30, 2010, is to include jobs data for April through June 2010; however, the Water Board reported data for the months of March through May 2010. Further, three of the five state agencies—the Department of Community Services and Development, Department of Transportation, and the Water Board—did not include paid time off in the total hours worked, as specified in the task force guidance. Of these three, two made no attempt to include paid time off in their jobs data calculation, while one attempted to include paid time off but did so incorrectly.

Additionally, the task force could do more to ensure that state agencies verify the accuracy of their local subrecipients' jobs data. Although the OMB explicitly states that its guidance does not establish specific requirements for documentation or other written proof to support reported estimates on jobs data, it does advise recipients to be prepared to justify their estimates. Further, the task force issued guidance with specific recommendations for how to ensure the accuracy of subrecipient jobs data. We found that although all of the state agencies we reviewed issued guidance to their local subrecipients and conducted high-level assessments of the reasonableness of their local subrecipients' jobs data, only one followed the task force's recommendation to review their subrecipients' calculation methodologies, and none reviewed supporting documentation to verify the accuracy of the jobs data. In one instance, the Tax Credit Allocation Committee (Tax Committee) stated that it reviewed the jobs data submitted by subrecipients for any obvious anomalies but did not review the jobs data calculation methodology or supporting documentation. Further, the Tax Committee reported triple the actual number of jobs created and retained by collecting the monthly FTEs from its subrecipients and then summing the three months' data without dividing the total by three to adjust for the quarterly calculation. This error, in addition to other errors, resulted in a net overstatement of 545 FTEs. In addition, when we validated the jobs data for two state agency subrecipients and five local subrecipients related to four of the eight state agencies for which we reviewed subrecipient jobs data, we identified errors in the data for two of the local subrecipients. For example, San Juan Unified School District overstated its jobs data by about one FTE out of the 240 jobs it reported.

Finally, since May 2010, two federal audit agencies—the U.S. Department of Labor, Office of the Inspector General (Labor Inspector General), and the U.S. Government Accountability Office—and one state audit agency—the California Department of Finance, Office of State Audits and Evaluations—have reviewed California's administration of jobs data reporting under the Recovery Act. All three of these reviews reported errors or concerns in subrecipient data reporting. For example, the Labor Inspector General reported that the California Employment Development Department did not use the available correction period to update its jobs data after its initial submission of jobs data to the federal reporting Web site.

RECOMMENDATIONS

The task force should provide targeted technical assistance and training to state agencies that are not calculating their jobs data in accordance with OMB guidance.

The task force should issue clarifying guidance to state agencies to ensure the following:

  • Jobs are not triple-counted because monthly totals have been summed and not averaged.
  • Jobs data estimates are reported for the correct reporting months and state agencies use the correction period to revise their estimates when actual data becomes available.
  • State agencies understand the task force's guidance on including paid time off in the quarterly jobs estimates.

The task force should instruct state agencies to review their subrecipients' methodologies for calculating jobs data and, at least on a sample basis, review supporting documentation to ensure the accuracy of the subrecipients' jobs data reported, or use alternative procedures that mitigate the same risks before certifying their jobs data report.

AGENCY COMMENTS

The task force generally agreed with our recommendations. However, it expressed its ongoing challenges with collecting accurate data from departments, and its frustration with the changing federal guidance and the variations between federal agencies' interpretations of the jobs definitions.


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