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GAO Slams Flimsy Auditing Rules for Stimulus Dollars

July 8: This post has been corrected.

Fresh on the heels of last week’s dreadful unemployment numbers, which raised new questions about whether the stimulus package is working, the Government Accountability Office this morning released a seriesofreports (PDF) about how effectively states and municipalities are using the stimulus money. One issue the GAO sounds the alarm on: weak auditing rules.

In notably blunt language, the GAO states that the federal audit reporting deadline, which instructs agencies to begin audits of their stimulus spending no more than nine months after the end of the fiscal year, "is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to Recovery Act risks."

Translation: In the GAO’s opinion, the system for making sure that stimulus dollars are spent properly simply isn’t up to snuff. The report goes on to note that state auditors — whose job is to make sure that public dollars are appropriately spent don’t have the funding to exercise their own responsibilities under the stimulus bill, something that ProPublica wrote about back in May. (We’ve called the GAO for more details on its concerns, and we’ll update the piece as soon as it responds.)

The GAO reported that "significant questions have been raised about the reliability of the data on," which is mandated by law to track financial information about who gets federal funds. The GAO points out that because the numbers on the site come from those receiving funds, the quality of their data can’t easily be verified. (Of course, as ProPublica has reported before, verifying numbers associated with the stimulus package is never easy.)

This report is a red flag for the Office of Management and Budget, which has responsibility for fixing that process. The GAO notes that it warned the OMB in April that the state-level audit process for stimulus money wasn’t good enough. (ProPublica highlighted the report.) While the OMB took steps to respond to the criticisms, the GAO notes, "These actions do not sufficiently address the risks."

The OMB responded to today’s reports from the GAO by noting that it has "already taken and is planning actions" to address the shortcomings with its auditing process. For example, according to the report, the OMB said that it plans to issue additional stimulus auditing guidelines later this month. The GAO retorted that the OMB has "not yet completed critical guidance in these areas."

Correction, July 8, 2009: An earlier version of this post inaccurately stated that the deadline for states to begin audits of their stimulus spending is at least six months after the end of the fiscal year. In fact, the deadline is nine months after the end of the fiscal year.

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