Special Report

Federal Watchdogs Hit Oversight Trail on Stimulus

By Michele McNeil — February 12, 2011 6 min read
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It’s one thing to hand out billions of dollars in the hope of turning around the poorest-performing schools and sparking states to devise bold plans to improve their K-12 systems. It’s another thing to make sure the money is well spent.

That’s the job facing a pack of stimulus-funding watchdogs, who are charged with monitoring the spending of $97 billion the U.S. Department of Education has awarded to states and districts as part of the American Recovery and Reinvestment Act, the economic-aid package passed by Congress in 2009.

A web of federal government agencies has its hands in this effort: the Recovery Accountability and Transparency Board, created by the stimulus legislation; the Government Accountability Office, the investigative arm of Congress; the Education Department’s inspector general; and the department itself.

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“Where folks aren’t following through, are we prepared to take funds back? Absolutely,” U.S. Secretary of Education Arne Duncan said in a December interview. And for skeptics who think that promise lacks teeth, he points to his decision to award grants to only two states in the first round of the economic-stimulus program’s Race to the Top competition. “No one thought we’d do that, either.”

Mr. Duncan and other education policy leaders acknowledge that carrying out ARRA-financed programs and tracking the money will be hard work, and that a lot is riding on the success of those efforts. The stakes include whether the new Republican-controlled House holds hearings on stimulus spending, and agrees to put more money into new programs created with stimulus aid.

“The implementation question is significant,” said Jonathan Schnur, a former adviser to President Barack Obama who helped shape the education programs funded by the recovery act. “There’s a big risk around capacity at the local and state level, and around execution.”

Inspector General’s Role



SOURCE: U.S. Department of Education

The watchdog role for states and federal agencies won’t end any time soon. About three-quarters of the education stimulus funding has already been spent, but that still left a combined $26 billion in the bank for recipients, as of Jan. 28. Although much of that money must be spent by Sept. 30, some grants have much longer spending timelines. Race to the Top grants can be spent over four years, and Teacher Incentive Fund grants have a five-year lifespan, through 2015.

One of the biggest stimulus stewards of all is the Education Department’s office of the inspector general, or OIG, which conducts audits, investigations, and training as part of its general watchdog role. With the addition of the nearly $100 billion in stimulus education spending, its portfolio expanded enormously.

From the time the first dollars started flowing in 2009 to state and districts through Nov. 30 of last year, the inspector general fielded 514 complaints from the public about possible misuse of stimulus money. The bulk of the complaints, 433, were deemed not to warrant an investigation. Among the rest, 64 are part of an ongoing investigation, while five have ended in convictions or settlements. For 12, federal prosecutors decided not to pursue charges.


• 514 complaints the U.S. Department of Education inspector general has received about the misuse of stimulus funds

• 64 active investigations

• 5 convictions, settlements, and judgments reached against grant recipients

• 13,670 hours of training the inspector general’s office has provided to grant recipients

SOURCE: Office of the Inspector General, U.S. Department of Education

To date, the amount of money involved in any stimulus wrongdoing has been fairly small. So far, according to the OIG, $7,200 has been recovered and $1.2 million saved through its investigations.

The inspector general is also auditing the stimulus spending of many states and districts, handpicked both to achieve a mix of large and small grant recipients and to focus on those that pose the most risk. The risk factors include states and districts that received a large amount of money or had problems uncovered in other stimulus or non-stimulus-related audits, according to spokeswoman Catherine Grant.

Of particular focus, according to the office, is spending under the State Fiscal Stabilization Fund, which provided nearly $54 billion to help states shore up their budgets and prevent layoffs. But competitive grants, such as the $4 billion in Race to the Top awards and the $650 million Investing in Innovation program, also face scrutiny.

The inspector general also keeps tabs on the Education Department’s work. For example, in September, the OIG issued a report critical of the department for failing to verify state-submitted data in fiscal-stabilization-fund applications.

To cope with all the additional work, Congress gave the OIG $14 million to beef up staff, and 10 additional people were hired to work exclusively on stimulus spending.

Avoiding Overlap

The inspector general coordinates work with other federal agencies so as not to duplicate audits and investigations. The office works most closely with the GAO, the congressional watchdog. Already, the GAO has conducted in-depth reviews in 16 states, issuing 63 recommendations to improve efficiency and accountability in stimulus spending, including the Education Department.

School districts and other recipients must file quarterly reports—posted online at recovery.gov—on everything from how many jobs were created to what they purchased with the stimulus money. Those reports are posted online.

The reporting also provides information for fraud detection.

In November 2009, the Recovery Accountability and Transparency Board launched its Recovery Operations Center, the bedrock for its oversight program. Using sophisticated software and data analysis, expert analysts try to detect “irregularities, questionable connections, and indicators of fraud” in the quarterly reports, according to Earl E. Devaney, the board’s chairman, writing in his year-end report.

The department’s accountability plan isn’t limited to reviewing data. A monitoring team will make at least one visit to each state through December of this year to track spending of State Fiscal Stabilization Fund dollars. The additional stimulus money that flowed through existing formulas, such as that used for Title I aid to disadvantaged students, will be tracked the way those funds have always been monitored, including through site visits to states and districts.

The department also is creating a branch called the Implementation and Support Unit, charged with providing a new level of assistance in helping states implement programs, including the Race to the Top and fiscal stabilization funds, according to Ann Whalen, the deputy director of program and policy implementation

Such measures aside, the department acknowledges it must, in many circumstances, rely on states to help police stimulus spending, and has provided training to help them with that new duty.

And state education chiefs say they are getting the message.

In Illinois, in addition to using internal auditors, the state education agency is hiring outside firms to audit stimulus spending by a sample of 204 of the state’s 870 school districts. The cost: $606,033.

“Everybody’s felt a lot of pressure, and everyone wants to do a good job by [the aid],” said state schools Superintendent Chris Koch. “There’s just a ton of money going out, and we had to literally train everyone on the new requirements.”

Coverage of the American Recovery and Reinvestment Act is supported in part by grants from the William and Flora Hewlett Foundation, at www.hewlett.org, and the Charles Stewart Mott Foundation, at www.mott.org.
A version of this article appeared in the February 09, 2011 edition of Education Week as Federal Watchdogs Hit Trail in ARRA Oversight Effort


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