In late March, as the coronavirus pandemic resulted in mounting economic costs to communities and businesses across the country, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, to deliver the largest economic aid package in American history. The law includes detailed reporting provisions meant to ensure that this extraordinary level of government spending would get more than the ordinary level of transparency and accountability. However, in a recent guidance memo to federal agencies on how to report on allocation of relief funds, the Office of Management and Budget defied Congress by ignoring a number of clear reporting requirements in the CARES Act.
This guidance all but ensures that the over $2 trillion in relief funds will receive less oversight and accountability than Congress intended.
The CARES Act provides relief through an array of loans, grants, insurance, and direct assistance to a wide range of recipients including small businesses, hospitals and health care providers, students and educational facilities, as well as heavily affected large industries such as the airline industry. Congress sought to embed accountability for the relief funding into the law with a variety of requirements, including creating a special inspector general for pandemic recovery and a Congressional Oversight Commission. Congress also established an interagency committee of inspectors general, called the Pandemic Response Accountability Committee, to be the main vehicle for administrative oversight and transparency.
The law requires the committee to establish a user-friendly website to serve as the primary conduit for all information related to the relief funds. The website must provide access to detailed data on federal awards; recipients’ data on the use of the funds, which is to be reported on a quarterly basis; plans from each agency on how the funds will be used; and other reports the law requires. In short, Congress gave the Pandemic Response Accountability Committee the responsibility to make it clear to the public what is being done with the more than $2 trillion in taxpayer dollars. Robust oversight and reporting are especially important given the ongoing public health and economic emergencies that these relief funds were intended to help mitigate.
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Despite a few early bumps in the road, the Pandemic Response Accountability Committee is operational and moving forward on its responsibilities. The committee hired an executive director, launched its website, and has begun to post information.
But the Office of Management and Budget’s guidance to agencies concerning the CARES Act reporting requirements fundamentally undermines those statutory requirements in several key ways, and could lead to significant setbacks for transparency and accountability over relief spending. The office wields a great deal of authority when it comes to agency implementation of reporting or management of major programs such as the efforts under the CARES Act.
The first major problem with the guidance is that the Office of Management and Budget asserts that existing federal spending reporting requirements, with minimal modifications, can satisfy the CARES Act’s requirements. Federal agencies regularly post data on spending awards—such as contracts, grants, loans, and direct assistance—to the USASpending.gov website. The office claims that the types of spending data agencies are already required to report on the website can provide the full scope of data now required by the CARES Act.
This is incorrect.
The data on coronavirus relief awards that agencies will report on USASpending.gov, when properly identified, will indeed provide some insight into agencies’ spending decisions. That data includes important details on the funding amounts, recipients, locations of the recipients, and any government programs involved, such as those that provide disaster assistance loans. Under the CARES Act, agencies are required to report monthly to the Pandemic Response Accountability Committee and Congress on coronavirus relief awards, essentially a filtered subset of the full reporting of all agency awards to USASpending.gov.
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However, Congress also explicitly required in the CARES Act that agencies collect new information from recipients of $150,000 or more in relief funds. This information would provide greater detail about how exactly the recipient used the funds, how many jobs were preserved or created, and if the recipient provided any funds to a subrecipient through an award or contract.
Under the CARES Act, recipients of $150,000 or more are required to report the following information on a quarterly basis to the Pandemic Response Accountability Committee and the agency that awarded the funds:
- Total funds received from the agency
- How much of that money has been spent or obligated to a particular project or activity to date
- A detailed explanation of those projects or activities, including the name of the project, a description, and the estimated number of jobs created or retained by the project or activity
- Detailed information about any subcontracts or subgrants awarded
Data reported on USASpending.gov does not include data reported by recipients of federal funds and therefore would provide no details on specific projects or jobs created using coronavirus relief funds. And while the website does have data on subawards, it is generally fraught with errors including missing data and duplicate transactions that often make it appear that several times more money was spent in subawards than the government provided in the original award.
Despite those facts, the Office of Management and Budget states in its guidance that it “does not expect that additional reporting by agencies or recipients should be necessary to meet the requirements” of the CARES Act.
It is difficult to reconcile that statement with the CARES Act’s clear requirement that agencies collect new, detailed data directly from recipients of funds. The Office of Management and Budget’s plan is to use fields in the agency-reported USASpending.gov data to stand in for the detailed reporting expected from recipients of relief funds. But, in addition to not fulfilling the statutory requirement, that would result in the Pandemic Response Accountability Committee, Congress, and the public not having the information they need to get a full picture of how relief funds are being spent.
For instance, the office appears to believe that agencies can use USASpending.gov’s award description field to fulfill the requirement to provide a description of the project or activity. However, as the Project On Government Oversight noted in a June 2018 letter to the Treasury Department enumerating necessary fixes and improvements for the website, exceptionally poor award descriptions are the norm. Agencies often offer no description of specific grant or loan awards, but only list the program under which the award was made or the general mission of the program.
For instance, over the past several years, every disaster assistance loan the Small Business Administration has awarded after major disasters has the same award description: “To provide loans to restore as nearly as possible the victims of physical type disasters to pre-disaster conditions.” And the USASpending.gov data on those loans does not include any information on what each company needed the money for, such as infrastructure, salaries, or supplies and materials. This falls far short of the more detailed quarterly updates that Congress mandated in the CARES Act.
It is particularly important for the government to collect detailed data on jobs saved or created using the relief funds. According to recent reporting, the U.S. economy lost 20.5 million jobs in April alone. Congress specifically required that recipients of funds report data on job creation and preservation to create a potential indicator of how successful coronavirus relief funds are in mitigating the rising unemployment problem.
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But data reported on USASpending.gov does not include information about the number of jobs a given award supports. Information on how many jobs can be directly attributed to government relief funds would be critical to evaluating the use of funds across industries, geographic regions, and types of awards. For example, with reliable data on jobs saved and created, agencies might find that loans are more effective than grants at preserving employment, or that small companies save more jobs per $100,000 in relief than larger businesses do. But if we don’t have the data, there’s no way to conduct a comprehensive evaluation.
In its memo, the Office of Management and Budget also fails to address the data on loans that will be issued by the Federal Reserve. Under the CARES Act, the Fed can provide up to another $2.3 trillion in loans. The bank, which is usually quite secretive about its activities, has announced its intention to disclose details about recipients from four lending programs authorized under the CARES Act. However, the bank does not use USASpending.gov for its reporting. In fact, ordinarily the Fed does not publicly report on its loans at all. So while the Fed’s commitment to transparency for these coronavirus relief loans is welcome, the Office of Management and Budget guidance, focused on using USASpending.gov data, will not affect the Fed’s disclosures.
To the greatest extent possible, the reporting format for the Federal Reserve’s loan data should match the agency-reported USASpending.gov data structure. This would allow the information to be easily merged and provide a more complete picture of federal relief efforts. Additionally, the recipients of Fed loans should be required to report, on a quarterly basis, detailed information on their use of the funds. The Office of Management and Budget’s lack of guidance in this area threatens to leave us with separate and incompatible data sets.
The Office of Management and Budget’s guidance does offer several helpful improvements to the federal spending data agencies produce for USASpending.gov. For instance, the office instructs agencies to use the special “disaster emergency fund code” to track expenditures of CARES Act assistance awards, such as loans, grants, and direct assistance. This will allow agencies and users to more easily identify awards related to coronavirus relief. Agencies are already using a different code, the “national interest action code,” to track coronavirus relief contracts.
However, according to the timeline included in the guidance, expanded use of the disaster code will not be fully incorporated into agency USASpending.gov data until July. This multi-month delay in getting a tracking code in place likely means that the Pandemic Response Accountability Committee, Congress, and the public will not get a complete database of the awards until late summer.
While some delay in getting a system fully in place is to be expected, it does not seem unreasonable to hope that the administration could expand the use of the disaster tracking code within 30 days rather than closer to 90.
The CARES Act requires agencies to report monthly on all coronavirus relief awards made, including loans, contracts, grants, and direct assistance. The law states:
On a monthly basis until September 30, 2021, each agency shall report to the Director of the Office of Management and Budget, the Bureau of Fiscal Service in the Department of the Treasury, the Committee, and the appropriate congressional committees on any obligation or expenditure of large covered funds, including loans and awards.
Congress required monthly reporting to ensure timely oversight of spending. Since the law did not specify a starting date for the reporting obligation, the clock started when the law was signed on March 27. That means agencies are already behind on providing their first monthly reports, leaving the public almost completely in the dark about how the bulk of relief funding is being distributed.
The importance of transparency cannot be overstated. For example, large chains Ruth’s Chris Steak House and Shake Shack, as well as the Los Angeles Lakers received relief funding from the Small Business Administration’s Paycheck Protection Program, only to return the millions of dollars they received after public reporting led to criticisms.
The Office of Management and Budget’s guidance offers no explanation for how agencies can fulfill the requirement to begin monthly reporting immediately while it will still be months before the disaster code they need to use will be in place. Most agencies could probably produce award data for their major coronavirus relief programs during the intervening months to provide transparency around the majority of spending. The lack of an interim plan to allow monthly agency reporting seems to indicate that OMB does not place high importance on the congressionally mandated reporting. The result will be hundreds of billions of dollars being spent over a period of months with almost no public review, which could mean higher levels of waste, fraud, mismanagement, and abuse going undiscovered for longer.
A False Choice Between Speed and Accountability
In its guidance, the Office of Management and Budget appears to be attempting to justify its minimalist approach to reporting and accountability by framing these as activities that must be sacrificed, at least in some part, to facilitate quick agency action in distributing relief funds. The memo instructs agencies that “in balancing speed with transparency” they should consider three core principles: mission achievement, expediency, and transparency and accountability. While no one would question the urgency of communities’ need for the funds, this is a false choice.
The legally mandated transparency and accountability activities will not slow down the distribution of funds. Reporting takes place after the money has been distributed. Congress included transparency requirements in the CARES Act to ensure that agencies, inspectors general, Congress, and the public have sufficient information to review and evaluate agencies’ spending decisions and to ensure that money has reached its intended targets. Indeed, the decisions made in the haste of responding to urgent needs are those that require especially robust oversight.