Recovery Act reporting becoming the norm

Less than half of 1 percent of all recipients of stimulus contracts, grants and loans have failed to file mandatory spending reports, according to data released on Monday by the Recovery Act's primary oversight board.

Since October 2009, more than 75,000 prime recipients of Recovery Act funds, including contractors, state governments, universities and nonprofits, have submitted quarterly reports on their stimulus spending to the Recovery Accountability and Transparency Board. New data from the board show that through the most recent reporting period, which ended in December 2010, only 366 spending reports, or less than 0.5 percent, remain outstanding.

"That's good news to the recovery and to taxpayers," Chairman Earl Devaney wrote in a column posted on the board's website. "Most recipients, it is clear, accept the idea that if they take taxpayer dollars, they have a legal and ethical obligation to report on their spending."

The Recovery Act requires all prime recipients of agency stimulus funds to file a spending report outlining how they are using the funds and the number of employees detailed for the work, at the end of each calendar quarter.

The new figures represent a startling turnaround for the relatively new reporting program. In the initial reporting cycle, covering the period from March to October 2009, 4,359 recipients did not comply with the reporting requirement. In the second reporting period, which closed in January 2010, the number of non-reporters declined to 1,036, representing $583 million in unaccounted-for stimulus funds.

Devaney attributed the subsequent improvement in compliance, in part, to the board's strategy of embarrassing and then punishing those recipients who failed to file spending reports.

In February 2010, the board published a list of "two-time losers" on its website, Recovery.gov, highlighting recipients who had failed to file reports in the initial two periods.

And in April 2010, the Obama administration issued a presidential memo authorizing agencies to begin terminating the awards of noncomplying recipients, reclaiming unspent funds and potentially suspended or debarring those contractors or grantees from future awards.

Among the companies that have faced stiff punishment for their noncompliance was Sunland Industries LLC, a California-based women-owned small business. The company has repeatedly failed to file a report on a $229,000 award the National Parks Service issued in September 2009 to provide road materials to Lava Beds National Monument in Northeastern California, Devaney said. Sunland subsequently was suspended from government work, and the Interior Department inspector general has recommended a permanent debarment. The issue is under review, he said.

The board has not collected data on the total number of recipients that have been suspended or debarred, according to spokesman Ed Pound.

As of Jan. 31, the board and the agency inspectors general have received 5,703 complaints of wrongdoing associated with Recovery Act funds. More than 1,100 complaints have triggered active investigations, according to figures on the website.

At least one company, Eyak Technology LLC, an Alaska native corporation-owned small business with offices in Virginia, has argued that it does not have to file a spending report. Eyak initially was awarded a $1.1 million contract by the Homeland Security Department Customs and Border Patrol in September 20008 -- before passage of the Recovery Act -- to upgrade communication sites in Maine. The following year, DHS modified the contract and added a $656,960 task order using Recovery Act funds.

When the company claimed it did not legally have to report its spending on the task order, CBP attempted to pull back the Recovery Act funding. Eyak filed suit, claiming breach of contract. The case is now pending at the U.S. Civilian Board of Contract Appeals.

Eyak spokeswoman Melissa Zelinger said the company is not challenging the reporting requirements in general but is arguing that CBP "unlawfully used [American Recovery and Reinvestment Act] funds on the contract in question and therefore no ARRA reporting was required." The firm said the agency was prohibited from using Recovery Act funds on an existing contract unless it first modified the contract to incorporate a clause from the Federal Acquisition Regulations regarding the use of ARRA funds on the award. "The agency never modified the contract to incorporate the required FAR clause," Zelinger said. "Because the FAR clause was never incorporated into EyakTek's contract, the agency could not lawfully use ARRA funds and ARRA reporting requirements were not required by EyakTek. Given the emphasis on transparency of the use of Recovery Act funds, EyakTek would not agree to report when, in its opinion, the ARRA funds were unlawfully used by the agency." Eyak is believed to be the only Recovery Act recipient to argue in court that it is not required to file a spending report, Pound said.

For other recipients, the excuses for not reporting have run the gamut. Dell Federal Systems LP cited "clerical oversight" as the reason it did not report for two consecutive quarters on a $150,699 contract. Tampa Ship LLC, meanwhile, blamed its lapse on its staff's failure to renew a required government registration form. The best excuse, Devaney said, was a recipient who claimed to be "unexpectedly pulled out of the office for some out-of-town meetings for several days and was unable to connect laptop to a wireless connection.''

"The way I look at it, there are no good excuses for failing to report to taxpayers," Devaney said. "Recipient reporting is at the heart of the board's accountability program. You can be certain we will keep up the pressure on the relatively few recipients who ignore their reporting obligations."