Tracking jobs created under Recovery Act could be tricky

How many workers does it take to steady a floundering economy? If those workers are getting paid through the American Recovery and Reinvestment Act, the Obama administration is betting about 6.8 million. That's the administration's estimate for the number of jobs created or saved over the next four years as a result of the $787 billion economic stimulus plan signed into law in February.

But documenting that number may require some fancy accounting. Ed DeSeve, special adviser to the president and the Office of Management and Budget for implementing the Recovery Act, said on Thursday that it will be up to fund recipients to estimate the number of jobs created or saved.

"We believe [the number of] direct jobs created should be defined by the recipients themselves," said DeSeve, speaking at a breakfast sponsored by the Association of Government Accountants in Washington. He noted that not all states define full-time jobs the same way, making it difficult to impose a universal methodology for counting jobs.

In addition, recipients of stimulus funds, which include state and local governments as well as contractors, may choose to rely on subrecipients or subcontractors to provide such data, DeSeve said. "We're doing our best to not require recipients to be in the verification business," he said, adding, "There is no incentive for fraud here."

That view troubles William Beach, director of the Center for Data Analysis at the Heritage Foundation, a Washington think tank. The center conducts statistical research on a range of economic issues.

State highway departments are "notoriously creative," in how they document spending and employment, he said. Beach was a Missouri state budget officer in the 1980s when President Ronald Reagan signed the 1983 Employment Act, a major effort to stimulate the economy through construction jobs.

"Determining who was working on these projects was very difficult," Beach said. "To say there is no incentive for corruption or bad dealing is enormously naïve, or worse."

It's important to know how many new jobs are actually created through Recovery Act projects versus the number of positions transferred from a different part of a department's payroll, Beach said. With state agencies and localities under enormous economic pressure to receive stimulus funds, they will naturally seek to portray their spending programs as desirable as possible. One way to do that is to show that they're employing a lot of people.

Relmond Van Daniker, AGA's executive director, said the reliability of employment data raises major concerns for federal chief financial officers, who must report spending and jobs data to OMB and Congress, a view confirmed in recent interviews with a number of federal CFOs.

It is essential that federal agencies and states be able to provide citizens with understandable, accurate reports about how Recovery Act funds are being spent, Van Daniker said.

OMB is expected to issue final guidance for reporting on Recovery Act spending next week.