Archive for December, 2009

OMB Moves to Fix ARRA Snafus

December 22, 2009

Responding to criticisms such as those issued by the Coalition for an Accountable Recovery (CAR) and States for a Transparent and Accountable Recovery (STAR), the Office of Management and Budget (OMB) has revised its guidance that governs how Recovery Act grant and contract recipients report on jobs.

The revisions, consistent with recommendations from CAR and STAR as well as the Government Accountability Office (GAO), are intended to make job-counting less subjective and therefore less prone to errors. In the new guidance, OMB also signals that recipients that continually fail to report will be subject to penalties.

Because many recipients failed to accurately account for created or retained jobs in their October reports, OMB simplified its instructions. The new guidance says: count all work hours funded by Recovery Act dollars, divide those hours by a full-time work schedule for the quarter, and report that number. And don’t try to figure out cumulative jobs.

Although the guidance is likely to correct the most egregious reporting problems on the number of Recovery Act jobs, it fails to address CAR and STAR concerns about job quality and equity issues. Specifically, the coalitions remain on record seeking revisions in the guidance to include:

  • The wages of the jobs and whether they include access to benefits like healthcare.
  • The race, gender and nine-digit residential ZIP code of all workers performing those hours of Recovery Act-funded jobs. This will help determine if those most in need of economic stimulus are receiving their fair share.

The revised guidance also states that Federal agencies can terminate awards and/or revoke a recipient’s ability to receive future funds if a recipient or sub-recipient:

The guidance also warns that failing to submit a report or persistently filing late or negligently shall be treated as a non-compliant recipient subject to Federal action. There were more than 4,000 such cases in the first round alone. Moreover, it states, if a recipient or sub-recipient intentionally reports false information, Federal prosecutors may bring civil and/or criminal proceedings as enabled by ARRA or existing Federal procurement rules.

With clarified reporting rules, the blame for any new egregious errors will clearly rest with recipients, including state governments, not the feds. Effective February 2, corrections can be made continuously, not quarterly, at FederalReporting.gov.

While OMB should be congratulated for clarifying job reporting guidelines, the failure to include metrics on job quality and equity issues remains troubling.

The Dog Ate My ARRA Reporting

December 16, 2009

The Recovery Accountability and Transparency Board has just published a list of more than 4,000 prime recipients of ARRA contracts and grants that failed to comply with the first round of reporting requirements, including data on job creation and retention.

If nothing else, the document shows the difficulty of trying to get thousands of companies, non-profit organizations and state/local government agencies to follow instructions and meet a single deadline. Since the list also includes the apparent reason for each case of non-compliance, it also provides an impressive collection of excuses for screwing up.

Here’s a selection of the self-justifications offered by these recipients of federal largesse:


The rules were to blame

A company called EnGenius said its failure to report was “due to late breaking guidance” (even though the final rules were published well before the filing deadline).

Cherry Central Cooperative and other Agriculture Department recipients complained “there was confusion about the reporting requirements vs. the exemptions that are provided for reporting salary information for top executives.” (The salary requirement applied only to very large federal contractors.)


The reporting system was flawed

All American Brothers Co. LLC: “Claimed they did not receive all the correct coding information to allow for input into stimulus template & drop down menu does not contain necessary information needed for report.” (Somehow thousands of others managed to make it work.)


The Internet was broken

CBS Surveying and Mapping and others said they did submit the data but it somehow did not get recorded by FederalReporting.gov.  (Didn’t they notice their data was missing from Recovery.gov?)

D.E.L. Disaster Recovery Enterprise LLC: “The FederalReporting.gov website was down and the recipient could not report and could not get help.” (Sounds like they need their own disaster recovery help.)

Advanced Integration Group Inc.: “Website down at time of reporting.” (And they never bothered to try again?)


I forgot to finish

Speaking of the Ruffed Grouse Society, USDA said: “Draft report submitted. Recipient was not aware they had not finalized the report.“ (The organization, whose website says it is “dedicated to hunting and conservation of young forest species,” was apparently too eager to get back to the woods.)

Interactive Elements Inc.: “Contractor inadvertently did not hit ‘submit’ to finalize its draft report in the federal reporting system.” (Yes, that interactive stuff is complicated.)


I forgot to start

Green Building Construction & Electric, Inc.: “Contractor said he simply forgot to do the report, even though contracting called and reminded him. “


Reporting requirement? What reporting requirement?

Eureka Development, LLC: “Were not aware of the ARRA reporting requirements.” (This was their non-eureka moment.)


I heard that the assignment was cancelled

Chester Bross Construction Company: “Misinformed that no reporting was required – will report 1/10. “ (I swear that’s what I heard.)


I was confused

Dell Federal Systems: “Lack of understanding of the reporting requirement and associated guidance.”

State Military Department of Indiana: “Recipient lacked understanding of Recovery Act reporting requirements.”


I was on vacation

Siku Construction, LLC: “The responsible administrator was on vacation and did not receive the e-mails and phone messages left by the awarding office.”


I was really sick

City of Pauls Valley: “Reporter Contracted H1N1, no backup.”


I’m Canadian

Nanometrics Inc.: “Contractor tried to submit report, but system won’t recognize Canadian institutions. “


There was this big wave…

American Samoa Criminal Justice Planning Agency: “Grantee was given waiver due to tsunami.”


Reporting—I Don’t Need to Do Any Stinking Reporting!

Eyak Technology Limited Liability Company: “Recipient has chosen not to report.” (This from a firm that got an award from the Department of Homeland Security.)


You caught me

Johnson Controls Inc. and numerous other contractors for the Department of Veterans Affairs: “No valid reason discerned.” (Busted.)

Thanks to Tommy Cafcas for research help.

(reposted from the STAR Coalition website)

NYC Approves Recovery Zone Bonds for Project that Won’t Aid Recovery

December 16, 2009

The New York City Capital Resource Corporation (CRC) is blurring job numbers on stimulus bond projects again. On December 15, 2009 the CRC’s board voted to issue $19.8 million in tax-free Recovery Zone bonds on behalf of Arthur Management Corp. to finance the construction of a parking facility in the Bronx. The facility will serve St. Barnabas Hospital, which created Arthur Management in order to be eligible for the financing.

CRC staff insisted the new facility will create six permanent jobs. What they didn’t mention was that 28 jobs will be displaced when the old facility is torn down because the new one will rely heavily on automation, allegedly saving the hospital $500,000 a year. Good Jobs New York staff and organizers from the Committee of Interns and Residents (CIR) who testified against the deal questioned the logic of using stimulus bonds intended to “contribute economically to the neighborhoods in which projects are located,” as the city’s own criteria state, for a project that could result in a net loss of 22 jobs.

Even the argument that saving a hospital some money aids recovery doesn’t hold up in light of the millions in bonuses St. Barnabas, despite being in financial straits, recently gave to its top executives. The hospital has also spent hundreds of thousands of dollars–and plans to spend more–attempting to overturn a 1999 National Labor Relations Board decision that cleared the way for resident physicians to legally unionize. In the meantime, the NLRB was obligated to impound secret ballots generated when staff voted earlier this year on whether to unionize, an indication that St. Barnabas’s relationships with unions and its employees is less than the standard New Yorkers should expect from companies seeking public subsidies.

A Clawback Enforcement Trend?

December 15, 2009

North Carolina officials, outraged at Dell over its closure of a heavily subsidized assembly plant, are doing everything they can to recoup subsidies given to the company. Governor Purdue, a fierce proponent of incentives to attract jobs, stated “that every red cent of incentives money had to come back to the people of North Carolina.” State and local officials have enforced clawback provisions from various grant programs recapturing $28 million, but Dell says it’s not obligated to pay back up to $6 million in tax credits given between 2005 and 2007. The state openly disagrees with Dell’s interpretation.

Secretary of Revenue Kenneth Lay stated in an interview that Dell no longer meets agreement benchmarks and is therefore ineligible for past and future tax credit subsidies. Dell’s position is that by creating the number of jobs required by past benchmarks, it is entitled to keep past tax credits awarded, even if by closing the factory it becomes ineligible for that same subsidy going forward. The law, hastily written and passed in 2004 under pressure from Dell, is unclear about who is correct.

Ambiguous legislative and contractual clawback language is also an issue in Missouri. Two years ago, Pfizer broke ground on a heavily subsidized St. Louis facility. Now, Pfizer has announced it is closing the lab, and officials appear unwilling to let Pfizer walk away from the deal with taxpayer subsidies in hand. Pfizer was offered a $7 million, 10-year tax abatement as well as sales tax exemptions on construction materials and training cash grants for creating 1,000 jobs. State and local officials are reviewing the economic development contract signed with Pfizer, Inc. to determine if a clawback of subsidies is possible.

Although no national statistics are available, clawback enforcement appears to be an increasing trend. Between 2004 and 2009, the Texas Enterprise Fund has clawed back at least $1.3 million from 12 projects. In 2008, the State of Illinois found 11 projects to be in violation of agreement terms and began recapture efforts on all of them.

Even site location consultants are recognizing that clawbacks are here to stay. Most now advise clients to seek easily obtainable benchmarks in negotiations instead of refusing clawbacks outright. “Even when a company is presented with seemingly inflexible documents, it may have some room to negotiate related points,” said site location consultant Tracey Hyatt Bosman. Many deals now contain clawbacks but lack strong standards. Clawback agreements are much less useful if they lack clear, robust benchmarks.

As clawbacks become the norm in development agreements, officials should take care to ensure that incentive standards are not watered-down or negotiated out altogether.


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