Senator Tom Coburn (R, OK) brought up his current gripe at a hearing of the Governmental Affairs Federal Financial Management subcommittee this week, the $687 billion in unspent grant money sitting in accounts all around the country. At the subcommittee meeting he said a large portion of that money is in earmarks that were done improperly. “The money went out and there is no way to get it,” he said — and the reason is that Congress was “careless” in the way it wrote laws.

Coburn released a report on unspent grant money in June. That report points out a very topical example:

Nearly $3 million from a 1991 earmark approved “for various transportation 
improvements in connection with the 1996 Olympics” in Atlanta, Georgia remains 
unspent.  

Coburn calls the whole mess “fraud, waste, and stupidity.” 

The speakers at the hearing mentioned closeout procedures as a serious problem, and indeed it is. Grants recipients have little incentive to file final reports on their grants spending. Their grants are over; they can’t use the money that’s left, and their staff members have moved on to other things. Yet without those final reports saying that all obligations have been met, the unspent money that had been set aside for them can’t be released.

Some agencies have unofficial blacklists for grant recipients who don’t file final reports, and try not to give money to them next time, but earmarking trumps those blacklists. 

Other times, the blacklists can’t be connected to applications. Recipient organizations often divide and reform, rather like amoebas, so they look different when the come back to apply for other grants. Typically this restructuring is not to hide their identities, but to bring together the right expertise to address issues. Nevertheless it results in applications that don’t trigger blacklisting. The people who were not penalized for not filing final reports have no incentive to file them the next time they get grants. 

Those who testified at the hearing — Danny Werfel, the head of OMB’s Office of Federal Financial Management; Elizabeth Harman of FEMA; Nancy Gunderson of the Office of Grants and Aquisition Policy and Accountability at HHS; and Stanley Czerwinski of GAO — all said they’re working on the problem, and gave examples of successes. But Coburn and the committe are right: we need to do more. Coburn has at least one good recommendation to deal with the problem, canceling inactive and expired accounts.  Perhaps the hearing will lead to other good ideas.