What is the big deal about ARRA?

ARRA ARRA ARRA - every conference I attend has someone talking about ARRA.  Every audit team that wants me to cover the Single Audit wants me to talk about ARRA.  What is the big deal?  Everyone is stirred up and agitated.  

Part of the excitement comes as the result of our staid, slow moving profession.  When something new comes up to talk about - everyone who plans conferences is relieved. Believe me, I am one of these people.  You can only talk about Yellow Book independence issues a few times before you get booed off the stage.  A few years ago the hot topic was the PCIE report, then sampling, now ARRA.  We have to make a big deal of something so that people will come back and see us.

Part of the excitement comes from the speed at which the money was distributed and the uncertainty regarding several key requirements of the grant that were meant to enhance accountability and transparency.

A friend of mine who is the director of monitors of subrecipients for a major ARRA funded program here in Texas has been visited by auditors 10 times since the funds were granted.  Calm down, why don't we?

Accountability and Transparency

I absolutely love these concepts and applying them to government programs.  The first line of the 2007 Yellow Book - written by the leader of the GAO at the time - David Walker, says, "The principles of transparency and accountability for the use of public resources are key to our nation's governing processes."  Here here!

But the way these ARRA monies are being treated is unprecedented.  I was part of a meeting in Austin where the GAO auditors from Dallas warned the internal audit directors of the state agencies that they were sending down the funding this week - but expected these agencies to report valid performance measures the next week so they could be posted on the web.
Why so fast?  Well, the political pendulum has swung ... hard.  Under Bush, we bailed out the banks in an effort to keep the economy from collapsing and to free up credit.  My father builds apartments in Houston, and he will tell you that is not what the banks did with the money!  Credit has not freed up and we, the citizens, have no idea what the banks did with their billions.  We did hear that AIG went on a $500,000 spa retreat - expletive - but otherwise we have no idea where our money went.  The public went crazy and Obama doesn't want to see that happen to him.

One of Obama's favorite words is transparency.  He sprinkles it into his speeches and his websites.  And his administration designed the ARRA funded programs to be as transparent as possible.  As such, the programs have to report how many jobs were created and retained and their audit results will be available on the web.  The website www.recovery.gov  is spectacular.  All ARRA audits will undergo a mandatory quality control review at the inspector general level. 

But the bottom line is more of the same

ARRA grants are still federal grants and subject to the same Single Audit requirements.  So, the audit techniques are the same. 

Yes, the compliance supplement has redefined some requirements  - usually surrounding eligibility- but that isn't that big a deal to integrate into your work.  That is the same thing you do when you audit a new grant.

And, yes, the ARRA grants are considered high risk - always.  Which means you will have to add them to your audit plan. 

The biggest excitement has surrounded the performance measures

The most prominent measure on the recovery.gov website is jobs created or retained.  The ARRA monies were intended to supplement the spending already occurring at the grantee level - not replace it.
So the grantees were supposed to use the moneys to do new things that they couldn't afford before - not use the money to do the same things.  For instance, many states are using the money to fund already existing positions and activities and then diverting the money they were going to spend on those positions and activities to fund another activity.  Inadvertently, the ARRA grants have helped many state governments stay afloat during a very rough financial period.  But did they stimulate growth?  HM.  Very questionable.

My buddy who monitors ARRA grants for the state says that in order to show progress on the grants, they took last years service levels and contrasted them with this year's service levels.  He had to come up with this technique on his own because the 10 auditors who visited him last year wanted the numbers - but could give him zero guidance on how to create them.

And the jobs created/retained number has been quite controversial.  Many grantees argued that they would have had to eliminate existing positions without the funding - so shouldn't they brag about that in the performance measure so we could post it to the website and show the public how much bang we were getting for our buck? 

After plenty of wrangling - the feds finally decided to use the metric `jobs funded' and simply count how many people's salaries were being funded by the grant.  My buddy says that the accountants at his agency have creatively reallocated everyone's salaries who even touches these grants to extract the maximum number.  That is not unusual behavior when it comes to performance measures - what gets measured gets done. 

So what's the big deal?

Personally, I don't think much.  I think everyone should just calm down and make sure they have all of their ducks in a row on these grants.  They are going to be looked at very closely and the results will be posted on the web.   But we were going here anyway - moving toward true transparency and accountability with governmental programs and funds.  Maybe it is a just a little quicker than some are comfortable with.
What will be the hot topic next year?  The Single Audit requirements and the Yellow Book are due for an update.  Maybe attestation standards, maybe information technology, maybe CPE requirements.  What an anxiety inducing, wild, fast, dangerous life we auditors lead, eh?  Better stock up on your meds.

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Governmental auditors unite! Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of “The Yellow Book Interpreted” and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors. Whether you are an internal auditor or monitor for a government entity or a CPA doing grant audits, you will enjoy Leita’s humorous take on the complexity of auditing in the government environment.

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