Sunlight Foundation Reporting Group

Stimulus grantees cited for poor oversight of federal funds

The Carson City Airport Authority, which has benefited in the last four years from more than $13 million in federal funds, is now slated to receive another $9.6 million in stimulus money, even though an independent auditor cited problems earlier this year with how it manages its federal grants.

The airport authority, which saw a board member resign in 2008 while calling for an independent investigation into the authority's directors, is one of dozens of organizations that received funds from the $787 billion American Recovery and Reinvestment Act despite having flaws in their management systems. Overall, federal agencies administering stimulus funds have awarded $119 million to 106 recipients that independent auditors cited in 2009 as having "significant deficiencies" in their ability to administer federal programs, a Sunlight review of Recovery.gov and Federal Audit Clearinghouse data has found.

Government regulations require nonprofits and state and local government agencies that annually spend more than $500,000 in federal funds to undergo audits (called "single audits") to ensure these grantees are able to administer taxpayer funds effectively and efficiently, can detect and prevent fraud, waste, and abuse; and reliably report how they spent the funds. Summary data from the audits are collected and published by the Federal Audit Clearinghouse, Web site published by the Census Bureau, including whether a federal grantee has significant deficiencies in its management of federal funds. Significant deficiencies can vary from failing to file required documents to serious mismanagement of funds and even fraud. To get details on the seriousness of a significant deficiency, one must obtain the complete single audit report, which many agencies will release only after a formal request under the Freedom of Information Act.

According to Office of Management and Budget guidance, single audits are one of the tools that will be used to drive accountability for Federal awards under the Recovery Act. Yet millions have been awarded to recipients that have been flagged for having problems.

"We've been on this for awhile," said Ed Pound, director of communications for the Recovery Accountability and Transparency Board, which tracks stimulus spending and looks for waste, fraud and abuse in the program. "The Federal Audit Clearinghouse is one of sources we look at to measure past performance...we're definitely aware of the issue."

Among the institutions that had significant deficiencies were housing authorities in North Carolina, Georgia, Illinois and California; health care facilities in Pennsylvania, Florida, Washington state, Wyoming and North Dakota; and higher education institutions in Maine, Minnesota, New York and Iowa. For the list of stimulus fund recipients that have had significant deficiencies cited in 2009, click here. To download the data, click here.

Many of the grantees that were cited in 2009 have been receiving federal funds for years. The Carson City Airport Authority has benefited from millions in the past decade even though the city it serves, Nevadas state capital, is only 30 miles away from a much larger airport in Reno that has regular commercial airline traffic. Carson Citys airport, which has no commercial traffic, has received more than $14 million in federal grants since 2000, including $2.9 million in federal funds earmarked by Sen. Harry Reid, D-Nev.

Auditors reviewing the airport authoritys expenditure of money awarded through the Airport Improvement Program, which is managed by the Federal Aviation Administration, found two problems with the authoritys oversight: the majority of accounting functions were performed by a single personauditors warned that errors and fraud could occur and not be detected in a timely manner. The auditors also found that the authority failed to report all its expenditures to the federal government in a timely manner.

The airport authority responded that its limited resources left it unable to hire staff or consultants to mitigate the auditors concerns, though they did agree to implement some of the procedures to reduce the potential for fraud recommended by the auditors.

Neal Weaver, a former board member of the airport authority, resigned his position in 2008 while calling for an independent investigation of how the board oversaw the authority, which he charged with conflicts of interest and operating in violation of the states open meeting laws. He told a reporter for the Carson Times that the board "gets to play with tens of millions of dollars without oversight."

Weaver questioned the necessity of directing stimulus funding to the airport. The funding from the Airport Improvement Program was adequate to maintain and rebuild the runway, he told Sunlight, adding, "We had an airport before this and will continue to have an airport, it has done nothing to add to the community.

An FAA spokesperson refuted Weavers claims and said that funding for the airport is essential to ease the traffic in Reno and that the runway work would be stalled until 2010 if there was no stimulus funding.

As of October 2009, $2.3 million of the $9.6 million in stimulus funds awarded to the Carson City Airport Authority have been paid out by the FAA, creating 35 jobs for the construction of the runway.

When the entire project is finished, it will create 300 jobs and bring in as much as $20 million annually to the community, according to an earlier economic impact study conducted by the airport authority.

The figure of 35 jobs does not represent the number of full-time workers on site. It includes part time construction workers employed by Granite Constructions that was awarded a contract earlier this year. "At any given point of time there are at least 100 people from the construction company that work here, but we've reported lower numbers because not all of them work here full-time," said Casey Pullman, the airport manager in Carson City. "Federal reporting requirements are different and they look at the number of hours employees worked, so the numbers are much lower," he added.

Sunlight has requested other audit reports for stimulus grant recipients and will post these online as we receive them.