When signing the American Recovery and Reinvestment Act (ARRA), President Obama made clear that "every taxpayer dollar spent on our economic recovery must be subject to unprecedented levels of transparency and accountability." Accordingly, the president has identified five objectives for federal agencies to help ensure accountability and transparency in the distribution and use of stimulus funds. These objectives require that:
* Recovery funds are awarded and distributed in a prompt, fair, and reasonable manner;
* The recipients and uses of all recovery funds are transparent to the public, and that the public benefits of these funds are reported clearly, accurately, and in a timely manner;
* Recovery funds are used for authorized purposes and every step is taken to prevent instances of fraud, waste, error, and abuse;
* Projects funded under the recovery legislation avoid unnecessary delays and cost overruns; and
* Programs meet specific goals and targets, and contribute to improved performance on broad economic indicators.
Title XV of the ARRA is devoted entirely to accountability and transparency requirements. In particular, Section 1511 discusses certifications to be made by governors, mayors, and other chief executive officers with regard to infrastructure investments. Section 1512 addresses the specifics related to recipient reporting to federal agencies on the use of funds, and it includes requirements such as a detailed list of all projects or activities for which recovery funds were expended or obligated, as well as detailed information on any sub-contracts or sub-grants awarded by the recipient. (1)
FEDERAL AGENCY GUIDANCE
To facilitate compliance with the objectives of the accountability and transparency provisions, the president has directed federal agencies to take certain critical steps to implement the act. On April 3, 2009, the Office of Management and Budget (OMB) issued the latest in a series of guidance to federal agencies for carrying out programs and activities enacted by the ARRA. Noteworthy in the guidance is the requirement that the federal agencies responsible for distributing the funds must post all information related to recipient reporting on their agency Web sites, and they are also encouraged to disseminate the information to external stakeholders and to respond to their inquiries about the reporting requirements. Federal agencies are also encouraged to engage state and local governments during the development of any relevant reporting requirements. Reci-pients of federal funds will be reporting on the use of their funds beginning mid-July 2009. The OMB guidance and accompanying memorandum can be found at http://www.recovery.gov/sites/default/files/m09-15.pdf.
DIRECTIVES TO RECIPIENT STATE AND LOCAL GOVERNMENTS
While the guidance released by OMB is directed at federal agencies charged with distributing the funding to recipients, it contains significant information for recipients themselves, including state and local governments. In particular, Section 2 of the guidance elaborates on the recipients reporting requirements set forth in Section 1512 of the ARRA, and includes a discussion of items such as the types of reporting that will be required, reporting on the number of jobs created, and how the information will be collected. Also of note, Section 5.6 of the guidance discusses what tools federal agencies should employ to audit the use of the federal awards distributed to states and localities.
In addition, OMB has solicited comments from both federal agencies and funding recipients, including states and localities, on the standard data elements under consideration for use in complying with the reporting requirements of the ARRA. The standard data elements for reports under Section 1512 of the ARRA was developed to serve as a government-wide standard data set for federal agencies to use in collecting information required under Section 1512. The notice can be found at http://www.whitehouse.gov/omb/assets/fedreg_2009/ 040109_in_formationcollection.pdf.
Once the standard data elements are approved, each federal agency must require its recipients of grants, cooperative agreements, and loans to report the information and data electronically through a central government-wide portal or through an agency collection process. Information on these and all federal agency reporting procedures will also be posted to http://www.federalreporting.gov within 45 days of a reporting deadline.
Finally, the guidance includes Appendix 9, "Interim Final Guidance for Federal Financial Assistance," which sets out guidance for state and local governments on the application of the "Buy American" requirements.
THE RECOVERY ACCOUNTABILITY AND TRANSPARENCY BOARD
To help further carry out the accountability and transparency requirements of the act, the ARRA created the Recovery Accountability and Transparency Board (Board) to coordinate and conduct oversight of funds distributed under the new law in order to prevent fraud, waste and abuse. The board includes a chairman, Earl E. Devaney, appointed by the president, and ten inspectors general specified by the act. The board has a series of functions and powers to assist it in the mission of providing oversight and promoting transparency regarding expenditure of funds at all levels of government. Quarterly and annual reports on the use of ARRA funds and any oversight matters will be issued as part of the board's work. The board may also make recommendations to agencies on measures to avoid problems and prevent fraud, waste, and abuse. To address issues quickly, the board may send flash reports to the president and Congress on potential management and funding problems that require immediate attention (see http://www.recoverygov/?q=content/ig-reports).
WEEKLY REPORTS BY FEDERAL AGENCIES
Federal agencies receiving ARRA funds submitted weekly cumulative reports between March 3 through May 12, detailing their latest recovery activities (see http://www.recovery.gov/?q= content/agency-weekly-reports). These reports give regular updates to government officials, Congress, and the public on how much is being spent and on what, and list out the agency's major actions.
RECOVERY.GOV WEB SITE
Recovery.gov is the main vehicle for finding out how funds authorized under the new law are being spent to rejuvenate our economy This Web site contains information on accountability and transparency, and both federal and state actions related to distributing and reporting on the funds used.
States and localities have begun to receive a portion of the stimulus funding and are now putting those funds to use on shovel-ready projects to help stimulate the national, state, and local economies. It is important to recognize, however, that the administration, Congress, and the public will be giving considerable scrutiny to how stimulus funds are ultimately used. The Nation-al Conference on State Legislatures has put together a document summarizing the actions states are taking to provide the necessary accountability and transparency regarding the implementation and spending of these funds. The document can be found at http://www.ncsl.org/programs/fiscal/stimulusoversight.htm. In addition, the Government Accountability Office (GAO) has reported that it is taking steps to ensure accountability by asking the public, government workers, and contractors to identify improper activities or weaknesses in programs that warrant scrutiny and report this information to FraudNet, which is an e-mail, telephone, and fax hotline that processes allegations about federal agencies and federally funded programs (www.gao.gov/fraudnet/fraudnet.htm). The GAO is also conducting bimonthly reviews on how funds are used by selected states and localities. This information can be found at http://www.gao.gov/recovery/.
Government finance professionals are encouraged to work closely with their state and local elected officials, city managers, and city attorneys to ensure that all reporting required by the ARRA is carried out in a thorough and efficient manner. The Government Finance Officers Association (GFOA) will continue to monitor the developing accountability and transparency requirements of the new law and post updated information on its Web site at www.gfoa.org.
COMING IN JULY: CHANGES TO MUNICIPAL BOND DISCLOSURE PRACTICES
Beginning July 1, 2009, cities and towns, their agents, and other parties that are responsible for providing continuing disclosure documents pursuant to their continuing disclosure agreements will have to file at a single new location operated by the Municipal Securities Rulemaking Board (MSRB). This new Web-based single filing location, the Electronic Municipal Market Access system (EMMA), was created by the MSRB and is supported by many participants in the municipal securities industry including state and local government associations.
Currently, Securities and Exchange Commission (SEC) Rule 15c2-12 mandates that issuers of municipal securities file continuing disclosure documents (annual financial information and information related to a material event, which the SEC defines as an occurrence or development relating to outstanding securities, the issuer of the securities, or other parties) at four nationally recognized municipal securities information repositories (NRMSIRs). In December 2008, the SEC approved changes to continuing disclosure filing requirements for municipal securities issuers solely to create a single filing location for disclosure materials. For the vast majority of governmental entities, the SEC's actions do not add disclosure requirements on municipal securities issuers. However, for issuers and other parties with less than $10 million in municipal securities outstanding, annual financial and operating information that previously would have been provided to investors upon request will be submitted to EMMA after July 1,2009.
Issuers are encouraged to visit the EMMA Web site at www.emma, msrb.org to become familiar with the system. The MSRB has also announced that it will implement a pilot program to help issuers learn the system before its use is mandated on July 1.
WHAT ISSUERS NEED TO KNOW
The SEC's action to create a single filing location replaces the need for governments to file disclosure documents at all four NRMSIRs. Beginning July 1, an issuer will meet its continuing disclosure responsibilities, as dictated by their continuing disclosure agreements, for previously issued and newly issued bonds by filing at EMMA. Issuers are encouraged to consult with either their bond or disclosure counsel about their specific continuing disclosure agreements and ensure that all new agreements clearly state that continuing disclosure filings will be made with EMMA.
Issuers will register with the system and identify and upload documents that will then be available to the public and investors. Continuing disclosure documents are submitted to EMMA is as a PDF file, and there are no costs associated with making EMMA filings. Additionally, issuers and other parties will be able to submit past annual financial filings and material event notices to EMMA, as well as voluntary filings.
INFORMATION AVAILABLE TO THE PUBLIC
In addition to creating a single filing location, the SEC also acted to ensure free public access to continuing disclosure documents issuers file through EMMA. The EMMA Web site currently houses official statements submitted by underwriters, advance refunding documents, and real-time and historic trade data for municipal bonds. Beginning July 1, continuing disclosure documents submitted to EMMA will be matched to the official statements that were prepared at the time that the bonds were sold. EMMA will provide investors with a single source of consolidated disclosure and bond trading information.
EMMA will make all continuing disclosure documents submitted to the system available to the public within 15 minutes of submission. Neither the EMMA system nor the MSRB will change or adjust submissions; the documents will be posted on the EMMA Web site exactly as sent by the issuer or another party However, issuers and obligors will have the opportunity to review submitted documents and resubmit documents to EMMA to correct any errors.
Users of EMMA can search, view, and download all documents related to a particular issue or security. All information submitted by issuers will be displayed chronologically on EMMA for each security
(1.) For the specific state and local government reporting requirements, see Title XV of the American Recovery and Reinvestment Act, available at http://frwebgate.access.gpo.gov/cgi- bin/getdoc.cgi?dbname=111_cong_bills&docid=f:hlenr.pdf.
SUSAN GAFFNEY is director of the GFOA's Federal Liaison Center in Washington, D.C. BARRIE TABIN BERGER is the assistant director of the GFOA'S Federal Liaison Center.…