General Oversight Provisions in the American Recovery and Reinvestment Act of 2009 (ARRA): Requirements and Related Issues
Released: 2009-05-11T00:00:00

Summary: In the wake of a rapidly deteriorating economic picture and year-long recession that the Congressional Budget Office has called the most severe since World War II, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). This report discusses ARRA's "general oversight provisions" and several related issues for Congress. For purposes of this report, the term "general oversight provision" means an oversight-related provision that addresses multiple programs, agencies, or appropriations accounts. Provisions that are specific to a single program or appropriation (e.g., appropriations set-asides and reporting requirements) are excluded from the report's scope.

The report includes tabular presentations of ARRA's general oversight provisions. The provisions provide for, among other things, establishment of a Recovery Accountability and Transparency Board, numerous reporting and evaluation requirements, and increased resources for agency Inspectors General (IGs) and the Government Accountability Office (GAO).

Even before considering experience with implementation, several broad issues related to ARRA oversight may be of interest to Congress. These include assessments of ARRA's role in achieving economic objectives. Typical objectives of a fiscal stimulus policy relate to increasing economic activity in the short term, compared to what would have happened without a stimulus. In addition, some stakeholders have emphasized that stimulating the economy in the short term alone is not a sufficient definition of "success." From this perspective, the manner in which spending, tax, and other public policies are implemented, and also the impacts of these policies, may be important.

All of these perspectives appear to have been included among the law's explicit purposes and "general principles concerning use of funds." Given ARRA's direction to "commenc[e] expenditures and activities as quickly as possible consistent with prudent management," difficult trade-offs among goals may be inevitable. Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation. The experience with ARRA also may offer lessons learned for the "normal," non-ARRA systems of oversight.

Beyond the immediate situation, additional oversight issues for Congress may relate to longer-term questions. These include how to build and monitor capacity within agencies to respond effectively to crises. Questions also may arise regarding how to build and monitor capacity in agencies and government overall to anticipate crises, mitigate their risks, and avoid preventable crises. This report analyzes these and other issues after reviewing how the oversight provisions were developed and providing an overview of the enacted provisions themselves, including related appropriations and reporting requirements.

The topic of subsequent implementation of the oversight provisions, including actions by executive agencies and the Office of Management and Budget (OMB), is not included in the scope of this report. This report will be updated as events warrant.


paragraphs: In the wake of a rapidly deteriorating economic picture and year-long recession that the Congressional Budget Office (CBO) has called the most severe since World War II, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA). This report discusses ARRA's "general oversight provisions" and several related issues for Congress. For purposes of this report, the term "general oversight provision" means an oversight-related provision that addresses multiple programs, agencies, or appropriations accounts. Provisions that are specific to a single program or appropriation (e.g., appropriations set-asides and reporting requirements) are excluded from the report's scope. The provisions provide for, among other things, establishment of a Recovery Accountability and Transparency Board, numerous reporting and evaluation requirements, and increased resources for agency Inspectors General (IGs). 

The topic of subsequent implementation of the oversight provisions, including actions by executive agencies and the Office of Management and Budget (OMB), is not included in the scope of this report. Nevertheless, even before considering experience with implementation, several broad issues related to ARRA oversight may be of interest to Congress. These include assessments of ARRA's role in achieving economic objectives. Typical objectives of a fiscal stimulus policy relate to increasing economic activity in the short term, compared to what would have happened without a stimulus. In addition, some stakeholders have emphasized that stimulating the economy in the short term alone is not a sufficient definition of "success." From this perspective, the manner in which spending, tax, and other public policies are implemented, and also the impacts of these policies, may be important. All of these perspectives appear to have been included among the law's explicit purposes and "general principles." 

Given ARRA's direction to "commenc[e] expenditures and activities as quickly as possible consistent with prudent management" ( P.L. 111-5 , Section 3), difficult trade-offs among goals may be inevitable. Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation. The experience with ARRA also may offer lessons learned for the "normal" systems of oversight that correspond to non-ARRA-related funding and operations. Beyond the immediate situation, additional oversight issues for Congress may relate to longer-term questions. These include how to build capacity within agencies to respond effectively to crises. Questions also may arise regarding how to build capacity in agencies and government overall to anticipate crises, mitigate their risks, and avoid preventable crises. This report analyzes these and other issues after reviewing how the oversight provisions were developed and providing an overview of the enacted provisions themselves, including related appropriations and reporting requirements. 
subsections: section_title: Development of ARRA's Oversight Provisions
paragraphs: Examination of how ARRA and its general oversight provisions were developed may provide perspectives on congressional objectives associated with the legislation. In addition, reflection on the development of the provisions may suggest opportunities to make enhancements in ARRA's existing oversight provisions or to address any perceived gaps in the provisions' coverage of significant matters.
subsections: section_title: Obama Transition Planning for Fiscal Stimulus and Oversight
paragraphs: On November 7, 2008, then President-elect Barack Obama held his first news conference since the presidential election. In view of continued monthly job losses, he called for a "fiscal stimulus plan that will jump-start economic growth." In response to a question about the prospect that "a stimulus package may be in trouble" during the remainder of the 110 th Congress, the President-elect said "[i]f it does not get done in the lame-duck session, it will be the first thing I get done as President of the United States." Later that month, he announced he had directed his transition "economic team to come up with an Economic Recovery Plan." On December 23, 2008, Vice President-elect Joe Biden said "there will be no earmarks in this economic recovery plan." After the holidays, President-elect Obama referred to the plan as an "American Recovery and Reinvestment Plan." He reiterated on January 6, 2009, that under the economic recovery plan, "[w]e are going to ban all earmarks." He also said that the plan "will set a new higher standard of accountability, transparency, and oversight."

section_title: Legislative Action in the 111th Congress on Stimulus and Oversight
subsections: section_title: Planning for Stimulus Legislation and Related Oversight Provisions
paragraphs: In the wake of a rapidly deteriorating economic picture, CBO released an economic forecast on January 7, 2009. CBO issued the forecast "several weeks earlier than usual to aid the new [111 th ] Congress in its deliberations." The Senate Budget Committee held a hearing on the forecast the next day. In the forecast, CBO said that a "downturn in housing markets across the country, which undermined the solvency of major financial institutions and severely disrupted the functioning of financial markets, has led the United States into a recession that will probably be the longest and the deepest since World War II." 

To help establish a basis for Congress to consider alternative courses of action, the forecast was done under an assumption that current laws and policies regarding federal spending and taxation would remain the same. CBO noted, for example, that the forecast did not include "the effects of a possible fiscal stimulus package." CBO anticipated that the recession, which began in December 2007, would last until the second half of 2009. Economic output over the next two years, CBO estimated, would average "6.8 percent below its potential—that is, the level of output that would be produced if the economy's resources were fully employed." CBO explained that this gap in gross domestic product (GDP)—a "GDP gap"—is "the difference between real (inflation-adjusted) gross domestic product and its estimated potential level (which corresponds to a high level of resource—labor and capital—use)." In accompanying testimony, CBO's acting director said that "[m]any economists believe that a stimulative fiscal policy (that is, an increase in spending or reduction in taxes designed to foster faster economic growth in the short run) is desirable under the current economic conditions." 

Congress soon considered legislation intended to diminish this GDP gap and, in the process of doing so, to bolster employment and address perceptions of other economic and policy problems. An early version of the legislation reportedly was drafted by then President-elect Barack Obama's transition team working with Members of the House Committee on Appropriations. 

On January 14, 2009, then OMB Director-designate Peter Orszag appeared before the Senate Committee on Homeland Security and Governmental Affairs for a confirmation hearing. Among other things, he was asked about his plans for oversight of the economic stimulus package that was anticipated to be considered at the beginning of the 111 th Congress. Director-designate Orszag said the incoming Administration would favor creating a special oversight board. The board would be composed of relevant IGs and chaired by a newly established White House position of Chief Performance Officer (CPO). The board "would review problems and ... would conduct regular meetings to examine specific problems that might be identified." Director-designate Orszag also said the Administration planned "to create a website that will contain information about the contracts and include PDFs [of] contracts themselves." 

Soon after President Obama was inaugurated, the Obama Administration established a website called Recovery.gov in anticipation of enactment of stimulus legislation. The home page explained the Administration's future intentions for the website: "Check back after the passage of the American Recovery and Reinvestment Act to see how and where your tax dollars are spent. An oversight board will routinely update this site as part of an unprecedented effort to root out waste, inefficiency, and unnecessary spending in our government."

section_title: Action on Legislation and Oversight Provisions
paragraphs: Numerous oversight provisions subsequently were included in economic stimulus legislation considered by the House and Senate. On January 21, 2009, after mark-up of a draft bill by the House Committee on Appropriations, the committee issued a press release that characterized the stimulus as providing "unprecedented accountability" (see Box 1 ).

On January 26, 2009, the American Recovery and Reinvestment Act of 2009 ( H.R. 1 , 111 th Congress) was introduced in the House. Shortly before introduction, the White House reportedly had released a document describing several goals of the legislation, both in terms of economic stimulus and achievement of various public policy objectives relating to energy, health care, education, infrastructure, tax policy, income maintenance, and accountability. On January 28, the House passed an amended version of the measure by 244-188. Senate versions of components of ARRA were introduced and reported on January 27 ( S. 336 , with written report) and January 29 ( S. 350 ). 

At the same time, general concerns had been expressed about the capacity of agencies and "a depleted contracting workforce" to spend funds rapidly "while also improving competition and oversight." In addition, the question had been raised whether IGs and the Government Accountability Office (GAO) have sufficient resources to conduct oversight of the stimulus legislation. Situated in the context of these concerns, however, many observers felt quick action on the stimulus legislation was critical. According to one press report, "[w]hile economists remain divided on the role of government generally, an overwhelming number from both parties are saying that a government stimulus package—even a flawed one—is urgently needed to help prevent a steeper slide in the economy."

The Senate amended the House version and passed an amendment in the nature of a substitute on February 10, 2009, by a vote of 61-37. A conference report, which included a joint explanatory statement, was filed on February 12, 2009, stating that it contained no congressional earmarks, limited tax benefits, or limited tariff benefits. The conference report was agreed to in the House on February 13, 2009, by a vote of 246-183, with one Member voting present. On the same day, the Senate agreed to the conference report by a vote of 60-38, clearing the measure for presentment to the President. President Obama signed the measure into law on February 17, 2009.

section_title: General Oversight Provisions in ARRA
subsections: section_title: Context in Which Oversight Provisions Will Operate
paragraphs: Several aspects of ARRA establish the context in which the legislation's general oversight provisions will operate. These include the structure of the legislation, the legislation's explicit purposes and "general principles," and the scale of the oversight task at hand.
subsections: section_title: Structure of Legislation
paragraphs: ARRA was enacted in two divisions. Division A, titled "Appropriations Provisions," included many discretionary appropriations provisions in 16 titles. Some of the appropriations were provided for IGs and other oversight-related institutions. Division A also included substantive legislative provisions in some titles. These included provisions to, among other things, promote health information technology (Title XIII), establish a State Fiscal Stabilization Fund (Title XIV), and create a variety of mechanisms and entities focused on oversight (Title XV). A title containing general provisions for Division A focused on oversight (Title XVI). Division B, titled "Tax, Unemployment, Health, State Fiscal Relief, and Other Provisions," included seven titles. Titles in Division B appeared to contain very few general oversight provisions, as discussed later.

References to "the Act" within ARRA generally refer to either Division A or Division B, not to the entire law. Therefore, most of ARRA's substantive general oversight provisions that are located in Titles XV and XVI of Division A appear to cover activities and provisions associated with Division A rather than the entire law. Many, but not all, oversight-related appropriations also focused on oversight of funding provided by Division A, as opposed to the entire law.

section_title: ARRA's Purposes and "General Principles"
paragraphs: A conventional approach for oversight is to assess a program, agency, or law in terms of its purposes and related objectives. ARRA identified several explicit purposes and "general principles concerning use of funds," which are excerpted in Box 2 .

As discussed later in this report, the purposes and principles might be thought of as falling roughly into three categories: 

macroeconomic objectives related to recovery from the recession; discrete programmatic, microeconomic, and other policy objectives; and process objectives, which include balancing speed (to address macroeconomic objectives) with "prudent management" (e.g., to minimize waste and fraud). 

Many of ARRA's specific appropriations and nonfunding provisions, which concern myriad policy areas, might be viewed as falling roughly into these categories, as well.

In some cases, there may be ambiguity around, or disagreement about, the specific purposes and objectives of a law and how to define "success" in its implementation. To the extent these phenomena may be evident, stakeholders may believe other criteria are important to consider when overseeing or evaluating a program, agency, or law. Unintended consequences also may be of interest or concern.

section_title: Scale of Oversight Task: CBO Estimates of ARRA Impacts
paragraphs: In response to a congressional request, CBO prepared a year-by-year estimate of the short-term economic impacts of ARRA. In addition, CBO included tables that showed estimated economic "multipliers" corresponding to many provisions, and, in addition, the agency's cost estimate for the conference agreement on H.R. 1 . In the letter, CBO estimated that ARRA would increase the federal government's budget deficit by an overall total of $787.2 billion over 11 years. CBO also broke down the legislation's estimated fiscal impacts on spending and revenues.

With regard to spending, CBO estimated that Division A of the legislation would increase discretionary spending by $308.3 billion over the 11-year period from FY2009 through FY2019. Nearly half of the total amount would be spent by the end of FY2010 (September 30, 2010), and nearly 72% would be spent by the end of FY2011 (September 30, 2011). CBO estimated that Division B would increase direct spending by $267.0 billion over the same 11-year period. Nearly 73% of this total would be spent by the end of FY2010, and over 91% would be spent by the end of FY2011. Overall, spending from the perspective of the federal government's unified budget was estimated to total $575.3 billion from FY2009 through FY2019. 

CBO estimated that Division A would decrease revenues by $0.1 billion over 11 years. Division B would decrease net revenues by $211.8 billion over 11 years, with $244.9 billion in revenue reductions occurring by the end of FY2010. The tax provisions of Division B's Title I accounted for the vast majority of these estimated decreases. The total revenue decrease would be $211.9 billion over 11 years. 

section_title: Two Categories of General Oversight Provisions
paragraphs: ARRA's general oversight provisions might be grouped into two categories: 

nonfunding provisions, which established federal agencies, required agencies to undertake certain tasks, established procedures that must be followed, etc.; and funding provisions, which provided appropriations to oversight-related entities including IGs, GAO, and the newly established Recovery Accountability and Transparency Board.

General oversight provisions that fall within each category are discussed in the sections below.
subsections: section_title: Nonfunding General Oversight Provisions
paragraphs: Nonfunding general oversight provisions appeared to be included only in Division A, chiefly in Titles XV and XVI. Nevertheless, they were included in considerable variety. Among other things, these substantive provisions established new oversight-oriented entities like the Recovery Accountability and Transparency Board (RATB), enumerated diverse reporting requirements for federal agencies and nonfederal recipients of funds, and tasked RATB, IGs, and GAO with numerous duties. Some highlights of these statutory provisions and related reporting requirements are summarized in bulleted form, below. A more comprehensive tabular presentation of provisions, their ARRA citations, and related reporting requirements, including when ARRA requires specific information to be posted on the Recovery.gov website, is provided in Table B -1 , in Appendix B .
subsections: section_title: IG and GAO Reviews and Reports
paragraphs: IGs are required to review "any concerns raised by the public about specific investments using funds made available in [Division A]" and relay findings to agency heads. (Title XV, Sections 1514 and 1515). The Comptroller General is required to conduct bimonthly reviews on the use of funds made available in Division A by selected states and localities. (Title IX, Sections 901 and 902).

section_title: Reports on Use of Funds
paragraphs: Recipients of funds are required to report certain information within 180 days of ARRA's enactment, where recipient is defined as a state or any entity "other than an individual" that receives funds directly from the federal government from appropriations in Division A. (Title XV, Section 1512(c)). Federal agencies are required to publicly report information submitted by funding recipients to the agency. (Title XV, Section 1512(d)). State and local governments' reporting and recordkeeping may be funded, at least in part, by flexibility granted to federal agencies to adjust applicable limits on administrative expenditures for federal awards. (Title XV, Section 1552).

section_title: State and Local Certification
paragraphs: Chief executives of state and local governments are required to certify that infrastructure investments have "received the full review and vetting required by law and that the chief executive accepts responsibility that the infrastructure investment is an appropriate use of taxpayer dollars." (Title XV, Section 1511).

section_title: Establishment and Functions of RATB
paragraphs: RATB is established "to coordinate and conduct oversight of covered funds to prevent fraud, waste, and abuse." RATB's membership is to consist of at least 10 IGs, including, or in addition to, a chairperson, who may be designated or appointed by the President according to certain criteria (Title XV, Sections 1521 and 1522). RATB has several enumerated functions, including to review whether reporting for contracts and grants "meets applicable standards" and "specifies the purpose of the contract or grant and measures of performance." The board also is required to coordinate oversight activities with the Comptroller General and state auditors. RATB is tasked with four categories of reporting requirements. (Title XV, Sections 1523 and 1528). RATB is required to make recommendations to agencies "on measures to prevent fraud, waste, and abuse relating to covered funds." An agency that receives a RATB recommendation is required to submit a "responsive report" to the President, the congressional committees of jurisdiction, and RATB within 30 days of receipt. (Title XV, Section 1523). RATB is required to conduct audits and reviews, and in doing so, may issue subpoenas to compel testimony from nonfederal officers and employees. RATB is authorized to hold public hearings and may enter into certain contracts. RATB has authority to transfer up to 100% of its appropriated funds to any office of inspector general, OMB, the General Services Administration, and an independent advisory panel established by Section 1541 of Title XV. (Title XV, Section 1524). RATB is required to establish a website. (The website was established by the Obama Administration as Recovery.gov in anticipation of enactment of ARRA.) As agencies implement ARRA, the website is to contain, among many other things, considerable information about how funds are allocated and used. Fifteen specific requirements for the website are identified in one provision of Title XV, and other provisions in Division A describe additional information that is required to be posted on, or linked to, the RATB website. (Title XV, Section 1526). IGs are instructed that nothing in the provisions related to RATB shall affect the independent authority of an IG "to determine whether to conduct an audit or investigation of covered funds." An IG's decision "shall be final." (Title XV, Section 1527).

section_title: Additional Oversight Provisions
paragraphs: Contracts funded under Division A are required to be awarded as fixed-price contracts through the use of competitive procedures "to the maximum extent possible," and exceptions are required to be posted on RATB's website. (Title XV, Section 1554). The Council of Economic Advisers, an entity in the Executive Office of the President, is required to submit quarterly reports to the House and Senate Appropriations Committees that "detail the impact of programs funded through covered funds on employment, estimated economic growth, and other key economic indicators." (Title XV, Section 1513). Employees of nonfederal employers receiving funds are granted certain whistleblower protections when disclosing certain information to RATB, an IG, the Comptroller General, a Member of Congress, or other specified entities and persons. (Title XV, Section 1553).

section_title: Funding Provisions with Appropriations for IGs, GAO, and RATB
paragraphs: Appropriations to IGs, GAO, and RATB were included predominately in Division A. In total, the appropriations provided to these oversight-oriented entities summed to $363.75 million. Highlights of these appropriations are discussed here. A more comprehensive listing of the various oversight entities for which ARRA provided funds is presented in Table C -1 , located in Appendix C . 

Twenty-three IGs received $254.75 million in 25 separate appropriations. Sixteen IGs in all 15 executive departments received appropriations, ranging from a single appropriation of $1 million for the Department of Veterans Affairs to two appropriations totaling $48.25 million for the Department of Health and Human Services. IGs in an additional seven independent agencies also received appropriations. 

ARRA provided the funding with widely varying periods of availability. For the IG at the Department of State, for example, funds are available until the end of FY2010. Other IGs variously have funds available until the end of FY2011, FY2012, FY2013, or "until expended" (i.e., "no-year" funds). GAO received $25 million, available through the end of FY2010, and RATB received $84 million, available through the end of FY2011. 

Some of the appropriations were designated for specific purposes, chief among them oversight of programs, grants, and projects funded by ARRA. Other appropriations were essentially supplemental increases without a restrictive specification of purpose. RATB has authority to transfer up to 100% of its funds to any office of inspector general, OMB, the General Services Administration, and an advisory panel for RATB that ARRA established. 

section_title: Potential Issues for Congress
paragraphs: With enactment of ARRA, a flurry of activity commenced in executive agencies and the Executive Office of the President. Further requirements and guidance concerning ARRA implementation were forthcoming from the White House and OMB. These documents focused especially on issues related to oversight, accountability, and transparency. Some of the requirements also went beyond ARRA's statutory requirements. 

On February 18, 2009, OMB issued to agencies "initial implementing guidance" regarding ARRA, including numerous reporting requirements, in a 62-page document. Some of the required information is to be posted on Recovery.gov and agency-specific ARRA-related websites. A month later, President Obama issued a presidential memorandum entitled "Ensuring Responsible Spending of Recovery Act Funds." The memorandum directed agencies in how to use "available discretion" when allocating and spending certain ARRA-related funding. The memorandum also directed agencies to disclose certain communications with federally registered lobbyists. On April 3, 2009, OMB issued "updated implementing guidance" to agencies in a 175-page document. Further guidance from OMB and RATB is expected. 

In addition, the White House announced the designation of RATB's chairperson (Department of the Interior IG Earl E. Devaney) and the board's full membership in February and March 2009, respectively. The Obama Administration also identified a number of leadership roles for purposes of ARRA implementation (e.g., the appointment of Mr. Edward DeSeve to a White House coordination role for ARRA implementation). Several congressional committees have incorporated ARRA into their oversight agendas and convened hearings. 

Based on experience with ARRA implementation and other emerging developments, Congress may revisit the structure and contents of ARRA's general oversight provisions. Even before considering experience with implementation, however, several broad issues related to ARRA oversight may be of interest to Congress.
subsections: section_title: Oversight and Crises: Short- and Long-Term Perspectives
paragraphs: In the event of a crisis to which Congress, the President, and federal agencies feel compelled to respond, several challenges may present themselves. Some challenges might be characterized as relatively short term. Others may involve a longer-term orientation.

Among the short-term challenges, in the present context, is the question of how to balance speed (to address macroeconomic objectives) with "prudent management" (e.g., to minimize waste and fraud). Other challenges in formulating a response to a crisis occur when allocating funding during budget execution. When allocating resources to specific projects and priorities, how should the federal government reconcile values of accountability, efficiency, effectiveness, transparency, public participation, fairness, and equity? Oftentimes in such circumstances, values "trade off" against each other. In making these judgments, agencies and policy makers typically have little time for planning or reflection. 

For purposes of oversight, prioritization likely will be necessary. The need to prioritize raises a number of difficult questions. Which policy areas (e.g., transportation, health care information technology) or processes (e.g., contracting, grant management) should receive initial attention? Which should receive the most attention? Also, what types of oversight activity will be most effective at preventing future problems, catching current problems when changes still may be made, or identifying problems after the fact? Some of these shorter-term issues are explored in greater detail under subsequent headings.

Some longer-term issues include questions of how to build the capacity of federal agencies, Congress, and the President to better prepare for and respond to crises. For example, concerns have been expressed by some observers for years about the adequacy of agency capabilities and workforces in areas such as contract management and program evaluation. To address longer-term issues like these, Congress might explore advantages and disadvantages of options for assessing (or grading) the adequacy of agency management capabilities, both under "normal" circumstances and for contingencies. If Congress wished to consider related options, Congress might explore how systematic, periodic, and transparent such assessments could be.

In addition, and arguably no less significant, questions arise of how to anticipate, avoid, and mitigate preventable crises. For example, the National Commission on Terrorist Attacks Upon the United States, generally known as the 9-11 Commission, described an aspect of this capability as "institutionalizing imagination." Organizational, procedural, and system-related options might be explored to address any of these questions.

section_title: Overseeing Extent to Which ARRA Meets Objectives
paragraphs: A typical purpose of oversight is to assess the extent to which an agency, program, or law is meeting its objectives. Through a variety of tools and approaches, Congress may learn what seems to be working well or not well, where more study may be necessary, and about consequences that may not have been intended. Furthermore, both oversight activity and the prospect of scrutiny may prompt behavior changes by agencies and nonfederal actors to address areas of concern. 
subsections: section_title: Potential Frameworks for Evaluation
paragraphs: As noted earlier, ARRA specified several explicit purposes and "general principles concerning use of funds" (see Box 2 , earlier in this report). These purposes and principles might be thought of as falling into three general categories: 

macroeconomic objectives (e.g., creating or saving jobs; other indicators of economic activity affected by a reduction of the GDP gap, compared to situation without stimulus); programmatic, microeconomic, and other discrete policy objectives (e.g., impact on public policy outcomes in myriad policy areas addressed by ARRA); and process objectives (e.g., quick action; transparency; prudent management; low levels of waste, fraud, error, and abuse). 

ARRA also could be examined through the lens of additional or different criteria, which may be based on corresponding views about the proper goals of public policy. For example, alternative criteria could be used if an observer perceived the law's specified purposes as not being sufficiently comprehensive. Certain non-governmental and non-ARRA activities, such as scams perpetrated on the public by impersonators of federal agencies and personnel, also may be of concern for oversight purposes.

For objectives related to the first two general categories, many quantitative and qualitative data may be informative, including data from metrics, studies, and program evaluations. For example, in testimony before the Senate Budget Committee, CBO identified three criteria for judging the effectiveness of a fiscal stimulus policy: timeliness (i.e., the increase in aggregate demand caused by a stimulus should match the period when there is a GDP gap); cost-effectiveness (i.e., for a given budgetary cost, the increase in aggregate demand should be maximized, in order to bring real GDP as close as possible to potential GDP and thereby diminish the GDP gap); and consistency with long-term budget objectives (i.e., a short-term stimulus should not significantly exacerbate the nation's long-run fiscal imbalance). 

For the third general category, relating to process objectives, a typical inference is that effective implementation (e.g., balancing speed with prudent management) increases the probability of achieving objectives associated with the first two categories. Nevertheless, some aspects of speed or prudent management may prove to be more important than others, or to trade off against each other (see related discussion further below). Experience with implementation may yield corresponding "lessons learned."

section_title: Likely Considerations
paragraphs: In assessing the extent to which ARRA meets its objectives, several related considerations likely will be significant. For example, a frequent challenge with metrics and evaluations is estimating the impact of a policy. That is, did a policy intervention such as ARRA (or one of its constituent parts) change the state of affairs for the better, compared to what would have happened without the policy intervention? The task of validly estimating an answer to this question may require grappling with another, related question: to what extent are observed outcomes due to the policy intervention, as opposed to other factors? In order to estimate ARRA's impact, it therefore may be necessary to make comparisons between observed data, on one hand, and estimates of what would have happened in the absence of ARRA, on the other. 

From a macroeconomic perspective, for example, what impact is ARRA having on GDP, employment, and other indicators of economic activity, compared to what would have happened without a fiscal stimulus? What often makes this evaluation difficult is that experience without a fiscal stimulus, under identical conditions, is not observed. In addition, other factors unrelated to the stimulus may affect macroeconomic results or modify the stimulus' potential impact. For example, CBO cited the importance of an assumption in its March 2009 economic forecast, which included the estimated impact of ARRA. Specifically, the forecast assumed "that financial markets will begin to function more normally and that the housing market will stabilize by early next year. The possibility that financial markets might not stabilize represents a major source of downside risk to the forecast." Because a number of such factors may influence overall economic results, some level of uncertainty arguably is unavoidable in making any estimates of ARRA's impact.

Another potential consideration relates to trade-offs among ARRA's multiple objectives. A frequent complication of multidimensional goals (e.g., speed, effectiveness, efficiency, transparency, fairness, and accountability) is that some goals may trade off against each other. For example, the use of speed in the obligation of funds has been seen as essential for economic recovery. Greater speed may promote economic stimulus, but at a cost of some efficiency in the use of tax dollars to achieve public policy outcomes in discrete areas. Speed also may increase the risk of waste or fraud, particularly when agency capacities to handle a sudden infusion of funding may be in question. On the other hand, greater scrutiny and accountability may diminish speed and therefore economic stimulus. They also may increase or decrease efficiency and effectiveness, depending on whether the nature and level of scrutiny are adequately calibrated. When governmental decision makers evaluate policy options and make choices, they implicitly make trade-offs. Decision making regarding ARRA most likely will be no exception. The reconciliation of trade-offs in decision making may be informed by policy analysis and management of risks. Ultimately, however, judgments about trade-offs arguably always are informed by an observer's priorities, beliefs, values, and ethics.

A third consideration relates to assessing what is realistically achievable in the short to medium term for each of the three general categories of objectives that were outlined above (i.e., macroeconomic, policy-specific, and process). With respect to process objectives, for example, a subject of considerable attention has been how to build the capability of the Recovery.gov website to provide full transparency for federal funds. Data availability, however, hinges on a number of complex factors, including legacy information technology systems, disparate state and federal systems and data definitions, uneven data quality, and a need for effective project management across a variety of jurisdictions. In that light, it is unclear how much capability may be realistically achievable by the end of FY2010, at which point CBO estimated nearly half of ARRA's discretionary spending will have been spent. In building the capacity of Recovery.gov, the experience of implementing the USASpending.gov website may in some ways be instructive with regard to data availability and quality.

section_title: Assessing Oversight Systems, Coverage, and Objectives
subsections: section_title: Potential Questions Regarding ARRA Oversight
paragraphs: An Obama Administration official has called ARRA "the largest peacetime economic expansion program in the country's history." The Administration and Congress negotiated numerous general oversight provisions for inclusion in the legislation. ARRA's oversight provisions—a collection of new institutions, processes, systems, and resources—supplement the federal government's existing systems of oversight in numerous respects. Some of ARRA's provisions cover all government operations funded by Division A (e.g., many provisions in Title XV). Others operate in specific policy areas (e.g., specific appropriations set-asides). Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation. In so doing, several topics and questions that are specific to ARRA might be examined. 

Does the combination of existing and new oversight mechanisms adequately address ARRA's objectives and risks? Are there some potential oversight topics that are not explicitly addressed in ARRA? Does the combination of new and existing oversight systems leave gaps? Is there a point at which oversight efforts and scrutiny become counterproductive? If so, in what sense(s)? How are competing imperatives (transparency, accountability, flexibility, cost, etc.) to be reconciled? Are some approaches to oversight more helpful than others? Do some approaches produce unintended consequences? Does the experience with ARRA offer lessons learned for the "normal" systems of oversight? If so, are some changes in the "normal" system of oversight advisable? What approaches to oversight work well in a separation of powers system, in which federal government branches compete for control over public policy, and in a federal system, in which the federal government and states have potentially overlapping lines of authority?

If Congress wishes to assess the overall oversight framework for ARRA, several overarching considerations about federal oversight may be relevant to assessing questions like the foregoing. A number of these considerations are analyzed below.

section_title: Federal Oversight Systems and Objectives
paragraphs: As a threshold matter, the federal government might be viewed as embodying a system of "nested" oversight. That is, multiple entities engage in simultaneous and multi-tiered oversight activities. For example, Congress oversees the President, EOP (including OMB), agencies, and nonfederal entities. Furthermore, Congress has established, structured, and funded executive agencies to allow for oversight of agency actions. Congress also has passed a variety of "general management laws" for executive agencies to establish procedures that may be overseen. At the same time, IGs and congressional support agencies such as GAO provide assistance to Congress, agencies, and the President with oversight. Within the executive branch, OMB has a statutory responsibility to provide management leadership for many agencies, including monitoring and oversight of their activities. Agencies oversee their own activities, the activities of regulated entities, and the activities of recipients of federal funds. Agencies undertake these tasks through a variety of organizational and procedural arrangements, often as Congress has mandated via statute. When state governments receive federal dollars, they may oversee the activities of local governments. All of the foregoing entities also oversee in many respects the activities of industries, firms, and other nongovernmental actors. 

Viewed together, for example, GAO may attempt to oversee OMB's oversight of an agency's oversight of a state agency, which in turn attempts to oversee the use of funds it made available via contract or grant to a firm, local government, or nonprofit organization. Throughout, tools such as monitoring, analysis, and evaluation may be utilized. 

In assessing and potentially considering how to modify an oversight framework, there also are multiple perspectives on the potential objectives of oversight. These include the following:

compliance with applicable laws and regulations (e.g., adherence to legal requirements and avoidance of fraud); implementation that is faithful with congressional intent, when an agency or the President exercises discretion; avoidance of mismanagement (e.g., adherence to sound management practices); avoidance of undesired bias in funding allocations and policy execution (e.g., fair allocation of resources and fair implementation of policy, with intended equity); effectiveness of funded activities (e.g., achievement of programmatic missions and purposes); and efficiency of funded activities (e.g., minimization of avoidable "waste" and unnecessary redundancy).

The ways in which RATB, IGs, GAO, OMB, implementing agencies, and nonfederal recipients of funds (e.g., state governments) approach these perspectives on oversight, in the context of ARRA, may reveal lessons learned and patterns over time. 

section_title: Topics Not Explicitly Addressed by General Oversight Provisions in ARRA
paragraphs: Assessments of ARRA's implementation and oversight framework likely will be informed by an observer's values, short- versus long-term orientation, and perspectives on the proper structure and objectives of oversight. Nonetheless, as a point of departure, some initial observations still might be made regarding topics that do not appear to be explicitly addressed by general oversight provisions in ARRA. 
subsections: section_title: Coverage of Division B
paragraphs: Almost all of ARRA's general oversight provisions apply to provisions included in Division A of the legislation. Very few appear to apply explicitly to Division B (e.g., regarding tax expenditures). At the same time, however, some provisions in Division B are subject to study or oversight in specific cases. In addition, although some appropriations to IGs in Division A specified that funds were to be used for oversight of activities related to Division A (thereby restricting their use to that purpose), other appropriations to IGs and GAO did not contain a specification of purpose related only to Division A. Therefore, some appropriations presumably could be used for oversight of activities and funding associated with Division B. 

Consideration of the extent to which ARRA's general oversight provisions cover Division B may raise questions. For implementation purposes, will Division B receive the same level of oversight as Division A? Will existing oversight mechanisms provide adequate oversight for all of ARRA's provisions, notwithstanding the focus of ARRA's general oversight provisions on Division A?

section_title: Funding for, and Capacity of, State and Local Oversight Entities
paragraphs: State and local governments will receive a surge of many billions of dollars under ARRA, raising the potential issue of whether these governments will have capacity to effectively manage the influx of funds. ARRA authorized agencies that receive funds under Division A to "reasonably adjust applicable limits on administrative expenditures for Federal awards to help award recipients defray the costs of data collection requirements initiated pursuant to [Division A]" (Division A, Title XV, Section 1552). However, it is not clear if state and local oversight entities (e.g., state-level auditors general) will have access to increased resources, if they are needed in order to accommodate a surge in activities funded by ARRA. To what extent might this be an issue that state and local governments confront?

section_title: Transparency Regarding Agency and OMB Decision Making
paragraphs: In addition, many of the general oversight provisions in Division A focus on transparency regarding final allocations of funds and the outcomes of expenditures. However, not as much attention in ARRA appears to focus on the process within executive agencies for deciding how to allocate funds in the first place. When early versions of ARRA were being developed, then President-elect Obama and Vice President-elect Biden indicated an Obama Administration position that ARRA should contain no congressionally originated earmarks. The President later made a policy statement on the general subject of congressionally originated earmarks, outside the context of ARRA. He said that "on occasion, ... [p]rojects have been inserted [in legislation and report language] at the 11 th hour, without review, and sometimes without merit, in order to satisfy the political and personal agendas of a given legislator, rather than the public interest." 

Some of the same concerns, however, might be raised in the context of OMB and agency decision making during budget execution under ARRA. Agencies frequently are granted considerable discretion during budget execution. Given this discretion, to what extent might political appointees within agencies cause certain projects to be funded, without substantial review or merit? Similar concerns about "presidential earmarking" and "executive earmarking" sometimes have been raised. At the same time, the Obama Administration has issued presidential memoranda regarding agency use of discretion under ARRA and in contracting. Experience with ARRA's implementation may indicate what level of transparency regarding executive agency and OMB decision making ultimately will be forthcoming.

Appendix A. CBO January 2009 Estimate of GDP Gap, Without Enactment of ARRA 

Graphical displays may assist with visualizing the concept of a GDP gap. CBO's January 2009 testimony before the Senate Budget Committee included such a graphic, showing an estimate of the GDP gap without enactment of a stimulus law. Based on CBO's economic forecast, which assumed no changes in policy, CBO projected "that the economy will produce about $1 trillion less output per year than its estimated potential in each of 2009 and 2010 and significantly less than its potential in 2011 and 2012 as well." See Figure A -1 .

Appendix B. Table of Selected ARRA General Oversight Provisions

Appendix C. Detail of ARRA Appropriations to IGs, GAO, and RATB

IGs are listed in alphabetical order of their parent departments, followed by IGs located within independent agencies. GAO and RATB are listed at the table's end. The table indicates the division and title of ARRA in which the appropriation was included, the funding amount, the period of availability for the funds, and, in the last column, whether appropriations language specified that resources be used only for the purpose of overseeing ARRA-provided funds.

Appendix D. Early CBO Estimates of GDP Gap, Including Impact of ARRA

Congress required in ARRA's Division A that the law's impact on economic indicators be evaluated (Title XV, Section 1513). Congress may conduct oversight over the federal government's attempts to diminish the recession's GDP gap and ARRA's contribution to the effort. Graphical displays may assist with visualizing the concept. After ARRA was enacted, CBO prepared a year-by-year estimate of the short-term economic impacts of the law. CBO noted that "[t]he macroeconomic impacts of any economic stimulus program are very uncertain," and that "[e]conomic theories differ in their predictions about the effectiveness of stimulus." Nonetheless, CBO developed a range of estimates of the impacts of ARRA "that encompasses a majority of economists' views." CBO's letter included a graphic that showed the estimated impact of ARRA on actual GDP. 

CBO explained that the previous figure "shows three different projections of the economy's actual output: CBO's January baseline projection of GDP (which does not include the effects of ARRA), GDP using CBO's high estimate of the effects of the legislation; and GDP using CBO's low estimate of the effects of the legislation."

CBO subsequently updated its economic forecast of the GDP gap in its analysis of the Obama Administration's preliminary budget proposals for FY2010. In two graphics, CBO showed "the middle of the range of the agency's [March 2009] estimates of ARRA's impact on GDP and employment." 

In brief, CBO estimated ARRA likely would contribute to helping end the recession, in concert with actions by the Federal Reserve and Department of the Treasury.

The current recession, which began in December 2007, took a sudden and severe turn for the worse late last year. Of the 4.4 million jobs lost since the recession began, more than half have been lost in just the past four months. According to the Congressional Budget Office's economic projections, the economy will continue to deteriorate for some time, although the adoption of the American Recovery and Reinvestment Act and very aggressive actions by the Federal Reserve and the Treasury will help end the recession this fall.

CBO performed similar analysis regarding the unemployment rate. See Figure D -3 , below.

CBO noted, however, that the range of estimates of ARRA's impact "is quite large," and that CBO's "current [economic] forecast, particularly for the near term, is subject to a greater than normal degree of uncertainty."


Question-summary annotations: questions: question: Under what circumstances did Congress pass ARRA?
answer: In the wake of a rapidly deteriorating economic picture and year-long recession that the Congressional Budget Office has called the most severe since World War II, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5).

question: What does this report cover?
answer: This report discusses ARRA's "general oversight provisions" and several related issues for Congress.
child_questions: question: What is "general oversight provision"?
answer: For purposes of this report, the term "general oversight provision" means an oversight-related provision that addresses multiple programs, agencies, or appropriations accounts.

question: What provisions were excluded for this report?
answer: Provisions that are specific to a single program or appropriation (e.g., appropriations set-asides and reporting requirements) are excluded from the report's scope.

questions: question: What issues related to ARRA might be of Congressional interest?
answer: These include assessments of ARRA's role in achieving economic objectives.

question: What are typical objectives of fiscal stimulus policies?
answer: Typical objectives of a fiscal stimulus policy relate to increasing economic activity in the short term, compared to what would have happened without a stimulus.

question: To what extent is short-term economic stimulus a measure of success?
answer: In addition, some stakeholders have emphasized that stimulating the economy in the short term alone is not a sufficient definition of "success."
child_questions: question: How does this affect the manner in which policies are implemented?
answer: From this perspective, the manner in which spending, tax, and other public policies are implemented, and also the impacts of these policies, may be important.

questions: question: How were these perspectives considered in the law?
answer: All of these perspectives appear to have been included among the law's explicit purposes and "general principles concerning use of funds."

question: How will Congress assess the effectiveness of ARRA's additional provisions?
answer: Over time, Congress may consider whether existing management and oversight mechanisms, in combination with ARRA's additional provisions, adequately support effective management and oversight of ARRA implementation.
child_questions: question: To what extent are lessons learned from ARRA generalizable?
answer: The experience with ARRA also may offer lessons learned for the "normal," non-ARRA systems of oversight.

questions: question: What oversight issues will Congress face?
answer: Beyond the immediate situation, additional oversight issues for Congress may relate to longer-term questions. These include how to build and monitor capacity within agencies to respond effectively to crises.
child_questions: question: What questions will be important to consider?
answer: Questions also may arise regarding how to build and monitor capacity in agencies and government overall to anticipate crises, mitigate their risks, and avoid preventable crises.

question: What does this report address?
answer: This report analyzes these and other issues after reviewing how the oversight provisions were developed and providing an overview of the enacted provisions themselves, including related appropriations and reporting requirements.