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Administration Promises Stimulus Job Count Changes

Brain A. Shactman|CNBC Reporter
Thursday, 19 Nov 2009 | 11:31 AM ET

The Obama administration is promising to change the way it counts the number of jobs saved or created by the economic stimulus program, after the Government Accounting Office revealed measurement flaws in the current system.

Stimulus Scorecard
Stimulus Scorecard

The GAO report made public today, part of bimonthly tracking of Recovery Act spending, says recent stimulus-related job claims by the administration are inaccurate.

The number of jobs created or saved and the accuracy of those figures have been the subject of intense media attention, scrutiny and criticism since the White House touted the Recovery Board’s report that claimed approximately 640,329 jobs had been created or saved through the billions spent on contracts, grants and loans.

The GAO says the numbers are incorrect and it provides scenarios where both understating and overstating the figures may have occurred. Here is a sampling of the most glaring flaws noted in the GAO report:

  • 25-percent of the more than 100,000 reports have not yet been vetted by any federal agency.
  • It found that 3,978 recipients reported jobs created or saved without actually receiving any Recovery Act funds.
  • It also says that 9,247 reports showed the receipt of money but no jobs were created or saved.

Some of the problems stem from the fact that recipients do the reporting and there aren’t sufficient resources to vet the reports. There is also a strong chance that recipients simply made mistakes submitting the data.

In addition, there have been over 100 allegations of fraud surrounding Recovery Act funds. More than half are at various investigative phases, while 41 have been dismissed.

The GAO report, however, does not include any specific revisions or changes to the administration's job claims and the GAO does not plan to issue its own numbers.

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One of the contentious elements of the controversy is what actually makes up a job “created or saved”. Right now, only direct, full-time equivalent jobs are counted.

The Office of Management and Budget, which established the guidelines, decided not to include indirect job creation. Also, keep in mind that part-time jobs are counted, but they are worked into the full-time model, meaning that a full-time equivalent job counted as saved or created might have been two part-time jobs.

The GAO calls for change. “A fuller picture of the employment effect would include not only the direct jobs reported but also the indirect and induced employment gains resulting from government spending,” said Gene L. Dodaro, Acting Comptroller General of the United States, in Congressional testimony on Thursday.

The OMB responded quickly. In a letter to Dodaro, OMB Controller Danny Werfel wrote, “Prior to the January reporting period, OMB will refine its jobs-counting guidance.”

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Changes are coming, but that is not quieting the critics, both of the Recovery Act and of the reporting process.

“The whole jobs reporting metric is not only entirely troubling, it is deceitful,” said Rep. Darrell Issa (R-Calif.), The Ranking Member of the House Committee on Oversight and Government Reform, during Thursday’s hearing on Capitol Hill.

In addition, Issa asked the Recovery Board to certify the employment numbers as accurate and auditable.

Earl Devaney, who runs recovery.gov, could not certify them.

“It’s a startling admission that he hasn’t even been provided with a list of who should have reported, which means he can’t know who didn’t report, which just adds fuel to the argument that the whole effort at transparency has failed,” Issa said in a statement on Wednesday. “The Administration has provided inaccurate data, missing data, data that might be missing but they don’t even know for sure and they should be a part of Thursday’s hearing to answer for these discrepancies.”

From the beginning of the effort to transparently report on the $787 billion package, the Recovery Board has qualified the process by stating that discrepancies were expected, and it would be a constant “work in progress”.

In addition, the Recovery Board only received $25 million to run the site and vet the billions of dollars slated to be spent. As of September 30, approximately $47-billion worth of spending had to be accounted for.

Despite the early admission of possible inconsistencies and the potentially under-funded vetting process, there has been an onslaught of reports of gross inaccuracies—from phantom Congressional Districts receiving money to dozens of jobs created by the purchase of a $1,000 lawnmower.

Late on Wednesday, the Recovery Board announced that the issue of phantom congressional districts had been fixed. Devaney added that there is flexibility to make corrections in the future.

“In cases where incorrect data results in a significant risk that the public will be misled or confused, the Board, as it has previously done, may opt to step in and correct or omit data in lieu of the established OMB guidance that only recipients can enter or change data,” Devaney said.

In the final analysis, the GAO concludes it has been a “lessons learned process”, and there should be changes to how jobs created and saved are defined, while continuing to work with recipients to accurately report the impact of Recover Act funds.

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Molly Malizu contributed to this report. Be sure to get in touch with us: stimulus@cnbc.com

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