Calif. stimulus czar falling short of expectations

[December 19, 2009]  SACRAMENTO, Calif. (AP) -- As federal stimulus money began to pour in earlier this year, Gov. Arnold Schwarzenegger created the nation's first state-level inspector general to serve as a watchdog over California's windfall.

He had high expectations, saying the stimulus czar would root out waste, fraud and abuse as an estimated $50 billion was being spent throughout the state.

But eight months later, the stimulus czar has not produced any audits or formal reports. The office doesn't investigate potential whistle-blower cases. It also doesn't track the number of jobs created or saved by stimulus dollars, and its Web site provides only bare-bones information for the public.

Inspector General Laura Chick acknowledges that her office is falling short, mainly because she says the deficit-plagued state hasn't provided enough money to hire auditors and investigators.

"I wouldn't mind being a little bit further along," said Chick, who earned a reputation as an aggressive taxpayer watchdog in Los Angeles. "But I'm understanding, in these tough times, that it has been a challenge for the state to access the needed resources for my office."

It is a dilemma faced by states around the country as they attempt to police stimulus spending at a time when money and staff are tight for such efforts.

Most states used existing functions within the offices of their attorney general, controller or auditor to oversee the flow of stimulus money, said Chris Whatley, director of the Council of State Governments' Washington office, which has been monitoring how states spend the stimulus. The Recovery Act allows states to bill the federal government for limited administrative expenses.

Rather than hiring more staff, those states have asked their officials to pull double duty.

For example, New Hampshire's Deputy Attorney General Orville "Bud" Fitch was named director of the state's Office of Economic Stimulus to monitor its spending and reporting. With a $1.5 million budget and three people on staff, Fitch works both jobs but continues to receive his salary through the attorney general's office.

New Hampshire's economic stimulus office will close in September 2011, when the stimulus funds run out.

"What happens after that is yet to be determined," Fitch said.

Schwarzenegger wants to make the inspector general's office permanent at a time when the state is facing a projected $21 billion deficit in the fiscal year that will begin in July.

Schwarzenegger's press secretary, Aaron McLear, said the governor plans to give Chick more help by redirecting staff from other departments at no additional cost to taxpayers. Several will begin in January, he said.

"We believe Laura's done a great job and she has been able to provide the oversight that the governor wants to see with these federal dollars," McLear said. "We've given her every resource possible through existing budgets, but we agree that we need to find a way to provide more resources to do her job."

The governor will soon propose legislation to make the inspector general's role permanent by granting Chick the authority to investigate waste and fraud throughout all of state government, McLear said. He would not say how the governor plans to fund the office or characterize the scope of the job.

Other state officials wonder if Schwarzenegger hasn't just created another layer of government.

State Auditor Elaine Howle said she is concerned about her job overlapping with the inspector general's. As the state's independent, external auditor, Howle and her staff are responsible for preparing the state's financial statements.

She is responsible for making sure state agencies and their programs comply with federal regulations. The auditor also has the authority to investigate whistle-blower complaints. With a budget of about $17 million, she has 140 auditors, investigators and administrative staff.

Some of Howle's recent reports came after investigations into how the state was reporting or spending its stimulus funding, raising concerns that Chick's office might be redundant. The auditor's office found that California corrections officials overstated how many jobs they saved using more than $1 billion in federal stimulus money and that the California Energy Commission was not moving quickly enough to spend $40 million in stimulus money for energy-related projects.

"I'm not sure what the vision was for that office compared to what my office does and has done for years," Howle said. "I have respect for Laura, but I'm just not sure how it fits."

Howle suggested Chick act as an "enforcer" within the administration when her auditors detect something wrong.

Chick took the $175,000-a-year job after serving as a watchdog in Los Angeles, winning praise for exposing, among other things, a backlog of untested rape kits and contractor overbilling. She developed a reputation as an aggressive investigator who would not back down from city officials and contractors.

She intends to fight what she calls a culture of complacency in state government while rooting out inefficiencies.

"The most important thing is to turn our economy around, but it's also about rebuilding the public's trust and confidence that we can spend their money well," she said.

Whatley, of the Council of State Governments, agreed. While the public expects to be able to see how stimulus money is being spent, states have to think strategically when it comes to using the one-time money to generate the most jobs possible.

Since taking the job, Chick has advocated for more state assessments to be posted online and criticized the state Department of Community Services for planning to give stimulus funding to a high-risk nonprofit in San Francisco.

The FBI estimates that 7 to 10 percent of stimulus funding will be subject to fraud: "I'm not willing to accept that figure," she said.

[Associated Press; By JUDY LIN]

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