States May Get More Flex In Federal Spending Muscles

States May Get More Flex In Federal Spending Muscles<@VM>Frustrated Officials<@VM>GAO Study

Turner & Davis

Thom Rubel

Legislation is in the works on Capitol Hill that would provide states with more flexibility in how they spend federal funds earmarked for information technology projects.

Rep. Tom Davis, R-Va., said he will introduce the legislation in the current session of Congress. Hearings on the topic are expected in September.

State chief information officers visiting Capitol Hill in May met with Davis and Rep. Jim Turner, D-Texas, to ask for legislative relief from regulations that impede their ability to deploy governmentwide solutions. Davis and Turner are the majority and minority chairmen, respectively, of the House Government Reform subcommittee on technology and procurement policy.

"They convinced me when they came to see me. I think we're going to have legislation," Davis told Washington Technology.

Davis said he and Turner will work together to give states more flexibility to mix and match grant money, as long as the states can show accountability and ensure the federal government that no money is misspent. The federal government provides hundreds of millions of dollars in grants each year to support a wide array of state programs, including Medicaid, child support enforcement and juvenile justice.

The subcommittee plans to hold hearings this fall on allowing the states greater flexibility in spending the grant money, said Amy Heerink, the subcommittee's chief counsel. The subcommittee also has asked the General Accounting Office to study the matter, she said.

The GAO will make an initial recommendation in time for the hearings and will publish its final recommendations in a written study early next year, Heerink said.

State government officials have long complained that restrictions on how they spend federal funds inhibit their ability to coordinate related functions that cross departments or agency lines, and make it difficult to provide effective service to citizens.State CIOs told Davis earlier this year they are frustrated by inconsistent interpretations of the cost-allocation principles established for agencies to follow when issuing federal awards to states and localities.

Cost allocation is the assignment to agencies of an equitable proportion of the costs of certain activities. For federally funded programs, it is a way for states to show funds are being spent for the activities for which they were intended.

The CIOs are equally concerned about the continued use of the advanced planning document process with respect to IT projects that use federal funds. They claim the process, which looks at how the funds will be spent and can take up to six months or more, takes too long and is difficult to coordinate with the state budget process.

As a result, some states find it easier to forego federal funds for cutting-edge programs and projects rather than go through an exhaustive approval process, the CIOs said.

The legislative relief that Davis and Turner may provide would facilitate deploying integrated systems and eliminate the need for creating and maintaining separate systems that can't communicate with each other and cost more to maintain, said Thom Rubel, program director for state information technology of the Washington-based National Governors Association.

Rubel said that at the National Governors Association annual meeting held in early August in Providence, R.I., several governors spoke about the need to stop focusing on the technology and start focusing on the outcomes. The governors who argued this point noted that federal funding restrictions often work against those goals, Rubel said.

The stringent rules governing use of federal funds can result in wasteful spending for duplicate hardware and software used for federally funded state programs, state CIOs said. They told Davis earlier this year about a program involving child welfare where the state had to buy two printers, even though they were being used for the same program, because federal funds were not allowed to be mixed with nonfederal funds for the purchase and use of technology.

Another example is a program in Tennessee where a federal hardware funding requirement is preventing the state from loading software on a computer if that software is not funded by the same federal program that purchased the hardware.

Such commingling of software and hardware can result in a time-consuming audit or even loss of funds, said Chris Dixon, digital government coordinator, National Association of State Chief Information Officers, Lexington, Ky.

"This kind of regulation actually forces states into a small, single-application server where a large, shared server would be more cost effective," Dixon said.How Davis and Turner proceed will depend on the advice they receive from the GAO, Heerink said. The GAO is studying OMB Circular A-87 provisions regarding the mixing of funds from separate grant programs and also the advanced planning document process, Heerink said.

OMB Circular A-87 sets the cost principles for federal awards to state and local governments.

Until the GAO makes an initial recommendation, Davis and Turner have put the legislation on hold, Heerink said.

"For us to say what the legislation would look like without having a handle on the problem would be unrealistic," she said. "How we proceed depends on the outcome of the GAO's examination."

NASCIO, however, has provided the subcommittee with draft legislation that would eliminate overly stringent review and audit procedures for federal funding used for IT purposes. The proposed language would prohibit an administrator or executive agency from requiring more stringent and burdensome reviews on IT programs than for other programs or initiatives.

Rubel said any proposed legislation should carry a strong provision that clearly states federal funding for state programs should be based on performance measures and not restrict states to specific technology solutions. The National Governors Association supports NASCIO in its request for funding reform of federally funded, state-run programs.

Davis told Washington Technology the officials who review the advanced planning documents are simply following the rules as they perceive them. When the document process was first implemented, one could convincingly argue that the federal government was in a position to guide states and localities on the best use of technology, Davis said.

That situation is now reversed.

"Ten years ago, the federal government was way ahead of the states," Davis said. "You can't say that is true in half of the cases now. You've got some states that have moved way up the ladder in terms of their proficiency in technology, and the federal government can learn a thing or two from some of them."

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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