It is "critical that state governments quickly and effectively build the necessary administrative capacities to meet their reporting and other responsibilities under the Act." -- OMB Director Peter R. Orszag (pictured).

The U.S. Office of Management and Budget released a memo recently that outlines how states can handle some of the administrative costs for ARRA funding. "A majority of Recovery Act dollars are disbursed by the states," said OMB Director Peter R. Orszag in the memo, "who thus play a central role in the prudent, timely, and transparent expenditure of Recovery funds. It is therefore critical that state governments quickly and effectively build the necessary administrative capacities to meet their reporting and other responsibilities under the Act. OMB has been working closely with federal agencies and state governments to identify potential barriers to state implementation efforts and identify solutions that will enable successful outcomes."

The memo goes on to say that state officials responsible for ARRA implementation have asked OMB to look at the administrative cost-recovery process for federal grants, and that the standard reimbursement-based system is such a barrier to building administrative systems to meet the oversight and reporting requirements. The memo "encourages states to utilize existing flexibilities to recover administrative costs," and details a number of OMB publications and references that outline how this can be done.

According to the memo, a state, under certain conditions, can bill for administrative costs not more than "0.5 percent of total Recovery Act funds received by the state."

Wayne Hanson  |  Senior Executive Editor, Center For Digital Government