Up to $1 billion in federal grants intended to be used by businesses and communities nationwide sat unspent in government coffers in recent years, including millions that could have helped Colorado during the 2008 economic slide, financial reports show.
The precise figure is difficult to peg, but a two-year audit of 325 federal programs said the amount of untapped grants approached 10 figures at the outset of 2007.
And the federal investigator who led the inquiry said Thursday, “I have no reason to believe that the money has suddenly evaporated or gotten smaller.”
The government is pursuing heavy borrowing to stimulate a deeply recessed economy, but fiscal watchdogs say existing programs designed to pump money into the system should be better managed and tracked.
The unspent funds don’t even come close to the trillions being sought to revive the economy. The money wouldn’t have been enough to stave off the economic downturn, but the grants could have helped buffer the damage to some small businesses and neighborhoods.
“We didn’t expect to find a billion dollars,” said Stanley J. Czerwinski, director for strategic issues at the federal Government Accountability Office.
“This is a lot of money and much of it is sitting there gathering dust. A time of recession calls for the federal government to help citizens. Here’s one source of funds you could use to help.”
At least $8 million targeted for the Colorado region was not distributed during 2008, according to a Denver Post analysis of local records.
Money that could have flowed to Colorado included:
• $1.9 million in U.S. Department of Agriculture loan guarantees. That money can be used to help banks cover business loans for rural business expansions and startups.
• $2.5 million in Community Development Block Grants. Those funds could go to local governments for housing construction or rehabilitation and economic development.
• $3.7 million in excess cash from revolving loan funds managed by the Economic Development Administration of the U.S. Department of Commerce. The money could go to governments and nonprofits for low-interest loans to businesses.
Perceptions a problem
Administrators say the local block grant funds have been carried over to this year. And an Economic Development Administration spokesman said excess cash in the program can still be accessed.
Still, the development agency’s Denver office has a history of gathering excess cash without ensuring it’s put to “efficient” use, say internal audits. One problem: It doesn’t have a computer database that contains accurate loan balances. A new system is expected this spring.
As for the unused Department of Agriculture funds, a lack of public awareness about the programs, including perceptions of time-consuming bureaucratic red tape, kept applicants away, officials said.
“You bet I wish I could have found a use for that money,” said Mike Bennett, outgoing Colorado director of the department’s rural development office.
“With the staff we have, we try to get the word out. There’s always a reluctance in the rural areas to get involved in a government program.”
The unused money ultimately was returned to Washington.
Andy James, a loan officer with The State Bank serving La Junta and Rocky Ford, acknowledged that rural banks fear a cumbersome processes.
But he’s confident that the untapped money somehow could have been put to use to help local businesses.
“We need to find out more about the programs. If there is that much money available, there are banks that can use it.”
The program did funnel $13 million to hotels in rural areas last year, records show.
GAO investigators describe federal grant money as a massive river that splits into hundreds of tributaries, then streams. Grants can flow through three to four agencies before reaching their destination, and a lack of uniform rules and accounting systems makes tracking the money difficult.
Other issues included “poorly timed communications with grantees or insufficient compliance or enforcement,” according to the study.
Clearing the logjams
The GAO urged that the Bush administration instruct agencies to monitor their undisbursed grant money and report their findings.
But the Office of Management and Budget did not take action under former President George W. Bush. Officials in the office, now under the Obama administration, did not respond to questions this week.
In April 2008, Colorado had $7.1 million in unused block- grant money for rural projects, a backlog from past years.
That number has since fallen to about $2.5 million, with applications for projects totaling $6.3 million, said Tony Hernandez, director of the Colorado Division of Local Government.
He said that state officials created a committee to make sure that worthy community projects are quickly identified and funded.
Fremont County benefited from the new process this year when it returned to the state for a second grant to help it upgrade its sanitation system.
The state gave the county $700,000 last fall; the two grants totaled $1.3 million.
Meanwhile, U.S. Sen. Tom Coburn, R-Okla., who sat on the Finance Committee that commissioned the GAO study, believes the administration should follow the audit’s recommendations.
“We should know why this money didn’t get administered so we don’t have these lost opportunities,” Coburn said Thursday.
Staff writer Greg Griffin contributed to this report.
Miles Moffeit: 303-954-1415 or mmoffeit@denverpost.com
