Vice President Joe Biden recently said, “we know some of this [stimulus] money is going to be wasted.”
The FBI already said it expects massive fraud to arise from government bailouts and the billions flowing from Washington to the states, so does common sense, making Biden’s comments no revelation. But the acknowledgement makes clear that states must address the issue. And since halting government printing presses is not an option, transparency is the next best option.
Most Americans will never be able to track how the money flowing to their states is used. But thanks to the State Funding Accountability Act (HB 1192) passed earlier this year, Maryland residents will be able to check where their money goes and how it is spent.
Starting June 1, nonprofits and for-profits receiving more than $50,000 from Maryland taxpayers must submit yearly reports due Sept. 1 about how they used the money. They will eventually be posted online in a public, searchable database. State authorities will be able to audit the organizations.
As the fiscal note on the legislation shows, a huge chunk of the budget will finally receive scrutiny. The Office of Legislative Audits estimates that there were 1,000 organizations receiving over $100,000 in fiscal 2008 for a total over $900 million. To put that number in perspective, it could give every one of Baltimore City’s public school students a $10,000 scholarship to attend the school of their choice with $80 million left over.
The Department of Management and Budget does not know how many organizations receive taxpayer dollars because they are not coded in a “clear and consistent manner.” That is code for the state has no clue.
But as Del. Anthony O’Donnell, minority leader and co-sponsor of the bipartisan bill, said, “The more we can make detailed data available to the public, the better.”
O’Donnell said the legislation was the next logical step from a bill passed in 2008 making all state contracts above $25,000 available in an easily searchable online database.
Many nonprofits provide services that the government could not fulfill without them, on time and on-budget. For them, this legislation will be a fund-raising tool that enables them to show how efficiently they run their operations.
For maximum benefit, they should exceed government disclosure regulations so that viewers can clearly see how their work aligns with state goals and expectations. They should also disclose any ties to state legislators and government officials. As noted in previous columns, many state legislators sit on boards or have family members who work for nonprofits that the state supports, creating a clear conflict of interest. Making that information available would engender trust in those organizations and bolster Gov. Martin O’Malley’s reputation for supporting clean government.
Spending databases in other states have helped them to save millions by bringing to light duplicate services or products and overcharging. They also give residents the ability to see if the government’s stated priorities match their spending at a time when fewer and fewer journalists cover Annapolis.
The legislation also makes explicit that private organizations receiving taxpayer dollars can no longer refuse to disclose information about how that money is used – a common practice. And it will allow viewers to question why certain organizations receive money in the first place.
A CBS news report recently highlighted how some nonprofits don’t deserve their nonprofit status and cost the state and federal government millions in lost taxes. It focused on Commonwealth Research Institute, a nonprofit defense contractor headquartered in Johnstown, Pa., the hometown of Rep. John Murtha (D).
The report noted Commonwealth has received millions from the federal government, but refuses to disclose any of its research as promised when it applied for tax-exempt status.
Local governments, including Baltimore City, which by design makes it impossible to search contracts and grants, should also disclose connections with nonprofits and other organizations which receive taxpayer dollars in a public online database. They should also stop doing business with those who fail to meet state standards.
The legislation would be even better if it asked every organization receiving grant money, not just those getting $50,000 or more, to disclose information about how it was used. But it will foster trust in the government at a time when we have the most to lose through waste and fraud.
Examiner columnist Marta H. Mossburg is a senior fellow at the Maryland Public Policy Institute.
