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Even Before Vote, District Counting on Stimulus Cash
'Clean' Audit May Bolster Case for Budget Help

By David Nakamura and Nikita Stewart
Washington Post Staff Writers
Tuesday, February 3, 2009

D.C. government officials said yesterday they expect to spend money from President Obama's economic stimulus package to narrow a $456 million budget gap next year, counting on funds that have yet to be approved by Congress to avoid deep cuts in city services.

After an hour-long meeting with Chief Financial Officer Natwar M. Gandhi, D.C. Council members calculated that the House version of Obama's plan to boost the economy would provide the city $1 billion over three years. The biggest savings for the city could come through Medicaid, which could receive about $288 million under the stimulus package, according to a city breakdown of the House stimulus bill.

Council members are also hoping that the stimulus package could free up at least a portion of the $100 million in sales taxes set aside annually to rehabilitate the city's public schools. Officials said local money would then be freed up to reduce social service cuts.

The budget discussion came yesterday as the District received its 12th consecutive "clean" audit from an independent accounting agency. Gandhi said city attorneys and economists are examining the stimulus package to determine what restrictions might be applied to how the money is spent. "I will not sign anything that is improper or goes against the spirit of the stimulus," he said.

Council members are considering what to do with the money. Council Chairman Vincent C. Gray (D) wants to use any savings to restore cuts in the District's affordable housing program that were made in November. But he realizes that plans could change because the Senate has not yet approved Obama's stimulus plan. The council has scheduled a public round table on the stimulus package Feb. 11, pending its approval by Congress. The District is struggling to meet its $5.4 billion budget for fiscal 2010, council members said.

But D.C. Council member Jack Evans (D-Ward 2) said the city shouldn't count on anything.

"If the stimulus package does materialize . . . then that could be helpful," he said, adding that Congress could institute restrictions on how the money could be spent and require matching funds.

Under the House bill, the District could get more funding per capita than all the states. Evans attributed the disparity to the District's status as the nation's capital, with its responsibility for infrastructure, and to the city's high poverty and unemployment rates used to calculate funding.

The audit released yesterday showed slight progress toward fixing chronic problems related to the financial management of D.C. public schools and the Office of Tax and Revenue.

Both entities were rated last year by BDO Seidman auditors as a "material weakness," the highest level of warning short of forcing an "unclean" audit. That designation could downgrade the District's credit rating on Wall Street. This year, the auditors, in their Comprehensive Annual Financial Report, have lowered the alarm by one level, rating the schools and tax office as a "significant deficiency." That rating is still considered poor, but city officials said it shows the agencies are on the right track.

At the same time, the auditors found that the District's handling of Medicaid and Medicare funds is still flawed, especially in the Child and Family Services Agency, and that the D.C. treasurer's office continues to be plagued by bookkeeping errors. Both were rated as a "material weakness" again this year.

The city's handling of Medicaid and Medicare money has been problematic for years, and auditors have routinely cited issues with the District's internal controls over procurement, federal grants and services in its health agencies. The council last year created a new Office of Health Care Finance, and council members said reforms will pay off over the next few years.

Council members, aides to Mayor Adrian M. Fenty (D) and Gandhi's staff have met regularly over the past year with agency officials to work on an improvement plan.

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