It is one of the oddest spending habits in Washington: This year, the government will spend at least $890,000 on service fees for bank accounts that are empty. At last count, Uncle Sam has 13,712 such accounts with a balance of zero.
They are supposed to be closed. But nobody has done the paperwork yet.
So even as the sequester budget cuts have begun idling workers and frustrating travelers, the government is required to pay $65 per year, per account to keep them on the books.
In this time of austerity, the accounts are a reminder of something that makes austerity hard: expensive habits, built into the bureaucracy in times of plenty. The Obama administration has spent the past year trying to close these accounts, with only some success.
“If anyone had kept open a bank account with no money, and was getting a charge every month, they would do everything they could to close it,” said Thomas A. Schatz of the watchdog group Citizens Against Government Waste. But, he said, the government hasn’t shown the same kind of urgency with taxpayers’ money.
“It’s just lack of attention to detail. And poor management,” he said. “And, clearly, the fact that no one gets penalized for paying money to keep the accounts open.”
The money spent on the empty accounts is a tiny fraction of the federal budget. But, in its own way, it is something special: Washington’s waste, a rare specimen of cost untainted by any reward.
The Pentagon once paid $435 for a hammer, after all. But at least in that case it got a hammer.
Here, when the money is spent, “there’s no benefit whatsoever,” said Sen. Tom Coburn (R-Okla.), who has joined Sen. Thomas R. Carper (D-Del.) in pushing the Obama administration to close these accounts faster.
Administration officials said they’re trying. Last year, the Office of Management and Budget urged agencies to crack down on these “zero balance” accounts. And this year, it proposed a wide-scale push for better oversight.
“We have worked with agencies to improve the timely closeout of grants,” Danny Werfel, the controller at the OMB, said in an e-mail. “Agencies have made noteworthy progress so far, with the number of zero-balance accounts falling by more than 50 percent since the end of fiscal year 2011.” Back then, the total was more than 28,000.
Here is how the government winds up spending money on nothing:
First, a federal agency gives a grant. It doesn’t just write a check; it creates an account within a large, government-run depository. The grantee can draw money from it. The agency that created the account is charged a monthly fee, which goes to the government depository and is used to cover the costs of operating it.
Then, at some point, it’s over. The money runs out. Or the grant’s time limit expires. The agency is given notice: It’s time to close the account.
But that takes work. An agency is first required to audit the account, to make sure the money was spent properly. (In rare cases, some money is returned to the grantee and the dead account comes alive again.) That’s generally supposed to happen within 180 days. If it doesn’t happen, however, there is no formal consequence. So sometimes it doesn’t happen. OMB officials say some grants, such as those involving homeland security and complex building projects, could require unusually long audits.
“Construction grants, as another example, may require additional time for grantees to consolidate and submit invoicing information from multiple parties to meet agency close-out reporting requirements,” Werfel said in testimony prepared for Congress.
Right now, about 7 percent of the 202,000 government grant accounts are devoid of money. These sit on the books, costing about $5.42 per month. The service fees are the same, whether an account is full or empty.
Last year, the Government Accountability Office found that all that nothing was costing about $2.1 million a year.
“Agencies paying fees for expired accounts with [a] zero dollar balance are paying for services that are not needed,” the watchdog agency noted.
Around Washington, there are plenty of problems like this one — old bugs, built into the machine of government, that make spending money seem easier than saving it. Things such asthe red tape that delays the sale of excess government buildings, or the long-standing tolerance of duplication. Currently, for instance, six government agencies have begun separate projects to do the same thing: build a computer program to track personnel background checks.
Last summer, the Obama administration sought to fix this bug. It sent a memo to agencies that said, “Focus first on closing out expired grants that are several years past their end dates or have no remaining funds.”
In some places, it apparently didn’t work. The U.S. Agency for International Development has the same number of empty accounts now as it did in 2011. The Fish and Wildlife Service didn’t provide new numbers, despite a request from The Washington Post.
The Department of Health and Human Services also had success. It had been paying for 21,000 empty accounts but the total is now 9,286 — a major cut, but still an expense of about $604,000 per year.
Could the agency get that number lower?
Officials answered this way: They could never imagine getting it to zero. The government would always have to spend something on nothing.
“We will continue our efforts to accelerate grant closeouts,” said Nancy Gunderson, who oversees grants at HHS. “These accounts are a normal part of the grants business cycle and will never be totally eliminated.”