The federal government spends nearly $1 million a year on fees for bank accounts with a balance of zero. The Washington Post calls this “one of the oddest spending habits in Washington” and explains how it works.
When federal agencies hand out grants they don’t just send out checks. Rather, they create “an account within a large, government-run depository,” and the federal agency is charged a monthly fee “which goes to the government depository and is used to cover the costs of operating it.” The money eventually runs out but the fees continue because the federal agencies fail to close out the accounts, which “takes work.” Audits and so forth are supposed to happen within 180 days, but they don’t. So the accounts stay open, with a balance of zero and the government paying fees.
By the Post’s count, the federal government has 13,712 such accounts drawing $890,000 in service fees, and about 7 percent of more than 200,000 grant accounts have a balance of zero. A grant administrator at Health and Human Services told the Post “These accounts are a normal part of the grants business cycle and will never be totally eliminated.”
Such “cost untainted by any reward,” is all part of the waste inherent in the system. The Obama administration tried to fix this problem but some agencies have the same number of zero-balance accounts as they did three years ago. So the federal bureaucracy is not only inherently wasteful but essentially reform-proof. A government that can’t close out a bank account will never eliminate an entire agency, however redundant or wasteful it may be. The Post also noted that “six federal government agencies have begun separate projects to do the same thing: build a computer program to track personnel background checks.”