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In early 2005, the office of Senator Ben Nelson received a curious phone call.

Officials from the University of Nebraska told him that they had not received all of a $1 million medical research earmark he had secured for them. The Department of Defense, the agency controlling the money, was withholding 12 percent of the total to oversee the project.

That phone call set off a chain reaction of Congressional inquiries and a Bush administration study, still in progress, over how agencies manage lawmakers’ pet projects once they are written into spending laws. Mr. Nelson, a Democrat from Nebraska, later found out that the Department of Agriculture had also withheld about 10 percent of a $222,000 earmark to the university for drought research.

While many of his questions remain unanswered, Mr. Nelson says that federal agencies have been taking a cut from earmarked funds for years, some for unrelated purposes as varied as staff salaries and postage stamps.

Mr. Nelson calls the practice “earmark skimming,” and lately he has become increasingly vocal over what he describes as unaccountable federal bureaucrats diverting millions of dollars into agency “slush funds.”

“They are skimming a percentage of each earmark off the top and failing to disclose what happens to those funds they withhold,” Mr. Nelson said in an e-mail message.

Congress mandated more than 11,000 earmarks to pet projects costing nearly $20 billion this year. It is common for federal agencies to take part of the money from each earmark for administrative costs and other expenses. That, Mr. Nelson concedes, is acceptable.

But according to a Congressional Research Service study that he ordered, the federal government has no umbrella legal authority that allows agencies to take a cut of each earmark, and it has no overall standard for how much agencies should take.

The Department of Housing and Urban Development, for example, takes nothing to administer its earmarks, while the Defense Department takes out as much as 25 percent. A spokesman for the housing department said it used money budgeted for salaries and expenses to manage earmarks.

Many federal agencies can cite specific laws or rules that they say grant them the authority to take part of earmarked money. Even so, such laws and rules do not always specify the percentage that is allowed to be withheld, and some agencies say there is no law outlining how much they can take. As a result, many agencies have developed their own policies for dealing with earmarks.

The Animal and Plant Health Inspection Service at the Agriculture Department, for example, keeps 2.5 percent to 9 percent. While the agency does not have any stated authority to do so, it told the Congressional Research Service that the authority was implied in its budget requests.

“The money has to come from somewhere,” said W. Scott Steele, budget director for the Agriculture Department. “We don’t put money in our budget for earmarks. If it’s an earmark for a program that is not already at the agency, someone has to deal with that.”

The amount taken from earmarks can even vary within an agency. The Agricultural Research Service at the Agriculture Department, for example, takes 10 percent of earmarks, while the Extension Service at the department takes 4 percent.

Agency officials say that the processing and oversight of earmarks consumes staff members’ time and departments’ financial resources, which could otherwise be used to further the agencies’ core missions.

“It’s not as simple as just writing a check,” said Steve McMillin, deputy director of the Office of Management and Budget. “There are actual costs and an infrastructure needed to administer these funds.”

But Mr. McMillin concedes that no one knows how much federal agencies have spent to manage earmark projects, or how the money ultimately was spent.

“The truth is, we don’t know a lot about what happens to the money that is earmarked,” said Ryan Alexander, director of Taxpayers for Common Sense, a watchdog group that tracks Congressional earmarks. “While this appears to be a case of a legislator concerned about his own earmarks, there is a need for more transparency in how the process works.”

Agencies say administrative costs can run high. The Justice Department said its Office of Justice Programs, which provides grants to state and local law enforcement authorities, spent about $10 million to administer Congressionally directed financing in 2006. Congressional watchdog groups say Mr. Nelson hardly fits the bill as a reformer — he requested more than $16 million for projects in Nebraska last year alone, according to a database of Congressional earmarks — but his complaints have raised questions about what ultimately happens to the billions of dollars requested for pet projects each year and the lack of openness.

Mr. Nelson notes that the Congressional Research Service study found that some agencies used the money for expenses that might not be related to earmarks. The Animal and Plant Health Inspection Service, for example, used the money for staff salaries, postage, public awareness efforts and education programs. But Mr. Steele, the Agriculture Department’s budget director, said this spending was justified because the service did not receive money in its budget for overhead costs.

“Most agencies have a salaries and expenses account to pay for overhead costs, but the Animal and Plant Inspection Service doesn’t,” Mr. Steele said. “They have to take a portion of money allocated for different programs, including earmarks, to pay their people and other expenses.”

The White House budget office is currently preparing a governmentwide report, due in March 2009, that examines how much each agency takes from earmarks and for what purpose. Mr. Nelson directed the budget office to conduct the study in the 2008 spending bill.


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