It came to the attention of Congress due to a whining contractor that many Federal Departments hold back some of the earmarked money they get in order to administer the funds. These "taxes" of money are not new as most higher headquarters hold portions of all the funds they receive in case of contingencies or to cover operating costs.
Now a report ordered by Senator Ben Nelson (D-NE) highlights that the Defense Department especially is not funneling the full amounts of the earmarks to their intended recipients. Nelson asked for the report after one of the planned recipients of an earmark complained that they did not receive one hundred percent of the money. There are rules set by Congress that govern the transfer of money within Departments from project to project. Different levels of authority may authorize these transfers with the DoD Comptroller being able to move higher amounts then a service acquisition official. For large amounts or to start a new program Congress must approve.
Taxing appropriations to cover overhead and management should not be a surprise. Building up little slush funds with the money is also allowable as long as the amount requested does not increase to account for this. The United States Air Force Special Operations Command was doing that a few years ago and got into trouble for it.
Another problem that the DoD has had with earmarks is that it is not always clearly identified who should get the money or what it will be spent on. This makes it hard to release the money down to whichever part of the military is to spend it and to get it to the right contractor. The Department has also taken the view that if an earmark is not in the final appropriations bill specifically, but just in the various committee report or a single bill from the Senate or House, then they won't spend it. Nelson says in the future the Appropriations Bill will be clear that such earmarks will be included.
This problem of no clear direction may lead to the money just sitting in an account or the Department trying to move it to something that has a higher priority. This then complicates relations with Congress who desire to see the earmark get to the intended company. There is a cost associated with processing all of this money and earmarks are beyond what originally is planned for by Departments and this may necessitate more money to do the work.
There has been a great deal of pressure on earmarking the last few years and this kind of report only helps illustrate the problems with the practice. While Nelson's report doesn't aid in ending them it draws even more attention to something that is quite wasteful of U.S. taxpayers dollars.