Feds pay to ferret out stimulus fraud

Federal investigators have received more than 730 allegations of waste or fraud in stimulus act funding so far, have canceled the contracts of some bad actors and have sent a couple of dozen cases to the FBI, the Internal Revenue Service and prosecutors.

As the pace of spending peaks, continuing to police the $862 billion will take a huge portion of investigators’ resources over the next year - as much as 60 percent of some inspector generals’ budgets, according to a report released Tuesday by Sen. Mark Pryor, Arkansas Democrat, who has taken a keen interest in weeding out fraud from stimulus spending.

One auditor warned that reports of fraud are expected to increase as the money continues to flow.

“HUD reports that they have obligated 98 percent of [stimulus] funds. However, the majority of these funds have not yet been received by grantees,” Kenneth M. Donohue, inspector general at the Department of Housing and Urban Development, said in a letter to Mr. Pryor. “While it is early in the process, we anticipate seeing trends of waste, fraud and abuse once the grants are received, especially in light of the results of our capacity reviews.”

Mr. Donohue said his office already has conducted more than 50 audits of Recovery Act spending and found a number of local housing authorities who aren’t up to managing or administering the grants they’ve been given or, in at least one case, an agency that was using stimulus money to replace other money, in violation of its contract with the department.

He said 13 investigations could result in criminal cases.

Mr. Pryor, declaring “there is zero room for fraud,” said the money must be protected to create jobs and revive the economy.

“That means ensuring our federal watchdogs root out inefficiency and fraud in stimulus spending. It means wrongdoing will be publicized, and fraudsters will be caught and punished,” the senator said.

Congress passed the American Recovery and Reinvestment Act in February 2009, and President Obama quickly tapped Vice President Joseph R. Biden Jr. to oversee the spending and work to prevent waste, fraud and abuse.

In his one-year report last month, Mr. Biden said the incidence of fraud was lower than expected and lower than what is typical in both private and government spending.

In January, Mr. Pryor, a member of the Senate Homeland Security and Governmental Affairs Committee, asked inspectors general at 21 agencies or departments that oversee stimulus funds to report to him on their investigations so far.

Each IG office replied with a letter, and the data show 739 total complaints. Of those, 220 cases have been closed and the rest are either still under investigation, are awaiting assignment or have been referred for discipline.

The IGs said they have sent 19 cases to U.S. attorneys, two cases to the FBI and three cases to the IRS.

Auditors said federal prosecutors have declined to handle at least two cases - one from the Social Security Administration and the other from the Defense Department - saying the dollar amount was too small for them to bother.

The Social Security Administration’s inspector general didn’t return a message left seeking comment. A spokesman for the Defense Department auditor said the case has been sent to Georgia’s attorney general to determine whether to prosecute.

Story Continues →