- Washington Guardian - Tuesday, October 23, 2012

The government’s fiscal watchdogs have identified more than $5.8 billion in problematic stimulus spending, a figure that dwarfs the election-year statistics the Obama administration is using to tout the integrity of the president’s signature economic recovery program, a Washington Guardian review of investigative reports has found.

The problems uncovered in hundreds of federal audits and investigations range from estimated millions in Agriculture Department funds for the rural poor that went to pay for prohibited homes with swimming pools to millions more that went to construction firms that did shoddy weatherization work or were later barred from government contracting because of criminal activities.

The Veterans Affair’s Department’s chief watchdog, for instance, says the agency can’t demonstrate the $50 million it spent to refurbish cemetery monuments or memorials was justified. The Energy Department admits it wasted $7 million unnecessarily on golden parachutes to temporary stimulus workers it hired, then laid off. And the Labor Department inspector general says that agency spent $31 million more for a building than was necessary. None of those amounts are counted in the figures used this fall by the administration on the campaign trail.

The tally calculated by theWashington Guardian so far accounts for about 2.4 percent of the $243.6 billion in President Obama’s $830 billion stimulus program that went to direct spending, such as grants and loans. The figure is expected rise as the inspectors general at the 29 federal agencies that got funding from the American Recovery and Reinvestment Act pursue more than 1,900 open criminal investigations and hundreds more audits.

Officials say they anticipated large problems — far more than what has been portrayed on the campaign trail — because so much money was pushed through the federal spending pipeline in such a short period of time.

“It was a large amount of funds the department was provided with,” said Rickey Hass, the deputy inspector general for audits and inspections at the Energy Department where more than $1 billion has been questioned by auditors and congressional overseers. “Dealing with that was trying to hook a garden hose to a fire hydrant. It was difficult to put that money through the existing infrastructure.”

The audits by the inspectors general contrast with the more rosy assessment offered by the Obama administration. From a debating Vice President Joe Biden to White House surrogates on the campaign trail, officials have been using narrowly cast statistics to convince voters that precious few of their tax dollars were wasted in the effort to revitalize the economy.

One of their favorite figures is $11.1 million, the amount the U.S. Recovery Accountability and Transparency Board says comes from court records of those stimulus recipients already convicted specifically of the crime of fraud through June. It amounts to a micro-fraction of one percent of the money spent so far on stimulus grants and loans. “The Recovery Act has been responsibly implemented with so far low levels of fraud, waste, and abuse,” the White House says on its Web site.

Added Michael Wood, executive director of the Recovery Board, in a blog post in September that highlighted the $11.1 million figure: “For a program with so much money in the pipeline, the fraud numbers are surprisingly low.”

But Wood’s figure was never intended to be the final political seal of integrity for the Recovery Act, officials said. Rather, it is an initial tally of stimulus funds deemed unrecoverable from closed fraud cases and doesn’t include ongoing cases or any of the audits that found waste, abuses or undocumented expenses.

With 1,900 open investigations, the fraud figure is expected to grow. For instance, the Board recently alerted the Veterans Affairs Department that stimulus-related benefits may have been paid to 16,000 people using the Social Security numbers of deceased Americans. In fact, the fraud number recently went up to $11.6 million, a half million dollar jump from the previous month, officials said Wednesday.

More significantly, the figure doesn’t address the variety of other spending problems inspectors general have found with the stimulus, officials acknowledged.

“The Board focuses primarily on fraud. The $11.6 million in fraud is based on convictions and pleas on file in various courts. The number represents a status report and no doubt will go up as additional investigations are completed,” Wood told the Washington Guardian. “But based on what we have seen thus far, we do not believe that the final fraud numbers will be extraordinary.

“The Inspectors General have done a superb job in investigating and auditing the Recovery program. The IGs, in coordination with the Recovery Board, attempted to prioritize work in high risk areas. Many of the IG reports that you have reviewed point to programs where funds could be put to better use or that have potential control problems that the agencies need to address,” he added.

The Washington Guardian calculated the $5.8 billion number by tallying specific dollar figures in stimulus-related audits and investigative reports the IGs have issued in the last two years that involved fraud, waste, abuse, undocumented expenditures flagged for reimbursement, prohibited expenditures, or loans, contracts or grants to firms or individuals that went bankrupt, were convicted of crimes or were barred from federal contracting. Some of the IG figures are based on estimates derived from statistical samples of the programs they monitor.

White House officials declined repeated requests for on-the-record comment. But in private conversations, administration officials acknowledged the numbers they have been using on the campaign trail, while technically accurate, were narrowly cast and did not capture all the spending problems identified by inspectors general. 

“We know there are problems out there, and they will grow before all spending ends, but we picked the numbers that made the best case we could for the election,” said one official directly involved in stimulus issues, who spoke only on condition of anonymity. “On balance, we believe the program was a success and voters understand it saved them from a worse economic downturn.”

Story Continues →