Recovery Blog

The good news: Almost all recipients of Recovery Act funds submit spending reports as required by law.

The bad news: Some recipients do not report, meaning the American public, in those cases, has no idea how its tax dollars are being used.

For those scofflaws, we created the “Wall of Shame,’’ a listing of recipients who essentially thumbed their noses at taxpayers. This time around—for the quarter ending September 30—recipients failed to submit 353 reports on how they used Recovery funds. Ten recipients, including four government entities, failed to submit reports in three or more quarters, the new listing shows.

The excuses ran the gamut. Three recipients told federal agencies they were “unable to access a computer over the weekend.’’ Another recipient reported being out of the country while still another claimed she was on vacation. The Labor Department said one recipient of a $3.2 million grant gave this reason: “Grantee president responsible for approving report had deceased; no backup plan in place.’’

The last time I reported on this issue, the largest number of non-compliers had received Justice Department grants. Unfortunately, in the most recent quarter, this troubling pattern continued—34 percent, or 120, of the awards on the Wall of Shame represented grants from the Justice Department. These included police departments, sheriff’s offices, and city and county governments.

Looking at the big picture, reporting compliance is excellent. In this past quarter, recipients submitted 105,784 spending reports to the Recovery Board.

– Michael Wood, Executive Director, Recovery Board

Recovery Operations Center analysts use enhanced software and multiple data bases to find potential fraud.

The Recovery Board, when you get right down to it, has two principal jobs—giving taxpayers a close-up look at how Recovery money is being spent and ensuring that those dollars are not misused.

To accomplish the first job of transparency, the Board posts detailed information from recipients of Recovery Act funds on Recovery.gov. The second job—accountability—requires the Board to review many of those recipient reports and work closely with the federal Inspector General community to protect taxpayer dollars.

The Recovery Operations Center, an analysis facility based in our offices in Washington, serves as the heart of our oversight operation.  Known within the Board as the ROC, the center is an exceedingly useful analysis tool for the Board and for those in law enforcement, including Inspectors General. We also give access to the ROC to some federal agencies that fund Recovery contracts, grants, and loans.

Given that backdrop, I thought I would explain the history of the ROC and how we use it to keep fraudsters from running off with your tax money. The Board developed and launched the ROC in the early days of the Recovery program. The idea was pretty simple: We needed an analysis capability that would allow us to track $276 billion—the amount of taxpayer money allocated for contracts, grants, and loans that would be awarded to tens of thousands of recipients.

We weren’t looking to develop just another pay-and-chase oversight program that would detect fraud after all the money went out the door. Detection was part of the plan, of course, but our focus was on being pro-active—preventing criminals and other bad actors from ever getting their hands on Recovery funds. To do that, we decided to build a program that would identify potential risks early on—questionable activities and business practices, business owners with shady backgrounds, and other factors that could put taxpayer funds at risk.

But a serious oversight program required more than sophisticated computer technology that integrated 27 government and commercial datasets into a single analytical platform. Someone had to review and make sense of the data fed into that IT system. We set about finding a group of young analysts and trained them to scour the recipient data looking for risk factors in the backgrounds of recipients of Recovery funds.

Coupled with the strong work of the IG community and law enforcement agents around the country, the ROC has proved to be a very effective oversight tool the past three years. What have been the results? For a program with so much money in the pipeline, the fraud numbers are surprisingly low. All told, the latest statistics show, an estimated $11.1 million has been lost to fraud. The 29 IGs with Recovery oversight responsibility have more than 1,900 investigations under way; convictions and judgments total 598.Many of those IG inquiries are based on information referred by ROC analysts.

Meanwhile, we are continually helping agencies review sensitive procurement issues, including some with criminal potential sent to us by the Department of Justice and others in law enforcement. “The ROC allows the IGs and DOJ prosecutors to focus their assets better. They can target risks within a program,’’ says John McCarty, the Board’s Assistant Director for Law Enforcement Liaison. “The ROC allows you to build a case from a reasonable suspicion to probable cause—rapidly and with reliability.’’

Let’s take a look at some of the ROC’s results:

• Working with the Veterans Benefit Administration, an arm of the Department of Veterans Affairs, ROC analysts discovered that veterans claimed more than 16,000 dependents with Social Security numbers matching those of dead people. We briefed the benefits agency on our findings.

• In a separate review, conducted jointly with the Department of Veterans Affairs, ROC analysts found that more than 150 potential shell companies may have improperly received Recovery funds set aside for the Service-Disabled Veteran-Owned Small Business program. Our findings were forwarded to the relevant IGs for further review.

• Acting on information supplied by a news reporter, ROC analysts identified nearly 30 potentially fraudulent Medicare providers operating in two dilapidated buildings. The information was provided to the Office of Inspector General at the Department of Health and Human Services.

• ROC analysts discovered that more than 400 Recovery Act recipients of funds from 15 federal agencies had previously been terminated for default. Most certified incorrectly, some multiple times, that they had not been terminated for default.

The list could go on but suffice it to say that we are undertaking even more ambitious projects and handling dozens of requests for assistance from various federal agencies. Most involve Recovery funds but we are using the limited authority given to us by Congress to analyze other government spending projects unrelated to the Recovery program. What that tells you is this: The Recovery Board is taking the lead in providing strong oversight of the use of taxpayer funds.

– Michael Wood, Executive Director, Recovery Board

The Government Accountability and Transparency Board (GATB) recently welcomed three new members, including a new chairman:

Richard Ginman – New GATB chairman and Director of Defense Procurement and Acquisition Policy (DPAP), U.S. Department of Defense. Mr. Ginman has served in numerous defense-related positions, including as Principal Deputy Director of DPAP from 2008 to 2011 and as Deputy Director of four DPAP directorates from 2006 to 2011. Mr. Ginman retired from the U.S. Navy as a Rear Admiral in 2000 after a distinguished 30-year career.

Nani Coloretti – Acting Assistant Secretary for Management and also Deputy Assistant Secretary for Management and Budget, Department of the Treasury. Ms. Coloretti joined the Treasury Department in September 2009, and she most recently helped stand up the Consumer Financial Protection Bureau as its first Acting Chief Operating Officer.

Gregory Friedman – Inspector General, U.S. Department of Energy. In addition to his oversight duties at DOE, Mr. Friedman has been a member of the Recovery Board since its inception in 2009.

The GATB was established by Executive Order in June 2011 to identify guidelines for integrating systems that support the collection and display of government spending data, ensuring the reliability of that data, and broadening the deployment of fraud detection technologies, including those proven successful under the Recovery Act.

More about GATB

The Department of Energy is a major player in the $840 billion economic stimulus program. Indeed, the Department has received more than $35 billion to support science, energy and environmental projects along with the authority to make or guarantee another $52 billion in energy-related loans. Put simply, that amount of funding makes the Energy Department one of the largest federal agency recipients of Recovery Act funds.

Given our professional responsibilities in the DOE Office of Inspector General, my colleagues and I keep a close eye on how that money is spent to ensure that the taxpayer’s interests are protected and that the funds are not wasted. It’s a big job. By last April, my office had completed nearly 80 reviews and a number of investigations that pinpointed serious problems in Energy’s Recovery programs. We discovered, for instance, that work done under Energy’s $5 billion weatherization program was often of poor quality. To cite another example, my auditors found that poor record-keeping made it difficult for DOE managers to document the decision-making process in a major loan guarantee program designed to encourage development of alternative energy sources.

What to make from all of this? What are the lessons learned? The overarching takeaway is that, if after the expenditure of such an enormous amount of taxpayer funds, the Department has not learned a great deal about the efficient and effective delivery of public services, an important opportunity has been lost. Drawing on our oversight experience, we developed a series of recommendations intended to help Department officials make better decisions. These were captured in a January 2012 special report entitled, “Lessons Learned/Best Practices during the Department of Energy’s Implementation of the American Recovery and Reinvestment Act of 2009.”

The report points out that Energy officials were required to push a lot of Recovery money out the door quite rapidly. This expansion of existing programs strained the Department’s resources and led to both notable successes and failures. Given that backdrop, we offered a number of lessons in the report that can benefit the Department. They include:

• Implementing a rigorous system of risk management practices to ensure that program decisions are made after due diligence, that risks are continuously monitored and adjustments made as needed, and that performance metrics ensure programs meet their intended objectives.

• Using spending plans and project baselines to manage and account for changes in financial resources and to ensure the information being reported on program and project progress is correct.

• Ensuring that staffing levels and employee skills match the demands of the work being performed.

• Anticipating and planning for the impact of regulatory requirements on DOE operations, a recommendation that would help the Department and its grant and contract recipients achieve a high level of program performance.

• Monitoring program activities more closely to improve the quality of work and addressing fraud complaints from the public in a more effective and timely manner.

Department officials have assured us that they intend to implement management reforms to ensure that program risks are more clearly identified and minimized, that Recovery Act staffing and oversight activities have been improved, and that best practices derived from the Recovery Act experience will be applied more broadly in departmental operations. DOE management has also vowed to work closely with my office to achieve more efficient and effective implementation of Recovery Act programs. This is good news, considering that substantial funds have yet to be spent, which will require continued oversight activities for several more years.

– Gregory H. Friedman, Inspector General, Department of Energy & Member of the Recovery Board

Throughout its three-year history, the Recovery Board has worked closely with law enforcement to keep a watchful eye on the $840 billion stimulus program.

That collaboration has paid remarkable dividends.

Take a look, for instance, at the most recent stats on criminal convictions and monetary losses:

• There have been 351 convictions, many of them Social Security fraud cases.
• Losses of Recovery money associated with those convictions total $9.1 million, a relatively small amount.

Now, it’s never good news when thieves steal taxpayers’ money but the idea is to prevent losses or detect the crime early on before the funds are lost.

Fortunately, the Board has developed strong partnerships with the 29 federal Inspectors General who oversee the federal agencies that distribute Recovery Act funds.

That’s not a coincidence; twelve of the IGs serve on the Board.

We use our first-rate analysis center to dig out irregularities linked to recipients of Recovery Act awards and are constantly sending leads and tips to IGs.

The Board also warns federal program managers when we see inconsistencies in agency awards.

The most recent oversight data shows there are 1,826 ongoing investigations relating to Recovery Act awards.  More than 500 cases have been closed.

The IGs also have completed nearly 2,100 reviews of the use of Recovery funds and pressed various agencies to improve management of their Recovery funds.

All in all, that kind of oversight is good news for taxpayers.

– Michael Wood, Executive Director, Recovery Board