“I appreciate how quickly Director Orzsag responded to my first letter. The reach of this $787 billion program is enormous, so every effort needs to be made to account for the tax dollars that are spent. Transparency is a key element of accounting for the expenditures and determining the success of the effort,” Grassley said. “I’ll keep asking questions and working to shed light on where the money is going.”
The text of Grassley’s second letter, which he sent today, is immediately below. The letter he sent last Friday can be found by clicking here. The February 1 response of OMB Director Orszag is found by clicking here.
February 3, 2010
The Honorable Peter R. Orszag
Director
Office of Management and Budget
Eisenhower Executive Building
1650 Pennsylvania Avenue, NW
Washington, DC 20503
Dear Director Orszag:
Thank you for your prompt response to my recent letter on the stimulus program. As the federal government moves forward with this unprecedented federal spending, continuous dialogue between the executive and legislative branches is critical to ensure taxpayer dollars are spent in a transparent and accountable manner. Throughout my career in Congress, I have believed I have an obligation to oversee how our government conducts the people’s business and spends their money. I have worked to fulfill this obligation through both Republican and Democratic administrations.
As Ranking Member of the Senate Committee on Finance, I conduct oversight of federal health care spending, including the Medicare program. In this one program alone, taxpayers are bilked out of at least $60 billion every year through fraud, waste, and abuse. So you can understand my consternation over the Administration’s efforts to spend more dollars in a shorter period of time than we have seen in our nation’s history. Administration officials, as well as others, have predicted no less than $55 billion dollars in Recovery Act money will be lost to waste, fraud, and abuse. I think this is being optimistic.
Although I appreciate your prompt response to my earlier letter and the effort that it took to prepare it, I find that too many questions remain unanswered and the reliance on future plans and guidance to correct current problems is, at best, misguided. Let me provide you with a few examples.
While it is true that “OMB’s guidance requires Recovery Act grant recipients to begin reporting as soon as an award is issued,” all too often this is not the case. It is also true that “Recovery Act contract recipients are required to begin reporting as soon they invoice for the first time, which occurs before any funds reach them.” But, again, this is not always the case. Too often, recipients fail to report because they understand that they are unlikely to be penalized.
After reading your response, I continue to have concerns. Therefore, I reached out to the Recovery Accountability and Transparency Board (RAT Board), which advised me that about 1,500 ARRA recipients have failed to file for two quarters, and that more than 2,000 ARRA recipients who filed for the first quarter failed to file in the second quarter. And then there are those ARRA recipients who were not required to file during the first quarter; but were required to file during the second quarter and failed to do so. That’s more than 3,500 recipients of ARRA money who are not following the rules. Perhaps they have little incentive to do so.
As the Chair of the RAT Board testified late last year, there are a “considerable number of recipients who” do not report to the Recovery Act because it “prescribes no penalties for failure to report.” Perhaps even more important is the fact that the Administration currently does not require that agencies take any punitive action(s) against ARRA recipients who fail to file; rather it provides the agencies with discretion as to whether or not action should be taken if an ARRA recipient fails to file. In the interim, it is critical that federal agencies do everything they can to clamp down on non-reporting recipients and OMB ought to be encouraging them to do so. In addition, please provide to me the total number of recipients penalized for not reporting data or reporting it late, and describe what, if any, punitive action has been taken against them as of the date of this letter.
In my letter I also raised concerns about Suspension & Debarment (S&D) problems at the Department of Transportation. It is also my understanding that until recently the Interior Department completely lacked an S&D program at all; so it would not be unusual to find that the Interior Department gave ARRA money to an organization that had earlier failed in, for example, some aspect of its performance to Interior.
I also greatly appreciated your response to my inquiry regarding the Excluded Parties List System (EPLS) and my staff looks forward to receiving a briefing on that system. According to its website the EPLS is intended to:
provide a single comprehensive list of individuals and firms excluded by Federal government agencies from receiving federal contracts or federally approved subcontracts and from certain types of federal financial and nonfinancial assistance and benefits. The EPLS is used to keep agencies abreast of administrative, as well as, statutory exclusions taken throughout the Federal Government.
However, there is a substantive and critical concern that has been brought to my attention by federal officials regarding the EPLS that I would like you to address. Let me start with an example to illustrate my concern. Company/Individual ABC receives a $5 million dollar ARRA contract from Agency X on June 1, 2009. Subsequently, on August 1, 2009, Company/Individual ABC is placed on EPLS for “administrative, as well as, statutory exclusions taken.” From my conversations with federal officials, it is my understanding that because the ARRA contract was awarded prior to Company/Individual ABC being placed on the EPLS system, ARRA contract payments will continue to be paid.
This is an appalling bureaucratic mishandling of taxpayer funds. Please let me know as soon as possible whether this type of scenario is being addressed, and if not, why not.
But even for recipients who want to report data, it is not always easy to do so. A January 6, 2010 column in the Washington Examiner described the many problems one business owner had when reporting a $2,000 contract to federalreporting.gov.[1] The article noted that the business owner spent seven hours attempting to input the data, and did so only after all of the stimulus money was spent.
In addition, in response to my inquiry I was recently advised by the RAT Board that it does not have access to a complete list of precisely who received a loan, grant or contract, pursuant to the Recovery Act. To say that this is remarkable and a serious shortcoming is an understatement. How can the RAT Board do its job efficiently or effectively when it does not have possession of the most basic and fundamental of information to conduct its work, namely: who got the money?
While I am eager to see the completion of the Federal Awardee Performance and Integrity Information System (FAPIIS), I remain concerned by flaws in the current system and the numerous cases that have already arisen regarding questionable entities receiving Recovery Act dollars. For instance, a recent report told the story of two entities that have both received stimulus funds under circumstances that do not inspire confidence.[2] In one case, a construction company under criminal investigation for bilking the taxpayers of San Diego, California, received $6.4 million in stimulus funds to repair roads and runways. In another case, a large corporation recently fined for polluting a creek with chromium, dioxin, lead, and mercury received $15.9 million in stimulus funds to conduct environmental monitoring on the same site. Please keep me updated on the completion of the FAPISS, and provide me with the total amount of ARRA funds and non-ARRA funds that will be spent to create it and maintain it.
I was also interested to read your response regarding the federal government’s irregular accounting of ARRA funds. Your letter stated that these “alleged discrepancies” were the result of “incorrect assessments of the sources referenced.” Any incorrect assessments occurred within the executive branch, as the terms and data in my prior letter originated there. Indeed an executive branch official told my staff: “in the federal government everybody is using different terms to talk about the same thing, and similar terms to talk about different things.” In addition, I read your response to Question 5 with great interest and note that it is limited strictly to tax cheats and/or criminals who are contractors. Please provide to me your response with regard to those who received ARRA grants or loans as well.
Regarding the ability of states to protect ARRA funds from fraud, waste, and abuse, you stated that OMB is “very concerned about States’ capacity to protect against waste, fraud and abuse.” I share your concern. Until better controls are in place to protect these funds the waste, fraud, and abuse will only grow and we will find ourselves again in a ‘pay and chase’ system that routinely ends poorly for taxpayers.
My concern with sub-recipients continues despite your responses and it seems that my concerns are well founded. I recently came to learn that there are over 10,000 sub-recipients of ARRA money that reported for the first quarter. However I understand, in response to an inquiry I made, that thousands of these same sub-recipients did not report in the second quarter. Please provide information indicating whether the rules changed regarding their reporting and, if not, why these sub-recipients stopped reporting and what is the Administration going to do about it.
Additionally, I was also pleased to read in your letter that OMB is open to “alternative uses” of unobligated stimulus money if taxpayers would be “better serve[d].” But like so many Americans I remain confused about how so many of the stimulus projects were determined to be the best use of limited taxpayer dollars in the first place. For instance, recent reports by my colleague Senator Coburn and others have highlighted the following ARRA projects:
·
Millions of taxpayer dollars to buy road signs reminding taxpayers of how their money is being spent.
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$2.2 million grant to construct new water pipes for a San Francisco golf course.
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$1.15 million to construct a guardrail around a Woodward, Oklahoma lake that does not exist.
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$578,661 to combat homelessness in a New York town that never requested the money and does not have homelessness. A HUD official encouraged town officials to come up with “creative strategies” to use the funding.
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$1,849,627 to a Nevada non-profit for weatherization services, after the non-profit was terminated from the same project for deficient work and failing to follow accountability requirements.
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$800,000 for the construction of a super-runway at a Johnstown, PA airport that serves an average of 20 passengers per day.
Finally, I appreciate your noting that additional funds have been provided to the Inspectors General community to pursue ARRA matters. At the same time, I am interested in learning more about the resources that each agency is dedicating to ARRA administration and oversight. Accordingly, please let me know how many full-time employees are being provided by each agency to conduct ARRA activities.
It is no surprise that Americans are worried, and they have good reason. With a ballooning federal debt and growing unemployment, Americans are rightfully angry to see their hard-earned dollars as well as dollars the government has borrowed to fund projects that are so patently wasteful. Hundreds of thousands of dollars here and there might not sound like a lot to some in Washington, but it is an incredible amount for the millions of Americans struggling to put food on the table and pay their bills.
Please provide the requested information by February 10, 2010. Should you have any questions regarding the contents of this letter please do not hesitate to contact Christopher Armstrong or Brian Downey of my Committee staff at (202) 224-4515.
Sincerely,
Chuck Grassley
United States Senator
Ranking Member of the Committee on Finance