Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/dot-oig-uncovers-financial-mismanag

Reason Foundation

DOT OIG Uncovers Financial Mismanagement in TIGER Grants

Baruch Feigenbaum
April 11, 2012, 9:38pm

The Office of Inspector General (OIG) of the Department of Transportation has uncovered financial management problems in a significant number of the TIGER stimulus programs. Inspector General Calvin Scovel detailed some of these problems in last week’s testimony before the House Subcommittee on Transportation, Housing and Urban Development.

According to The Fiscal Times:

But federal investigators have uncovered widespread financial management problems with many of the projects. As of early March, federal authorities were investigating 66 cases of alleged false statements, bid rigging, fraud and embezzlement, according to a report by Calvin L. Scovel III, the Department of Transportation’s inspector general. Justice Department lawyers are scouring 47 of those cases for potential prosecution, according to Scovel.

Twenty-five of those cases involve alleged fraud by minority-owned or operated enterprises that received preferential treatment in the awarding of the contracts, while 22 involve allegations of false claims. Investigators are also looking into nine cases of alleged violations of the prevailing wage law, three involving corruption and one case involving embezzlement, according to a report Scovel presented to the House transportation appropriations subcommittee on March 29. A spokesman for Scovel’s office declined to provide further details of the ongoing investigation, but stressed, “We take very seriously any allegations of waste, fraud, abuse or violations of the law.”

The section is part of a larger report on DOT management practices where OIG studied effective stewardship of the department’s resources and enhancing aviation, surface, and pipeline safety. The report states that a number of, “Ongoing and emerging management challenges remain.” The full report is available here. 

Among the findings, FHWA has not yet enhanced the local public agency program that managed projects overseen by cities, counties, and other local entities. The OIG found “persistent risks” including insufficient state oversight, non-compliance with federal labor requirements, and improper processing of contract changes. FTA directed a significant amount of funding to major projects, which had not been adequately monitored. For example, the department awarded $423 million to the Fulton Street project, which “had experienced significant cost increases and delay.” Meanwhile FRA and MARAD are still implementing oversight practices for grants some two years after the first grants were awarded.

Allegation

FHWA

FAA

FTA

FRA

MARAD

Total

False Statements, Claims, Certifications

15

3

2

1

1

22

Disadvantaged Business Enterprise Fraud

16

4

5

0

0

25

Anti-Trust Violations, Bid-Rigging, Collusion

4

1

0

0

0

5

Embezzlement

0

0

1

0

0

1

Prevailing Wage Violations

8

0

1

0

0

9

ARRA Whistleblower

0

1

0

0

0

1

Corruption

1

1

0

1

0

3

Total

44

10

9

2

1

66 

The agency should have expected problems with the TIGER Grants. Any new program, no matter how well designed, brings new opportunities for fraud. And the TIGER program was not well designed; the administration rushed to create it without implementing sufficient checks and oversight. Without additional monitors, the TIGER Grants Program could be a goldmine for corruption.

How can DOT solve these problems? First, FHWA should immediately create a task force to fix the local public agency program. This task force should include state and local agency heads and create interim deliverables and a full-report within a year that details how to improve management and cooperation of local governments. FTA should create a special review team to oversee large projects. The OIG indicated that large transit projects have the majority of problems; creation of a special team over the next six months to monitor only these projects should not be that expensive or difficult. FRA and MARAD need to implement review teams immediately. While resources are always constrained, it is inexcusable that the divisions have been awarding TIGER Grants for two years and still have not implemented oversight practices. If these two divisions have not implemented practices by this August, Congress should reduce the budget for these two divisions. 

Creating new discretionary spending programs is challenging. It is impossible to consider all of the implementation challenges and opportunities for fraud. One of the disadvantages of large government programs, including merit-based programs, is they bring out the crooks. Grant programs need to be created methodically. While the Obama Administration wanted to create its program quickly for economic reasons, a more deliberate creation process would have yielded more benefits and less fraud. Hopefully, future discretionary grant program creators will take note and work to prevent some of the problems of the TIGER grants in any new program.


Baruch Feigenbaum is Transportation Policy Analyst


Print This