The Department of Education's Reading First Program has let favoritism guide who gets grants.

Four years ago, a nonprofit education firm called Success for All occupied four floors in a Towson office building and employed 500 people. Hundreds of schools across the country were signing up to use its highly regarded reading curriculum, which stresses phonics.

Today, Success for All has laid off two-thirds of its employees and shrunk to two floors. A federal inspector general's report appears to explain why. It says the U.S. Department of Education steered federal grant money to certain reading programs and away from others.

The report, issued last week, accuses the department of favoritism, conflict of interest and mismanagement in the awarding of $4.8 billion in federal funds.

President Bush has signed S. 2590 into law (see the White House press release here). Congrats to everyone who helped push this bill through!

Today, the Senate Committee on Homeland Security and Governmental Affairs is having a hearing on the disclosure of tax expenditures.

Not many people know it, but tax expenditures are a huge part of the federal budget. The Joint Committee on Taxation estimates that the federal government spent $947 billion in tax expenditures just this year. And much of that enormous sum goes to programs that are ineffective, ineffecient, and highly regressive, according to the Congressional Research Service.

Read our statement for the hearing here. We suggest that the S. 2590 database include some data on tax expenditures to help the public track them.

The Department of Housing and Urban Development (HUD) Inspector General has found that HUD Secretary Alphonso Jackson "instructed staff to award HUD contracts to President Bush’s political allies and withhold them from his political opponents." Think Progress has more.

We've been posting recently about some of the bizarre and downright ridiculous things going on over at the Internal Revenue Service lately concerning enforcement of the country's tax laws (see this recent analysis for more background).

While these policy changes certainly deserve criticism, you have to tip your hat when things go right. Within two days last week, the IRS announced the two largest tax settlements in the agencies' history (one individual and one corporate) related to tax evasion.

In the individual case, the IRS settled its case against former telecommunications entrepreneur Walter Anderson. Apparently Anderson failed to pay over $200 million in taxes and did not report $365 million in income in 1998 and 1999. He further attempted to hide over $450 million in income from 1995 through 1999 in offshore companies and accounts. (hat tip: CAP BudgetBlog).

In the corporate case, the IRS settled its 16-year suit against British drugmaker GlaxoSmithKline in a "transfer pricing" scam where the company underreported its profits in the United States since 1989. From a Washington Post article:

At issue was one of the thorniest concerns facing tax collectors -- how multinational corporations apportion profits and expenses among units in different countries. The IRS has said that companies often manipulate cross-border transactions to minimize taxes...

...The IRS had alleged that Glaxo's parent company, GlaxoSmithKline PLC, based in Britain, had allotted too little of its profits from worldwide drug sales to its U.S. subsidiary. Determining the proper split in what are known as "transfer pricing" cases can involve apportioning such intangible items as the value of trademarks and brand names.

The company agreed to pay an unbelievable $3.4 billion to the IRS to settle the case - causing many private analysts and observers to conclude they were in very deep trouble. But no worries Glaxo stockholders - because they case dragged out so long, the company was able to build in the cost of the settlement over time and the payment will not have "any significant impact" on the company's earnings. Company shares rose 17 cents to $55.25 the day the settlement was announced.

Only $341.4 billion per year to go IRS, and the tax gap is closed. Keep it up!

TomPaine.com has a good article on the cost of a privatized military here.

Each week seems to add new counts to the indictment against the administration’s reconstruction quagmire. The Campaign for America’s Future has compiled the basic case in a damning report it is making public today. That report chronicles “a procurement process that rewards cronies and condones widespread abuse.” It describes how half of the $270 billion spent on the reconstruction effort between the fall of Hussein and 2005 was distributed without competitive bidding and reveals that the government can’t even track the distribution of more than $20 billion.

You may recall back in July that OMB Watch drafted a joint letter with the National Taxpayers Union that was signed by 54 organizations urging the Senate to require that agency budget justifications be publicly available online. See this post for more information.

The effort seems to be paying off. In the latest update to OMB Circular A-11 - the document that guides agencies in the compilation of their annual budgets - OMB Director Rob Portman has added a provision to require all agencies to post their budget justifications and related materials online within two weeks of submitting them to Congress.

This is a very good step forward to a more transparent and accountable government - but could easily be revised in the future when a new OMB director enters the post. We applaud Director Portman for his actions, but continue to urge Congress to pass a requirement for public disclosure to ensure these documents will be available for good in the future.

The Bush Administration is showing its support for S. 2590. From an Office of Management and Budget press release:

Today, OMB Director Rob Portman applauded the Senate for its unanimous approval of S. 2590, the Federal Funding Accountability and Transparency Act of 2006. "Federal funding should be used to achieve measurable results for Americans, and wasteful and ineffective spending should be eliminated. That's why we welcome the Senate's unanimous approval of a bill to increase transparency and accountability. I particularly appreciate the leadership of Senator Tom Coburn of Oklahoma and Senator Barrack Obama of Illinois in spearheading this effort.

"The House — led by Majority Whip Roy Blunt of Missouri and Rep. Tom Davis of Virginia — has approved a similar measure, H.R. 5060, the Federal Spending and Assistance Bill. This bill would also improve the quality and accessibility of information about federal spending.

"American taxpayers benefit from having the necessary information to hold government accountable for results. The Administration is committed to the goals of these two measures, and I look forward to working with the House and Senate to enact a bill that accomplishes them.

And the House should pass S. 2590 soon. From BNA ($$):

The House is expected to act during the week of Sept. 11 on legislation to create a searchable Web site tracking both governmental grants and contracts, under compromise language unveiled Sept. 8 after Senate passage of a database bill.

The language bridging the main difference between House and Senate bills appeared to remove one of the final hurdles to bipartisan efforts to boost "fiscal transparency" by opening up more details of how the federal government spends money, including legislative earmarks. Until S. 2590 was approved by unanimous consent late Sept. 7, those efforts had been blocked by procedural maneuvers in the Senate that the efforts' supporters feared could kill the proposal.

"Our legislation creates a transparent system for reviewing these expenditures so that Congress, the press, and the American public have the information they need to conduct proper oversight of the use of our tax dollars. The package we've agreed to move requires the Administration to establish searchable databases for both grants and contracts," said House Majority Leader John Boehner (R-Ohio), Majority Whip Roy Blunt (R-Mo.), and Rep. Thomas Davis (R-Va.), chairman of the House Government Reform Committee in a joint statement Sept. 8.

To keep you informed of IRS Commissioner Mark Everson's latest antics, we bring you this from American Public Media's Marketplace. Yesterday, they aired a great piece on the outsourcing of IRS collections. The nut of the story is this: The IRS wants to outsource the job of collecting outstanding taxes due and let the collection agency keep a percent of haul. Sounds great - the IRS gets some money it wouldn't have otherwise - the budget fares that much better. The rub? It's been done before and it ended up costing taxpayers $18 million when it was tried in 1996.

So why embark on a money-losing scheme?

KEVIN MCCORMALLY [of Kiplingers Magazine]: Congress will not give the IRS a dime to hire more employees. Because, no one's ever lost an election beating up on the IRS, so the IRS has been told to go out and hire private debt collectors, even though it's going to cost 20 to 25 cents on a dollar to collect these debts with the private people, versus maybe 3 to 5 cents on a dollar if they hired employees.

Marketplace: "Legislators keep rejecting, IRS keeps collecting"

Privatization comes to the...labor department?

Several leading women’s organizations, including the Coalition of Labor Union Women, are vigorously protesting the latest scheme by GOP President George W. Bush and his Labor Secretary Elaine Chao to downsize and outsource much of her department’s Women’s Bureau.

In an Aug. 1 letter initiated by the National Council of Women’s Organizations and Wider Opportunities for Women, the groups call on Chao to reverse planned budget cuts at the Women’s Bureau and instead give it increased money in the fiscal year that starts Oct. 1.

The cuts and the outsourcing will affect half of the bureau’s jobs, some 85 in total, which will be put up for bidding between the bureau’s workers and private contractors.

The Women’s Bureau is one of a number of DOL agencies whose functions Chao is trying to outsource, in line with a Bush initiative — supposedly due for completion by 2010 — to transfer as many federal jobs as possible to private contractors.

Weird stuff, but it's probably too early to speculate what affect privatization would have on DOL (though if I had to guess I'd say it wouldn't be pretty). Also, didn't know that there was a "Bush initiative" to privatize federal jobs, but it would help explain the mad rush to privatize the IRS.

After a full month of secret holds and back-room manuevering, of personal conflicts and idle rhetoric, a bill promoting transparency and disclosure of a vast array of government spending has finally passed one chamber of Congress. Late last night, during a period when all previous secret holds on the bill had been removed, Majority Leader Bill Frist (R-TN) acted quickly and S. 2590 was quickly approved unanimously by the Senate.

The bill now moves to the House with little time left before Congress breaks for the last pre-election campaign push. The House passed a weaker version of S. 2590 earlier this year that would disclose less than half of the information that would be available under the Senate bill.

The House needs to take up the Senate bill and pass it quickly so the president can sign the bill into law this year. Full disclosure of federal speading must include all available information - including federal contract data. It's time to shed sunlight on federal spending.

Per word confirmed by Senate Minority Leader Reid's office and via the apparent blogo-euphoric Dr. Frist, there now appear to be no current holds now on S. 2590... for now.

Meanwhile, OMB Watch joined a broad spectrum of groups yesterday to promote S. 2590 at a Capitol Hill press conference. The Hill has an excellent piece on it today.

Also take a look at the joint sign-on letter signed by 82 organizations in support of S. 2590 organized by the National Taxpayers Union and OMB Watch. The letter was sent to Senate Majority Leader Bill Frist (R-TN) after the press conference yesterday.

The controversy over secret Senate legislative holds following the confession by Sen. Ted Stevens (R-AK) last week rages on. The trailblazing reformer Trent Lott has just found religion. "Secret holds are outrageous…. It's one of the fundamental problems we have in the Senate today. It's abused and misused… It's corrosive."

And now today even Stevens has seen the light and lifted his hold on the database bill "now that [Coburn] has ceased blocking several Commerce Committee with his secret holds."

But wait, there's more —- Bill Frist can't resist joining the fun:

"Now is the time to act on S. 2590. And we will act this September to pass this bill… Update from Senator Frist: As soon as I blogged this, I received word that a Republican Senator has not cleared the bill. Let me be clear, hold or no hold, I will bring this legislation to the floor for a vote in September... I am grateful for the support of the blogosphere and other groups who are passionate about bringing more, appropriate transparency to the federal budget process… Some way, somehow, the Senate will vote this month on the Federal Funding Accountability and Transparency Act of 2006."

But before we turn blue holding our breath wondering how Dr. Frist will rescue S. 2590 from the clutches of his colleagues, let's ponder this last word from the no-holds-barred beneficiary of the blown-open holds, Coburn himself, who says he has no qualms with secret holds, or any other rules or traditions that reduce the volume of legislation passed by Congress: "I want less. Fewer bills, smaller government… I have no problem with secret holds."

Posted by Dana Chasin, 03:26:16 PM



GAO: Inadequate Transparency in Katrina Spending

The Government Accountability Office has released several reports on U.S. disaster preparedness. You can find the reports here.

One of GAO's main findings supports claims by the Brookings Institute that there's been inadequate transparency for Katrina-related spending. Across the board, government agencies are not tracking and reporting how they've been using funds for the recovery. If they have been doing it, they've mostly botched it. From CongressDailyAM (sub.):

For example, FEMA's Sept. 28, 2005, report stated it had allotted $2.2 billion to the Defense Department for cleanup activities. Since then it has amended its reports twice to show that actual Pentagon spending has been roughly half that amount. On the other hand, internal Pentagon reports show the agency had only spent about $481 million as of April 5 -- less than half of even FEMA's sharply reduced estimate.

USA Today also has a good story on the GAO reports, via Think Progress. Key quote:

Congress needs to know "how much federal funding has been spent and by whom, whether more may be needed, or whether too much has been provided," the GAO said. Taxpayers and hurricane victims also should be able to find out how the money's being spent, one report said.

Too bad another hold has been put on the contracts and grants database bill. It wouldn't do much for Katrina spending, since it would take effect years from now. But it could help prevent the waste, fraud, and feet-dragging that have so hampered the recovery effort. It's terrible, but it seems like learning from our mistakes and holding people accountable might be the best we can do for New Orleans. Or maybe it's the least we can do.

Hedieh Rahmanou writing at Center for American Progress's Budget Blog, points us to this GovExec article reporting on the 18 percent increase in federal agency contract spending.

Federal agencies issued $388 billion in contracts in fiscal 2005, up more than 18 percent from the year before. Defense contracts topped $278 billion, a healthy increase from $229 billion in 2004.

[...]

Fairmont Homes Inc...had $521 million in FEMA contracts...Morgan Buildings and Spas Inc. was awarded nearly $400 million....Circle B Enterprises $287.5 million...Carnival Corp. garnered $236 million in contracts...for providing short-term housing on cruise ships.

That adds up to nearly $1.5 billion in Katrina-related spending for those four companies alone. And keep in mind, the hurricane hit barely a month before the end of fiscal 2005, so these were among the earliest contracts awarded. Further effects of the vicious storms of 2005 certainly will be felt in next year's Top 200 Contractors list.

This is the kind of reporting that helps hold the federal government's feet to the fire. Three hundred eighty-eight billion dollars is a lot to keep tract of, and GovExec has done some great work here reporting on the top 200 federal contractors, but wouldn't it be great if ordinary citizens could go to a website and research this kind information for themselves and not wait for a news organization to report it?

It's a good thing Senators Robert Byrd (D-WV) and Ted Stevens (R-AK) released his secret hold on S. 2590.

Update: This post originally stated that Stevens had released his hold. He has, in fact, not released his hold.