Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Thursday, November 30, 2006

Contractors, FEMA Still Bungling Hurricane Relief

Louisiana officials are fed up with a company contracted to administer a fund for rebuilding hurricane-damaged homes. The fund, called the Road Home Project, has $8 billion in it. But as of Wednesday last week, only 39 applicants had received anything from it- 8 weeks after the fund got up and running. Governor Blanco has given ICF -the contractor in charge of managing the fund- until the end of month to issue payments to at least 10,000 applicants.

Despite the slow pace, ICF can earn a maximum of $756 million on the project. Given the nearly 80,000 applicants, ICF could make around $9,000 on each grant!

The old adage "You get what you pay for" doesn't seem to apply here.

In other news, a federal judge ruled that FEMA wrongfully denied housing aid to tens of thousands of Hurricane Katrina victims. The judget ordered that FEMA resume payments immediately, but how soon FEMA will comply is anybody's guess.

New Orleans City Business: ICF Seeks Road Home Fast Lane

The Washington Post: FEMA Told to Resume Storm Aid

Posted by Matt Lewis, 10:27:55 AM

Wednesday, November 29, 2006

"Emergency" Defense Bill Likely to be Anything But

More news coverage is out today on the enormous upcoming "emergency" appropriations request being developed by the Pentagon for the wars in Iraq and Afghanistan. We previously posted (here, and here) about how the Pentagon is attempting to widen the scope of this funding request to include not only expenses related to the two wars, but anything that could be categorized under the "broader war on terror."

Along with many in Congress and numerous outside analysts, now the Congressional Research Service has complained (in a Sept. 1 report) that the distinction between "emergency" spending related to the ongoing wars and money to continue to transform and modernize the armed forced more broadly has almost disappeared. A few gems reported recently in the media help to underscore this conclusion.

From the Los Angeles Times:

[Winslow Wheeler, director of the Straus Military Reform Project and a former congressional budget aide] said the services were doing more than just replacing equipment destroyed in Iraq or Afghanistan. He was particularly critical of the Marine Corps' decision to use the emergency spending requests to replace old helicopters with the new V-22 Osprey, a controversial and expensive tilt rotor airplane that has yet to be deployed in Iraq or Afghanistan.

And this one from the Vermont Times Argus:

Both the Congress and Pentagon have been guilty of using the emergency spending device to bankroll non-emergency programs. For example, Congress directed the Air Force to use emergency money to buy additional C-17 jet transports, while the Pentagon is using emergency money to refurbish and replace weapons used up in Iraq — the manufacturing of which won't be completed for years — and for training new military units with expertise not required for service in Iraq and Afghanistan.

It's bad enough that the Pentagon and the Bush administration have not managed to include war costs in the regular budgeting process - that they are expanding the scope of "emergency" spending is downright shameful.

Posted by Adam Hughes, 12:36:12 PM

Tuesday, November 28, 2006

Tax (Gap) Evasion

TaxAnalysts has just announced that it's suing the IRS to get suspiciously withheld documents on the tax gap.

Last week, IRS commissioner Mark Everson said that IRS enforcement efforts had brought in more money, and that the IRS was paying more attention to high-income earners who avoid paying taxes. However, the IRS won't release the documents on which it's been basing these claims. So TaxAnalysts is suing them for the documents under the Freedom of Information Act.

Kudos to TaxAnalysts for trying to get these important reports. Still, it wouldn't really matter much even if the IRS is telling the truth. Whatever progress IRS has made recently is only the beginning. The tax gap is in the $300 billion range; IRS enforcement efforts still only pick up around $40-odd billion of it.

Plus, much of the money owed to the IRS is staying with publicly-traded corporations, which Everson has not said the IRS is focusing on. From today's BNA ($):

As the Internal Revenue Service focuses on getting companies to reconcile the differences between the profits they report to shareholders and those they report for tax purposes, figures from 2004 showed a big discrepancy among publicly traded companies, an IRS spokesman confirmed Nov. 27.

He confirmed that according to data done by IRS researchers, in 2004 publicly traded companies reported $554 billion in profits on their financial statements but told IRS that for tax purposes they earned only about $394 billion.

The IRS and the new Congress will have plenty of work to do on the tax gap. Nothing short of sweeping reform should get them off the hook.

Posted by Matt Lewis, 05:31:40 PM

Contractors to Face Increased Oversight in 2007

Government contractors are preparing for additional oversight, tighter regulations and responsibility rules, and perhaps even a downturn in the size of future contracts due to the Democrats takeover of Congress in 2007, according to The Washington Post.

Every company that does business with the government could feel the impact, but contractors that benefited most from work in Iraq and Afghanistan, from homeland security initiatives or from Hurricane Katrina are especially likely to be under the microscope. Big-ticket weapons programs are also expected to garner special attention, and it may become more difficult to get a no-bid contract, according to industry observers.

All I can say is it's about time.

WP: Contractors Face More Scrutiny, Pinched Purses

Conduct your own oversight with FedSpending.org
Don't forget you can conduct your own oversight and investigation into government contracts using OMB Watch's searchable online database of federal spending ---> FedSpending.org.

Check it out anytime you need to know how much money a government contractor receives from the federal government, what services or products are most often purchased at the national level, or which congressional district gets the most federal dollars.

Posted by Adam Hughes, 04:26:44 PM

Monday, November 27, 2006

GAO Issues Oversight Suggestions

GAO Chief David Walker has sent Congressional leaders a list of what he thinks ought to be the oversight and investigatory priorities for the 110th Congress, in addition to suggestions for budget process reforms he recently issued. The list covers 36 topics, including:

Addressing contracting problems
Overhauling the Department of Defense's wasteful business practices
Modernizing federal employee compensations systems

Nobody's going to agree with everything Walker recommends, but the list is still a good place for the next Congress to get started on constructive oversight. The last thing Congress should want is to do oversight that looks like it's motivated by a desire for revenge or to embarrass the President. Acting on the non-partisan GAO's advice might give Congress the cover it probably needs to conduct good oversight- which, as Walker's expansive list shows, Congress needs to get working on soon.

And for a quick summary of the list, see this article in the Washington Post.

Posted by Matt Lewis, 09:18:29 AM

Monday, November 20, 2006

GAO Budget Process Reforms: Walker Shows the Way

A GAO memo today from David M. Walker, Comptroller General of the United States, entitled "Suggested Areas for Oversight for the 110th Congress" says that "fiscal policy is on an unsustainable path."

Among the memo's suggestions are the following "needing Congressional attention":

--> Reimpose caps on discretionary spending. Under caps, consider special rules for well-defined “emergency” designations.

--> Reintroduce pay-as-you-go (PAYGO) requirements—on both the spending and revenue side of the ledger

--> Consider budget triggers that would signal the need for action when there is significant growth in mandatory programs

--> Review the use of supplementals and earmarks in order to determine needed reforms

--> Require estimates of long-term cost implications of major policy proposals (tax and spending) before they are acted upon

OMB Watch applauds Walker's efforts to focus Congress' attention on these reforms. We will be issuing a proposal shortly, based on the last of these suggestions, to require a JCT estimate of the debt implications of legislation to cuts taxes and increase spending.

Posted by Dana Chasin, 03:33:40 PM

Bush to Seek Massive War Supplemental - Congress Should Demand Explanation

About a month after signing a defense appropriations bill containing $70 billion extra-budgetary "bridge fund" to pay for the wars in Iraq and Afghanistan, President Bush may request yet more funding for the conflicts. The next request could be an eye-popping $130 billion.

BNA ($):

Complicating the outlook for Democrats' own agenda would be the arrival of Bush's next supplemental spending request for the wars in Iraq and Afghanistan, others said. The next war supplemental is expected to be more than $130 billion, an aide to outgoing Senate Majority Leader Bill Frist (R-Tenn.) said. That supplemental request, which also would fall to the appropriations committees to tackle, would exceed all of Bush's previous requests for war spending.

This would be, by a long shot, the largest supplemental request for the Iraq and Afghanistan conflicts, and be the third such request in six months. In fact, this request would not only be the single-largest supplemental, but cost more than any single fiscal year’s war spending. It should raise a few eyebrows and bring Defense Secretary nominee Robert Gates to the witness table in January to answer a few questions, like How long will these funds last?. What exactly are we paying for that costs an order of magnitude greater than previous requests?, and Why, after three years is war spending still considered "emergency"?

This is not, however, totally unexpected. A few weeks ago we noted that the Defense Department might be seeking additional war funding. And while this week's reported figure is $30 billion less, it's still massive and is completely out-of-line in terms budget process.

Fiscal Year	War Spending (in billions)
2003	$80.3
2004	$88.2
2005	$77.4
2006	$116.1

(Source: CBO, "Estimated Appropriations Provided for Iraq and the War on Terrorism, 2001-2006" )

Posted by Craig Jennings, 12:28:19 PM

Is NASA's Oversight Chief the Next Michael Brown?

Another Bush administration official is in hot water today after documents related to an internal government investigation into NASA Inspector General Robert Cobb were leaked to the Orlando Sentinel. The Sentinel has a must read, detailed review of the investigation, conducted by the Department of Housing and Urban Development on behalf of the President's Council on Integrity and Efficiency (PCIE).

The investigation looks into 69 allegations against Cobb by current and former employees who charge him with stifling investigations and audits, mistreating and berating employees, and maintaining too cozy of a relationship with the political leadership of NASA he was supposed to be independently monitoring.

At least initially, the investigation looks pretty damaging, and the facts are helping Mr. Cobb either. According to the Sentinel report, the investigation cites that in the two years before Cobb's arrival at NASA, the IG's office issued 51 audit reports annually on average. Since then, the office has averaged only 26 reports per year.

The findings of the investigation have been forwarded to the PCIE and they are expected to make a decision by the end of the year about what, if any, action is appropriate. Cobb denies any wrongdoing, but one key fact may doom his chances of making it through this unscathed: The investigation into Cobb was originally requested by Sen. Bill Nelson (D-FL), who will be taking over in January as chairman of the Senate subcommittee responsible for NASA oversight.

Orlando Sentinel: Complaints fuel probe of NASA inspector

Posted by Adam Hughes, 11:19:43 AM

Friday, November 17, 2006

Hope for Iraqi Reconstruction Oversight Office

Good news this morning for oversight of government contracts that might be a precursor to a more vigilant Congress in 2007. After Democrats recently vowed to pass legislation to save oversight of Iraqi reconstruction efforts, Susan Collins (R-ME) and Joe Lieberman (D-CT) have unanimously passed a bill (S. 4046) out of the Homeland Security and Governmental Affairs Committee that would retain the Office of Special Inspector General for Iraq Reconstruction through most of 2008, according to BNA ($$). The Collins/Lieberman legislation was developed in response to a provision in the FY 2007 Defense Authorization bill passed earlier this year that would have eliminated the special Inspector General's office on October 1, 2007.

Both Collins and Lieberman expressed outrage that the office had been scheduled for elimination. Collins called it "inconceivable" that the office would be closed so soon, adding, "This office has proven to be a much-needed watchdog, auditing reconstruction contracts in Iraq and spotlighting numerous cases of waste, fraud, and abuse and we must keep the watchdog on the job." Lieberman added that the Special Inspector has done a "great job uncovering billions of taxpayer dollars wasted through abuse and mismanagement of Iraqi projects" and that his work is "critically important."

The language in S. 4046 would keep the Special IG's office open 10 months after 80 percent of reconstruction funds have been spent. Similar legislation was introduced in the House this week by future Armed Services Committee Chairman Ike Skelton (D-MO).

Nice to see Congress moving in the right direction on oversight of federal contracts, especially in Iraq. Now that he has helped to save his job, hopefully incoming Chairman Lieberman will hold hearings next year to actually hear what the Special Inspector General has to say.

Posted by Adam Hughes, 12:31:56 PM

Tuesday, November 14, 2006

Congress to Restore Oversight Office

Democrats may try to pass a bill reinstituting an Iraqi reconstruction oversight office, which Congress recently abolished, as early as this week. From the NYT:

Congressional Democrats say they will press new legislation next week to restore the power of a federal agency in charge of ferreting out waste and corruption in Iraq and greatly increase its investigative reach.

The bills, the first of what are likely to be dozens of Democratic efforts to resurrect investigations of war profiteering and financial fraud in government contracting, could be introduced as early as Monday morning.

A new bill may even grant more authority to the office.

As in the bill that the president signed, the new Senate proposal would expand the pot of money that Mr. Bowen [who leads the office] could investigate, but it would not set a hard deadline for the agency’s work to come to an end. Both the House and Senate measures extend the deadline at least into 2008, by most readings, but the House measure would also add about $2 billion — for training and equipping Iraqi security forces — to the amount that the agency could investigate, a Congressional staff member said. Representative Nancy Pelosi, the California Democrat who is expected to become the House speaker, said she would strongly support that legislation.

The rest of the NYT article goes into the new Congress's oversight plans. It's worth a read.

Democrats Aim to Save Inquiry on Work in Iraq

Posted by Matt Lewis, 01:39:27 PM

Thursday, November 09, 2006

Something Stinks at the IRS

We have previously reported (see here, here, and here) on the IRS's bizarre plans to outsource some of its tax collection responsibilities to private companies. The plan has received strong opposition from many in Congress and ended up costing taxpayers money the last time the IRS tried it. But they are pushing forward, nonetheless, and even talking about expanding the program before it has even been tried.

Now the Government Accountability Office has weighed in on the program and they seem to think something doesn't smell quite right:

IRS has not documented criteria that it will use to determine whether the limited implementation performance warrants program expansion. IRS officials indicated that they are considering criteria that could trigger a go/no go decision, such as the amount of taxes collected and indications of PCAs [private collection agencies] abusing taxpayers or misusing taxpayer data. IRS has not decided on whether these targets will include comparing the taxes collected to program costs, which was a key reason for canceling a 1996 PCA pilot program.

GAO goes on to say that the IRS is planning a comparative study to determine whether the private collection agencies are doing a better job than the IRS could do if it invested its resources in collecting the taxes itself. But get this - under the design of the study, the IRS will exclude the fees paid to the private agencies (up to a quarter of the revenue collected) in their analysis comparing the two different approaches. Because of this strange exclusion, GAO concludes:

[The study] will not compare the results of using PCAs with the results IRS could get if given the same amount of resources, including the fees to be paid to PCAs, to use in what IRS officials would judge to be the best way to meet tax collection goals. Adequately designing and implementing the study is important to ensure policymakers are aware of the true costs of contracting with PCAs and know whether PCAs offer the best use of federal funds.

So not only has IRS rushed forward with plans to implement this program despite heavy criticism, it has also skimpted on designing the process to guage the program's success, and then in order to stack the deck, decided to exclude the actual costs from its lone study - thereby rendering the evaluation essentially useless? This definitely smells fishy.

Posted by Adam Hughes, 02:44:42 PM

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