The Project On Government Oversight (POGO) Blog

Report: IRS Practices Inadequate in Exposing Links of Terrorism to Tax-Exempt Organizations

On May 21st, the United States Treasury Inspector General for Tax Administration (TIGTA) released a report documenting numerous deficiencies in the process used to identify terrorist activities related to tax-exempt organizations. The report (pdf) discusses how the IRS employs severely outdated manual paper checks of limited terrorist watch lists to uproot any links with terrorism. The outdated list documents only 1,600 known organizations, compared to the updated, 200,000-name list compiled by the Federal Bureau of Investigation.

The constraints of such lax policies are all too clear. Using the smaller and outdated list, the IRS identified 93 possible terrorist organizations in 2006, and all but two were approved for tax-exempt status without further investigation. Such inefficiencies loom even larger in the far-reaching tax-exempt system of our nation: the IG report documents that in fiscal year 2006 there were around 1.6 million tax-exempt organizations (excluding churches) with $2.4 trillion in assets and $1.2 trillion in yearly revenues.

"The IRS clearly needs to use a more inclusive terrorist watch list and to computerize its tracking system as soon as possible," said Inspector General J. Russell George. "This nation is at war, and we must use all the tools available to us to stop the flow of U.S. dollars to our enemies."

Current IRS practices contradict regulations by the Department of Treasury that outline that all U.S. persons, including U.S.-based charities, are prohibited from dealing with anyone associated with terrorism under Executive Orders 13224 and 12947. In light of recent terrorist threats, President Bush has urged the Department of Treasury “to lead a comprehensive and sustained campaign against the sources and conduits of terrorist financing,” yet ensuing investigations including those recently completed by TIGTA, expose terrorist abuse of these charitable pathways.

In response to the report, the Senate Finance Committee Chair Max Baucus (D-Montana) sent a letter (pdf) to Treasury Secretary Paulson inquiring why the Treasury appears to be using an insufficient terrorist watch list and why they have been slow to automate the process of matching names to an updated watch list. Baucus stated that he was “concerned that the IRS has not implemented a coherent terrorist tracking system in a timely manner.”

POGO has also received information indicating that a major criterion currently used for flagging tax documents is whether the individual or organization has a "Middle Eastern sounding name,” which amounts to racial profiling in an attempt to flag potential suspects, rather than use available updated watch lists. These practices are both unsound and incomplete, and should be subject to further investigation.

-- Jesse Ferrantella

USMC Doc: Urgent Requests at Marine Corps Stymied

The U.S. Marine Corps' rapid acquisition system has failed repeatedly, unnecessarily delaying and, in some cases, denying urgent requests by Marines for equipment, according to a document made public by POGO today. The document was first reported on by the Associated Press last week.  It can be viewed here (pdf).

The document consists of briefing slides which were part of a cancelled March 2007 presentation to the Defense Department's Office of the Director for Defense Research and Engineering by the 1st Marine Expeditionary Force's (I MEF) technology staff, after a year long deployment in Iraq.  Though the document is unclassified (it is marked "For Official Use Only"), only the first eight pages are being made available due to some schematics which give insight into how some of the requested systems work.  POGO has, however, transcribed the names and timelines of those systems below.

Despite over 130 urgent need requests (known as Joint Urgent Operational Needs (JUONs) or Urgent Universal Needs Statements (UUNSs) from 1 MEF while it was deployed in Iraq, less than 10 percent were fulfilled and many were "cancelled, delayed" or led to solutions which were not asked for.

Before November 2006, the document says that the requests "frequently languished" at Multi-National Corps-Iraq (MNC-I) level until Central Command Chief of Staff (CoS CENTCOM) "intervened," restoring urgency to the process.

Among the most "outstanding urgent deficiencies," according to the slides, is the need for Counter Improved Explosive Device (CIED) technology, including Mine Resistant Ambush Protected (MRAP) vehicles, and for Area of Responsibility (AOR)-wide surveillance, including Scan Eagle Unmanned Aerial Vehicles (UAVs).  The AP story last week describes the delays in the MRAP program and Wired News today broke news on the Scan Eagle deficiency.

The presentation describes some of the most dire threats Marines face such as an anticipated larger number of explosively formed projectiles (EFPs) and more victim-operated improvised explosive devices (VO IEDs), also known as suicide bombers.

The Congress should undertake an in-depth investigation into the situation with rapid acquisition at the Defense Department to ensure that the right balance is struck between getting equipment into the field rapidly while maintaining accountability.

There is obviously some healthy tension between the traditional acquisition community's desire to ensure that money is spent well on tested and robust systems and the need to get systems into the field rapidly, but Marines in the field cannot wait years while known and proven off-the-shelf solutions exist. The authority for rapid acquisition is there, unfortunately breakdowns in the system are leading to unnecessary delays.

-- Nick Schwellenbach with assistance by Jesse Ferantella

Northwest Flight 327 DHS IG Report Released

Via the Freedom of Information Act, POGO has obtained the Department of Homeland Security's full inspector general's report on the Northwest Flight 327 incident (pdf), though it is partially redacted.  13 Middle Eastern passengers aroused passenger, flight attendant and air marshal suspicions on that flight on June 29, 2004.  The Federal Air Marshal Service and FBI are criticized for deficiencies by the DHS IG, namely for: lacking in-flight communication capacity; having unclear roles and responsibilites within DHS; and not having a Memorandum of Understanding with the FBI regarding post-flight investigations.

A brief account of the suspicious event is as follows in the report's Executive Summary:

Thirteen Middle Eastern men, traveling together as a musical group, 12 carrying Syrian passports and one, a lawful permanent resident of the U.S., of Lebanese descent, purchased one-way tickets from Detroit to Los Angeles. Six of the men arrived at the gate together after boarding began, then split up and acted as if they were not acquainted. According to air marshals, the men also appeared sweaty and nervous. An air marshal assigned to Flight 327 observed their behavior and characterized it as "unusual," but made no further reports at the time.

During the flight, the men again acted suspiciously. Several of the men changed seats, congregated in the aisles, and arose when the fasten seat belt sign was turned on; one passenger moved quickly up the aisle toward the cockpit and, at the last moment, entered the first class lavatory. The passenger remained in the lavatory for about 20 minutes. Several of the men spent excessive time in the lavatories. Another man carried a large McDonald's restaurant bag into a lavatory and made a thumbs-up signal to another man upon returning to his seat.  Flight attendants notified the air marshals on board of the suspicious activities.
In response, an air marshal directed a flight attendant to instruct the cockpit to radio ahead for law- enforcement officials to meet the flight upon arrival.

After arriving, Flight 327 was met by Federal and local law enforcement officials, who gathered all 13 suspicious passengers, interviewing two of them. An air marshal photocopied the passengers' passports and visas. The names of the suspicious passengers were run through Federal Bureau of Investigation (FBI) databases, indicating the musical group's promoter (promoter) had been involved in a similar incident in January 2004. No other derogatory information was received, and all 13 of the men were released. Weeks after the flight landed in Los Angeles, following press reports of the suspicious incident, both the FBI and Federal Air Marshal Service (FAMS) independently opened investigations into the activities that occurred on Flight 327.

-- Nick Schwellenbach

Taxpayers Win Earmark Transparency & Whistleblower Protections

The Senate Armed Services Committee approved language on the Defense Authorization bill last night which improves disclosure of Congressional earmarks (pdf) and improves taxpayer protections for whistleblowers (pdf) who work for defense contractors.

This week, POGO wrote to Senate Armed Services Committee Chairman Carl Levin and Ranking Member John McCain to urge that the Committee fix language on the bill in order to ensure that all earmarks must comply with new public disclosure rules. Senator John McCain proposed language to fix the loophole. As a result, when Members of Congress request additional funding for existing contracts or programs, those earmarks and their sponsor will be made public. Tell Senator McCain you appreciate his efforts to shed light on earmarks and pork barrel spending here.

POGO also helped lead the effort to ensure that the Committee adopted whistleblower protections for employees of defense contractors which had been proposed by Senator Claire McCaskill. Three cheers to Senator McCaskill who is quickly making a reputation as a "good government" champion to watch. Recent scandals exposed by industry whistleblowers, including the $24 billion Deepwater contracting debacle, underscore the vital importance of protecting individuals who have the moral courage to step forward and alert taxpayers to waste, fraud, and abuse. Send your letters and emails of thanks to Senator McCaskill here.

-- Beth Daley

Office of Special Counsel’s Follies: The Ugly Side of Leaking

We have been critical of the Office of Special Counsel Scott Bloch’s attempt to inject himself into a politically-heated investigation into the White House, in large part because Bloch is under investigation himself, an investigation commissioned by OMB Deputy Clay Johnson. As we feared, the Special Counsel appears to be using his perch in this investigation to salvage his tarnished public image. But, in doing so, it appears he is having troubles keeping himself out of trouble.

Now comes this note from a source regarding the leak of Bloch’s report into alleged Hatch Act violations by the General Services Administration Lurita Doan:

In today’s episode we learn that, in fact, OSC leaked the Doan report to the Wash Post. The Washington Post put the report on its website this morning. Except it turns out that the report they posted, dated May 17, was not the final report. The final report was dated May 18. The final report was materially different from the draft report, in that in the draft report OSC has essentially urged that President Bush remove Doan. The final report took a more neutral tone, suggesting that the President take whatever action he deems appropriate. OSC apparently gets wind of the fact that the Post had put the non-final May 17 report on its web site and it was taken down. A few hours later, the Post puts up a copy of the final (May 18) report (which it obviously obtained from OSC). Except this time, OSC did not redact the report (probably in too much of a rush) so that the report on the Post website includes defamatory statements made by Ms. Doan about one of her subordinates, who is named.

The Washington Post issued a correction to its article. The unredacted report (pdf) is posted as well, with some nasty comments from Doan about a certain subordinate. Interesting, Doan had different things to say earlier this year.

Meanwhile, Govexec reports on OSC’s response:  “OSC will not comment on the report until Doan has submitted a response, a spokesman said. ‘We believe she should be given that opportunity,’ he said.” Yeah, right.

To Scott Bloch, we say, “Good luck with Karl Rove!!”

-- Beth Daley

Update: Lurita Doan’s lawyer at Patton Boggs intends to take up the report leak with the Office of the President.

Deepwater Whistleblower Challenges Testimony by Lockheed Martin

Michael DeKort, who has helped to expose on the Coast Guard Deepwater scandal, issued a letter today challenging testimony by Lockheed Martin before two Subcommittees of the House Homeland Security Committee last week. On a number of issues, Mr. DeKort finds that Lockheed Martine Maritime Systems President Fred Moosally was not entirely accurate or truthful when he testified May 17. Full text of the letter here.

-- Beth Daley

The General Services Administration (GSA) – Another Acquisition Reform Disaster

Aside from all the press reports concerning embattled GSA Administrator Lurita Doan's political problems, Bob O'Harrow and Scott Higham had a great front page piece in the May 23, 2007 Washington Post about GSA's multiple award schedules (MAS) contracting program and the conflicts of interest and pricing disparities it generates.   Although the concept of a central purchasing agency for government makes sense, and GSA long performed this function in a highly capable manner, the "acquisition reform" movement of the 1990s declared that government procurement should be run more like a business.

To this end, GSA's MAS program was turned into a "fee-based" self-supporting program.  While the MAS program continues to serve as a virtual shopping center for other government agencies, providing both traditional products ( e.g., computers, office equipment, etc.), it has added services to the mix -- services ranging from landscaping to "business process improvement."  To make GSA more business like, the agency receives an "industrial funding fee" ( i.e., commission) for all purchases made by other government agencies using the schedules contracting program.

Predictably, once GSA was put on a "commission plan", the agency's main goal became to increase sales in order to earn higher fees, which in turn pays for the agency.   Tough requirements for most favored customer pricing and arms-length negotiations were replaced with contractor "partnerships" and revenue maximization schemes.   Unfortunately, this means that GSA does not try to get the best possible prices for its government customers.  As O'Harrow and Higham's Washington Post  piece highlights, even some of GSA's experienced contracting officers began to balk at the prices demanded by some contractors, such as Sun Microsystems.

Unfortunately, another outgrowth of "acquisition reform" was the notion of allowing many agencies (e.g., NASA, NIH, Commerce) to earn commissions based on sales by performing contracting services for other government agencies.   This concept is also known as entrepreneurial government.   The result has been a tremendous growth in so-called government-wide acquisition contracts (GWACs) and other multi-agency contracting vehicles.   Of course, the primary purpose of these contracting programs is not necessarily to get the best deal for taxpayers, but rather to create profit centers for the contracting agencies through commissions earned.    Since the "commissions" generated by this approach all come from appropriated funds paid by the using agencies, the incentive structure to get the best deal for taxpayers is completely distorted.

Hopefully, as the "acquisition reform" debacle continues to unfold, contracting will get back to a true business like approach, where contracting officers will be able to get the best possible deals for taxpayers, without worrying whether this hurts their agency's "bottom line".

-- Connie the Contractor

Conyers Strips Out Key Ethics Provision

I’m depressed. I really thought ethics reform was going somewhere. Then the House Judiciary Committee slapped me in the face. They stripped a provision in their “ethics reform” package that would have extended the ban for Members of Congress and their staff becoming lobbyists from one year to two.

The reason? Chairman John Conyers said he opposed the ban because it would hinder his ability,”to attracting and retaining top flight staff.” What an INSULT to the dozens of Hill staff I know, let alone Members of Congress, who have absolutely no interest in becoming a lobbyist.  They are there because they love public service. Aren’t those the kind of people we should be attracting to the Hill, rather than those planning, in advance, to cash in on their contacts to become lobbyists?

There is still a chance to re-insert this revolving door ban on the House floor. Let’s hope they get a clue as to the message voters sent in the last election.

-- Danielle Brian

Defense Contractors Running Government: A Recipe for Disaster

If you missed 60 Minutes this week, the good news is you can still watch their feature segment online. The topic is the Coast Guard's so-far disastrous Integrated Deepwater System program, and 60 Minutes interviews two of the whistleblowers, Michael DeKort and Captain Kevin Jarvis, who first exposed the program's failures. The situation began in 2002, when the Coast Guard awarded Lockheed Martin and Northrop Grumman a contract to manage Deepwater’s then-$17 billion program to modernize the Coast Guard’s aging fleet. And by "manage," we mean to literally manage.

In the 1990s, the government started placing contractors in charge of contracts due to a shortfall in the number of government employees who traditionally oversaw contract programs. The results have been disastrous. In Deepwater's case, the contract ballooned to $24 billion and has included problems such as failed encryption technologies, which jeopardizes classified government information, and boats rendered unusable due to buckling and cracking hulls.

Under the pressure cooker of Congressional and media scrutiny, the Coast Guard announced April 17 that it would take away management of the Deepwater contract from Lockheed Martin and Northrop Grumman. They also demanded last week that the contractors refund $100 million in federal money. Yet questions remain about whether the Coast Guard has enough skilled employees to oversee the project.

The moral of the Deepwater story is that the model of contractors executing programs on behalf of the federal government is a recipe for disaster. And why wouldn’t it be? Priority number one for major companies is to make a profit. That drive needs to be tempered by the demands of a vigilant and cost-conscious consumer. In the case of Deepwater, there are few incentives to control costs and deliver on promises.

Congress has heard the message loud and clear. Representative Duncan Hunter (R-CA), ranking member of the House Armed Services Committee (a Congressional member with a reputation for doling out goodies to defense contractors rather than holding them accountable), inserted language into the 2008 Defense Authorization bill which limits future contracts using the Deepwater contracting model, known as having a “lead system integrator.”

That provision is a step forward but will do nothing to reign in abuses on existing lead system integrator contracts including the Army’s Future Combat Systems program with costs skyrocketing by one estimate from $175 billion to $300 billion in just three years, Missile Defense with perennial cost overruns and a projected price tag of $247 billion from 2006 to 2024, and the Navy’s Littoral Combat Systems program with runaway cost overruns which even led to a two month stop-work order earlier this year.

Meanwhile, the government’s top contracting agency, the General Services Administration (GSA), announced a new initiative last week to dramatically expand the use of contractors in the hiring of contractors. Hello?!…Earth to GSA…is anybody home?

-- Beth Daley

Nuclear War on Drugs

According to a recent Los Alamos Monitor article, approximately 200 employees at Los Alamos National Laboratory have been called in for random drug testing as part of a new policy implemented on March 5 of this year.  While this number is statistically viable as a sample of the workforce, the results are a cause for concern.  Of these 200 people, “fewer than 10” have either failed testing or refused to submit to be tested, then opted to resign to avoid termination.  If this number, which theoretically is an accurate sample, is representative of the Los Alamos workforce, that would suggest that as many as 5% of the 9,635 employees are afraid of what their drug tests might reveal.  Now that’s a scary thought.

-- Caleb Rowe

The Nomination of Baroody: "Putting the fox in charge of the henhouse"

The NY Times reported yesterday that Michael Baroody, Bush nominee to head the Consumer Product Safety Commission (CPSC), not only worked as a senior lobbyist for the National Association of Manufacturers (NAM) but also received a severance payment of $150,000. This “extraordinary payment” was not part of his standard compensation package and highly unusual for an employee leaving voluntarily.

Next Thursday, the Senate Commerce, Science, & Transportation Committee, chaired by Sen. Inouye, has scheduled a hearing to consider Baroody’s nomination, but his confirmation is likely to be a battle. Committee member Sen. Nelson and Senate Majority Whip Durbin have already placed a hold on Baroody’s confirmation and have called on Bush to select a new candidate. Nevertheless, there’s a chance that the President will wait until Congress goes into recess next month and then appoint Baroody without Senate approval.

Regardless of Baroody’s severance package from NAM, the mere fact that he lobbied for the largest trade association under CPSC’s purview should be enough to automatically disqualify him as a candidate to lead CPSC. When called upon to make a decision that favors the public yet negatively affects his former employers, one must question whether he would side with the public good.

Furthermore, as 8 consumer groups have pointed out in a recent white paper (pdf) opposing Baroody’s confirmation, the CPSC is already facing problems in its mission to protect consumer safety:

CPSC’s job today is more challenging than ever. There are more than 27,000 deaths and more than 33 million injuries each year associated with consumer products under CPSC’s jurisdiction. However, since the 1980s, the Commission has been slowly starved of staff and resources. While there has been an exponential increase in consumer products since its creation more than 30 years ago, CPSC’s staff is projected to be cut to 401 full time employees (FTEs) this year – which would be an all-time low and less than half the number of people employed by the agency in the 1970s. Additionally, in real dollars, its budget has plummeted.

With someone like Baroody at the helm of this struggling agency, it’s safe to say that he would do little to strengthen it. The consumer groups list three reasons (pdf) why this would be the case:

He has not demonstrated a commitment to protecting the public from risks to safety;

He oversaw efforts to weaken the CPSC and to undermine safety proposals pending before the Commission as one of the top two executives at the National Association of Manufacturers,

Faced with product safety and public health issues, Mr. Baroody has consistently favored reducing business costs at the expense of consumer protection.

-- John Pruett

Strykers Losses Raise Questions on Light-Armor Approach

New reports from Iraq again raise questions about shortcomings in the ability of Strykers to adequately protect the troops from roadside bombs, noting: "analysts have long questioned the wisdom of moving away from more heavily armored tracked vehicles like tanks and Bradley fighting vehicles to wheeled transports, like the Stryker."

In 2005, POGO released a study from the the Center for Army Lessons Learned, which was reported on in the Washington Post, revealing that the Stryker Interim Armored Vehicle was "only 50 percent effective overall against Rocket Propelled Grenades during combat in Iraq."

The Army responded by mounting a vigorous public relations campaign which even included a promotional video (need quicktime to watch) and an invitation for POGO to visit Fort Lewis.

In related news, pressure has been building at the Pentagon to accelerate and expand the purchase of Mine Resistant Ambush Protected (MRAPS) vehicles which are slated to replace the failed effort to uparmor Humvees. The Army now plans to buy 17,000 instead of 2,500. The announcement is good news for defense contractors in the running for the contract, including General Dynamics which built the Stryker.  More importantly (but is often not the case) it may mean good news for the troops too.

-- Beth Daley