The Project On Government Oversight (POGO) Blog

Morning Smoke: BlackRock's Conflicting Roles

Wall St. Firm Draws Scrutiny as U.S. Adviser [The New York Times]

Army to Restructure Weapons Program, Expand It to All Combat Brigades [The Washington Post]

House contracting caucus tackles acquisition workforce issues [Government Executive]

$144.5M to Boeing for C-17 Retrofits [Defense Industry Daily]

Efforts to Repay Bailouts May Undercut Benefit for Taxpayers [The New York Times]

GAO: Defense must make cultural, procedural changes to NSPS [Government Executive]

Stimulus Deadline Passes, But Where Are the Reports? [ProPublica]

Hearing: "To receive testimony on the Department of the Army in review of the Defense Authorization Request for Fiscal Year 2010 and the Future Years Defense Program" [Senate Armed Services Committee]

Hearing: "Approaches to Improving Credit Rating Agency Regulation" [House Financial Services Committee]

Corporate Ethics Rankings vs. Contractor Responsibility - Round 2

Ethisphere Magazine recently announced its annual ranking of "The World's Most Ethical Companies".

POGO wrote about this last year when Ethisphere put out its 2008 ranking. On one hand, rankings compiled by business publications like Ethisphere serve many useful purposes. On the other hand, if you're a close follower of corporate accountability or contractor responsibility issues, they don't give you a complete picture. Such surveys and rankings tend to focus on companies' managerial structures and processes to the exclusion of their actual conduct, especially conduct that occurred more than a few years ago. (Ethisphere also compiles a special ethics ranking of the 100 largest government contractors. Needless to say, POGO also finds that one to be an unreliable indicator for the same reasons.)

For what it's worth, the following companies in the Federal Contractor Misconduct Database are among the 99 that made Ethisphere's 2009 list. As a point of comparison, I have included the number and dollar amount of their misconduct instances:

Contractor	Rank (according to FY07 federal contract dollar amount)	Instances of Misconduct (Since 1995)	Misconduct Dollar Amount (Since 1995)
Honeywell International	19	30	$ 641.2m
Aerospace Corporation	74	0	$ 0.0m
Harris Corporation	30	3	$ 1.6m
Accenture	68	5	$ 13.9m
Dell, Inc.	50	9	$ 8.6m
Hewlett-Packard Company	16	4	$ 204.8m
General Electric	17	32	$ 37.4m
Fluor Corporation	40	22	$ 186.4m
CH2M Hill Companies, Ltd.	45	6	$ 2.8m

General Electric, Honeywell and Fluor also made Ethisphere's 2008 ranking. Notice anything strange about their number of misconduct instances as compared to the others? All three companies have also posted misconduct instances since the 2008 ranking was published, GE's settlement of a gender discrimination lawsuit and Honeywell's two settlements of environmental violations in and around Phoenix, Arizona being the most noteworthy.

-- Neil Gordon

Morning Smoke: Nuclear Contractor Accused of Delays and Cost Overruns Receives Stimulus Funds

Nuclear Cleanup Awards Questioned [The Washington Post]

4 Xe contractors queried in Afghan death [Associated Press]

At Geithner's Treasury, Key Decisions on Hold [The Washington Post]

Navy Scraps Old Ship Plan [War Is Boring]

My Personal Credit Crisis [New York Times Magazine]

Buyout Firms Elude Fed as OTS Lets Private Equity Acquire Banks [Bloomberg News]

Board to Ban Accounting Practice That Helped Lending Proliferate [The Washington Post]

Air Force vows to improve acquisition system [Government Executive]

43 State Recovery Websites Lack Whistleblower Protections, Procedures, and Hotlines

In light of POGO's May 5th testimony detailing the need for state recovery websites to outline clear whistleblower hotlines and protections, as well as procedures for reporting fraud, waste, and abuse, we decided to conduct our own unscientific survey to figure out just what these state recovery websites say about blowing the whistle.

As has been reported in ProPublica and Federal Computer Week, here's what we found:

• Only 7 states (Arkansas, Connecticut, Florida, Georgia, Iowa, Maine, Texas) listed clear procedures for whistleblowers, such as what information to report, who to report to, and what will be done with that information.

• Only 7 states (Connecticut, Florida, Georgia, Massachusetts, Maine, Texas, Kentucky) listed which whistleblower protections exist. Of those 7 states, many only had a sentence or two explaining that retaliation is illegal.

• Only 14 states had a hotline phone number listed to report waste, fraud, and abuse. Some simply had a “Contact Us” email and phone number, while others had a “Suggestions Box.”

• 84% of the state websites listed the federal agency that awarded the contract, while the other 16% either didn't have the information, or provided information that was insufficient and confusing.

We wanted to applaud a few states in particular for their whistleblower-friendly websites, which will hopefully pave the way for others to follow. Tied for first prize were Florida and Georgia, whose sites did an excellent job of providing clear procedures and protections for whistleblowers. Next up were Maine, Connecticut, and Texas, whose websites all did a good job of making the whistleblower's job just a little bit easier.

All in all, the state websites demonstrate a newfound dedication to transparency and public input. And while the federal Recovery.gov website run by The Recovery Accountability and Transparency Board currently doesn't have their online complaint form up yet, we hope that stronger language and accountability measures will soon be put in place there too. Whistleblowers play an essential role in preventing fraud, waste, and abuse, and it is in the best interest of these states to create websites where it is easy and safe to blow the whistle.

We'll be watching to see whether the other 43 states follow the example of the top 7, allowing the detection and prevention of waste, fraud, and abuse to become the rule, not the exception.

-- Gracie Bowden

Can You Really Track the Lifespan of Stimulus Money from "Cradle to Grave"?

As a commendable first step towards ensuring better transparency, Rep. John Tierney (D-MA), with bipartisan support from Members of Congress, POGO, and other organizations, sent a letter on May 11 to OMB Director Peter Orszag urging him to require reporting from contractors and subcontractors who receive stimulus funds that are funneled through states and localities. Currently, the reporting guidelines for sub-awards are seriously inadequate, with no reporting required below local governments or organizations, ripening these funds for fraud and abuse.

As the system currently stands, a federal agency, say the Department of Education, would give a grant to Pennsylvania to be distributed through its education system. Pennsylvania would then disperse those funds to say, 14 different school districts. Part of that dispersal would then include hiring 20-30 contractors to complete the work needed, such as building a new roof. However, those contractors would not be required to report how the money was spent to build the roofs; only the school district would be required to report the hiring of the contractor (without naming specifically who it was) to Pennsylvania, who would then report back to the Department of Education. For all intents and purposes, there is no actual reporting at the ground level.

Earl Devaney, chair of the Recovery Accountability and Transparency Board, stated in a May 5 hearing titled "Follow the Money Part II: Government and Public Resources for Recovery Act Oversight" that he would like to be able to track stimulus spending on the ground level: "If I could wave a magic wand, I would want to follow a dollar from cradle to grave." And POGO, along with 37 other groups in the Coalition for an Accountable Recovery (CAR), sent a number of suggestions and comments to OMB for improving stimulus oversight, including that “all recipients and sub-recipients, regardless of how many layers removed from the initial federal disbursal should be required to report to the system for any Recovery Act money over $25,000.”

Of course, such an unprecedented level of reporting requirements has been a huge cause of concern for states whose offices simply lack both the manpower and financial ability to fulfill their duties. In an effort to assist these states, the White House released a memo on Wednesday announcing that the federal government will provide funding to states to cover the costs of hiring auditors and accountants to keep track of stimulus spending. OMB Director Peter Orszag added that instead of the usual reimbursement for these costs after the fact, funds will be provided pre-spending, a huge relief to these struggling states.

We applaud the recent memo by the White House ensuring states have the resources to fulfill their oversight duties, and we hope it will contribute to a groundbreaking new level of openness and transparency in government spending.

-- Gracie Bowden

Morning Smoke: Intelligence and National Security Employees Need Whistleblower Protections

Debate erupts over whistleblower rights for intelligence workers [Government Executive] - For a play-by-play of the hearing, check out POGO Executive Director Danielle Brian's Twitter feed

Gates vs. Congress [Slate]

U.S. Slates $22 Billion for Insurers From TARP [The Wall Street Journal]

Lobbyists Skirt Disclosures on Stimulus Lobbying [ProPublica]

Attorney General Writes To U.S. Treasury Secretary Geithner Calling On Fed To Stop Steering $400 Million To Credit Rating Agencies That Enabled Economic Meltdown [State of Connecticut Attorney General's Office]

Open Government Advocates Urge the Senate to Improve Public Access to CRS Reports [OpenTheGovernment.org] - Click here to read the letter

Where to find stimulus contracts [Real Time Investigations]

Is The Defense Fix In?

Yesterday the House unanimously passed its defense acquisition reform bill, the Weapons Acquisition System Reform Through Enhancing Technical Knowledge and Oversight (WASTE TKO) Act of 2009, H.R. 2101. The Senate also unanimously passed S. 454, the Weapons Acquisition Reform Act of 2009 (including the horrific Murray-Chambliss amendment notifying Congress whether program terminations are "consistent with the national security objectives for the national technology and industrial base"). And on Tuesday, the Department of Defense's (DoD) Under Secretary for Acquisition, Technology, and Logistics issued a memorandum to Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, and the service secretaries stating his support for defense acquisition reform. So, everybody's on board to restore discipline to the procurement process, the problem's fixed, right?

Well, not exactly. As a letter that POGO sent with National Taxpayers Union, Taxpayers for Common Sense, and U.S. PIRG outlines, there are some significant differences in how the Senate and the House approach the problem, and how far Congress goes towards solving this problem will largely be determined by whether the key principles in the bill are preserved in conference. But legislation isn't going to solve the problem, and I have to agree with Travis Sharp at the Center for Arms Control and Nonproliferation (though he is only one of many with these concerns) that it would be misguided to think that this is a panacea.

Instead, the success of the bill is reliant upon Congress and the Pentagon enforcing the rules--and as anyone who watched Congress defend their pet projects in the House and Senate Armed Services' hearings these past two days can attest, there are at least 19 different reasons to wonder if Congress is up to the task (and that's really just the latest--we were already familiar with 44). While I don't anticipate Congress ditching their parochial interests any time soon, and don't even think that's a fair measure of the success of this legislation, here are a few (but by no means an exhaustive list) of the issues Congress and watchdogs should continue to monitor to see if all of this rhetoric has translated into real change:

1. On the independent cost estimates issue, seeing whether independent program estimate numbers are placed in budget requests;

2. Looking to see if DoD and Congress can sit on their hands until programs have demonstrated that they have the design and technological maturity that merits receiving Milestone approval and being pushed farther into production;

3. If the requirements for number 2 are waived, that they are waived for legitimate reasons; and

4. When costs get out of control because number 2 was waived, whether DoD will really factors in costs as part of whether a program is viable for the future.  And in the event that they cancel a program because they determine it is something we can't afford, whether Congress will allow that cancellation to stay in place.

-- Mandy Smithberger

Morning Smoke: Hearings Today on Defense Budget and Whistleblower Protections

Hearing: "To receive testimony in review of the Defense Authorization Request for Fiscal Year 2010 and the Future Years Defense Program" [Senate Armed Services Committee]

Hearing: "Protecting the Public from Waste, Fraud and Abuse: The Whistleblower Protection Enhancement Act of 2009" [House Oversight and Government Reform Committee]

GOP Senators Block Interior Nominee's Confirmation [The Washington Post]

Marine official fears firing over MRAP testimony [USA Today] - Click here to read POGO's 2008 letter to Congress calling for hearings on MRAP delays and retaliation against Marine Corps science advisor Franz Gayl

Senators Push Panel For 15 More C-17s [Aviation Week]

Judicial Watch Forces Release of Bank Bailout Documents [Judicial Watch]

Acting Special Counsel says employee morale, productivity is high [Government Executive]

U.S. Pushes Ahead With Derivatives Regulation [The Washington Post]

Air Marshal Whistleblowers Get Ally to Speak Out on Agency Retaliation

Rarely do we hear from executive branch management about the problems they see on the inside, such as abuses of power and whistleblower retaliation. That is why we are so excited that Matt Issman, then-senior manager at the Immigration and Customs Enforcement at DHS, has publicly spoken out about what he observed when several federal air marshals tried to raise concerns about fraud, waste, and abuse at their agency, including safety and security vulnerabilities.

Not only does Issman call out the witch-hunt investigations the federal air marshals were subjected to by then-Director of the Federal Air Marshal Service (FAMS) Thomas Quinn, which POGO explored in its report Breaking the Sound Barrier: Experiences of Air Marshals Confirm Need for Reform at the OSC, but he also recommends that Congress ensure that the air marshals' recommendations are implemented at FAMS and that they get their jobs back.

Tomorrow, the House Committee on Oversight and Government Reform will have a hearing on "Protecting the Public from Waste, Fraud and Abuse: The Whistleblower Protection Enhancement Act of 2009." We hope the Department of Justice witness will announce what the Obama administration's new policy will be and how it will address the gaping holes in protections for federal employees, including national security employees.

-- Ingrid Drake

Fact-Checking Kashkari

I just got around to watching a rare television appearance by Neel Kashkari, the former head of Treasury's $700 billion Troubled Asset Relief Program (TARP), on last week's Charlie Rose Show.

While there were several noteworthy moments in the interview--including Kashkari's secret for coping with an occasionally hostile Congress (" I put a little index card in front of me that said, 'The louder he yells, the calmer I shall be'")--I wanted to take a closer look at two points he made:

1. Kashkari's continued insistence that it would be nearly impossible to track what banks do with TARP funds because money is fungible. In his latest report (pp. 137-138), Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, called this argument "unfounded." Although we haven't seen them yet, Barofsky reported to Congress that he got a 100 percent response rate from the 364 banks he surveyed about their use of TARP funds, including some granular-level detail about the banks' lending activities. Frankly, it's looking more and more like Kashkari and other Treasury officials have been hiding behind the "money is fungible" argument as a way of protecting the banks from rigorous oversight. Of course, it doesn't help that Kashkari's previous employer was Goldman Sachs, which has benefited from $10 billion in TARP assistance, not to mention the counterparty payments it received from the AIG bailout.

2. Kashkari's claim that the Public-Private Investment Program (PPIP) is set up so that "if taxpayers lose a dollar, you [the private investment firm] lose a dollar. You can't make a dollar unless we make a dollar. So we share the upside and downside equally on the equity side." To be fair, he was making a larger point about some of the compromises that had to be made in order to develop initiatives that would be politically feasible. And he's technically correct that taxpayers and private firms will share the gains and losses when it comes to equity. But Kashkari conveniently neglects to mention that the government is guaranteeing a majority of the total financing for the public-private partnerships: the FDIC is providing up to 6:1 leverage in debt guarantees for the Legacy Loans Program, and the Legacy Securities Program will be bolstered by additional non-recourse government loans. This means that if the investments go south, the government (and taxpayers) will ultimately have to absorb a vast majority of the losses.

As we wrote in our public comment on the Legacy Loans Program, POGO takes no position on the strategic merits of these initiatives. But it would be nice if officials like Kashkari were a little more honest about the terms of the PPIP, which, as pointed out in a recent hearing by the Congressional Oversight Panel, will allow private investors to make huge profits while assuming almost none of the risk.

-- Michael Smallberg

Morning Smoke: NIH Seeking Public Comments on Conflict of Interest Regulations

Public Comments Sought on Regulations for Financial Conflicts of Interest in Federally-Funded Research [National Institutes of Health]

FCS Vehicle Dies In Days [DoD Buzz]

OMB tells states how to recoup costs of administering stimulus [Government Executive]

Help* for Geithner on the Way [The Washington Independent]

IG: Energy needs to improve contractor oversight [Government Executive]

Justice Dept. offers tips on spotting stimulus-related fraud [Federal Times]

Hearing: "AIG: Where is the Taxpayer Money Going?" [House Oversight and Government Reform Committee]

POGO Responds to NIF's Award: Over Budget, Behind Schedule, Undeserving

Last week, POGO sent a letter to Energy Secretary Steven Chu challenging the decision to bestow upon the National Nuclear Security Administration (NNSA) an award for "Project Management Excellence" for the performance of what is ironically one of its most poorly managed projects, the National Ignition Facility (NIF).

In the letter, we highlighted the absurdity of rewarding such a wasteful project with an award for management excellence, pointing out that, among many major clear management failures, NIF is “more than 600 percent over budget and at least 8 years behind schedule.” We also pointed out that, despite some claims that the project has finally been completed, according to NIF's website it will not begin to attempt 'ignition' until next year (and, even by using the most optimistic of predictions, no commercial use will be available through this program for at least twenty years).

The release of POGO's letter garnered some immediate and much-needed media attention. Robert O'Harrow at The Washington Post's "Government Inc." talked to an NNSA spokesman today who said that we were providing misleading information. Here was our response:

"It is misleading for the DOE to give out an award for project excellence before it has been shown that it works. In fact, the Congress recently tasked the GAO with an investigation to determine if the NIF will achieve its goal and timeline for ignition, something that was deemed 'unlikely' by the lead scientific body JASON in 2005. This body found that: 'The NIF Ignition Program has scientific and technical risks that demand involvement by experienced personnel to the greatest extent possible. We are concerned by indications of trends to the contrary.”

POGO recommends that DOE take a second look at this award, review the evidence, realize their mistake, and rescind the award. For the sake of protecting taxpayers' dollars, for the sake of good governance, for the sake of guarding against waste, and for the sake of distinguishing between project excellence and project mismanagement, we hope that happens as soon as possible.

-- Jerry Dunleavy