Weeding Out Waste and Fraud at Federal Agencies

Some recent inspector general reports from within various federal agencies show that the Trump administration is attempting to weed out abuse, fraud, and waste in government programs.

Early in his tenure as secretary of the Department of the Interior (DOI), Ryan Zinke asked for a briefing on DOI grant programs and found to his dismay that not a single person could tell him how much DOI disbursed in grants every year or what projects it had funded or was committed to funding.  Saying he feared that the grant program was open to fraud and abuse, Zinke order DOI to review its major grants and cooperative agreements.

Zinke's fears proved prescient.  A February 20 DOI inspector general (I.G.)'s report found that Richard Ruggiero, head of the Department of International Conservation (DIC), which is within the U.S. Fish and Wildlife Service (FWS), had violated federal ethics laws when Ruggiero took advantage of a federal cooperative agreement providing nearly $325,000 in funding to the International Fund for Animal Welfare (IFAW).  The agreement financially benefited a family member who was an independent contractor with IFAW.

The I.G. report says that before Ruggiero took over DIC, the department had signed a cooperative agreement with IFAW to establish a professional training program for conservation leaders overseas, providing the $126,871 to fund the program.  Within nine days of Ruggiero becoming DIC chief, the cooperative agreement was modified several times, extending the program for three years and increasing DIC's grant to $324,108.

The I.G. discovered that Ruggiero shared confidential "nonpublic" information about the agreement with his family member.  In addition, according to the I.G.'s report, neither Ruggiero nor his family member "disclosed their relationship in writing" to the FWS, a requirement of federal ethics laws.  When questioned about his participation in decisions related to the IFAW grant, Ruggiero initially denied any role in the agreement.  Later, Ruggiero admitted his involvement and acknowledged he should have recused himself from working on the agreement.  Beyond Ruggiero's wrongdoing, the I.G. report says several senior employees knew that Ruggiero had a conflict of interest but failed to report this fact to their supervisors or the Ethics Office, as required by agency rules.

The I.G. report also notes that the IFAW grant was not the only instance where Ruggiero acted to benefit this family member.

"We also found that Ruggiero was a decision maker on other grants awarded by the FWS with which his family member was involved, and that he did not report applicable income on his financial disclosure forms between 2012 and 2017," the report stated.

After receiving the I.G.'s report, the U.S. Attorney's Office for the Eastern District of Virginia declined to prosecute the case.  Zinke responded to the report with a statement saying, "This Inspector General report identified exactly the kind of mismanagement and tax dollar abuse I have been concerned about and I am looking to root out at Interior.  The previous administration created an environment that was so unaccountable that it led to bad actors taking advantage of taxpayers in plain sight."

A second report, this one from the Department of Energy (DOE)'s I.G., found that in its push to commercialize the capture and storage of carbon dioxide from coal-fired power plants, the Obama administration failed to exercise proper oversight over more than $400 million it gave to a now bankrupt Texas company.  This was a case of incompetence rather than malfeasance.

Summit Texas Clean Energy (Summit) partnered with DOE on the Texas Clean Energy Project, which promised to capture 2 million tons of carbon dioxide per year from a coal plant, or 90 percent of its annual emissions, and bury them underground.  The project never became operational.

Because the project was continually beset with delays and Summit proved unable to attract private financing to finish it, the Energy Department stopped supporting the deal in June 2016, but not before it spent approximately $450 million in taxpayer money.  Summit filed for bankruptcy in October 2017.

The I.G. report noted that under the terms of the project, DOE was supposed to obtain invoices from Summit prior to allowing expenses or reimbursing the company, but the I.G. found that DOE had approved more than $38 million in reimbursements without receiving proper documentation.  Among the expenses the IG deemed "potentially unallowable" were bills sent by Summit to DOE for more than $1.2 million in lobbying costs and $1.3 million in "questionable or prohibited" travel-related expenses.

Under federal law, companies partnering with the federal government are disallowed from charging the government for their lobbying activities.  The travel-related expenses included more than $650,000 paid to a consultant for Summit, which the consultant spent on items such as a spa service, alcohol, first-class travel, limousine services, receipts in foreign currency, and business meals.

The I.G. said the Energy Department under the Obama administration was to blame for these prohibited expenses being reimbursed because it had not implemented required "invoice review controls" and that "[the Office of] Fossil Energy had not always exercised sound project and financial management practices in its oversight of the project."  That's the understatement of the year!

One lesson to draw from these two cases is that government regulatory agencies are just too big for Congress or even their own auditors to exercise proper oversight.  Because bureaucrats aren't held accountable when they undertake illegal activities or exercise inept financial controls, they play fast and loose with taxpayers' money, resulting in poor program results and squandered resources.

It's good to see the Trump administration attempting to rein in out-of-control agency officials.  However, I believe that to really have a far-reaching effect, punishment for such activities must ensue.  Only when bureaucrats lose their jobs and pensions or spend some time behind bars for their malfeasance will they take seriously their charge to serve the public and spend taxpayers' dollars wisely.

H. Sterling Burnett, Ph.D. (hburnett@heartland.org) is a senior fellow on energy and the environment at The Heartland Institute, a nonpartisan, nonprofit research center headquartered in Arlington Heights, Illinois.

Some recent inspector general reports from within various federal agencies show that the Trump administration is attempting to weed out abuse, fraud, and waste in government programs.

Early in his tenure as secretary of the Department of the Interior (DOI), Ryan Zinke asked for a briefing on DOI grant programs and found to his dismay that not a single person could tell him how much DOI disbursed in grants every year or what projects it had funded or was committed to funding.  Saying he feared that the grant program was open to fraud and abuse, Zinke order DOI to review its major grants and cooperative agreements.

Zinke's fears proved prescient.  A February 20 DOI inspector general (I.G.)'s report found that Richard Ruggiero, head of the Department of International Conservation (DIC), which is within the U.S. Fish and Wildlife Service (FWS), had violated federal ethics laws when Ruggiero took advantage of a federal cooperative agreement providing nearly $325,000 in funding to the International Fund for Animal Welfare (IFAW).  The agreement financially benefited a family member who was an independent contractor with IFAW.

The I.G. report says that before Ruggiero took over DIC, the department had signed a cooperative agreement with IFAW to establish a professional training program for conservation leaders overseas, providing the $126,871 to fund the program.  Within nine days of Ruggiero becoming DIC chief, the cooperative agreement was modified several times, extending the program for three years and increasing DIC's grant to $324,108.

The I.G. discovered that Ruggiero shared confidential "nonpublic" information about the agreement with his family member.  In addition, according to the I.G.'s report, neither Ruggiero nor his family member "disclosed their relationship in writing" to the FWS, a requirement of federal ethics laws.  When questioned about his participation in decisions related to the IFAW grant, Ruggiero initially denied any role in the agreement.  Later, Ruggiero admitted his involvement and acknowledged he should have recused himself from working on the agreement.  Beyond Ruggiero's wrongdoing, the I.G. report says several senior employees knew that Ruggiero had a conflict of interest but failed to report this fact to their supervisors or the Ethics Office, as required by agency rules.

The I.G. report also notes that the IFAW grant was not the only instance where Ruggiero acted to benefit this family member.

"We also found that Ruggiero was a decision maker on other grants awarded by the FWS with which his family member was involved, and that he did not report applicable income on his financial disclosure forms between 2012 and 2017," the report stated.

After receiving the I.G.'s report, the U.S. Attorney's Office for the Eastern District of Virginia declined to prosecute the case.  Zinke responded to the report with a statement saying, "This Inspector General report identified exactly the kind of mismanagement and tax dollar abuse I have been concerned about and I am looking to root out at Interior.  The previous administration created an environment that was so unaccountable that it led to bad actors taking advantage of taxpayers in plain sight."

A second report, this one from the Department of Energy (DOE)'s I.G., found that in its push to commercialize the capture and storage of carbon dioxide from coal-fired power plants, the Obama administration failed to exercise proper oversight over more than $400 million it gave to a now bankrupt Texas company.  This was a case of incompetence rather than malfeasance.

Summit Texas Clean Energy (Summit) partnered with DOE on the Texas Clean Energy Project, which promised to capture 2 million tons of carbon dioxide per year from a coal plant, or 90 percent of its annual emissions, and bury them underground.  The project never became operational.

Because the project was continually beset with delays and Summit proved unable to attract private financing to finish it, the Energy Department stopped supporting the deal in June 2016, but not before it spent approximately $450 million in taxpayer money.  Summit filed for bankruptcy in October 2017.

The I.G. report noted that under the terms of the project, DOE was supposed to obtain invoices from Summit prior to allowing expenses or reimbursing the company, but the I.G. found that DOE had approved more than $38 million in reimbursements without receiving proper documentation.  Among the expenses the IG deemed "potentially unallowable" were bills sent by Summit to DOE for more than $1.2 million in lobbying costs and $1.3 million in "questionable or prohibited" travel-related expenses.

Under federal law, companies partnering with the federal government are disallowed from charging the government for their lobbying activities.  The travel-related expenses included more than $650,000 paid to a consultant for Summit, which the consultant spent on items such as a spa service, alcohol, first-class travel, limousine services, receipts in foreign currency, and business meals.

The I.G. said the Energy Department under the Obama administration was to blame for these prohibited expenses being reimbursed because it had not implemented required "invoice review controls" and that "[the Office of] Fossil Energy had not always exercised sound project and financial management practices in its oversight of the project."  That's the understatement of the year!

One lesson to draw from these two cases is that government regulatory agencies are just too big for Congress or even their own auditors to exercise proper oversight.  Because bureaucrats aren't held accountable when they undertake illegal activities or exercise inept financial controls, they play fast and loose with taxpayers' money, resulting in poor program results and squandered resources.

It's good to see the Trump administration attempting to rein in out-of-control agency officials.  However, I believe that to really have a far-reaching effect, punishment for such activities must ensue.  Only when bureaucrats lose their jobs and pensions or spend some time behind bars for their malfeasance will they take seriously their charge to serve the public and spend taxpayers' dollars wisely.

H. Sterling Burnett, Ph.D. (hburnett@heartland.org) is a senior fellow on energy and the environment at The Heartland Institute, a nonpartisan, nonprofit research center headquartered in Arlington Heights, Illinois.