More stimulus waste: three states misspent highway repair money

The federal stimulus is the program that keeps on giving — examples of taxpayer waste, that is.

Investigators inside the Transportation Department offer the latest example of problematic Recovery Act spending from three states that misspent about $125 million in highway repair money – roughly 12 percent of the $1 billion that Pennsylvania, Florida, and Michigan received.

State officials didn’t have proof for why they paid contractors certain amounts, the DOT Office of Inspector General found.

“Adequate supporting documentation is important to ensure that contractors are paid according to the work delivered and installed,” the inspector general said.

Investigators also placed blame on the Federal Highway Administration for incomplete oversight that allowed the problems to slip through the cracks.

Instead of having a unified oversight system “FHWA allows each of its Division Offices to determine the type, scope, and consistency of project inspections and the extent of supervision needed,” the inspector general said.

“As a result, FHWA Division Offices rarely prepared written plans to identify which construction activities would be inspected, did not fully document oversight procedures performed or justify why they excluded some Federal requirements and the related risk areas from their review,” the IG concluded.  “FHWA does not have assurance that designating a project for full oversight results in a comprehensive review of project-specific risk areas to ensure compliance with Federal requirements.”

Poor oversight by federal agencies has been a common theme. Last fall, a Washington Guardian investigation found that stimulus recipients had been found to have misspent at least $5.8 billion in monies they received, and that total has grown in recent months as new audits uncovered other questionable spending. Federal agencies have been repeatedly blamed for failing to question, investigate or document spending.

The Transportation Department investigators said FHWA needs to set clear expectations for reviews, and make sure all officials are following a single set of guidelines for oversight.  The FHWA agreed there was room for improvement, and said they were “developing a more data-driven and consistent approach to project level oversight across the agency.”

While no system of internal controls will realistically detect all instances of non-compliance, the agency uses a structured, comprehensive, and well-organized approach to mitigate non-compliance risk,” said a response from FHWA, noting they were working to improve reviewing of the $27.5 billion in Recovery Act funding they’re in charge of overseeing.

Most of the trouble with the states centered around “progress payments” made to contractors while works is ongoing.  The inspector general said they found several instances where contractors were paid without state officials making sure that work was actually being completed.

For example, investigators found one project in Pennsylvania paid a trucking firm almost $11,000 without any documentation that work had been done.  In another instance, also in Pennsylvania, state officials paid out more than $285,000 based solely on a consultant’s verbal statement that the price was reasonable.

Meanwhile, FHWA officials marked reviews as completed even though they hadn’t been, the IG said, or accepted the states’ lack of documentation instead of questioning costs.

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