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The Desperate Need for Oversight

February 28, 2023

By Joe Adams, Research Coordinator, Public Affairs Research Council of Alabama

Political scientists have noted that disasters provide vast opportunities for corruption. In The Dictator’s Handbook: Why Bad Behavior is Almost Always Good Politics (2011), Bruce Bueno de Mesquita and Alastair Smith wrote that disaster aid in countries with corrupt political systems often enrich well-to-do supporters of the regime and barely trickle down to the populations. While it is easy to point fingers at less developed countries, the United States has also seen its share of plundered disaster relief.

This issue is of greater significance than ever before, as the scale of the response to multiple crises, notably the pandemic, has snowballed in orders of magnitude.

Consider the $7.6 trillion in funding that has been appropriated since March 2020, including the CARES Act ($2.2 trillion), the Economic Stimulus of December 2020 ($2.3 trillion), the American Rescue Plan Act of March 2021 ($1.9 trillion), and the Inflation Reduction Act of November 2021 ($1.2 trillion). These staggering amounts are being distributed through dozens of agencies to millions of recipients and accounts of these dollars being misused, mishandled or outright stolen abound.

For example, in the recently released Semiannual Report to Congress, the Inspector General of the Department of Labor (DOL) reported that: “The volume of UI (Unemployment Insurance) investigative matters currently under review is unprecedented. Prior to the pandemic, the OIG opened approximately 100 UI investigative matters annually. Since the pandemic started, the OIG has opened over 190,000 investigative matters concerning UI fraud. That is an increase of more than 1,000 times in the volume of UI work that we are facing. UI investigations now account for approximately 96 percent of the OIG investigative case inventory, compared to approximately 11 percent prior to the pandemic.”

The OIG estimated that $163 billion may have been improperly paid. One year before, the OIG complained about not having direct access to unemployment insurance records, a problem that remained, in subsequent reports, with continuing problems in developing modern information technology systems to address the information shortfall. As before, auditors are hampered by inadequate resources and technology in an environment where the bad guys are increasingly agile and sophisticated.

Though the amount of dollars spent on current crises are larger than any in the past, this kind of problem is hardly new. In 2005, in the wake of Hurricane Katrina, millions of dollars in federal aid were distributed to a wide variety of recipients who had been affected by the devastation of the storm. I had been working at Mississippi State University to help small towns budget better, under a grant from HUD when it hit.

To my consternation, I discovered cases of embezzlement while attempting to assist some small municipalities. These cases had generally involved the diversion of payroll taxes by clerks. At one point, a registered agent called me to inform me that one clerk where we were doing work had threatened her, so I had to pull my graduate students out of the situation.

Not long after, I recall hearing a feature on  NPR in which the first Inspector General of New Orleans, Bob Cerasoli, was being interviewed. He said, “Corruption is neither greed-based nor need-based. It is merely opportunity-based. And where there is an opportunity for corruption to exist, corruption will exist.”

A few years later, in 2008, in an effort to relieve the effects of the Great Recession, $454 billion was put aside in the Troubled Asset Relief Program (TARP). In the wake of that program, Neil Barofsky, Special Inspector General for TARP, told lawmakers: “Inadequate oversight and insufficient information about what companies are doing with the money leaves the program open to fraud, including conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.”

These alarming examples from recent years and the past aren’t inevitable, though. There are ample opportunities for heightened oversight, which may not eliminate all fraud, waste and abuse but can certainly reduce their frequency and magnitude.

Some governments have neglected to heighten oversight sufficiently by indicating that it’s too expensive. The implication here is that it’s more important to provide additional services to people than to make sure that the money spent on those services is being appropriately used.

This is false logic. In 2014, John Hudak and Grace Wallach wrote a report explaining how inspectors general produced returns on investment (ROI) as high as $43 for every dollar spent. Estimates for DOL were $9.41 for every dollar spent. An investment in inspectors general now could be even more valuable than ever before.

Unfortunately, sometimes we don’t seem to pay attention to issues like this unless someone famous is involved, like famed football player Brett Favre, whose lawyers are fighting a lawsuit against him for the alleged misuse of federal funds that was filed by the Mississippi Department of Human Services, some of which he has repaid.

While that case involves an alleged injustice surrounding money diverted from the Temporary Assistance for Needy Families (TANF) program, it pales in magnitude compared to much larger amounts of money that have been siphoned off by criminal organizations and recipients with questionable needs during the pandemic in a variety of programs.


The contents of this blog post reflect those of the author, and not necessarily those of the GFRC.