More Katrina waste and fraud

The government is at risk of squandering significantly more money in a Gulf Coast rebuilding effort that has already wasted hundreds of millions of taxpayer dollars, federal investigators said Wednesday.

Prosecutors and inspectors general from five agencies addressed a House subcommittee on Katrina rebuilding and pledged stronger oversight to combat waste. They cautioned that some of the biggest fraud may be yet to come as some of the larger government contracts are awarded.

“As the bigger dollars start flowing into the area for the major reconstruction projects, we expect that we may see a greater number of procurement fraud cases developing,” Alice Fisher, assistant attorney general in charge of the Justice Department’s Criminal Division, said in testimony.

“A lack of confidence in the integrity of the process could dry up donations and undermine taxpayer confidence,” she said.

The joint appearance of agencies comes as the government prepares for the next phase of the Katrina recovery in the coming months and years, when big-ticket spending items to rebuild roads, bridges, hospitals and power lines are awarded. The new hurricane season also begins June 1.

It also comes amid heightened congressional scrutiny of contracts and audits showing the government wasted hundreds of millions of dollars _ much of it on large contracts awarded to large, politically connected companies _ in the initial days after the Aug. 29 storm.

Last week, the Senate passed a little-noticed provision in its $109 billion Iraq and hurricane relief bill that would block the government from entering into no-bid contracts in excess of $500,000. The provision was prompted by numerous reports of bloated Katrina-related contracts.

“Now that we are in the rebuilding phase, controls are more important than ever,” said Rep. Todd Platts, R-Pa., chairman of the House Government Reform subcommittee on management, finance and accountability.

During the hearing, investigators:

_Identified poor data-sharing among agencies as a major barrier to stemming fraud. Collaboration between Homeland Security, the Social Security Administration, the IRS and the Postal Service, for instance, would allow the government to verify names and addresses of aid applicants.

_Said they had filed fraud, theft and other charges against 261 people accused of hurricane-related scams; 44 have been convicted. Many of the defendants were FEMA employees accused of soliciting bribes from contractors in exchange for higher government payments; or individuals fraudulently obtaining emergency aid.

_Said they were reviewing delays in the processing of $9 billion in small business loans. While internal controls might explain why only $1 billion has been disbursed to Gulf Coast victims, “We are looking into whether agency inefficiencies are contributing,” said Eric Thorson, inspector general for the Small Business Administration.

In the months since the Aug. 29 storm, the government has appropriated some $85 billion for Katrina rebuilding, and the Senate last week approved an additional $28 billion. Of the $85 billion, agencies have awarded about 6,665 contracts worth $9.7 billion.


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