Watchdog: The Feds' 37 High-Risk Areas – Risking $37 Billion This Year
June 5, 2023
There are 37 areas whose government operations are high risk to fraud, waste, abuse, and mismanagement, or in need of transformation, costing taxpayers at least $37 billion, a Government Accountability Office annual “High Risk List” reported.
The April report detailed the 37 areas in which the federal government needs to substantially improve, each of which are costing taxpayers at least $1 billion.
Some of these areas have been on the high risk list for decades, yet continue to go unaddressed. Twenty-five of the 37 areas have been on the list for over a decade, with five areas dating back to 1990. Only 16 areas have made progress in the past two years, the report found.
High risk areas include the Department of Defense Weapons Systems Acquisitions, Acquisition and Program Management for Department of Energy’s National Nuclear Security Administration, and Ensuring the Cybersecurity of the Nation. Others have potentially catastrophic economic consequences, like Strengthening Medicaid Program Integrity, the Unemployment Insurance System, and the US Postal Service’s Financial Viability.
Taking action to address these areas would have substantial economic benefits. The GAO claims agencies that have taken corrective action based on the issues it has highlighted has saved $675 billion from 2006 to 2022, and $100 billion since its last report in 2021. It also notes that solutions are multifaceted, and both executive and congressional action is needed to remedy many of the issues on the list.
While the federal government has no shortage of issues to address, GAO has given Congress and executive agencies a clear roadmap for issues that must be urgently remedied. Now it’s up to both branches of government to take decisive action to make the government work more efficiently for everyone.
The 50 States Racked Up $1.2 Trillion in Debts
June 6, 2023
More than two-thirds of U.S. states do not have enough cash to pay their bills, and all 50 states hold a collective $1.2 trillion in debt, according to a concerning reportfrom Truth in Accounting, an organization that seeks to educate people with transparent government financial information.
The Financial State of the States report for 2022 reports on financial conditions in each state. Their report found that while 49 of the 50 states have balanced budget clauses in their laws, many states skirt those provisions because they have “not included the true costs of the government in their budget calculations.”
Of the 31 states that don’t have enough cash to pay their bills, New Jersey, Connecticut, Illinois, Hawaii, and Massachusetts are the top five worst off. This calculation is based on the taxpayer burden, the result of dividing the total amount needed to pay a state’s bills by the total number of people in that state. New Jersey has the highest taxpayer burden in the country, at $62,50 per taxpayer. Connecticut and Illinois are not far behind, at $58,300 and $57,000, respectively.
The number of states that can’t pay their bills has actually gone down in recent years, from 40 states in 2018 down to 31 now. Total debt, on the other hand, has increased 26% since 2020 to $1.2 trillion.
These deficits are largely driven by unfunded retirement liabilities. States shortchange retirement liabilities to use that cash to “balance their budget,” a practice that according to Sheila Weinberg, CEO of Truth in Accounting, “has resulted in a $699 billion shortfall in pension funds and a $665 billion shortfall in [other post-employment benefits] funds.”
As the cost of borrowing increases in a higher interest rate environment, states need to get a handle on spending and balance their budgets before it’s too late.
Turnstile Jumpers: Subway Fare Evasion in NYC Cost $690 Million Last Year
June 7, 2023
With riders’ return to mass transit systems post-pandemic, fare evasion has soared, costing cities millions of dollars and threatening the solvency of already struggling systems. In New York City, a study found fare evasion cost the Metropolitan Transportation Authority $690 million in 2022.
According to the NY Daily News, the study was released by a 16-member MTA panel that found fare evasion cost $190 million more than the previous year’s loss of $500 million.
The biggest fare evasion came from buses, where a third of riders failed to pay the fare, costing $315 million, the panel found. Another $285 million came from subway riders jumping the turnstiles and not paying, while commuter rail fare evasion came to about $44 million.
Finally, drivers with obscured or counterfeit licenses plates cost $46 million in lost revenue from the MTA’s bridges and tunnels, the report says.
While individual fares may seem small, the frequency of evasions results in large budgetary impacts for the MTA. Fares were expected to bring in $7 billion in 2022, which would account for about 37% of the cost of operations. With substantially decreased revenue, New York will have to divert resources from other budget areas to account for the shortfall.
Other cities are also struggling to combat fare evasion, although to lesser extents. In Washington, D.C., fare evasion cost the Washington Metro Area Transit Authority $40 million in 2022, with 13% of riders not paying fares. Bay Area Rapid Transit is also looking into strategies to deter increased fare evasions.
The solution is not obvious. Many cities are investing substantial resources in new gate designs to make them more difficult to evade than the current turnstiles. These are still largely experimental, and are costly to implement, with San Francisco investing $90 million into new gates.
Increasing lawlessness in cities is bad for citizens and budgets, and everyone will suffer from reduced service and higher fares if cities can’t get fare evasions under control.
Throwback Thursday: Forest Service Spent $51 Million on Unprofitable Timber Sales
June 8, 2023
Throwback Thursday!
In 1986, the U.S. Forest Service spent $51 million – $141 million in 2023 dollars – to sell Alaskan timber at an average loss of 83%.
William Proxmire, a Democrat from Wisconsin, gave Congress and the U.S. Forest Service his Golden Fleece Award for this ridiculously bad business deal.
According to Proxmire, between 1981 and 1986, the Forest Service took enormous losses on a stable commodity like timber. Some eye-popping statistics include only selling 43% of their stock of timber, spending millions to build new service roads, and losing an average of 83 cents on the dollar for every sale they made.
This horribly mismanaged program was snuck into a 1980 bill and required the Forest Service to offer 450 million board feet of timber from Alaska’s southeastern panhandle, with funding from a fund immune to congressional review, guaranteeing $40 million per year in subsidies. Even after these huge subsidies, only about 40% of the timber attracted buyers in 1985.
Internal estimates showed that the losses could get much worse, with one estimate predicting $6 billion in losses over 50 years.
Proxmire found many wasteful practices in the program that hurt the bottom line, including a “bridge to nowhere” in Yakutat that had no road on one end, and a planned $5 million road for a timber sale "even the Forest Service admits it could not sell." Many other useless road projects also helped run up the price tag.
The subsidies for this project were an unnecessary waste of taxpayers’ money, and demonstrate the risk of the government subsidizing an investment the private sector is unwilling to make.
Overpayments: Navy Error Costs 1,200 Servicemember Retirees $7 Million
June 9, 2023
The U.S. Navy is trying to claw back $7 million from over 1,200 retired sailors after a system error resulted in overpayments for almost four years, according to NBC News.
The errors were a result of inaccurate service calculations for 1,283 retired sailors between August 2019 and February 2023, caused by its personnel system sending incorrect data to the Defense Finance and Accounting Service.
It counted inactive reserve service as active duty creditable service. That error leaves sailors with debts from $35 to $70,000 that the Navy now must attempt to recoup, with a median debt of $2,700 per sailor, NBC reported.
Defense Finance and Accounting Service will soon issue official debt notifications to retirees detailing how to pay the debt or request a waiver. On top of reduced retirement income since the error was discovered, retired sailors are bracing for tens of thousands of dollars in debt.
According to NBC, retired sailor Devin Morrison has seen his payments fall by $762 per month, and is expecting to be hit with a bill for around $30,000 in repayments. “Through no fault of my own, I’m going to be saddled with this pretty significant bill…That’s a hard pill to swallow” Morrison told NBC.
This isn’t the first administrative mistake the armed services have made in recent years. The Navy found that 65 dentists and physicians owe three additional years of service after a similar computer error, and in another incident the Air Force found 600 aviation officers also owe three additional years of service.
Our brave men and women that serve in the military risk their lives to defend our country. The least we owe them is a competent administration and accurate information about their years of service and income.
The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.