Dept. of Labor Overspent $321M

June 26, 2023

The Department of Labor spent $321.3 million more than it needed to from 2015 through 2020 on prescription drugs for its Federal Employees’ Compensation Program (FECA), according to a DOL Inspector General report.

The Department of Labor manages the FECA program, which administers workers compensation benefits to 2.6 million federal workers when they get hurt on the job. Part of that includes paying for prescription drugs.

Independent auditors found that the FECA program didn’t pay the best price for drugs, therefor not effectively managing pharmaceutical spending, leading to $321.3 million in excess spending on drugs.

The DOL didn’t use a pharmacy benefit manager, which negotiates prices to get a better deal on expensive drugs for healthcare systems, the report found.

Even worse, the program provided the wrong drugs to individuals, which in some cases could have had lethal consequences.

This included 1,330 prescriptions for a fast-acting fentanyl drug, despite having a policy that restricted its use. The report also found the program, “spent hundreds of millions of dollars on drugs that may not have been necessary or appropriate for FECA claimants.”

Overall, auditors found the program managers, “lacked sufficient clinical expertise and guidelines to ensure appropriate pharmaceutical decisions, which could negatively impact claimants’ health, recovery, and return to work.”

The incompetent administration of the FECA program has put the health of federal workers at risk, and wastes millions of dollars that could have been spent on healthcare to help workers recover and get back on the job quickly and safely.

 

 

NYC Gets $135M for Asylum Seekers

June 27, 2023

The Federal Emergency Management Agency is sending almost $105 million to New York City to help provide services and shelter to the influx of asylum seekers the city has been trying to accommodate, according to Politico.

The funding is part of FEMA’s Shelter and Services Program, which plans to spend about $363 million in total to help cities deal with overwhelming amounts of migrants. New York City alone has seen more than 72,000 migrants pass through since last spring, many of them in need of shelter and basic social services.

This is the second round of funding from the Shelter and Services Program. The first round doled out $332.5 million in early May, of which New York City received about $30 million. That puts New York City’s total at about $135 million, which while substantial, hardly covers the $4.3 billion it expects to spend through next summer on asylum seekers.

While providing housing and social services may not seem like a waste, it’s a cost that should not be incurred in the first place.

In most countries, those seeking asylum must wait for their claim to be adjudicated before they are let into the country. In the U.S., however, asylum seekers can lawfully stay in the U.S. while their claim is pending, a policy Donald Trump temporarily changed with his “Remain in Mexico” policy. In some cases, asylum adjudications can be pending for years.

The border crisis and the country's broken immigration system have many implications, not least of which are financial. The cost to process, adjudicate, and take care of asylum seekers and migrants is skyrocketing with no relief in sight.

 

 

Contractors Upcharge DOD Millions, Including Fighter Jet Program

June 28, 2023

Defense contractors have price-gouged the Pentagon for years, charging the Department of Defense much more for parts and equipment than they were worth, according to an investigation from 60 Minutes.

Contractors took advantage of the massive Pentagon budget, over $842 billion for 2023, and the complex and confusing bureaucracy to overcharge the DOD on countless purchases of even routine and simplistic pieces of equipment.

In one case, the Pentagon purchased an oil pressure switch for over $10,000, while NASA paid only $328 for the same switch.

In another bad deal, a former Raytheon executive found that the government was willing to pay $119 million for parts that should have only cost $28 million.

Critical parts for existing equipment also received mark-ups. One contractor, TransDigm, hiked the price of a crucial Apache helicopter valve by $747, or 40%.

One of the reasons for rising costs is a combination of mergers among defense contractors and deregulation in the industry.

Another example of an increased price is in the shoulder fired stinger missile, which cost $25,000 in 1991 and costs $400,000 today — a seven-fold increase accounting for inflation.

One of the most egregious examples of overpriced equipment purchases comes from the F-35 Joint Strike Fighter program, which in 2012 was seven years behind schedule and $90 billion over budget. It could end up costing taxpayers a total of $1.3 trillion after factoring in future support and maintenance costs.

The absurdly large Pentagon budgets are riddled with waste and inefficiencies, and contractors are taking advantage of that. It’s critical to both national defense and the federal budget that the DOD improves its bargaining with contractors to end the practice of price gouging.

 

 

Throwback Thursday: HUD Approved Duplicate Payments, Nonexistent Loans

June 29, 2023

Throwback Thursday! 

In 1983, the Department of Housing and Urban Development wasted $1.2 million – $3.7 million in 2023 dollars – thanks to gross mismanagement that included duplicate payments, making loan payments on non-existent loans, and paying excessive management fees.

Senator William Proxmire, a Democrat from Wisconsin, awarded HUD his Golden Fleece Award for its horrendous financial mismanagement in multiple areas.

According to Proxmire, HUD had contracts with various properties to rent out housing at a subsidized cost to low-income people, with HUD paying a portion of the rent for the renter. Taxpayers covered about 75% of the rent for these units.

Unfortunately, HUD administrators barely looked at the proposals, resulting in poor oversight and plenty of financial mismanagement.

In one case, HUD double counted the cost of a guard service, which added $161,000 to a project. In another, HUD approved a ground maintenance proposal to spend $60,000, despite the work only costing $49,000.

HUD also mismanaged loan approvals. Once, it allowed a rent increase to pay for a $336,000 mortgage, but the mortgage taken out was much lower at $276,000, meaning the rent should ultimately have been raised by less than what was approved.

Property management fees also haunted HUD, with the agency routinely paying about double what its own criteria says it should, costing an extra $95,000 per year.

This reckless mismanagement hurt taxpayers and low income renters, and could have been completely avoided had bureaucrats given appropriate oversight to the agency’s projects.

 

NASA Sees $7.6B in Cost Overruns

June 30, 2023

The National Aeronautics and Space Administration has had $7.6 billion in cost overruns in 2023, down from an incredible $12 billion in cost overruns in 2022, according to a Government Accountability Office study.

The overruns come from 16 of NASA’s major projects, though the top four projects comprise the majority of the overruns. These include the Space Launch System, Orion Multi-purpose Crew Vehicle, Exploration Ground Systems and James Webb Space Telescope.

Of these, the Space Launch System and Orion Multi-purpose Crew Vehicle projects led with $2.7 billion and $2.5 billion in overruns, respectively, in both 2022 and 2023. The James Webb Space Telescope had the highest overrun in 2022 at $4.5 billion, but it has since launched and thus has no more overruns in 2023.

Since 2022, out of the 16 major projects, eight have experienced cost overruns or scheduling delays, including some delays of over a year. To combat these overruns and delays, NASA has proposed a simple solution: having discussions on acquisition strategies earlier in the process.

NASA plans to spend $83 billion on major projects, but concerns over its project management and efficiency have lingered for years. The GAO has listed NASA’s acquisition strategy as a High Risk Area since 1990. It is tied for the oldest high risk area on the list, and after 33 years, it has yet to be addressed.

Unlike the colossal Department of Defense, which has some of its inefficiency to blame on its sheer scale, NASA has no excuse for continual cost overruns. If it can’t get its fiscal house in order, Congress should seriously reevaluate its funding levels going forward.

The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.