Fraud and staffing levels are a concern EPA watchdog in tracking grants


Local governments and other groups receiving federal funding for the first time under infrastructure and climate laws are at heightened risk of fraud, said the lead watchdog EPA, whose office is launching new efforts to detect suspicious activity.

“There will be inexperienced participants in government funding,” Sean O’Donnell, inspector general at the Environmental Protection Agency, told Bloomberg Law. “And there will be participants who are inexperienced in contracting, making them more vulnerable to fraud.”

The inspector general’s office recently launched a data analytics team that is developing an algorithm to detect high-risk audits, state revolving fund loans and construction projects, O’Donnell said. But he also said he’s worried he won’t have enough staff to track everything adequately.

The Office of Inspector General is on high alert because so much money is coming out. Last year’s bipartisan $1.2 trillion infrastructure bill (Public Law 117-58) authorized funding for a wide range of projects, including Superfund cleanups and water system repairs. water. The recent Climate Bill (Public Law 117-169) provided an additional $369 billion to develop clean energy and fund various environmental justice projects.

Most of the EPA’s money under the infrastructure bill will flow through state revolving funds, which take money repaid by one borrower and lend it to the other. This model offers at least some security, as states will presumably ensure that it is spent properly.

EPA spokesman Tim Carroll said the agency was working with the inspector general to maintain trust and ensure accountability.

“Easy to take advantage of”

Still, the amount of money — some states will receive more EPA funding under the infrastructure bill than they have received in the history of their revolving fund programs — reinforces concerns. of O’Donnell.

EPA Inspector General Sean O’Donnell

Photo courtesy of EPA

The Inspector General has already Noted that the EPA didn’t have enough staff to process its grant documents before the infrastructure bill, “and now they’re going to increase that to a level that’s unknown to them,” he said.

Although O’Donnell said he doesn’t believe local governments seek to defraud the government, “I think they will be easily taken advantage of by others when they get this federal funding.” And in some cases, they are brand new. They may not know what they are supposed to do and what is allowed.

The recent failure of a water treatment plant in Jackson, Mississippi, highlighted potential problems with state revolving funds, O’Donnell said. The Inspector General recently announcement an investigation into how the state administered its revolving water funds in Jackson.

The climate bill raises different concerns because a significant portion of it will likely go to small community groups that have no prior relationship with the EPA, according to Sean Moulton, senior policy analyst at the Project on Government. Oversight.

“When it goes directly to these entities, that’s when we start to have heightened concern,” O’Donnell said.

Most of the fraud he expects to see is at the fund execution level – “the counting of funds, the spending of funds and the quality of projects”.

Catch the fraud

The inspector general hopes his new data analytics team will be able to spot indicators of fraud such as projects taking an unusually long time or experiencing cost overruns.

The team also wants to detect indicators of collusion – such as contractors secretly meeting to raise the price of their bids – as well as red flags such as bidders who have the same executives, bank account numbers, locations. physical and agents for incorporation, says O’Donnell.

Unexpected visits to the site are also expected to increase, he said.

All of these efforts come together with other moves in the Biden administration. In January, Zealan Hoover, senior adviser to EPA Administrator Michael Regan, told Bloomberg Law that the agency was creating a new program to ensure that infrastructure bill money is not ill-spent.

The agency also plans to double its body of auditors, human resources staff, contractors, engineers and budget analysts across the country to implement and track spending, Hoover said.

The White House additionally appointed John Podesta in September to oversee spending on the climate bill, and the Office of Management and Budget released tips in April to help agencies keep tabs on the money they are sending under the infrastructure bill.

“We don’t have the resources”

O’Donnell said he’s had positive conversations with the Office of Management and Budget and Congress about increasing the workforce. His office now has about 290 full-time staff, including 40 new ones under the infrastructure bill.

Still, “at this point we don’t have the resources to do as much monitoring as we think is necessary,” O’Donnell said.

At the same time, the inspector general’s office must deal with the political reality that the Biden administration wants to send the money quickly to communities in order to show voter results.

Ali Zaidi, President Joe Biden’s new national climate adviser, recently said that “if we don’t build – if people don’t see us putting the steel in the ground and exploiting the resources that we have, I think that they will have very good reason to be cynical about the objectives and the commitments we have made.

But O’Donnell said that “when you try to get the money out too fast, that’s when mistakes happen. It is then that you are easily taken advantage of. Because we desperately want to see results, and we will pay for any form of results.

Moulton, of the Project on Government Oversight, said he shared those concerns.

“When you’re trying to spend the money faster, you don’t do the checking,” he said. “You’re opening yourself up to, if not outright fraud, then you’re just wasting money – allocating money to places where it’s not needed and missing out on big needs because you haven’t raised enough. information.”

Criminal activity

Beyond concerns about early grant recipients, O’Donnell said he was worried about the possibility of outright theft.

“You see people who come with the specific intention of stealing money,” he said. “That’s my concern at the local level, where there’s less oversight, where they’re further away from us.”

Many examples emerged when the White House made emergency funding available during the coronavirus pandemic. For example, the Department of Justice recently accused 47 people stole $250 million from a child nutrition program, using fake meal tally sheets and fake bills.

But Rep. Jared Huffman (D-California), chairman of the House Natural Resources Oversight Subcommittee, dismissed the notion that fraud found under the Paycheck Protection Program suggests that significant swaths infrastructure and money for climate change will also be stolen.

“I think it would be grossly unfair to suggest that because there has been this pandemic fraud that we are all horrified about, we are now going to put our vital clean energy investments on hold,” he said.


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