FOR IMMEDIATE RELEASE September 13, 2005

CONTACT: Brendan Daly/Jennifer Crider 202-226-7616

Pelosi Reiterates Call for Anti-Fraud Commission, Requests GAO Oversee Spending for Reconstruction of Gulf Coast

Washington, D.C. – House Democratic Leader Nancy Pelosi and senior House Democrats sent a letter today to GAO Comptroller General David Walker requesting he immediately establish a team of experienced auditors and investigators to monitor in real time the contracts and spending for the recovery, relief, and reconstruction of the Gulf Coast.  To avoid the waste, fraud, and abuse that have plagued Iraq reconstruction and homeland security spending, the Members have proposed an independent anti-fraud commission and requested that GAO report evidence of wasteful spending, abuse, and poor contract management as it occurs so that Congress can intervene.

The text of the letter follows:                                      

September 13, 2005

The Honorable David M. Walker

Comptroller General of the United States

Government Accountability Office

441 G Street NW

Washington, DC  20548

Dear Mr. Walker:

We are writing with an urgent request.  Immediate and intensive GAO oversight is essential to protect the interests of the taxpayer and to ensure that hurricane relief funds actually reach the victims of Hurricane Katrina. 

Federal funds will soon be flowing into New Orleans and the Gulf region in enormous sums.  To date, Congress has approved over $62 billion in emergency funding for Hurricane Katrina recovery.[1]  Ultimately, costs are expected to rise to over $100 billion or more.[2]  

We fully support these hurricane relief efforts.  The federal government should act quickly and generously to meet the needs of the hurricane victims and their communities.  Our concern is that, based on its track record, the Administration may be incapable of spending these federal funds effectively or responsibly.

The history of this Administration’s handling of federal contracts is one of persistent and costly mismanagement.  Under this Administration, the value of no-bid contracts has skyrocketed.[3]  Oversight of federal contracts has been turned over to private companies with blatant conflicts of interest.[4]  And when government auditors and whistleblowers do flag abuses, their recommendations are often ignored.[5]

In Iraq, billions have been appropriated for the reconstruction effort, yet oil and electricity production remain below prewar levels.[6]  Waste, fraud, and abuse appear to have squandered hundreds of millions of taxpayer dollars.[7]  The contracting strategy adopted by the Administration suppressed competition on thousands of reconstruction projects, while favored companies like Halliburton received special treatment and lucrative monopoly contracts.[8]

Domestically, the record is no better.  The FBI spent $170 million on a “Virtual Case File” system that does not work.[9]  The Department of Homeland Security has spent another $200 million on a border-monitoring system of cameras and sensors that reportedly doesn't work.[10]  And the contract to hire federal airport screeners has been plagued by poor management and flagrant abuses.[11]

Already there are danger signs involving the contracts for recovery and rebuilding of the devastated Gulf Coast.  Last week, the Administration signed two $100 million contracts with the Shaw Group, a client of former FEMA Director Joe Allbaugh, to assist in recovery efforts.[12]  Halliburton, which has repeatedly overcharged the taxpayer in Iraq, has already received contracts for repair work at three Navy facilities in Mississippi.[13]  And the emergency relief bill passed last week allows federal officials to make purchases worth up to $250,000 per transaction on government-issued credit cards.[14]

Moreover, the first set of contracts relating to Hurricane Katrina was awarded without competition and on a cost-plus basis.[15]  This is the same flawed contracting strategy that produced disastrous results in Iraq.

Compounding these problems are contracting weaknesses at FEMA.  In March 2004, the Department of Homeland Security Inspector General found that FEMA’s “numerous deficiencies in its recording keeping” may have adversely impacted the agency’s “ability to adequately account for new contracts awards and other acquisitions.”[16]  The Inspector General also concluded that “FEMA had inadequate controls to ensure that its acquisition workforce … can function according to federal regulations.”[17]  In May 2005, the Inspector General testified before Congress about these deficiencies in FEMA’s contract oversight procedures.[18]

Aggressive and independent oversight will be essential if the interests of the taxpayer are to be protected.  That is why we are supporting the creation of an anti-fraud commission to oversee the federal spending and protect against waste, fraud, and abuse.  We are also asking GAO to do its part.  We urge you to take the extraordinary step of establishing a team of experienced auditors and investigators to monitor the contracts and spending for the recovery, relief, and reconstruction of the Gulf Coast in real time.  We ask that this team be directed to report evidence of wasteful spending, abuse, or poor contract management as it occurs — not after the fact — so that Congress can intervene as needed.

Thank you for your attention to this request.

Sincerely,

Henry A. Waxman                                                                                      Ranking Member                                                                                   Committee on Government Reform

Nancy Pelosi                                                                                        Democratic Leader

Steny H. Hoyer                                                                                     Democratic Whip                                                 

James L. Oberstar                                                                                      Ranking Member                                                                                           Committee on Transportation and Infrastructure

Bennie G. Thompson                                                                                   Ranking Member                                                                                          Committee on Homeland Security

David R. Obey                                                                                              Ranking Member                                                                                      Committee on Appropriations

John D. Dingell                                                                                            Ranking Member                                                                                    Committee on Energy and Commerce                 

George Miller                                                                                            Ranking Member                                                                                       Committee on Education and the Workforce

“ Democrats are united in presenting a New Direction for America, one that will make our nation as strong as its people, one that brings opportunity, security, and prosperity to all Americans. ”

Democratic Leader Nancy Pelosi