At the time the U.S. Government Accountability Office (GAO) released its first major assessment of federal COVID-19 spending in March, more than 400 people had pleaded guilty to defrauding the programs and another 550 had been charged with felony fraud.
The Internal Revenue Service followed with a report that it had conducted 660 investigations revealing loan, credits and payment fraud totaling $1.8 billion over the past two years.
Expect many more disclosures like those, according to the GAO report, which amplified the message delivered for a year by the Badger Institute. In the scramble to distribute trillions of dollars in a declared emergency, government at all levels sacrificed transparency and accountability to the taxpaying public.
The cost is only beginning to be realized. As of the start of 2022, according to the report, the Department of Labor’s inspector general had opened more than 31,000 cases alleging fraud in its unemployment insurance program alone. In 17 months, the Small Business Administration fielded 215,000 fraud complaints on its hotline concerning its Paycheck Protection and Economic Injury Disaster Loan programs.
For a year, the Badger Institute has been looking into some of this spending at the local level, $190 million in direct aid to Wisconsin through the Local Government Aid Grants (LGAG) program.
The LGAG provided $150 billion to all of the states, just one of many programs that made up the $2.2 trillion federal CARES Act, enacted on March 27, 2020.
In March 2020, in more than 1,150 county courthouses and city, village and town halls throughout Wisconsin, employees tried to figure out how to keep their municipalities running while keeping their employees and the public safe.
The program, referred to in Wisconsin as Routes to Recovery, was itself a guess made in all of the chaos, a pot of funding created and divided up by federal bureaucrats based solely on population rather than need and divided up again by the state Department of Administration based solely on that criteria.
What we’ve learned is that it’s nearly impossible to determine how well or how poorly the bureaucrats executed Routes to Recovery.
It prompted us to call for a state audit of Wisconsin’s share of all federal pandemic emergency spending, including the CARES Act, the $1.9 trillion American Rescue Plan Act passed in March 2021 and the $1.2 trillion Infrastructure Investment and Jobs Act passed in November.
The Legislative Audit Bureau at the direction of the Joint Legislative Audit Committee has begun such an audit, and the state Assembly has passed a measure to put to a vote an amendment to the state constitution giving the Legislature oversight authority over future federal spending.
Rep. Mark Born (R-Beaver Dam) told the Badger Institute that pressure for the audit came not only from legislators but from Legislative Fiscal Bureau staff who could not get meaningful information about CARES Act spending.
Born, co-chair of the Joint Finance Committee and a member of the Joint Audit Committee, said the way the CARES Act was administered, it was take and spend the money and ask questions, maybe, later. “The administration was just not set up for this,” he said.
The Badger Institute will continue to look at how CARES Act money was spent or, as we reported in our last issue, not spent. In some cases, the spending — such as the $2.2 million that county jail personnel in Wisconsin spent on disinfection robots — is egregious.
What we learned most clearly was in the haste and panic that gripped our federal and state governments, CARES Act programs were deliberately designed to get funding out the door as quickly as possible and to make that funding as easy as possible to spend.
Easy to spend, tough to track
While guidance for the program goes on for pages, guidelines for the spending was summed up in one sentence: government expenditures that were not previously budgeted, were necessary to respond to the COVID-19 public health emergency and were incurred after March 1, 2020.
Not only did the overall guidelines for spending change several times, the deadline for spending the CARES Act funding was extended to the end of 2022, recognizing the difficulty many communities were having spending all of the cash.
And the spending has all along been a moving target. The Department of Administration created a tracker for Routes to Recovery allocations from the state. While by no means the worst of its kind, the DOA tracker was criticized for failing to provide health and education data or allow a search by spending category or description, according to a December study by Good Jobs First.
In hundreds of instances, the amount of funding allocated is not the amount of funding reimbursed. Eau Claire County, for example, received an allocation of nearly $1.7 million but was reimbursed just $636,715. The City of Eau Claire was allocated $1.1 million but ended up with $1.7 million.
The state allowed communities unable to spend their allotments to release the funding to other communities, as occurred in Eau Claire. As far as the state was concerned, the $190 million money shuffle was all right as long as the total state allocations and reimbursements matched up, Tatyana Warrick, the DOA’s communications director, told the Badger Institute. “The Evers administration worked closely with local governments throughout the pandemic to identify needs for response and recovery funding,” Warrick said. “As a result, the state made some modifications to the Routes to Recovery program to address those needs that reflected the changing needs identified by local government officials.”
Learning the how and the why of those changing needs cannot be done at the state level. In early April 2021, when the Badger Institute first contacted the DOA for CARES Act spending data, we were told that by guideline the state kept only spending totals. Itemized spending can be gleaned only community by community.
Half of 20 communities that we contacted failed to respond to our original and follow-up email inquiries. Those that did respond have not been eager to answer questions about the records they’re keeping.
Milwaukee County, for example, was reimbursed for more than $7.6 million for public safety and public health “activities” between June and November 2020 in agencies such as the Office of Emergency Management and the Sheriff’s Department. The DOA did not ask for any explanation as to what those activities were before reimbursing the county. The Badger Institute has yet to get an explanation.
Dane County claimed all $8.7 million of its Routes to Recovery funding in the payroll category. The county also received more than $85 million in other CARES Act funding. A review of the county’s last five budgets, including the pandemic years 2020-’22, shows a steady increase of 22.9% from $538 million in 2018 to $661 million in 2022, beacause of the infusion of federal cash.
Good luck trying to find how that roughly $85 million was spent, other than on payroll. The offices of Controller Charles Hicklin and County Executive Joe Parisi have not responded to Badger Institute emails asking for explanations.
The GAO concluded that this lack of accountability, baked into the CARES Act bill, has made it tough to estimate the overall cost of the waste, fraud and abuse. There are, however, some hints. Even with several large agencies not reporting estimates, the federal Office of Management and Budget estimated more than $281 billion in improper payments for the pandemic fiscal year 2021. That’s $75 billion more than reported the fiscal year before and double the amount reported in fiscal 2017.
How much of that is tied directly to pandemic spending may not be known for a long time. While the CARES Act called for establishing a Pandemic Response Accountability Committee to oversee emergency funding, political squabbling delayed actual funding for the committee by a year. By then, the passage of ARPA had pushed pandemic spending past $4 trillion.
“We found that many agencies — including those that administer some of the largest COVID-19 relief programs — did not develop effective internal controls or apply financial management practices to manage and oversee the distribution and use of COVID-19 relief funds,” the GAO report says.
The GAO recommends that agencies designate any new program distributing $100 million or more as “susceptible to improper payments” and make those payment totals part of their annual reports. Those annual reports should also include reviews of fraud control and risk management for the previous year, according to the report.
The Office of Management and Budget should assist agencies in developing a plan to account for all funding in the event of emergencies in the future and to make that spending available on the USAspending.gov website.
As we reported in our last issue, Wisconsin communities still have millions in CARES Act funds left to spend. The state has already received nearly $1.5 billion of an expected $2.5 billion in ARPA funds and after a year, more than $900 million of it hasn’t been spent, according to State Auditor Joe Chrisman.
Like Routes to Recovery, it likely will be months before any reimbursement documentation is made public. It is also likely that ARPA will be just as opaque as the CARES Act.
Mark Lisheron is the managing editor of Diggings.