Thrift-Cleanup Overbilling Alleged : Bailout: Accountants overcharged the RTC up to $4 million as it rushed to resolve S&L; failures in the West, a Senate panel is told.
In a frantic effort to clean up failed thrifts in the West, the Resolution Trust Corp. was overcharged as much as $4 million as accountants billed the government for 16-hour days and for flying families in for weekend visits, a Senate committee was told Tuesday.
Most of the bills were submitted by Financial Management Task Force, a small Denver firm that was hired without competitive bidding for the $20-million special emergency accounting project, witnesses told the Governmental Affairs Committee.
The RTC’s Denver office divided the contract, the 10th biggest awarded by the RTC, into 92 “task orders” in order to bypass competitive bidding rules requiring big contracts to be approved by the agency’s board.
“We cannot tolerate this kind of waste and neglect of policy,” said an angry Sen. Joseph I. Lieberman (D-Conn.). The contract award is under investigation.
The revelations at the hearing were the latest in a series of embarrassing disclosures about the operations of the RTC, the agency responsible for disposing of the assets of hundreds of failed savings and loans.
Last week, the General Accounting Office told the House Banking Committee that the RTC may have significantly overstated the amount of money it will recover for taxpayers from selling real estate assets. The GAO also said the agency’s record-keeping systems are in disarray.
The GAO will go before the Senate Banking Committee on Thursday to provide more details of the confusion and errors plaguing the RTC’s costly computerized system for keeping track of its vast real estate inventory.
The hearing Tuesday focused on problems surrounding “Operation Western Storm,” in which the RTC tried last year to reconcile a $7-billion difference between the records of failed S&Ls; in the Western region and the agency’s central corporate ledger.
The discrepancy did not result from assets being lost or from wrongdoing, said William Roelle, the RTC’s senior vice president and chief financial officer.
“Western Storm” sent 800 accountants, who were hurriedly hired, poring through the records of the failed thrifts to assure accuracy and completeness. “We have not attempted to shirk our responsibilities,” Roelle said.
The RTC “has been asked to resolve the S&L; crisis at the same time we were building the infrastructure to manage and direct the process,” he said. “It is the equivalent of trying to live in a house while you are designing and building it.”
However, witnesses from the GAO and the RTC’s inspector general’s office painted a portrait of an agency under intense pressure, abandoning its own rules in a hasty scramble to throw money at an accounting problem.
“Instead of saying, ‘Here’s what we want to do, here’s what must be accomplished before we can do it and here is a realistic deadline for achieving our goals,’ the region, in essence, said, ‘Here’s our deadline, now let’s do anything to meet it,’ ” said Inspector General John Adair.
The RTC had only three employees to manage the 800 accountants rushing throughout the Western region, which includes California, Utah, Colorado, New Mexico, Arizona, Nevada and Hawaii, the GAO noted.
Adair said Financial Management, the firm with the main contract, enjoyed an “excessive “ profit margin of 21.6%, compared to 4% to 7% on many defense contracts. The company, which hired hundreds of temporary accountants through subcontractors, billed the government $58 an hour for workers hired at $14 to $45 an hour, Adair said. The rate was lowered to $52 an hour only after the inspector general complained to RTC officials.
Adair indicated that the overcharges may have totaled $4 million.
Although there were other qualified accounting firms available, competition “for this $20-million project was virtually nonexistent and planning was inadequate,” he said. There was no budget for auditing at each of the failed S&Ls; and no restrictions on spending.
“Without budgets and costs limits, there was no incentive for the contractor staff to control the hours charged,” said J. William Gadsby, the GAO’s director of federal management issues.
“In some cases, individuals charged over 300 hours a month, including 16 or more hours in a day,” said Richard C. Stiener, director of the GAO’s office of special investigations.
One group of accountants was sent from New York to Los Angeles, running up travel and lodging costs of $662,000, the GAO noted. Others from South Bend, Ind., billed the government for $690,000 for travel to New Mexico, Utah and Colorado.
None of the temporary accountants had to sign travel vouchers, and about half the time the record was signed by someone other than the person who took the trip. Some of the accountants on duty away from home brought family members to visit them on weekend trips, with the government paying the tab, according to the GAO.
“This type of careless squandering of public funds and inadequate oversight of government contracts must stop,” said Sen. John Glenn, D-Ohio, chairman of the committee.
