Government Waste Rampant, GAO Says : Finance: Report finds up to 10% fraudulent Medicare spending. Poor management at Pentagon, IRS and HUD cited.

President-elect Bill Clinton will take control of a bloated and often wasteful federal government, in which as much as 10% of Medicare spending may be fraudulent and the Pentagon has $40 billion in excess equipment and supplies, according to the General Accounting Office.

In a series of transition reports, Congress’ investigative office offered Clinton a look at the weak spots of the federal establishment, including the government’s failure to collect more than $30 billion in delinquent taxes.

The reports “paint a picture of a government in serious trouble,” said Sen. John Glenn (D-Ohio), chairman of the Senate Government Affairs Committee, which scheduled a hearing today on major issues facing the federal government.

“It will take action from all parts of the federal government to deal with the serious economic, budgetary and management problems outlined by GAO,” Glenn said.

The federal government, a gargantuan enterprise that will spend $1.5 trillion this year, does “an abysmal job of rudimentary bookkeeping,” with an embarrassing lack of controls, audits or financial balance sheets, the GAO said.

Washington “manages hundreds of programs, many of them individually larger than our nation’s publicly owned corporations, without adequate knowledge of their financial condition and the results they achieve,” the agency reported.

The GAO reported, for example, that:

--The government’s Medicare program paid more than $2 billion in claims that should have been paid by private insurance companies.

--The Department of Veterans Affairs cannot determine which of its 172 hospitals are working well and which are inefficient because it lacks basic operating information on these medical facilities.

The department, which now spends $34 billion a year on a wide variety of services and benefits, has been plagued by a slow-moving bureaucracy that has failed to streamline the agency to save money, according to the GAO. The study noted that as much as 19% of the $10 billion paid in disability compensation goes to veterans for diseases related to heredity or life style rather than from injuries suffered during military service.

--The justice system is so overwhelmed that U.S. attorneys in some heavily populated areas will not prosecute any health care fraud cases unless the taxpayers have lost more than $100,000.

--The Defense Department “routinely buys weapons systems that fail to work as intended, cost more than expected and take years longer than expected to field.”

While conceding that the military has made some progress in tightening its procedures, the agency said the Pentagon still wastes billions of dollars each year through overpricing by defense contractors and through overstocking of inventories.

The GAO report on the Department of Housing and Urban Development recounted the scandals of the Ronald Reagan Administration that erupted in 1989 and involved “influence-peddling, theft by private real estate agents of millions of dollars in HUD funds . . . and poorly designed programs and controls that made it relatively easy for developers and lenders to exploit the program.”

All this cost the government billions of dollars, the report noted. Congress and current HUD Secretary Jack Kemp have “made major efforts to address these management and program design problems,” the GAO said. But it warned that “the underlying causes of HUD’s long-standing management deficiencies remain largely unresolved,” and “another HUD scandal is a distinct possibility.”

Times staff writers Edwin Chen, William J. Eaton, Robert L. Jackson, Ronald J. Ostrow, Art Pine and Jube Shiver Jr. contributed to this story.