CAGW Reacts to GAO Report Detailing ARRA Contracts to Tax Cheats

(Washington, D.C.) – Today, Citizens Against Government Waste (CAGW), the nation’s premier taxpayer watchdog group, expressed frustration over a report released yesterday by the Government Accountability Office (GAO) revealing that thousands of contractors received tens of billions in stimulus funds even though they owed more than $750 million in back taxes.  The report stated that “At least 3,700 Recovery Act contract and grant recipients - including prime recipients, sub-recipients, and vendors - are estimated to owe more than $750 million in known unpaid federal taxes as of September 30, 2009, and received over $24 billion in Recovery Act funds.”

CAGW President Tom Schatz said, “The amount of wasteful - if not fraudulent - spending that has resulted from the ARRA is appalling, but not surprising.  Despite the Obama administration’s often-repeated promise to track the money down to the last dime, the overall picture is one of gross mismanagement and unfulfilled promises,” added Schatz.  “This most recent report simply highlights another in a long list of swindles, ineptitude, and huge taxpayer losses associated with ARRA, which has been nothing more than an $862 billion boondoggle.”  From weatherization programs that are preyed upon by unscrupulous rip-off artists, to high-speed railway projects that are over-budget and behind schedule, to rural broadband expansion funds that steal business from the private sector, it is hard to imagine how ARRA could have been more bungled. 

The report, which was requested by Sens. Max Baucus (D-Mont.), Tom Coburn (R-Okla.), and Charles Grassley (R-Iowa), emphasized the need for Congress to “consider whether tax compliance should be a prerequisite for receiving a federal contract.”  The government’s current suspension and debarment systems for government contractors has substantial weaknesses and contracting officers have little or no statutory authority to confirm applicants’ tax status.  The GAO looked at 3,700 of the 80,000 contractors that received ARRA.  Seventeen thousand of the recipients reviewed could not be properly audited since they could not provide complete paperwork and 15 were referred to the IRS for potential criminal violations. 

“The vast majority of jobs created by the ARRA were public sector jobs, which makes a mockery of the administration’s commitment to 90 percent private-sector job creation,”  concluded Schatz.  “The expansion of public sector jobs has bloated bureaucracies at the state and federal level and is destined to explode future pension and healthcare liabilities going out many years.  Yet, the nation is still burdened with a 9 percent jobless rate, a listless recovery, and dramatically higher federal budgets, which now treat stimulus-level spending as the baseline going forward.”     

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.