February 17, 2011 marked the two-year anniversary of the American Recovery and Reinvestment Act (ARRA), the so-called stimulus package. Needless to say, the contrived celebratory fanfare that characterized the one-year anniversary last year has now given way to the dull realization that the $862 billion program has been an abject failure. The oft-repeated promise that the stimulus money would be tracked to the very last dime has become the butt of late-night talk shows and taxpayers are left to wonder where all the money went.

Among the most egregious programs contained in the pork-laden stimulus (and they were legion) was the weatherization assistance program (WAP), a Carter-era Department of Energy program whose budget had loitered at about $250 million for years until the ARRA pumped it up to $5 billion.

At the time the stimulus passed, CAGW (among others) forecast that, because of the program’s tangled layers of bureaucracy and the fact that it had not been the subject of a top-down audit by the Energy Department in its entire history, WAP would be prime territory for waste, fraud and abuse. Both Secretary of Energy Stephen Chu and Energy Department Inspector General (IG) Gregory Friedman conceded that oversight of WAP had historically been tenuous and inadequate.

A March 5, 2009 story on Greenwire quoted Chu during a speech to community action agencies administering weatherization programs saying that “Those projects must be watched carefully…Because there is still little accountability for companies that do residential weatherizations, the [community actions agency] foundation must train inspectors and watch out for fraud.” In a March 26, 2009 letter to Secretary Chu, Freidman warned that the department was already snowed under trying to track current program expenditures, adding that “Our experience in the investigative arena has demonstrated that even during periods of normal operation, misuse of funds, submission of false or fictitious data, kickbacks and briberies, and other related fraudulent activity occur with troubling frequency.”

Inexorably, local and national news outlets started to scratch the surface of the weatherization program. The Government Accountability Office (GAO), IGs and state auditors began to pursue some of the weatherization money, and the extent of the mismanagement and fraud has begun to crystallize.

The GAO issues periodic updates on ARRA spending and weatherization has been a chronic source of criticism. A June 30, 2010 GAO report documented serious mismanagement of weatherization funds in Mississippi. The law allows community action agencies to pay labor costs up to 110 percent of material costs; the organization in Mississippi was paying contractors between 200 percent and 400 percent of material costs. Yet the Mississippi state oversight agency charged with watching over the money had given the group a green light for those excessive payments.

The Energy Department’s IG has issued reports on WAP in Florida, Pennsylvania, Virginia, Illinois, all of which document widespread disarray, confusion, bureaucratic bungling, miscommunication, and excessive spending on contractors.

In December, 2009, the Energy Department’s IG issued a report in which it identified multiple oversight failures in the weatherization program for the state of Illinois, including one instance in which a resident was physically endangered by the inferior workmanship of the program.

In Houston, Texas, Sheltering Arms Senior Services, which received the second largest grant in state state’s history to weatherize homes, came under the spotlight. The state’s Department of Human Services found that the group, which had gotten $22.3 million in ARRA money to improve the energy efficiency of low-income homes in the Houston area, had demonstrated “poor performance” and had spent almost half of its funding on administrative costs (the legal limit is 5 percent).

In New Jersey, a November 28, 2010 article in the New Jersey Star Ledger detailed widespread mismanagement in how the state and its contractors are spending the $118.8 million New Jersey received in stimulus weatherization funds, ultimately resulting in the dismissal of the state’s top weatherization program manager. The Star Ledger reported on significant underperformance by agencies contracted to do the work (the state is seeking to recover $8 million in weatherization funds from non-performing contracts), a dearth of experienced contractors, and shoddy workmanship.

The San Antonio Express News uncovered e-mails indicating that one of the community action agencies charged with administering the stimulus funds had asked its contractors to “submit invoices for work that hadn’t been done and falsify documents to cover their tracks.” Until the massive infusion of stimulus dollars, the Texas Department of Housing and Urban Affairs had administered a more modestly funded program, but saw its weatherization budget explode from $13 million in 2009 to $327 million.

In December, 2010, a Tennessee state audit revealed that, after reviewing the files for 444 homes that were weatherized through the WAP program, there were deficiencies in more than half of the cases, including poor or nonexistent documentation on whether applicants met income eligibility requirements, and whether the work was performed properly. The state had received $99 million in stimulus funds for weatherization.

In California, which received more than $93 million in stimulus money for weatherization, state auditors exposed community agencies’ sloppy bookkeeping practices, sluggish performance, and fiscally risky management. Even before the state auditor’s report, the state’s IG got wind of one weatherization contractor that was scheduled to receive $159,000 for weatherization projects, even though the contractor was notorious for mismanagement and extravagant overspending. The collection of alarming stories from federal and state oversight agencies, as well as local newspapers, continues to grow, all merging into a much larger picture of gross mismanagement, abuse, and fraud in the weatherization program.

More disturbingly, it is clear that oversight agencies are desperately playing catch-up, crafting oversight rules after money has already been spent. They must track money that is being funneled through 50 different state agencies, and U.S. territories, sometimes through city and municipal bureaucracies, further down to thousands of community actions agencies, and on to subcontractors and residents.

Even if one discounts the obvious fraud and mismanagement, tens of millions of tax dollars are being siphoned away to pay for the multiple layers of bureaucrats and middlemen charged with administration and oversight. The Energy Department itself skimmed $270 million of the $5 billion just to pay its own administrative overhead costs. Many millions more will vaporize in a frenzy of greedy, fly-by-night contractors, overpayment for materials and labor, ineligible residents, and general disorganization.

Two years out, with the national jobless rate hovering at 9 percent, it is clear that ARRA has failed to create new private sector jobs. What is has done very successfully is create more public sector jobs in a vast new bureaucracy inside the Energy Department (among other agencies) that is wasting tens of millions of dollars. If WAP is left unchecked, it will require an even larger and expensive cadre of bureaucrats at both the state and federal levels to oversee the program.

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) suggested in a November 22, 2010 op-ed in Politico that Congress should freeze spending on the WAP. CAGW welcomes the advent of any oversight hearings that Chairman Upton would convene to give taxpayers the first real look into the program. However, with a $14 trillion national debt, it is time to immediately turn whatever is left of the $5 billion in WAP appropriations back to the U.S. Treasury.