Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Archive for June, 2007

Why we can’t clean up the Department of Homeland Security

Posted by David Kassel on June 27, 2007

If we could put a man on the moon, why is it that 38 years later, we can’t create a homeland protection agency that can keep its books straight and its personnel honest?

From the debacle of FEMA’s performance during Hurricane Katrina to the contract cost overruns and delays in the Coast Guard’s “Deepwater” fleet modernization program, it seems DHS hasn’t been able to shake out the bugs since its inception in 2003.  If you read the latest two semi-annual reports by the DHS Inspector General, you might shake your head in wonder at how those problems seem to have cropped up in every area.

In October 2006, the IG detailed cases in which Customs and Boarder Protection officials received bribes for permitting illegal aliens to enter the U.S. and encouraging drug smuggling.  In some cases, CPB officials were working for alien-smuggling organizations and receiving thousands of dollars in payments for every vehicle containing illegal aliens they allowed to enter the U.S. without proper inspection. The 2006 report identified $46 million in questionable contracting costs and cited a lack of proper procurement planning and severe limits to DHS ability to monitor contractor performance and conduct effective contract administration.

The IG’s latest semi-annual report, issued in April, indicates that substantial progress has not been made in DHS’s procurement practices, four years after the agency’s inception. The report notes:

(1) DHS leadership has not firmly established strong centralized acquisition authority in the Office of the Chief Procurement Officer; (2) DHS has not maintained effective internal control over financial reporting, with recurring significant weaknesses reported; (3) DHS Information Systems are not integrated and do not provide helpful reports and analysis; (4) improvements are needed in the description of technical and performance requirements in contracts; and (5) additional staffing is required for program management activities.

The DHS is a mega-agency that combined 22 existing agencies and 170,000 federal employees into a new cabinet-level department.  Looking at FEMA, one of the 22 existing agencies, the IG contends in his latest report:

FEMA has not formed the necessary relationship with stakeholders to analyze agency needs and ensure goods and services are delivered according to the contract terms…Remaining significant issues are insufficient program management and oversight, increasing the risk of waste, fraud, and abuse….

…current financial systems do not have important analytical capabilities and FEMA does not have an information technology strategy for integrating financial and acquisition management data.

A lack of centralized authority, ineffective internal controls, poorly drawn contracts, insufficient oversight, and staffing shortages.  DHS is far from an agency created and operating according to a sense of national purpose, in response to a national emergency.

That putting-a-man-on-the-moon comparison is meant to be a serious one.  The moon landing was a response to a national consensus inspired by John F. Kennedy to put an American on the moon by the end of the 1960s.  After 9/11, you’d think a similar sense of mission would have inspired the creation of the DHS as an agency that would work cohesively to protect us from further terrorist attacks and respond to other disasters, but somehow, it hasn’t happened.

The June 2007 issue of PA Times  discusses the DHS IG’s previous critical report last October, and concludes that ethics training is needed throughout DHS.  Ethics training is fine, but the problems go deeper, or more accurately higher, even than the ethics or integrity of the 170,000 individual employees of the department.

The problem appears to go right to the top–the president–and the people he chose to head the agency and its component divisions.  In an article in the May/June 2007 issue of Public Administration Review , Paul Light singles out FEMA as an example of a DHS division that has suffered from ineffective presidential appointments. In “Recommendations Forestalled or Forgotten,” Light places the blame on the appointments process itself.  Using the 1989 Volcker Commission recommendations  on presidential appointments as a guide, Light maintains that the problem is that the appointments process is “long, cumbersome, insensitive, and embarrassing,” and therefore “may attract people who are motivated more by personal rewards than by the intrinsic value of public service.”  Light adds:

Thus, the first step toward reform may exist in the simple acknowledgement that past failures-such as the sluggish Hurricane Katrina response-were rooted, first and foremost, in the appointments process and the vacancies it so often produces.

Light is on to something, but his emphasis on the problems with the process takes George W. Bush off the hook.  Had Bush actively sought and recruited good candidates, one has to assume he would have found some.  And beyond making bad appointments, Bush has apparently done little to establish appropriate accountability systems at DHS.  In their seminal 1987 article, “Accountability in the Public Sector: Lessons from the Challenger Tragedy,” (May/June 1987 Public Administration Review), Barbara Romzek and Melvin Dubnick theorized that the establishment of inappropriate accountability systems can cause failures in governmental performance, such as the decisions that led to the 1986 Challenger space shuttle disaster.

Romzek and Dubnick postulated that agency managers and personnel operate under four different types of accountability systems: bureaucratic, legal, political, and professional. Different accountability systems are appropriate for different situations. They noted that a professional accountability system was established in NASA in the 1960s, under which managers deferred to the expertise of the scientists and engineers who had been recruited to the agency. It was the right system at the right time, and under it, NASA became “among the most innovative organizations (public or private) in recent American history.”

But after the successful moon mission, the sense of purpose drifted, NASA’s budget was cut, and a political and bureaucratic accountability system replaced the professional system. The engineers were now routinely overruled by managers who responded to political pressures from Congress and the Reagan White House to launch the shuttle on a routine, commercial basis. The fatal decision to launch of the Challenger in January 1986 was made over the concerns raised by engineers about the functioning of “O-ring” joints in the right solid rocket motor in cold weather.

In the case of the Homeland Security Department, it seems an appropriate set of accountability systems has never been either desired or established.  The Bush administration spent its political capital at DHS fighting for a  “flexible” management system that could operate outside the federal civil service.  The administration primarily wanted to change the ways employees are “paid, promoted, deployed and disciplined.”  It amounted to tinkering with the bureaucratic accountability system.  Hence, the inertia and slow progress on the recommendations that the IG has made.

Bush isn’t completely to blame for DHS.  Many of the problems at DHS may have resulted from institutional pressures outside his control. But a president’s job is both to make good appointments and instill a national sense of purpose. When that doesn’t happen, you tend to end up with agencies with unfixable problems like the HSD.

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Accountability in the Libby case

Posted by David Kassel on June 19, 2007

Might it have been a diabolical strategy on the part of the Bush administration to neutralize Patrick Fitzgerald-by disingenuously giving him too much power and independence?

Here’s the scenario: The Department of Justice appoints Fitzgerald as the special counsel to investigate the outing of Valerie Plame Wilson as a CIA agent and gives Fitzgerald independence in his probe.  Complete independence.  He’s not supervised by anyone and not even bound by DoJ policies.  It’s patently unconstitutional.  Ultimately, any convictions Fitzgerald gains are thrown out on appeal. 

Neat strategy.  I have no evidence, though, that anyone in the administration employed it.  But could the scenario play out that way anyway?  Fitzgerald did get convictions of “Scooter” Libby for perjury and obstruction of justice in the case. Will it all be thrown out on appeal because Fitzgerald’s appointment is found to be unconstitutional?  The amicus curiae brief  filed in the case on June 7 by a dozen prominent legal scholars makes a plausible sounding argument that it will.

United States District Court Judge Reggie Walton, who sentenced Libby, stated that evidence of Libby’s guilt was “overwhelming” and warned that Libby was unlikely to win a reversal of his conviction.  But the quality of the evidence against Libby may not be the issue that the appeals court considers.  The issue may be whether Fitzgerald was constitutionally appointed to his position.

The reasoning used by the 12 signers of the brief filed with Judge Walton has been called into question by at least one legal analyst.  I’m not a lawyer and don’t want to hazard a guess as to who’s right here.  But, to me, the issues raised by the brief do raise questions about the accountability, or lack of it, of the special counsel’s role in this case. 

The problem that the brief notes with Fitzgerald’s appointment is that it would appear to violate the Appointments Clause of Article II of the Constitution.  The Appointments Clause states that the president, with the advice and consent of the Senate, must appoint the top officers of the United States.  Bush, however, didn’t appoint Fitzgerald with the advice and consent of the Senate, but left it to the Attorney General to make the appointment, without seeking the Senate’s approval.

Why might that pose a problem in the prosecution of Libby?  According to the Bork-Dershowitz brief (I’ll refer to it as that, because those are the two signers I’ve personally heard of), the answer can be found in Edmund v. United States, a 1997 Supreme Court decision.  Edmund v. United States stressed the importance of the presidential appointment and Senate confirmation of the top officers as “among the significant structural safeguards of the constitutional scheme.”  The Appointments Clause, the High Court stated, was, at least in part, “designed to ensure public accountability for both the making of a bad appointment and the rejection of a good one.”

In other words, if the special counsel can be considered to be a top or “principal” officer of the United States and President Bush had appointed Fitzgerald to that position in the Wilson case with the advice and consent of the Senate, Bush could then be held accountable if Fitzgerald screwed up the job in some big way.  But he didn’t appoint Fitzgerald to the post, in effect, leaving no one accountable for Fitzgerald’s actions.

The question, according to the Bork-Dershowitz brief, is whether Fitzgerald can be considered to be a principal officer, or whether he is actually an “inferior officer,” which would not have required presidential appointment or Senate confirmation under Article II.  An inferior officer, as the High Court defined it in Edmond v. United States, is someone “whose work is directed and supervised at some level by others who were appointed by presidential nomination with the advice and consent of the Senate” (my emphasis).

Bork, Dershowitz et al contend that “only if one can conclude that Special Counsel Fitzgerald’s work is directed and supervised by a presidential appointee is it even possible to conclude that he is an inferior officer.” 

The Bork-Dershowitz et al brief makes three arguments as to why Fitzgerald’s work has not been directed or supervised by a presidential appointee and why his position is therefore akin to a top or principal officer, who should have been appointed by the president with the advice and consent of the Senate:

1. Fitzgerald’s office was not created by Congress.

2.  The now-expired statute that created the Independent Counsel in the wake of Watergate specified that the Independent Counsel was required to comply with policies of the DoJ, but no such statute binds Fitzgerald to comply with DoJ policies. 

The critic of the brief, whom I cited above, noted that Congress did authorize the Attorney General by statute (28 USC 510 and 515) “to delegate pretty much any power he chose” to Fitzgerald within the DoJ, “and similarly to authorize the conduct of pretty much any legal proceeding he chose to attorneys” within the DoJ.  That may well take away the argument that Congress had no say in the creation of Fitzgerald’s office, but it doesn’t seem to take away from the argument that Fitzgerald wasn’t supervised in his official activities (see point 3 below).

3. The Supreme Court  held in Morrison v. Olson (1988) that “an independent counsel can only act within the scope of the jurisdiction that has
been granted” by the three-judge panel of the United States Court of Appeals.  By contrast, Fitzgerald, the brief notes, was delegated “all the authority of the Attorney General with respect to the
Department’s investigation into the alleged unauthorized disclosure of a CIA employee’s identity,”
and “direct[ed]” to act “independent of the supervision or control of any officer of the Department.”  Those quotes, according to the brief, are from the December 30, 2003 letter from the Deputy Attorney General to Fitzgerald, appointing him to the post.

“To our knowledge, the Special Counsel appears to occupy virtually a “class of one” in the history of special prosecutors…” the brief stated.  The brief went on to say that:

 It appears to be undisputed that there is no day-to-day supervision of Special Counsel
Fitzgerald by anyone, and no way short of removal even to assure that he complies with the policies of the Department of Justice or the Executive Branch.

The brief then went on to advance several arguments as to why the DoJ’s power to remove Fitzgerald doesn’t constitute true supervisory power over him, or, at least, presents another “close question” for the appeals court to decide. 

Whether or not you buy the Bork-Dershowitz arguments, perhaps the important question here is whether all this is an argument for bringing back the Independent Counsel Law.  We’ve had a love-hate relationship with the Independent Counsel ever since the office was created in the wake of Watergate.  The office has been allowed to lapse twice now, most recently after the debacle of Ken Starr’s investigation of Clinton’s sexual peccadilloes.   But even under Starr, there was at least some supervision of the Independent Counsel and at least some restraints on the conduct of the office, as the Supreme Court recognized in Morrison v. Olsen.

Maybe the Libby case will spur Congress to take another look at the Independent Counsel statute.  Clearly, it was flawed in its last incarnation, but rather than just throwing it out and leaving special counsels to operate within the DoJ, yet with no restrictions or guidance, some modified form of the law should be considered–perhaps an independent commission rather than a three-judge panel to appoint and supervise the independent counsel.

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Are public-private partnerships accountable?

Posted by David Kassel on June 12, 2007

For the past decade, we’ve been witnessing the rise of the “public-private partnership,” not only in this country, but around the world.

Neither the public, nor the private, nor the nonprofit sectors can solve our increasingly complex societal problems by themselves, so the P-PPs have come to the rescue.  From the construction of municipal wastewater treatment plants to the establishment of development programs in poorer countries, public, private, and nonprofit players have come together in a spirit of “partnership” to get these jobs done.

So, why doesn’t it work so much of the time?

Two research papers that examine very different areas along the P-PP spectrum nevertheless come to a strikingly similar conclusion: Many so-called P-PPs are not really partnerships at all and fail to hold the “partners” truly accountable to each other.

In “Development as Accountability,” the nonprofit, international organization,  AccountAbility, has this to say about the current state of collaboration among governments, private corporations, nonprofits and nongovernmental organizations in fostering economic development, particularly in poorer countries around the world:

From Indonesia to Senegal to Bolivia, when public-private partnerships take over what have been traditionally public areas of service, like water and sanitation, they can blur the lines and channels for accountability.

The paper adds:

In some sectors, partnership has become a byword for inefficiency, or worse, a means of cheating intended beneficiaries. New methods are urgently needed to assess the accountability and effectiveness of partnerships.

Focusing elsewhere on the P-PP spectrum, Pamela Bloomfield writes in “The Challenging Business of Long-Term Public-Private Partnerships,” that:

In several cases reported by the author and her colleagues at an independent state oversight agency over the last decade, long-term public-private partnerships that were reported and promoted as low-risk, cost-saving initiatives have saddled taxpayers with high-risk, costly obligations for decades to come.

Bloomfield, whose paper won an award for the best paper by a practitioner published in  Public Administration Review in 2006, focuses on complex, long-term municipal contracts in the U.S. with private companies for services, construction, and in some cases financing. [By way of disclosure, Bloomfield, now with the Clarus Group, was my immediate boss at the Massachusetts Office of the Inspector General, where I worked as an analyst from 1998 to 2003.  I was involved in the OIG’s examinations of two of the cases cited in her paper.]

Both papers draw a distinction between what I would term the “stronger” and “weaker” players in P-PPs, and both note that the end result of many of these arrangements is that the interests of the weaker partners are overridden by those of the stronger. 

In the case of international economic development, it is often the poor themselves–the intended beneficiaries of development programs–whose real interests end up being ignored by the rich countries, corporations,  and investors running the show, according to AccountAbility.  In the municipal contracting cases, the weaker partner often appears to be the public partner–the municipality, for instance–which frequently lacks the contracting expertise of the private partner, and may not have the resources to adequately monitor and enforce the contract.

The AccountAbility paper puts the problem this way:

Accountability systems in [economic aid and] development [programs] tend to mirror the imbalance of power and resources of the stakeholders. It is unusual for donors or businesses to be effectively held to account by grassroots NGOs or poor communities. The result is underperforming development results and the potential for social and political unrest.

Bloomfield notes that one of the key results of the unequal relationship in long-term municipal contracts is that the financial risks of the “partnership” often end up largely being being borne by the public jurisdiction and consequently by taxpayers. 

For instance, a 20-year contract signed in 1999 by the Lynn (Massachusetts) Water and Sewer Commission with a private firm to design and build a new city sewer system, ultimately assigned the risks of sewer overflows and flooding rsulting from the contractor’s redesign work to the sewer commission rather than to the contractor.  Similarly, a 20-year contract signed in 1985 by 23 northeastern Massachusetts cities and towns with a private company offering to finance, build, and operate a solid waste facility “allocated most of the project’s considerable financial risks to the public…”  The towns in the North East Solid Waste Commitee, known as the NESWC consortium, ended up paying waste disposal fees that were more than twice the market rate in the region.  Both of these projects had initially been promoted by the private “partners” as unbeatable deals that would result in major savings for taxpayers and ratepayers.

The AccountAbility report describes a situation of economic imbalance involving energy supplies Russia, which has high rates of energy consumption and “no incentives for energy conservation.”  In the gas industry, in particular, there is “a lack of coordination of gas producers and distributors, from the private sector and State, at the national and regional levels.”  The only customers that have metering capacity are a handful of businesses.  Without adequate metering, consumers in the community end up paying for the rest, including the costs of lost resources due to leaks, the report notes.

Yet, there have been promising collaborations as well, including a “multi-stakeholder dialogue and negotiation” involving the government, businesses and NGOs on protecting the ecologically fragile Pantanal rainforest region in Brazil.  Bloomfield notes that there have been successful examples of long-term municipal contracts in this country.

Both AccountAbility and Bloomfield call in their papers for new accountability and transparency structures, including better oversight and monitoring of P-PPs.  AccountAbility recommends that investors and donors become involved in the governance of the partnerships.  NGOs and other “civil society organizations” must help in scruitinizing the arrangements as well, the report states.  One of the key recommendations is the adoption by the partners of a “mutually agreed scope of work,” followed by ongoing evaluations of effectiveness.

Bloomfield similarly suggests that sufficient resources be available to local governments “to manage, monitor, and enforce these contracts.”  She concludes with a call for a new public-private partnership, but this time one that would involve:

…a collaborative effort on the part of many public and private stakeholders: governments, academic institutions, independent think tanks, public interest groups, and other individuals and organizations committed to promoting and protecting the public interest.

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Nonprofit accountability

Posted by David Kassel on June 6, 2007

What’s the least accountable sector of our society?

It may just be the nonprofit sector; and there appears to be at least two people in Congress who are cooperating in an attempt to reform that situation.

As OMB Watch has reported, Senator Max Baucus and Charles Grassley, the Democratic and Republican leaders respectively of the Senate Finance Committee, have asked the Treasury Secretary to make nonprofit tax filings more informative and transparent.

In a May 29 letter to Treasury Secretary Henry Paulson, Baucus and Grassley single out nonprofit executive compensation, in particular.  “It can be easier to understand how much a Fortune 500 executive is paid than how much a charity is compensating executives due to the shell games that go on in some cases,” they write. They specifically call for updates to Form 990, which nonprofits file annually with the IRS. 

Baucus and Grassley are on to something, and have been for some time.  While nonprofits do much important and beneficial work for society, they are subject to relatively little scrutiny and have relatively light requirements to publicly disclose financial and other types of information.

The problem appears to stem in part from the race over the past two decades or so in this country to privatize governmental functions, from human services to highway construction.  As Robert S. Gilmour and Laura S. Jensen have noted in 1998 in their article, “Reinventing Government Accountability,” in Public Administration Review:

…delegation of public functions outside the bounds of government profoundly challenges traditional notions of accountability, making it all the more difficult, as James Madison put it, to “oblidge” government to “control itself.”

At Harvard’s Hauser Center for Nonprofit Organizations, Elizabeth K. Keating describes the “selective disclosure environment” in which nonprofit organizations operate.  One result has been a series of financial scandals in those sectors.

Among the recent cases are the questionable use by the Red Cross of donor funds and program management by nonprofits after 9/11 and again after Hurricane Katrina, Keating writes.  She also cites the case of New Era Philanthropy, in which hundreds of individuals and organizations were duped into donating money to a Ponzi or pyramid scheme.

The lack of public disclosure requirements also appears to encourage conflicts of interest in nonprofits, such as the case of Oriana House, Inc., a nonprofit that runs the Summit County correctional facility, halfway houses, and other facilities.  In The Nonprofit Quarterly, Rick Cohen writes in “Conflict of Interest, Mischief, Thou Art Afoot,” that the Ohio State Auditor had found that the firm had engaged in hundrds of questionable related-party transactions.  Yet the Oriana executive director fought the Ohio auditor’s access to Oriana’s financial records, claiming nonprofits were exempt from certain kinds of financial disclosure.

Cohen reports that despite its near-total dependence on government funds, the courts found that Oriana was not the equivalent of a public agency and did not have to accede to the auditor’s request for unrestricted access to the records.

Keating points out that the federal Freedom of Information Act is a key element of  a democratic government and of accountability.  But it doesn’t pertain, of course, either to nonprofits or the private sector. 

Yet, even the private sector has more reporting requirements than does the nonprofit sector.  As Keating notes, the Securities and Exchange Commission requires regular disclosures of financial and other significant information by private-sector companies wishing to sell securities to the public. These documents are submitted electronically to the SEC’s EDGAR system and become available to the public. Most firms must then make annual and quarterly filings to be allowed to have their securities traded on the secondary market. 

Currently, nonprofits’ IRS Form 990 filings can be found on the GuideStar website.  Keating suggests the adoption for nonprofits of a substantially enhanced electronic filing system similar to the EDGAR system.  It would seem that government, in particular, needs to beef up, rather  than reduce, its oversight capacity when it comes to nonprofits. 

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