Driving Up the Cost For Public Works

By Robert O'Harrow Jr.
Washington Post Staff Writer
Saturday, February 14, 2009

Design and engineering companies helping to build the nation's highways ran up millions of dollars in inappropriate charges at the expense of taxpayers, including bills for parties, luxury car leases and hefty paychecks for executives, according to auditors.

The bills were described by the firms as overhead costs but should not have been allowed, according to a Feb. 5 report by auditors in the Department of Transportation's inspector general's office.

The report serves as a cautionary tale as the federal government is preparing to quickly disburse billions in stimulus grants to states for highway projects.

A main reason cited for the misspending was the reliance on private accountants paid by the firms undergoing review. The accountants in some cases appeared to put their clients' interests ahead of taxpayers. The report also cited "deficiencies" in the Federal Highway Administration's oversight of the projects.

Among the "unallowable expenses" singled out:

$355,767 to pay the personal income taxes of executives.

$301,667 to lease 45 automobiles, including Mercedes, BMW and other luxury brands.

$247,685 for dinners, tickets to sporting events, theme-holiday parties.

$60,000 paid to a consultant with only a verbal agreement.

$35,352 charged by two firms for "image-enhancing items such as golf shirts."

The Transportation Department audit, which took four years, examined bills from a sampling of 41 design and engineering firms picked from 3,580 firms that had active contracts with state departments of transportation. Auditors looked at data from 2003 because it was the most current year available when the review began.

One firm alone charged $950,000 in unallowable costs, included a political contribution, spa resort bills and alcohol. The auditors estimate that in 2003, executives at design and engineering firms with highway contracts overpaid themselves by as much as $73 million.

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