View from the 3rd story window

The federal government hired ICF International, a private contractor, to administer billions of dollars in federal grant money to people who lost their homes to Hurricane Katrina. ICF handed out the money to applicants, but it seems that they gave out more than they were supposed to:

AP: Katrina victims may have to repay money
http://news.yahoo.com/s/ap/20080329/ap_on_re_us/katrina_collections

A private contractor under investigation for the compensation it received to run the Road Home grant program for Katrina victims says that in the rush to deliver aid to homeowners in need some people got too much. Now it wants to hire a separate company to collect millions in grant overpayments.

Why did ICF hand out too much money?

Brann said there was a sense of urgency in paying Road Home applicants, and ICF knew applicants might eventually have to return some money.

So, they started giving out the money early, before that had all of the applications. It’s not clear to me from the article exactly how this led to overpayment, but my guess is that once they had all of the applications they would compare them and decide who needed it most. In any case, they knew that they were probably doing things wrong at the time, but they didn’t care because they were keeping people happy with them for the time being.

The biggest grant amount allowed by the Road Home program is $150,000, so ICF believes it paid some recipients the maximum when they should not have received a penny. If ICF’s highest estimate of 5,000 collection cases — overpaid by an average of $35,000 — proves to be true, that means applicants will have to pay back a total of $175 million.

ICF paid out way more money than they should have. What’s more, they knew that they were probably doing this. Now, though, after the money has already been received and spent by many families, they want those families to pay back money. They are asking the displaced victims of Katrina to pay for their own errors, incompetence and general lack of concern for doing the job right in the first place.

But surely, ICF will suffer as well because of their mistake as well, right?

The prospect of Road Home grant collections comes less than two weeks after the Louisiana inspector general and the legislative auditor said they were investigating why former Gov. Kathleen Blanco paid ICF an extra $156 million in her waning days in office to administer the program. With the increase, ICF stands to earn $912 million to run Road Home, a contract that also sweetened its initial public stock offering, helping it buy out four other companies and enter government contracting in sectors including national defense and the environment.

Katrina victims pay back $175 million that in all likelihood they don’t have. ICF makes $912 in profit from the deal. Meanwhile, this deal puts enough money in ICF’s pockets to allow them to get more government contracts.

Aren’t there any consequences for this incompetence? Shouldn’t the money to make up the difference come out of ICF’s pockets rather than out of the pockets of aid recipients?

Hiring incompetent private contractors that end up doing a bad job and costing our government piles of money has been a hallmark of the Bush administration. They do it in part because of their ideological conviction that private enterprise is somehow magically more efficient than government, and in part because it makes the government look smaller on paper, which allows them to claim that they are “shrinking” government.