The government's TARP watchdog is pushing for more transparency surrounding the Treasury Department's $436.7 million in contracts with outsiders tasked with administering and overseeing the TARP program.
As more work is given to contractors, the Congressional Oversight Panel wrote in its most recent report, "accountability and transparency decrease, and the potential for conflicts of interest increases."
The study noted that Treasury publishes virtually no information on the performance of its contractors and financial agents during the life of the deals. As a result, any concerns about a contractor's performance cannot be addressed until the contractor has been paid in full.
For example, it is difficult to tell if Fannie Mae and Freddie Mac, hired to work on the HAMP mortage modification program, are performing adequately under their agreements with Treasury. The department also hasn't developed any written prcoedures for providing oversight of Fannie and Freddie.
Read more about the panel's analysis of Treasury's relationship with Fannie and Freddie here.
The report also noted that the contracting system obscures information such as details about subcontractors, monitoring procedures, hourly billing rates and other critical information that is sometimes only included in subsequent task-orders, which are not released publicly. Contractors also are immune to Freedom of Information Act requests.
The panel highlighted the case of a "small disadvantaged business" -- Anderson, McCoy & Orta, based in Oklahoma City -- which was hired to work on TARP but subsequently subcontracted 80 percent of the job to the huge law firm Cadwalader, Wickersham & Taft.
Because such information is typically obstructed by subcontracts, situations like that may be hidden from view.
"A contractor is not a government entity," the panel wrote. "Its employees do not take an oath of office, and it is not obligated to stand for election, so U.S. citizens have no opportunity to cast a vote on its performance."
"In this context, it is critical that Treasury use rigorous transparency and accountability standards to ensure that the public has access to the identities and performance records of the private entities working with Treasury to implement the TARP."
The panel highlighted the expansive role of contractors by noting that Fannie Mae has 600 full-time workers assigned to TARP duties, compared to only 220 Treasury staffers. "In other words, the vast majority of people working on the TARP today receive their paychecks from private companies, not the federal government," the COP wrote.
The report was the first to be released by the panel under the leadership of Sen. Ted Kaufman (D -- Del.). He was recently appointed to replace Elizabeth Warren, who resigned to help create the Consumer Financial Protection Bureau.
"When Harry Reid called and asked me, I thought this was a great opportunity," Kaufman said in a conference call with reporters Wednesday.
"It's really an ideal situation to get involved in this," he added. "Clearly I'm concerned about this. I'm concerned about Wall Street and Wall Street reform and we're doing right."
One expert interviewed by the panel last month testified that Treasury earns "strong marks" for its transparency efforts. The COP praised Treasury for adopting some recommendations by oversight bodies regarding its contracts, and it acknowledged that Treasury has made contracts and agreements available online, described financial agents' duties in the agreements, assigned oversight to special employees and hired staff to monitor its contractors.
But work remains, the COP said.
The panel said Treasury doesn't release the results of its monitoring efforts, so it can be difficult or impossible to determine if they are working. And a Treasury manual detailing "Policies and Procedures" that govern its relationship with contractors also isn't public.
"Treasury has failed to provide detailed, public descriptions of its plans for holding contractors and agents accountable," the panel wrote.
The COP recommended that Treasury make task orders public, publish information on contractors' performance, disclose results of monitoring, provide details on how it will hold contractors and subcontractors accountable, publish subcontractor information and explain how it chooses to outsource a job rather than do it internally.
The panel also urged the department to conduct spot-checks on its contractors during the course of oversight, so it isn't reliant on their self-disclosure, and called for Treasury to disclose ongoing conflict-of-interest findings for all its contractors.
The report went on to reiterate critiques that Treasury's solicitations for contractors are too large, which make it difficult for small businesses to get work.
While Treausry's goal was to send 28.5 percent of prime contract dollars to small businesses, the actual figure is less than 5 percent.
The report also revealed that the Special Inspector General for TARP is conducting its own audit of TARP professional services contract prices.