Waste of the Day: Throwback Thursday – Fees Paid For Empty Bank Accounts

Topline: The federal government paid $2 million in service fees for bank accounts with a balance of $0 in 2011, many of which had been empty for over three years, according to a Government Accountability Office report from April 2012.

Why did the government pays such fees to keep empty accounts active?

The money would be worth $2.9 million today.

That’s according to the “Wastebook” reporting published by the late U.S. Senator Dr. Tom Coburn. For years, these reports shined a white-hot spotlight on federal frauds and taxpayer abuses. 

Coburn, the legendary U.S. Senator from Oklahoma, earned the nickname “Dr. No” by stopping thousands of pork-barrel projects using the Senate rules. Projects that he couldn’t stop, Coburn included in his oversight reports.   

Coburn’s Wastebook 2012 included 100 examples of outrageous spending worth more than $18 billion, including the government’s junk fees. 

Key facts: When a federal agency awards a grant to a private business, the money is usually not paid immediately. It’s placed in a government bank account and disbursed gradually over several months or years.

Most of those bank accounts are managed by the government’s Program Support Center, which charges federal agencies a monthly fee for the service of managing the bank accounts.

In 2011, federal agencies paid an estimated $2 million in monthly fees for the Support Center to manage more than 28,000 bank accounts that had no money left, according to the GAO. More than 9,000 of the accounts had been empty for over three years.

The Department of Health and Human Services owned 21,000 of the bank accounts. The remaining 7,000 were split between 12 other federal agencies.

Easy to close, so why didn’t anyone close them?

Closing the empty bank accounts is easy. Federal agencies only need to type in a unique “closeout code” to shut the account. The Program Support Center even sends federal agencies a monthly report listing bank accounts that are ready to be closed.

Yet government officials ignored that simple task, meaning taxpayer dollars were “paying for services that are not needed instead of providing services to grant recipients,” according to the GAO. Instead of benefitting the public, the $2 million funded administrative expenses and salaries at the Program Support Center.

The GAO also found money in other bank accounts that federal agencies appeared to have forgotten about. There was $33 million in 430 bank accounts that had sat untouched for at least three years.

Search all federal, state and local salaries and vendor spending with the world’s largest government spending database at OpenTheBooks.com.

Summary: Most Americans would notice immediately if their own bank account suddenly had added fees of even a few dollars. Taxpayers should not have paid those fees on the federal government’s behalf.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RealClearInvestigations and made available via RealClearWire.