Vermont State Auditor Doug Hoffer said Monday that a controversial MIT economist appears to have overstated the work an assistant performed for the state of Vermont and that Gov. Peter Shumlin's administration "ignored the obvious signs that something was amiss."
In a five-page report released Monday, Hoffer stopped short of accusing the economist, Jonathan Gruber, of fraud, citing a lack of documentation pertaining to his alleged "inconsistencies and questionable billing practices." But the state auditor was unsparing in his criticism of the administration's oversight of the contract, which called for an economic analysis of Shumlin's since-abandoned single-payer health care proposal.
"[I]t's clear that the Agency of Administration failed to exercise due diligence and enforce important provisions of the contract," Hoffer wrote. "The Agency of Administration should be a model of best practices in contract administration. Hopefully, it will work to improve its oversight and control functions to ensure greater accountability."
Hoffer referred the matter to Attorney General Bill Sorrell, who said Monday afternoon that his office will look into it.
"Obviously the auditor raises serious questions and we're going to take it seriously," Sorrell said. "We'll just take the case where the facts lead us."
Secretary of Administration Justin Johnson, who recently took over the office that oversaw the contract, said he agrees with Hoffer that Gruber's "documentation wasn't detailed enough," but he disputes the notion that the administration erred.
"The bottom line to me is, did we get the work that we asked for?" Johnson said. "We did get what we were buying here."
After a competitive bidding process, Gruber entered into a $400,000 contract with the state last July to provide modeling and analysis of single-payer's potential impact on the state's economy. That contract became the focus of considerable scrutiny in November, following national news reports focusing on comments Gruber made appearing to insult the intelligence of American voters.
In response to the media firestorm, the Shumlin administration amended its contract with Gruber, ensuring that he would be paid no more than $280,000. To date, he has received just $160,000, according to Johnson.
Hoffer launched his investigation in December, after Sen. Joe Benning (R-Caledonia) and Rep. Oliver Olsen (I-South Londonderry) asked him to look into it.
"My antennae started to vibrate," Hoffer said in an interview.
In each of his first two invoices, Gruber claimed he spent 100 hours on the project, while his research assistants spent 500. But the economist subsequently told Hoffer that just one research assistant worked with him during the billing period, meaning that he or she worked 1,000 hours in 10 weeks.
"To do so, the RA would have worked exclusively on this project for more than 14 hours per day — every day," Hoffer wrote. "The evidence suggests that Dr. Gruber overstated the hours worked by the RA and that the Agency of Administration ignored the obvious signs that something was amiss."
In a formal response to Hoffer, Johnson noted that the state had renegotiated its contract with Gruber and had withheld a significant portion of what it owes "until we receive more detailed invoices, given the concerns regarding contract compliance." Johnson said he has since put his agency on notice that it must closely monitor all contracts — but he also argued that the state actually got a good deal.
"At the end of the day, in this particular instance, I believe the state will have paid significantly less than what was initially estimated for the cost of Dr. Gruber's services and work product," he wrote.
Hoffer agrees with that assessment.
"In the end, this [situation], perversely, has sort of a happy ending because we're ending up paying less than half of what we contracted for," he said. But the auditor worries that such happy endings aren't common.
"I have reason to believe that the state does not, in many cases, have sufficient resources, nor do they have sufficient policies and procedures in place to monitor contractors throughout state government," he said.