Consumer Assistance to Recycle and Save (CARS) AKA “Cash for Clunkers”

1. Consumer Assistance to Recycle and Save (CARS)AKA “Cash for Clunkers” U.S. DOT Office of Inspector General Gary Middleton, Program Director

2. Agenda • CARS Overview and Eligibility • Risk Areas • Fraud Consideration in Planning and Implementation • OIG Contributions / OIG Audit • Field Work • NHTSA Challenges • Current Status • Conclusion

3. Overview • NHTSA had 30 days to: • write the rule and design program guidelines, • establish an IT system to process payments, and • implement the $1 billion program. • Congress tripled funding. • Processed 678,412 CARS transactions from over 20,000 dealerships for a total of $2.86 billion. • 99% of transactions paid by September 30, 2009.

4. Basic CARS Program Process

5. Program Requirements(Trade-in) • Be in drivable condition; • Have been continuously insured and registered for 1 year prior to the trade-in; • Be less than 25 years old from the date of trade-in, and for category 3 trucks, older than a 2001 model; • Have a combined fuel economy of 18 MPG or less (except for category 3 trucks).

6. Required Documents • Customer ID • Trade-in insurance for one year • Current registration for trade-in • Title of trade-in vehicle (front and back) • Fuel Economy.gov print out • Manufacturer’s certificate of origin (MCO) for new vehicle • NHTSA summary of sale sheet

7. CARS Eligibility and Incentives

8. Fueleconomy.gov

9. Risk Areas • Consumer • Double participation • Vehicle ownership falsified • Documents altered / false • Dealer • Trade-in vehicle does not meet eligibility requirements • Does not kill the engine • Resells vehicle • Manipulates / Falsifies documents • Financing falls through, no returned payment • Fictitious or duplicate sales • Swapping engine

10. Risk Areas (cont.) • Salvage / Disposal • Improper disposal / selling entire vehicle • Switching engines • Not reporting • Other • Bank accounts • IT system manipulation • Vehicles going abroad

11. Fraud Considerations in Planning and Program Implementation • Dealer registration • Bank information checked with Treasury Department • Dealers instead of disposal facility killing the trade-in vehicle engine • Certifications • Documentation • Multiple Reviews • IT system checks • Civil Penalties

12. OIG Contributions • Contributed to discussions on internal controls while developing the rule, and commented on the draft rule. • OIG Office of Investigations assisted with outreach and fraud education with dealers and salvage entities, followed up on potential fraud cases, and monitored calls to the OIG fraud hotline. • Audit of the program.

13. OIG Audit • Congress required the OIG and GAO to examine the administration of the program. • Reported on: • Internal controls • Whether transactions met federal requirements • Significant program challenges (IT, processing) • Close-out activities: Compliance, Cost • Turned over potential fraud cases to NHTSA.

14. Field Work • 10 States (CA, GA, IL, IN, KS, NC, NJ, OH, PA, TX) • 39 dealerships • 391 transactions • 22 disposal facilities

15. Field Work Results • 3.3 percent of transactions from our sample were missing required documents. • When projected, this potentially represents 21,917 transactions for $93,547,140.

16. Fraud vs. Documentation Problems • Intentional vs. lack of understanding • Dealer / consumer / claims processor education • Balance between preventing fraud, meeting statute requirements, and keeping program moving.

17. Challenges NHTSA Faced • Tight timeline limited fraud prevention efforts • Developing, testing and implementing an IT system • Dealer and disposal facility education • Understaffed • Limited resources • NMVTIS – problems with disposal process and tracking

18. NHTSA Compliance Efforts Include: • Field work / in-person inspections • Data searches • Webinars for dealer, salvage education • Issuing “claw back” and civil penalty letters • Contacting salvage facilities for NMVTIS compliance • Examining the more than 2,900 cases identified for further review.

19. Results to Date • No instances of widespread fraud • Couple dozen vehicles exported • $878,000 in claw-backs • $67,000 in civil penalties • <10 vehicles not disabled at the disposal facilities • 18% of trade-in vehicles have not been entered into NMVTIS

20. Remaining Activities • Follow up on identified cases • Ensure proper disposal / reporting requirements for salvage facilities • Staffing

21. Take-Aways/Conclusion

22. Questions? Office of Inspector General, Department of Transportation To report fraud, waste and abuse: Call: 1-800-424-9071 (toll free) E-mail: hotline@oig.dot.gov