Inexpensive software and technology used mainly by intelligence agencies and law enforcement have helped limit fraud linked with $840 billion in federal recovery funds, a senior U.S. official said.

Earl Devaney, the former Interior Department inspector general whose probe led to the conviction of Washington lobbyist Jack Abramoff, helped set up the federal government's Recovery Transparency and Accountability Board in 2009 to oversee how the billions of dollars were spent and used.

There hasn't been a whole lot of recovery fraud, and what there has been -- has been vigorously prosecuted, Devaney told Reuters at his office just two blocks from the White House.

Devaney said the agency's focus on transparency and accountability -- with reams of data posted on cloud-computing infrastructure -- could be a model for keeping tabs on all government spending.

Charts showing current government spending and collection data looked like spaghetti thrown on a white wall, but simplifying the data and putting it on the cloud would save taxpayers money and eliminate redundancy in the long run, Devaney said.

He said he was keeping close watch on a bill introduced by Representative Darrell Issa, a California Republican, and Senator Mark Warner, a Virginia Democrat, to do just that.

Thus far, Devaney said contracts valued at just $2 million of the 270,000 awards made under the American Recovery and Reinvestment Act of 2009 have resulted in fraud convictions. That is a tiny fraction of what government observers had feared, and amounted to far less than the typical amount of abuse seen in government contracts, he said.

After brainstorming with inspectors general from the 28 other agencies that administer recovery funding, Devaney spent about $5 million to set up a Recovery Operations Center where 17 analysts track recovery funds and their recipients using technology typically used by intelligence and law enforcement.

The agency also set up two websites: www.recovery.gov and www.federalreporting.gov. The former allows citizens to see easily where recovery funding is going, and report any cases of waste, fraud or abuse.

Recipients of funds must report in great detail on their use of the federal money on the second website, www.federalreporting.gov, instead of providing the data to the government agency that provided the funding.

Devaney said he was initially skeptical about the new approach to reporting, but was surprised and pleased to see how well it worked. It turns out that with all these eyeballs on their money, people were very interested in getting it right.

ANALYSTS MINING FOR 'RED FLAGS'

Mining dozens of databases -- some open only to law enforcement, others open source -- has allowed analysts to alert state and local officials about fraud risks, often before contracts are ever awarded. New mapping software let them graphically depict where fraud cases are most likely to occur.

One case now being investigated involves several individuals who used credentials from elderly doctors in other states to file Medicare claims, according to agency officials.

The companies were suspicious because the fake doctors were so young, all shared one storefront office, and had no fax numbers or patient reviews, an analyst said.

In another case, Google maps showed the Indiana business address given by a businessman for over 14 separate firms was a parking lot that housed only a dozen tractor-trailers.

As of July 31, the recovery board and federal inspectors general have received nearly 7,300 complaints of possible wrongdoing. Of those, 1,583 had triggered open investigations, and 410 cases were closed without action.

One Senate investigator said it was too soon to judge the board's overall effectiveness given that it will continue its work through October 2013, but said the use of unique computer tools had clearly proven useful in averting more fraud.

They're referred hundreds of cases for investigation; they've clearly made a difference, said the investigator.

Vice President Joe Biden and officials from many federal agencies, including the Securities and Exchange Commission and the Department of Health and Human Services, have come to visit the agency's Recovery Operations Center, where a small team of 17 analysts monitors funding flows around the country.

Five agencies are also participating in a pilot program that allows them to run potential awardees through the combined database before contracts are made, Devaney said.

(Reporting by Andrea Shalal-Esa, editing by Matthew Lewis)

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