[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: INSPECTORS GENERAL VIEWS ON
NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS
=======================================================================
HEARINGS
before the
SUBCOMMITTEE ON NATIONAL SECURITY,
VETERANS AFFAIRS AND INTERNATIONAL
RELATIONS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 15, 2001
__________
Serial No. 107-51
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
77-881 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida DANNY K. DAVIS, Illinois
DOUG OSE, California JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky JIM TURNER, Texas
JO ANN DAVIS, Virginia THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida WM. LACY CLAY, Missouri
CHRIS CANNON, Utah ------ ------
ADAM H. PUTNAM, Florida ------ ------
C.L. ``BUTCH'' OTTER, Idaho ------
EDWARD L. SCHROCK, Virginia BERNARD SANDERS, Vermont
------ ------ (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on National Security, Veterans Affairs and International
Relations
CHRISTOPHER SHAYS, Connecticut, Chairman
ADAM H. PUTNAM, Florida DENNIS J. KUCINICH, Ohio
BENJAMIN A. GILMAN, New York BERNARD SANDERS, Vermont
ILEANA ROS-LEHTINEN, Florida THOMAS H. ALLEN, Maine
JOHN M. McHUGH, New York TOM LANTOS, California
STEVEN C. LaTOURETTE, Ohio JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky JANICE D. SCHAKOWSKY, Illinois
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
DAVE WELDON, Florida ------ ------
C.L. ``BUTCH'' OTTER, Idaho ------ ------
EDWARD L. SCHROCK, Virginia
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Lawrence J. Halloran, Staff Director and Counsel
Kristine McElroy, Professional Staff Member
Jason Chung, Clerk
David Rapallo, Minority Counsel
C O N T E N T S
----------
Page
Hearings held on March 15, 2001..................................1, 125
Statement of:
Griffin, Richard J., Inspector General, Department of
Veterans Affairs; Roberta L. Gross, Inspector General,
National Aeronautics and Space Administration; and Richard
L. Skinner, Deputy Inspector General, Federal Emergency
Management Agency.......................................... 66
Lieberman, Robert J., Deputy Inspector General, Department of
Defense; and Gregory H. Friedman, Inspector General,
Department of Energy....................................... 4
Sigmund, Ambassador Anne M., Acting Inspector General,
Department of State; Everett L. Mosley, Inspector General,
U.S. Agency for International Development; Charles D.
Smith, Inspector General, Peace Corps; and Dev Jagadesan,
Acting Inspector General, U.S. International Trade
Commission................................................. 126
Letters, statements, etc., submitted for the record by:
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statement of................... 228
Friedman, Gregory H., Inspector General, Department of
Energy, prepared statement of.............................. 33
Griffin, Richard J., Inspector General, Department of
Veterans Affairs, prepared statement of.................... 68
Gross, Roberta L., Inspector General, National Aeronautics
and Space Administration, prepared statement of............ 76
Jagadesan, Dev, Acting Inspector General, U.S. International
Trade Commission, prepared statement of.................... 197
Lieberman, Robert J., Deputy Inspector General, Department of
Defense, prepared statement of............................. 6
Mosley, Everett L., Inspector General, U.S. Agency for
International Development, prepared statement of........... 152
Sanders, Hon. Bernard, a Representative in Congress from the
State of Vermont, prepared statement of.................... 221
Shays, Hon. Christopher, a Representative in Congress from
the State of Connecticut, prepared statement of............ 3
Sigmund, Ambassador Anne M., Acting Inspector General,
Department of State, prepared statement of................. 129
Skinner, Richard L., Deputy Inspector General, Federal
Emergency Management Agency, prepared statement of......... 97
Smith, Charles D., Inspector General, Peace Corps, prepared
statement of............................................... 175
VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: INSPECTORS GENERAL VIEWS ON
NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS
----------
THURSDAY, MARCH 15, 2001
House of Representatives,
Subcommittee on National Security, Veterans Affairs
and International Relations,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 9 a.m., in
room 2247, Rayburn House Office Building, Hon. Christopher
Shays (chairman of the subcommittee) presiding.
Present: Representatives Shays, Putnam, Weldon, Schrock,
Otter, Kucinich, and Clay.
Staff present: Lawrence J. Halloran, staff director and
counsel; Vincent Chase, chief investigator; Nicholas Palarino,
senior policy advisor; Kristine McElroy, Thomas Costa, and
Robert Newman, professional staff members; Alex Moore, fellow;
Jason M. Chung, clerk; David Rapallo, minority counsel; and
Earley Green, minority assistant clerk.
Mr. Shays. A quorum being present, the Subcommittee on
National Security, Veterans Affairs and International
Relations' hearing entitled, ``Vulnerabilities to Waste, Fraud,
and Abuse: Inspectors General Views on National Security,
International Relations, and Trade Programs'' is called to
order.
In testimony before the subcommittee last week, Comptroller
General David Walker described serious management challenges
and high-risk operations in national defense, veterans, and
international relations programs.
He called for sustained systemic improvements in efficiency
and accountability in response to rapid technological advances,
shifting security threats, changing demographics, and economic
globalization.
Today, the Inspectors General [IGs] from nine departments
and agencies within our oversight jurisdiction will amplify and
supplement that reform agenda from their very unique
perspective as internal auditors and watchdogs. Despite the
diversity of the programs and functions under discussion this
morning, recurring themes ring through each IG's description of
wasteful information technology acquisitions, antiquated human
capital policies, sloppy financial controls, and the lack of
performance-driven, results-oriented management.
From the Marine Corps to the Peace Corps, from diplomacy to
deep space, waste, fraud, abuse, and mismanagement threaten
vital national missions and undermining public confidence in
Government.
Our mission is oversight, best defined as ``watchful and
responsible care for Federal programs and resources.'' It is
not an episodic game of ``gotcha,'' but the vigilant,
methodical examination of agency goals and performance. In that
endeavor we rely heavily on our oversight partners, the General
Accounting Office [GAO], and the inspectors general to illumine
general trends and specific problems in need of reform. We
welcome their testimony today, are grateful for their service,
and look forward to their continued help in the subcommittee's
work.
[The prepared statement of Hon. Christopher Shays follows:]
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Mr. Shays. At this time I would recognize the vice chairman
of the committee, Mr. Putnam.
Mr. Putnam. Thank you, Mr. Chairman.
I'm looking forward to hearing the testimony. I have no
opening statement.
Mr. Shays. Mr. Schrock.
Mr. Schrock. No.
Mr. Shays. Mr. Otter.
Mr. Otter. No, Mr. Chairman.
Mr. Shays. Thank you. So we are--Ed's ready and I'm ready
and Mr. Putnam is ready.
Mr. Lieberman, we are going to swear you in, and Mr.
Friedman.
Let me just announce who we have. We have Robert Lieberman,
Deputy Inspector General, Department of Defense; and Mr.
Gregory Friedman, Inspector General, Department of Energy.
If you'd raise your right hands, please.
[Witnesses sworn.]
Mr. Shays. Thank you.
It is great to have you here, Mr. Lieberman and Mr.
Friedman, and we welcome your testimony.
Obviously, you may need to go beyond 5 minutes. I'm not
sure, given the number of Inspectors General, how many
questions we are going to have, but it is important we put on
the record your testimony, so--Mr. Lieberman.
STATEMENTS OF ROBERT J. LIEBERMAN, DEPUTY INSPECTOR GENERAL,
DEPARTMENT OF DEFENSE; AND GREGORY H. FRIEDMAN, INSPECTOR
GENERAL, DEPARTMENT OF ENERGY
Mr. Lieberman. Thank you, Mr. Chairman.
My written statement describes the top 10 internal
management problem areas that we believe confront the
Department of Defense. In brief, these are as follows.
First, Defense has a very poor track record for developing
or acquiring information systems; yet, it depends heavily on
thousands of information systems to carry out almost all of its
activities and spends well over $20 billion a year on those
systems.
Second, security is a major challenge to all users of
network computer systems, and Defense is one of the largest
such users in the world.
Third, a range of other security concerns also need
continued attention. For example, there is a backlog of several
hundred thousand overdue security clearance investigations, a
problem of which you are well aware. Additionally, the task of
protecting military technology by revamping the export control
regime remains unfinished national business.
Fourth, Defense remains unable to compile auditable annual
financial statements because its efforts to acquire systems
that can meet new Federal accounting standards are incomplete.
Even more fundamentally, Defense accounting systems are too
complicated or error prone and do not provide reliable, timely,
and useful information to managers for decisionmaking purposes.
Fifth, acquisition reform remains very much a work in
progress, with major challenges remaining in terms of remolding
the weapons acquisition effort to match evolving national
strategy, force structure, and available funding. At present,
Defense has nearly 1,300 weapon acquisition projects worth $1.4
trillion underway. Besides reaffirming what capabilities are
actually needed and affordable, the Department needs to do more
to improve purchasing practices across the board to control
costs and speed up acquisition lead time, but without cutting
corners on testing or on the quality of material being put into
the hands of the war fighters.
Sixth, the military health system faces enormous cost
pressures, as do other public and private health care systems.
It now costs about $20 billion annually.
Seventh, the Department must find better alternatives to
the cold war practice of relying on huge stocks of supplies and
parts. Modern, Web-enabled business practices are being
introduced, but Defense remains behind the private sector in
terms of efficient supply chain management.
Eighth, Defense must find ways to address major unfunded
requirements in mundane infrastructure areas like facilities,
where the backlog of real property maintenance, alone, is over
$27 billion. But, at the same time, we must continue to trim
unnecessary overhead and support costs. At least one more round
of base closures is clearly needed.
Ninth, there is widespread consensus that the readiness of
the armed forces is suffering from the combined effects of the
force structure not being designed for the type and frequency
of missions being performed and shortcomings throughout the
whole range of support activities needed to train, equip,
maintain, and sustain the forces. Also, Defense leaders have
warned candidly of a logistics death spiral caused by the
rapidly increasing cost and frustration of maintaining old
weapons systems, especially tactical aircraft.
Tenth, the combined impacts of eliminating half a million
civilian jobs without proportional workload decreases, the
pending retirement of nearly half the remaining civilian work
force, and severe competition for skilled workers have created
significant staffing problems and dislocations throughout the
Department. Outsourcing is a partial solution but brings its
own oversight challenges.
In summary, this has been a very broad-brush treatment of
numerous and formidable management challenges already
acknowledged by the Department in various ways. The Office of
the Inspector General looks forward to assisting in every way
that we can as the new administration and Congress take on
these problems. I am looking forward to discussing them with
you in further detail.
That concludes my summary.
Mr. Shays. I thank you, Mr. Lieberman. Your statement is
quite in-depth. It will be available, obviously, to us and the
staff.
[The prepared statement of Mr. Lieberman follows:]
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Mr. Shays. We need to deal with some housekeeping, Mr.
Friedman, before we begin with you.
I would ask unanimous consent that all members of the
subcommittee be permitted to place an opening statement in the
record and that the record remain open for 3 days for that
purpose.
Without objection, so ordered.
I'd ask further unanimous consent that all witnesses be
permitted to include their written statements in the record.
Without objection, so ordered.
Mr. Friedman, you have the floor.
Mr. Friedman. Thank you, Mr. Chairman.
Good morning to you, Mr. Chairman and members of the
subcommittee. I am pleased to be here at your request to
testify on the major performance and management challenges
facing the Department of Energy. These challenges, which were
reported in our November 2000, special report and actually are
before you on the chart that you can see, are the startup of
the National Nuclear Security Administration contract
administration, energy supply and demand technology,
environmental remediation, human capital, information
technology, infrastructure, property controls and asset
inventories, safety and health, and security.
Progress in resolving these issues is dependent in large
measure on whether the Department effectively implements the
Government Performance and Results Act. The Office of Inspector
General continues to focus attention on the Department's
performance measures and results.
I'd like to summarize my full statement, Mr. Chairman, by
focusing on five of the challenge areas--startup of the NNSA,
infrastructure, security, contract administration, and human
capital.
First, I'd like to address the startup of the NNSA. As with
the establishment of any organization, the NNSA faces a number
of significant challenges. These include logistical and
organizational issues and human capital concerns. The NNSA also
faces a number of major policy issues. For example, it is
responsible, as you are well aware, for the stewardship of the
Nation's nuclear stockpile and for reducing the threat of
nuclear proliferation and terrorism.
In addition, the NNSA will need to address many of the
other departmental challenges that my office has identified.
This is particularly true of the second challenge I will
discuss, the nuclear weapons infrastructure.
For several years the Office of Inspector General has
reported that the condition of the Department's infrastructure
is inadequate and is, in fact, deteriorating at an alarming
pace. The nuclear weapons production infrastructure is a case
in point. According to the Department's own estimates, it will
need between $5 and $8 billion over the current budgeted amount
to address the deteriorating infrastructure of the weapons
production plants. The Department and NNSA must act swiftly to
counter the effects of deferred maintenance and the loss of
certain critical manufacturing capabilities.
The third challenge I would like to discuss is security.
Previous reviews by the Office of Inspector General, the
Congress, and others have identified weaknesses in the
Department's security program. For example, we have found that
security ratings were changed without documented rationale,
computers were not always sanitized prior to disposal, and
weaknesses existed that increased the risk that unclassified
computer networks could be damaged by malicious attack. Lapses
in security were also frequently cited during the debate
leading to the NNSA's creation.
Contract administration also continues to be a major
challenge to the Department. In short, we have concluded that
many of the Department's contract reform goals have yet to be
achieved. For example, while performance incentives have been
included in most Department contracts, Office of Inspector
General reviews have disclosed systemic weaknesses in the way
these incentives have been administered.
Further, while contractor fees have risen dramatically,
there has not been a commensurate increase in the financial
risk and accountability of the Department's major contractors.
An integral part of contract administration is project
management. My office has issued many reports that have been
critical of the Department's planning, justification, and
management of its major projects. Cost overruns, schedule
delays, and other management problems have plagued Department
projects, including the $47 billion tank waste project at
Hanford and the National Ignition Facility at the Lawrence
Livermore National Laboratory, which is now projected to cost
in excess of $3.5 billion.
Finally, the Department faces a number of human capital
issues. Since 1995, the Department has reduced Federal staff
significantly through reductions in force, buy-outs, attrition,
and a hiring moratorium. The staff eligible for retirement
today has nearly doubled in the last 5 years. By the year 2005,
34 percent of today's Federal staff will be eligible to retire,
and the Department's major contractors--specifically those
dealing in the nuclear arena and the Defense complex--are
experiencing similar and in some cases more severe losses. Many
of those retiring take with them technical and scientific
knowledge that is not easily replaced.
The Department and NNSA must take aggressive action to
ensure that it maintains the technical, scientific, and
management resources it needs to meet its critical mission
requirements.
I want to inform you the Department has made progress in
some areas. These include integrating research and development
activities, commencing operations at the waste isolation pilot
plant, and improving financial reporting of environmental
liabilities. However, a great deal more needs to be done. In
this regard, Secretary Abraham and General Gordon have asked me
to provide regular briefings on the progress made in addressing
the challenge areas.
Mr. Chairman and members of the subcommittee, this
concludes my statement. I would be pleased to answer any
questions that you may have.
Mr. Shays. Thank you very much.
[The prepared statement of Mr. Friedman follows:]
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Mr. Shays. Let me first welcome Mr. Kucinich. I don't know
if you have any opening statement you want to make?
Mr. Kucinich. Just include it in the record.
Mr. Shays. OK. We will include it in the record, and I'll
start us out.
Basically, let me just start with you, Mr. Friedman. I'd
like to know--and I am going to ask the same question of you,
Mr. Lieberman, as well. I'd like--you both have been very
helpful in outlining some key issues. I'd like to know the most
serious problem that faces the Department. I'd like to know the
least-serious on the list that you have given in your full
statement. I also ultimately would like to know--and I'll jump
back to them and remind you when I'm asking you--the easiest to
address, the hardest to address, and the one that has been
there the longest.
What's the most serious problem, Mr. Friedman, that you
think needs to be addressed?
Mr. Friedman. Well, that's a difficult question, Mr.
Chairman, but I think human capital may well be the most
difficult problem. You can't address all the others unless you
have the right people in place to take the appropriate
corrective actions and to move forward into the future, so my
quick answer to you would be that human capital is the most
serious problem.
Mr. Shays. And you've given us 10 in your full statement of
problems to deal with. What is the least-serious problem of
these?
Mr. Friedman. I suppose property controls and asset
inventories.
Mr. Shays. What would be the easiest to address?
Mr. Friedman. Well, I think, actually, all of them are
significant challenges or they wouldn't be on the list, but I
think the easiest to address are the ones that can be addressed
in the shortest period of time--probably deal with contract
administration.
Mr. Shays. In other words, the one if they just put their
mind to it they could get it done.
Mr. Friedman. I think contract administration could be
addressed quite easily.
Mr. Shays. And it could be done in the shortest period of
time?
Mr. Friedman. That's correct.
Mr. Shays. OK. And, again, you said the hardest to address
is what?
Mr. Friedman. Well, the hardest--let me state it
differently. I think the most significant challenge in this
certain in part falls within the purview of this committee--
deals with the environmental remediation of the former weapons
sites.
As you may be aware, Mr. Chairman, right now the unfunded
liability in the Department's books for environmental cleanup
is $230 billion, and that is to be a project the likes of which
have never been seen in the free world or in any part of the
world, for that matter.
I think over time--it is a 60 to 70-year project, so that
is going to be the longest-term project that we face.
Mr. Shays. How many years?
Mr. Friedman. 60 to 70.
Mr. Shays. Why that long?
Mr. Friedman. Well, these are some of the most
technologically challenging sites to clean up. The stuff is
very hazardous. It is very difficult. The technology is not
always there. It is a major project, and funding is a function,
as well. I mean, we couldn't spend that kind of money----
Mr. Shays. Are these dangerous sites?
Mr. Friedman. Absolutely yes.
Mr. Shays. I'm going to do something here. I want counsel
to explain to the committee what our jurisdiction is as it
relates, because we're hearing basically overall--you know, our
jurisdiction basically is what, as it relates to Department of
Energy?
The Counsel. The Department of Energy is military nuclear
programs and the civilian support offices that engage with the
nuclear safety--military security programs.
Mr. Shays. In other words----
The Counsel. And the laboratories.
Mr. Shays. Anything else?
The Counsel. That's it.
Mr. Shays. OK. The bottom line for us, we asked for that
jurisdiction given national defense concerns and so on, and our
concerns with the fact that we oversee the intelligence
community and we oversee terrorism.
You said the problem has been there for years. If we went
back 20 years, we would have seen this as a problem if
Inspectors General had written reports on it?
Mr. Friedman. Well, the environmental remediation problem--
--
Mr. Shays. Will go out in years, but what----
Mr. Friedman. But it basically started 60 years ago with
the Manhattan project.
Mr. Shays. Fair enough.
I'd like to ask the same round of questions to Mr.
Lieberman, and then I'm going to yield to Mr. Kucinich--not
yield, give him the floor.
Most serious problem facing DOD? You understand why I let
you go second, don't you? It is a little bigger here.
Mr. Lieberman. I do, Mr. Chairman.
Mr. Shays. So I gave you plenty of time.
Mr. Lieberman. All I can say is----
Mr. Shays. Don't look so surprised. [Laughter.]
Mr. Lieberman. I hope the rest of your questions aren't as
tough as the first one.
Mr. Shays. OK. We can take--which one has been around the
longest? We can go backward?
Mr. Lieberman. I believe that the inability to provide good
financial information to managers has been around for at least
25 years.
Mr. Shays. It's such a mammoth Department. It has just been
hard to get a handle on information systems, financial?
Mr. Lieberman. Yes. And I think there was a trend that goes
very far back--as a matter of fact, probably 25 years is
conservative. And that trend was that financial reporting was
considered a control mechanism strictly to make sure that
people did on the spend more money than they were authorized to
spend.
Mr. Shays. OK.
Mr. Lieberman. And that was fine. That's a legitimate goal
for financial managers. Unfortunately, the idea of capturing
costs and providing timely financial management information for
managers to use in decisionmaking, in comparing the costs of
different alternative ways of doing business, got lost many,
many years ago and Defense spent millions of dollars designing
several hundred financial reporting systems back in the 1960's
and 1970's, none of which provided that kind of cost
information.
Mr. Shays. OK. Let me ask you, what is the hardest or
easiest problem to address--again, whichever one you want to do
first.
Mr. Lieberman. The easiest is probably the infrastructure
problem, simply because that is a money problem.
Mr. Shays. OK.
Mr. Lieberman. And we know how to do base closures. All we
need is authorization to do them.
Mr. Shays. OK. And the hardest?
Mr. Lieberman. The hardest--I think is a very close race. I
do think that the financial management situation is not going
to be fixed unless a completely different mindset takes hold
within the Department, and that may well happen with the new
administration that is looking very hard at this particular
question.
Mr. Shays. What would be the other one that is close first?
Mr. Lieberman. The Department's inability to acquire useful
information systems, no matter what their purpose is.
Mr. Shays. OK. And the most serious problem facing the
Department?
Mr. Lieberman. I think the decline in military readiness is
the most urgent problem.
Mr. Shays. And the least-serious problem? I mean, not that
it is not a problem, but----
Mr. Lieberman. Well, I think the infrastructure situation
is bad. It gets worse every year. But it is tolerable.
Mr. Shays. OK.
Mr. Lieberman. It is painful and it is a morale depressor,
but you can live with that.
Mr. Shays. Thank you.
Let me do this. Let me recognize Mr. Kucinich. I do want to
welcome Butch Otter from Idaho. Nice to have you here, and
we'll get to your questions as soon as Mr. Kucinich is
finished.
Mr. Otter. Thank you.
Mr. Kucinich. Thank you very much.
Good morning, Mr. Chairman. Good morning to our witnesses.
One of the concerns that I have in reviewing areas that
relate to NNSA is the area of Presidential policy directives.
Mr. Friedman, are you charged with oversight to see if
Presidential policy directives are, in fact, being followed
with respect to the proliferation or non-proliferation
initiatives?
Mr. Friedman. Well, that is within our area of interest,
yes.
Mr. Kucinich. And are you familiar with Presidential
Decision Directive 60?
Mr. Friedman. I am not.
Mr. Kucinich. You're not? I'm very interested in whether or
not that policy directive is being followed, and also the work
that your office does with respect to monitoring the stability
of systems which puts thousands of nuclear missiles on alert.
Now, do you--what kind of control do you have in a
situation where we have intercontinental ballistic missiles
that are on a ready alert status? What is your work in
connection with that?
Mr. Friedman. Well, to the extent the Department of Energy
is involved, Mr. Kucinich, and as a role in implementation or
execution of a particular Presidential decision directive, it
would not be unusual for the Inspectors General to take a look
to review the implementation and see what steps are being
taken. I'm just not familiar with PDD 60.
To give you one example, we recently completed a review of
Presidential Decision Directive 63, which deals with the
critical infrastructure. So it is not unusual to do this; I'm
just not familiar with No. 60.
Mr. Kucinich. OK.
Mr. Friedman. And I couldn't obviously speak to the role of
the Department of Energy in implementation of that particular
PDD.
Mr. Kucinich. But you can speak to oversight in connection
with NNSA?
Mr. Friedman. Yes.
Mr. Kucinich. In your testimony, I believe you mentioned
that among the major policy issues which confront NNSA is
reducing the threat of nuclear proliferation and nuclear
terrorism by helping to upgrade physical protection and
material control and accounting system in nuclear facilities in
the states of the former Soviet Union.
Mr. Friedman. Right.
Mr. Kucinich. Do you have teams which go to those states on
a regular basis and are involved in inspection?
Mr. Friedman. Well, the last review we did of that program
was about a 1\1/2\ or 2 years ago, and we found weaknesses in
the way the program was being implemented in the fact that all
of the money that was being appropriated by the Congress was
not achieving what we thought were the goals of the Congress
when the money was appropriated.
Mr. Kucinich. Are the weaknesses in effect oversight
weaknesses, or are they weaknesses in the way the programs are
being managed? Are they weaknesses in the sense of we're not
seeing an effective diminishment of the role of nuclear weapons
in these former states?
Mr. Friedman. No. If I recall correctly, really there were
three or four components. One was that the government at the
time was siphoning off tax money from the money that was being
appropriated, which reduced the amount of money that was
actually achieving the goal for which the program was
established.
Second, the U.S. Government Federal oversight of the work
that was being done, the management of the work that was being
done was inadequate.
But we thought there was progress being made in a general
sense.
Mr. Kucinich. So do you then, in connection with the work
in the former Soviet states, help to keep track of the weapons,
themselves?
Mr. Friedman. We do not. No. To the extent that the U.S.
Government and the Department of Energy is involved in that
process, we would review the actions from time to time of----
Mr. Kucinich. Storage of such materials?
Mr. Friedman. It includes storage. The basic program was
designed to ensure that nuclear devices that were in those
states were protected from terrorist or rogue states obtaining
them as an anti-terrorism move around the world.
Mr. Kucinich. Now, does your directive include chemical and
biological weapons?
Mr. Friedman. It does.
Mr. Kucinich. Do you have anything to say about that? I
guess that could wait until the next----
Mr. Shays. You can continue.
Mr. Kucinich. OK. I had a discussion with the former
Russian premier, Serge Kurienko, recently. He is now Governor
of one of the largest areas in the old Soviet Union, in Russia.
He was expressing to me concern about the condition of 40,000
tons of chemical weapons which exist in Russia which present,
as he called it, the potential for a world ecological disaster.
He has asked for attention to be paid to this, and I wondered
if, you know--and since Russia has these large stockpiles of
chemical and biological weapons materials, what is being done
with respect to the policy of the United States in trying to
re-engage Russia and assist them in an effective disposition of
these chemical weapons?
Mr. Friedman. Mr. Kucinich, I misunderstood your question
and I didn't answer appropriately, so let me clarify what I
intended to say.
The Department of Energy, to the best of my knowledge, does
not have responsibility for overseeing or participating with
the Russian program.
Mr. Kucinich. OK.
Mr. Friedman. What we do, though, through our Defense labs
and other labs, is undertake for the Department of Defense and
others a comprehensive program to work with biological select
agents, including anthrax and others, to find ways to detect it
before it is used and to prevent its use and to treat soldiers
in the field, or whatever the case might be, in the event it is
used.
Mr. Kucinich. OK.
Mr. Friedman. And we have looked at that within the last 2
years.
Mr. Kucinich. OK. I will save that for another hearing,
then.
Mr. Lieberman, we've heard some of the record associated
with the Department of Defense's financial management, much of
it put forth by your own Department, and last week we heard Mr.
Walker of the GAO give the Department of Defense a failing
grade in terms of financial management and indicated that
they're probably worse than any other agency in this regard.
What is your assessment of those--of the financial
management and inventory practices?
Mr. Lieberman. I believe there are profound problems in the
financial management area, not only with financial reporting
but, as I said, with providing useful decisionmaking
information, which includes inventory information, to those
people who need to manage our supply chain.
Mr. Kucinich. One of the things that Mr. Walker said that I
thought was noteworthy was he said that the Department of
Defense's strategic plan ``is not tied to desired mission
outcomes.'' Would you agree with that?
Mr. Lieberman. We've not really looked at that. I am aware
of a very extensive set of performance measures and goals that
Defense has put into place in response to the Results Act. GAO
has criticized that list of measures for the last few years,
but the IG has really not been involved in it.
Mr. Kucinich. OK. You also indicated that the Department of
Defense ``Employs overly optimistic planning assumptions in its
budget formulation; thus, all too frequently has too many
programs for the available dollars, and tough decisions in
tradeoffs between needs and wants are avoided.''
Would you agree or disagree with that statement?
Mr. Lieberman. Well, it is a sweeping statement, but I
think I would basically agree that there are too many programs
chasing too few dollars.
Mr. Kucinich. Right. Well, what he told us then is that the
Pentagon--and these are points that were made--not only doesn't
fully know what it buys with its money, and where those
purchases are, but also assumes it has as much money to spend
on whatever it wants without considering what it needs to
fulfill its mission.
That was, in essence, what I got out of that hearing, Mr.
Chairman.
I just wondered if you would have any comment on that
possibility.
Mr. Lieberman. I don't quite understand the last part of
that formulation. Did he say that Defense assumes it has enough
money to do anything?
Mr. Kucinich. Well, I'm making an interpretation that it
has as much money to spend on whatever it wants. That is kind
of an assumption. There seems to be very little control there
in terms of standard budgeting practices, and their wants seem
to propel far ahead of what the needs of any particular
department might be.
Mr. Lieberman. Well, I wouldn't go quite that far. Defense
does have a very sophisticated, complicated budget formulation
system, and the Congress intensively reviews proposed Defense
budgets, at least as intensively as it reviews any other
department's proposed budgets annually.
Projecting Defense requirements is not an easy business,
and it is true that the military services are constantly
pushing for more-advanced technology. I don't think it--it's
certainly not fair to say that Defense assumes that it is
always going to get enough money to catch up with whatever
requirements it postulates. On the contrary, a lot of the
inefficient behavior I think we see in program execution is
caused by chronic under-funding--that is, too many programs
chasing too few dollars--and therefore you get a lot of
programs being run, for instance, at inefficient production
rates because they are not fully funded.
I think that the ongoing review of the basic assumptions
about what we need to buy is going to straighten out a lot of
the current imbalance here between stated requirements and what
is actually program.
Mr. Shays. Thank you. Thank you, Mr. Chairman.
If we have another round, I'd like to get back into some of
these accounting questions. Thank you.
Mr. Shays. OK. Thank you.
Butch Otter, you have the floor.
Mr. Otter. Thank you, Mr. Chairman.
I apologize for not being here for both of your formal
remarks, but I have had a chance to scan them. I just have a
couple of questions, and I think most of them are relative to
national policy rather than any specifics. But it concerns me,
reflecting back on Mr. Friedman--you mentioned the Manhattan
project. One of the greatest failures of an otherwise
successful program, the Manhattan project, was that, while
everybody was enthusiastic and very aggressively working to
make sure that Manhattan project worked and was successful,
nobody was working on the circumstances of what would happen if
it was successful, and so consequently we ended up in a cold
war for a long, long time because we failed to control and
failed to understand the aspects and the costs of stand-down of
that same project.
It seems to me that we really lack any kind of
institutional memory and institutional discipline for some of
that, because I take a look at some of the nuclear power plants
that were begun and built, never operated, shut down, cost a
lot of money, still costing a lot of money. I know up in my
country in the Pacific Northwest we built one that never got
started. It never started up and still had billions of dollars
price tag on it.
When we put the economy at risk, I think we risk the
national security.
I'm wondering if we are developing, along with the aspects
of--it seems now we have a very enthusiastic time to develop a
national energy policy and what it means to the economy, what
it means to national security, what it means to our lifestyle
and our values system.
Are we also in the process of that, Mr. Friedman, in
developing a national energy policy? Do we have the capacity to
also measure the stand-down costs and the costs of what if our
national energy policy works, No. 1?
And, No. 2, when we have these problems of shutting these
facilities down and scrapping them, it seems like the largest
and long-term cost of cleaning them up, whether it be through
EPA's Superfund sites or stockpiling of strategic and dangerous
materials, what happens to those costs, as well?
I know that is kind of a general cornucopia of problems,
but I'd like you to speak to the national policy of standing
down our strategic energy requirements some day.
Mr. Friedman. Well, I want to give you as precise a
response as I possibly can. Our responsibility in terms of the
Department's responsibility, I should say--and I'm not here
speaking for the Department, per se--the Department's
responsibility with regard to the commercial nuclear plants--
and I assume that's what you are referring to, at least in
part--clearly is to ultimately accept the waste from those
plants at Yucca Mountain in Nevada or at some other site
hopefully at some point in the future.
With regard to the--my area of expertise, if you will,
deals more directly with the nuclear facilities that were
created as part of the weapons program and the stand-down
associated with those plants. But I do have some personal views
about the overall process. And I hope I am being responsive to
your question.
Mr. Otter. Yes, you are.
Mr. Friedman. Right now, as I understand the numbers, we
depend upon nuclear energy for about 20 percent of our
electricity needs. That number may be not quite right, but it
is pretty darned close. And those plants clearly are--there is
a trend that they are going offline because of age.
One of the issues that I understand that is being addressed
under the task force that the Vice President is heading is how
do we fill the gap, the void that exists when those plants do,
in fact--when they are, in fact, shut down and we have a
shortage of electricity as a result of that power plant not
being in existence.
So I think that, as I understand the charge from the
President to the Vice President and what the Vice President has
done with regard to the Department of Energy is to address
broadly all of the issues that exist, both in terms of fossil
fuels and nuclear and the rest, and what will happen as we move
forward into the future.
I don't know if that is responsive to your question. I hope
so.
Mr. Otter. I think that is responsive to my question, Mr.
Friedman.
I guess I have one followup right now. Is there any way--
scrap that. How many production plants, nuclear power plants,
do we have shut down today, not as a result of antiquated
technology and exhausting their productive capacity, but for
any other reason other than the plant is no longer able to
produce energy? How many megawatts of electricity?
Mr. Friedman. On the commercial side?
Mr. Otter. Yes.
Mr. Friedman. I really don't have the answer to that.
Mr. Otter. Who would have the answer to that? Is that an
important answer for you to know?
Mr. Friedman. Oh, absolutely. Well, it's an important
answer in the interest of public policy. It's an important
question to ask and it's an important answer to know. That
information is absolutely critical, and should be critical, I
think, to the Vice President's task force.
Mr. Otter. Wouldn't you agree that the general comfort of
the population is also in the interest of national security,
and the comfort that they would have with a potential energy
supply, or lack of same?
Mr. Friedman. Well, absolutely.
Let me give you one statistic that is not on the nuclear
side. Our daily consumption of petroleum in this country is in
the neighborhood of 17 million barrels a day, or 18 million
barrels a day. And worldwide demand is about 70 million to 71
million barrels a day.
So you can see that, in terms of the security of this
country, the financial strength of the country, the way of
living in this Nation, energy policy is absolutely critical in
terms of the disproportionate amount of worldwide supply that
we utilize in this country to sustain our economic strength and
our ability, if you will.
Mr. Otter. OK.
Mr. Lieberman, the same question relative to the stand-down
aspects. Have we got somebody working on what happens if our
national defense policy does work?
You know, you talked about shutting down some of the
defense plants, whether it's a base or whatever. Do we have a
life expectancy? You know, in the private sector--I come from
the private sector--when I build a potato french fry plant that
produced 350 million pounds a year, I knew exactly how long the
life of that plant was going to last. I knew exactly at what
point I've got to quit adding equipment and just shut it down
and order the tombstone. Do you do the same thing with our
national defense plants?
Mr. Lieberman. As far as industrial facilities are
concerned, most of that is private sector now. The old arsenal
system was basically dismantled after World War II. There are
still a few naval shipyards and Defense facilities that do
maintenance and things like that.
I would say that on the average, nowadays the physical
plant, age-wise, is far beyond whatever projections would have
been made originally. It's very over-aged. The average of any
building on a DOD base, whether it be a barracks, a mess hall
or whatever, is over 40 years. Many of these facilities are
antiquated. And there really is no systematic replacement
policy, such as you would find in the private sector.
Mr. Otter. Should there be?
Mr. Lieberman. Yes, I think so, but that is a concept that
is very hard to implement in practice.
Mr. Otter. Mr. Chairman, is my time up? No?
Let me just ask you one question. Relative to some stuff
that you said before, that you've got too many project demands
and, I understand, many of those are congressionally inspired,
many of those are beyond your scope. I'm the new kid on the
block here, but I still understand that.
If, indeed, you had a life expectancy of every program that
you put into place, and the cost of taking it out of
production, private sector today, many antiquated plants, any
energy inefficient, people inefficient, regulation
inefficient--are kept going because they have with them a
historical right to produce. And to open a new plant, you may
not get the permits to produce.
So is the Department of Defense in that same trap, between
shutting down an old project and getting permission to start a
new one, and so subsequently we run terribly inefficient, cost-
ineffective operations?
Mr. Lieberman. Generally, yes. If you look at the base
structure, the Department's own studies say that we have, like,
23 percent excess capacity. The same thing holds true for
industrial capacity.
In the aerospace industry or whatever, we are paying
contractors their overhead costs for maintaining facilities
that we don't really need at the present time.
But it's very difficult to shut things down. To shut a
base, we need to have special authorization from Congress, the
base closure process, which is very painful. The department has
put forward a request with this year's budget for another round
of base closures. And certainly, there is not universal
consensus that's going to happen, because nobody wants their
base closed in their state or their district. Everybody says,
``Yes, you should reduce the number of bases, but don't close
mine.'' So, it is difficult.
And also, when we field weapons systems, if we're talking
about capital equipment, who would have ever thought the B-52s
would still be flying today? I read an article just the other
day about mechanics working on Navy F-14 Tomcat fighters that
are 29 years old. They're older than the mechanics. Originally
when that system was fielded, no one ever imagined that those
airframes would be called upon to still be in service after
they're, say, 20 years old.
But that's the name of the game nowadays is to deal with
systems and facilities that are clearly over-aged and very
maintenance intensive, very costly to operate. That F-14
requires 40 hours of maintenance team work for each hour that
it flies, and it eats up spare parts at a horrendous rate.
Mr. Shays. Let me use that to go to my question.
Your statement on page 6, Mr. Lieberman, you say, ``Despite
some successes and continued promises from ongoing reforms, the
business of creating and sustaining the world's most powerful
military force remains expensive and vulnerable to fraud,
waste, and mismanagement.'' And this is the point I'm
interested in--``in fiscal year 2000, the DOD bought about $150
billion in goods and services, with $15 million purchasing
actions.'' Excuse me, this is the part--``The Department
currently is attempting to stretch its acquisition budget
across 71 major programs, at an estimated cost of $782 billion,
and 1,223 smaller programs worth $632 billion.'' That adds up
to $1.4 trillion. Over what period of time is that looking to
be spent?
Mr. Lieberman. In some cases that would stretch out 8, 10
years into the future for a large system with a very long
production life.
Mr. Shays. Are we over budget, based on that number? In
other words, given the budget we have today, I mean, is that
just--is that like a balloon that just doesn't have the money
to pay for it?
Mr. Lieberman. Those are costs that may or may not
ultimately get funded, depending on how much money Congress
appropriates for procurement in the future.
Mr. Shays. Well, what I'm going to ask you to do, I want to
know how over-subscribed are we, you know, using this last
sentence with the 71 programs and 1,223 programs. My
understanding is that we are billions and billions of dollars
over-subscribed, given that--you know, if you were just to add
the cost of living to the programs for the budget that we would
add each year, if we did that for the next 10 years how much
more would we need to pay this? We have about $60 billion a
year, I think what we do. So that's $600 billion over 10 years.
And yet you're saying we have $1.4 trillion. Is that correct?
Mr. Lieberman. Well, $60 billion is increasing. That's in
future years. Even in your terms of future years it would be
more than that.
Mr. Shays. So if you do $60 billion and you add cost of
living each year--I mean, in other words, the budget basically
rises by the--should, ideally, unless we're just looking to
expand.
Mr. Lieberman. Well, but, Mr. Chairman, there have been
real increases above inflation in----
Mr. Shays. Well, I know there have.
Mr. Lieberman [continuing]. The procurement budgets for----
Mr. Shays. And we'll go bankrupt if that continues. I mean,
the fact that it has happened can't keep the--I mean, I could
make the same argument and say we haven't had proper accounting
in the Department of Defense for years, so that doesn't mean I
want to have it continue. I don't want to see us keep adding
well beyond the cost of living every year to any budget, as a
general rule.
But you have answered my question. If I took and factored
in a cost of living to $60 billion, you're telling me that in
the next 10 years we'd need $1.4 trillion to do all these
programs.
Let me ask you, is that a 10-year? Over 10 years is that
accurate?
Mr. Lieberman. Ten years is just a guess.
Mr. Shays. OK.
Mr. Lieberman. I would imagine a few----
Mr. Shays. Let's do this.
Mr. Lieberman [continuing]. Of those programs----
Mr. Shays. I don't need the answer today, but that's a
project I'm interested in. I'm requesting that you give us a
sense of, given all the different programs that are on the
books and anticipating one or two that are going to be coming,
what would we need to fund them over a cycle that makes sense,
not stretched out so they become even more expensive. Well,
either way.
Let me just ask you, what did you mean by ``logistics death
spiral'', that's very catchy phrase?
Mr. Lieberman. It is, and the former Under Secretary of
Defense for Acquisition, Technology and Logistics coined that
phrase. I didn't.
Mr. Shays. What does it mean?
Mr. Lieberman. It means that the equipment that we have in
the hands of the forces right now is becoming more and more
costly to maintain, harder to maintain, breaks more often, is
more frustrating for the mechanics to deal with, and these
logistics costs are steadily rising, which is unfortunate
because the Department needs to save money in the logistics
area so that it can apply those savings to modernization of the
equipment, buying new equipment.
So we're caught in a trap. In order to maintain what we
have out there in operational status, we have to spend an awful
lot of money; therefore, we can't afford to replace it with new
equipment.
The new equipment always costs more than the old equipment.
In the case of aircraft, for example, several times more.
That's----
Mr. Shays. I understand. What are the most significant open
Office of Inspector General recommendations DOD has not
addressed?
Mr. Lieberman. I'd like to go back and think about that a
bit, Mr. Chairman, and give you a list.
Mr. Shays. Yes. That's important to us. If you've made
recommendations that are being ignored or they haven't made any
progress, we'd like to know.
Mr. Lieberman. We did provide a list of some of those in
our December 1st letter to the congressional leadership, but
that's a few months out of date, so I want to update it.
Mr. Shays. Why don't you. So you'll followup on that?
Mr. Lieberman. Yes, sir.
Mr. Shays. Mr. Kucinich. And then we'll get to the next
panel.
Mr. Kucinich. Thank you very much, Mr. Chairman.
As the chairman was speaking, I was handed a page out of
the December IG report, which says, ``There needs to be a far-
reaching re-balancing of acquisition programs to match
available funding. That sounds like a modest statement. And it
also goes on to say that, ``We reported in June 2000, that, of
17 major weapons acquisition programs approved, the key
development milestones between March 1996, and July 1999, 14
programs lacked clearly defined open system design objectives
of strategy for achieving such objectives.'' That's the IG
report. That seems to coincide with what Mr. Walker said before
this committee, this subcommittee, last week.
Now, because I understand that GAO and the IG office have
distinct missions, and sometimes you don't always--you may work
parallel, but you don't always know what each other is doing, I
wanted to share with you some of the observations that he made
that may reflect, Mr. Chairman, on the issue of a logistics
death spiral, because he said, ``For example--'' and this is a
direct quote--``in the logistics area they may have the item.
They may not know where it is or they may not know how many
they have. Now, what's the result of that? They may order it
when they don't need it. They may not be able to access it when
they need it for operational purposes. We're not talking about
small sums of money; we're talking about significant sums of
money here. With regard to financial management, it is a basic
tenet of accountability. The Department of Defense is provided
over $300 billion a year. That's taxpayer money. There needs to
be accountability over the use of that money, and there is a
fundamental problem at DOD with regard to that.''
He also went on to state something that I think needs to be
reviewed, and that is with respect to the accounting system,
itself, and how it is very difficult to be able to keep track
of the equipment, and also that it is very difficult to be able
to keep track of $1 out of every $3.
He showed us an accounting schematic which was fairly
incomprehensible, and he talked about how the Department of
Defense could not match $22 billion worth of expenditures to
the items they purchased.
He talked about how the Navy had no financial information
on $7.8 billion of inventory aboard ships and that it wrote up
as lost $3 billion worth of in-transit inventory.
He also mentioned that in May 2000 a GAO report found that
the DOD had nearly $37 billion of equipment it didn't need. In
March 2000, the DOD Inspectors General reported that, of $6.9
trillion in Pentagon accounting entries, $2.3 trillion were not
supported by enough evidence to determine their validity.
Now, sir, respectfully, that doesn't square. Those reports
do not square with statements that suggest that the Department
of Defense just needs more money to handle all the programs
that it has.
Mr. Lieberman. I've never made such a statement. I hope
nothing I have said has been interpreted as saying all the
Department needs is more money.
The Comptroller General's particulars there draw heavily
from our reports. And I do agree, in general, with the GAO
testimony.
In the list of the top 10 problems that I just ran down, I
included, for example, not only financial management, but
supply inventory management. When I talk about poor supply
chain management, I'm talking about not knowing what we have
where and not getting it to whoever needs it in an efficient
manner.
There has been a chronic problem for years in keeping track
of the many millions of different types of parts and supplies
that Defense uses. We're not talking about a small operation
that only has a few hundred different types of inventory items;
we're talking about many millions of just spare parts, many
million different kinds of items. It is a tough problem, and
Defense has a long way to go.
You are absolutely right. For instance, inventory accuracy
is a serious problem.
Mr. Kucinich. Mr. Chairman, is that----
Mr. Shays. That's it. We have two----
Mr. Kucinich. OK. I just had one final comment, if I may.
According to information staff has provided, it says that
the Department of Defense has ignored the Inspectors General
based on recommendations and completed recommendations, that
your recommendations are ignored about 82 percent of the time.
Mr. Lieberman. That's absolutely wrong.
Mr. Kucinich. What percent of the time are they ignored?
Mr. Lieberman. It's 4 percent.
Mr. Kucinich. OK. So then if they are ignoring it only 4
percent of the time, how do you end up with not being able to
keep track of $1 out of every $3? That's my question.
Thank you, Mr. Chairman.
Mr. Shays. The answer to the question is that some are
bigger than others. Some are much bigger.
Mr. Lieberman. That's certainly part of it. And also the
Department agrees to do things that everyone agrees will take a
while to get done. There are not instant fixes to a lot of
these problems.
Mr. Shays. So, in other words, some are totally ignored and
others are attempted to be dealt with, but----
Mr. Lieberman. Let me clarify exactly----
Mr. Shays. No. I don't want----
Mr. Lieberman. The 96 percent means they agree with our
recommendation.
Mr. Shays. OK.
Mr. Lieberman. And agree to try to implement it. Some of
those are implemented immediately because they are easy. Others
take years because the recommendation may be, for example----
Mr. Shays. Let me----
Mr. Lieberman [continuing]. We need a whole new system.
Mr. Kucinich. Mr. Chairman, I just have, for the record,
some analyses of financial management recommendations and
acquisition and security concerned recommendations that were
made, and which ones were followed and which ones weren't.
Thank you, Mr. Chairman.
Mr. Shays. Yes. And the bottom line is their financial
management is worse than bad, and you would acknowledge that.
And it is pretty deplorable that we, as a Congress, haven't
demanded that they make better progress, and I know that you
have been eager to see that happen.
I'm just going to quickly mention that you did a report on
the blood supply and pointed out that next year over 50 percent
of the blood supply will be over 20 years old and we don't
allow blood over 10 years old in the commercial marketplace, so
we obviously have a double standard there.
The other concern I would just say to you is that, given
this committee's staff when we were a different committee did a
great deal on the safety of the blood supply. If we're going
back 20 years some of that could be infected blood supply. I'd
just raise a point of concern to you.
Just one last question to you, Mr. Friedman. Why is DOE
doing chemical biological defense research?
Mr. Friedman. Well, it primarily is part of the non-
proliferation efforts that are within the Department's mission.
It is also doing a great deal of work under work for other
programs for the Department of Defense and other Federal
agencies.
Mr. Shays. So are you saying it's a Federal mandate, or
they just began----
Mr. Friedman. No, I wouldn't say it is a Federal mandate.
What I'm saying is that the Department's laboratories--the
Department of Energy, Mr. Chairman, does about $6 billion----
Mr. Shays. Let me be more blunt.
Mr. Friedman. Yes?
Mr. Shays. Are they being asked to do it in part so we keep
these labs operating? I mean, is this somewhat of a make-work
effort?
Mr. Friedman. The total amount of money being expended in
this area in biological select agents, as I understand it, is
about $7 million a year or $8 million a year. It is an
insignificant amount of the $1 billion a year budgets of the
large defense labs, so I don't think that's the case.
Mr. Shays. OK.
Well, Mr. Friedman, it is nice to have you here. You are
kind of a new Inspector General to this committee and I
appreciate your being here.
Mr. Friedman. Thank you very much.
Mr. Shays. I know you have other committees to report, as
well.
Mr. Lieberman, always good to have you back. We appreciate
the work that both you and your staff do. Thank you.
Mr. Lieberman. Thank you.
Mr. Shays. Our next panel is comprised of three Inspectors
General: Richard Griffin, Department of Veterans Affairs; Ms.
Roberta Gross, National Aeronautics and Space Administration
[NASA]; and Mr. Richard Skinner, Federal Emergency Management
Agency [FEMA].
If you'd come and remain standing we'll swear you in.
If you'd raise your right hands.
[Witnesses sworn.]
Mr. Shays. Note for the record all three of our witnesses
have responded in the affirmative.
It is very nice to have you here. I think it worked well to
have summaries of your testimony. At least the first two
panelists did it quite well.
So I guess, Mr. Griffin, we'll start with you.
STATEMENTS OF RICHARD J. GRIFFIN, INSPECTOR GENERAL, DEPARTMENT
OF VETERANS AFFAIRS; ROBERTA L. GROSS, INSPECTOR GENERAL,
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; AND RICHARD L.
SKINNER, DEPUTY INSPECTOR GENERAL, FEDERAL EMERGENCY MANAGEMENT
AGENCY
Mr. Griffin. Mr. Chairman and members of the subcommittee--
--
Mr. Shays. Let me just interrupt to say I have a meeting
with the Speaker, so I am going to go out for a little bit and
come back. Mr. Kucinich I will have working the hearing, and
then I'm going to get back in time, I think, to ask some
questions, as well. But please don't be offended if I leave for
a little bit.
Thank you.
Mr. Griffin. Mr. Chairman and members of the subcommittee,
I am pleased to be here today to discuss major performance and
management challenges facing the Department of Veterans Affairs
and to highlight the contributions of the Office of Inspector
General in combating crime, waste, fraud, and abuse in the
Department.
Last November I responded to Chairman Burton's request for
the Office of Inspector General views on the top 10 most
serious management problems in the Department. Today I will
discuss and briefly highlight recent activities of my office,
focusing on four of these issues: quality health care, claims
processing, inappropriate benefit payments, and VA consolidated
financial statements.
Monitoring the quality of health care continues to be a top
priority for my organization. To monitor the quality of VA's
evolving health care delivery system, we developed combined
assessment program reviews in 1999. A CAP review combines the
skills and abilities of our major components to provide
collaborative assessments of medical facilities. CAP review
findings provide facility managers recommendations to improve
the quality and delivery of care.
In fiscal year 2000, we completed 18 medical center
reviews. Some of the CAP findings include inadequate staffing
in nursing and pharmacy, lack of secure medication storage,
lengthy waiting times, and patient safety issues. There is a
direct correlation between quality of health care and patient
safety. All of these issues contribute to increased patient
risk.
Unfortunately, we have investigated incidents where health
care providers have violated their sacred trust to care for our
veterans. One specific case was the successful investigation
and prosecution of Dr. Michael Swango for the murder of three
veterans. Swango was hired by the State University of New York
and worked as a resident in the Northport VAMC. Following a
long and complex investigation, Swango was charged with three
murders. He subsequently pled guilty and was sentenced to three
life terms without the possibility of parole.
While successful criminal prosecutions are critically
important, they reflect only one aspect of our mission. The
strategic focus of our proactive health care reviews is to
identify both best practices and vulnerabilities and to make
recommendations for change to prevent incidents from occurring.
A second issue is claims processing. VBA continues to
struggle with timeliness, accuracy, and quality of claims
processing, particularly in the compensation and pension
program. VBA faces high workload backlogs, unacceptable claims
form processing times, and a high error rate.
Now, if we recognize that VBA's backlog was impacted by
legislation mandating the duty to assist, the presumptive
rating for diabetes, and an increase in the number of
disabilities claimed by each veteran, which increases the time
to adjudicate claims.
With the pressure to improve timeliness and reduce the
backlog of claims, the potential is great for overlooking or
ignoring appropriate internal controls; however, the purpose of
these controls is to reduce the incidents of waste, fraud, and
abuse.
We've worked closely with VBA to identify internal control
vulnerabilities. Based on our findings, we have launched an
initiative to do reviews of all the VBA regional offices on a
cyclical basis.
A third issue involves the need for VBA to take a more
active and aggressive role to identify inappropriate benefits.
OIG audits and investigations have identified situations
indicating that the appropriateness of compensation and pension
payments is not always adequately addressed. For example, we
have identified $61 million in over-payments to VA
beneficiaries who were receiving dual compensation for
compensation and training and drill pay as reservists; $170
million to incarcerated veterans whose benefits have not been
cut; and to date $3.9 million in benefits that have been paid
to deceased beneficiaries.
On a final note, we recently issued our report on the VA
consolidated financial statements for fiscal year 2000. For the
second consecutive year, the VA has received an unqualified
opinion on the consolidated statement. This year's report,
however, continues to identify information technology security
controls as a material weakness and adds integrated financial
management system and control issues as a new material
weakness.
Mr. Chairman, this concludes my statement. I will be
pleased to respond to any questions you or any other Member may
have.
Mr. Shays. Thank you.
[The prepared statement of Mr. Griffin follows:]
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Mr. Shays. Ms. Gross.
Ms. Gross. Good morning. Thank you for the opportunity to
be able to comment on the management challenges facing NASA.
Our audits, investigations, and inspections cover the full
range of NASA activities, and that covers exciting, unique
programs like the international space station, to the more
mundane but important areas of fiscal control and procurement,
and, likewise, the key challenges to NASA's well-being range
from very unique challenges to get low-cost launch vehicles so
that we can explore space and make it common, like flying
across the country, to more common, everyday tasks that need to
be attended to--again, fiscal management and procurement.
Today I am going to discuss some of these key management
challenges. The first one I am going to start with is safety.
The NASA administrator correctly established safety as the
agency's No. 1 value. NASA programs work in a very hostile
environment of space--high-speed technology, cutting-edge
environments. And in those high-risk environments, safety does
need to be a No. 1 concern.
Many of you probably remember what happened after the
``Challenger'' incident. NASA basically shut down operations
for 2 years while it re-examined itself. Safety has to be a
priority.
Since 90 percent of NASA's dollars, or approximately 90
percent of NASA's dollars, go to the contracting community, we
put a lot of attention, both from audits, reviews, and
investigations, on the contractor community. One of the things
we found was that NASA was being very proactive in starting
affirmative programs for its future contracts, but did not go
back and examine earlier contracts, which are very large,
consolidated contracts going from multi years and multi million
dollars to make sure those contracts had appropriate safety
clauses and oversight by our safety personnel.
For example, when we looked at a number of contracts at
Kennedy Space Station and Marshall, we found something like 60
percent of those contracts did not have required safety
provisions in them.
Now, initially NASA had not concurred with going back and
looking at the contracts. They said, ``We'll look to future
contracts.'' And the NASA administrator, who set safety as the
No. 1 priority, correctly said, ``We're going to look at those
contracts and prioritize those.''
In terms of our Office of Criminal Investigations, we
prioritize safety, also. We look at contracts and we look at
quality assurance issues that have to do with product
substitution and false certifications, and we work with other
agencies on those, and U.S. attorneys and the Department of
Justice also prioritized those safety implications. Where NASA
is at risk because of safety, we vigorously pursue those, as
well as the Department of Justice.
The second priority challenge for NASA is information
technology security. It has been a priority for my office. I
was the first Inspector General to have the computer crimes
unit. We also have a very aggressive audit program, as well as
inspection group.
It is also a congressional priority--that is, we just
recently have enacted the Government Information Security
Reform Act, whereby there's a lot of prioritization put on OMB,
heads of agencies, and CIOs, as well as Inspectors General to
prioritize IT security.
One place where we see it doesn't seem to be such a
priority at all times is at NASA, and so we continuously have
placed that as a high risk material weakness.
There's often a lot of no-cost, low-cost management
techniques that NASA could use and does not use to help protect
its critical infrastructure, as well as its information
techniques.
We have found major problems in fragmented
responsibilities. There's 10 NASA centers. There's 10 NASA
CIOs. They don't report to the agency CIO. So you have people
doing things without accountability.
We also have a lack of basic controls to protect mission-
critical information systems, and we have many, many audits on
that.
We have problems in hiring and training employees with
specialized IT skills, including missing background checks when
we do hire people to make sure that, in fact, No. 1, they are
Americans, and, No. 2, if they are not, that they have had a
background check.
We find weaknesses in very basic physical security
controls--that is, just the environments. Are doors closed? Are
locks implemented? Are passwords locked? That's No. 2.
No. 3 challenge is our international agreements. Knowledge
and space have no boundaries, and they both continually expand,
and that's what is exciting about working at NASA. And
international agreements--NASA has something like 3,500
international agreements--bring a lot of capacity and a lot of
opportunities for NASA, but it also brings some risks in all of
how it does business.
For example, if you have critical paths, like with the
international space station, and you are relying on
international partners, that can create some problems. We did
have cost overruns and we had delays because of issues
associated with Russia and its internal politics and its
ability to have funding for some of the commitments that they
made.
We also have found in both our audits and reviews that we
have a lot of foreign visitors, and that is important for NASA.
NASA is a civilian space agency. It has both a national and
international mission. We work with universities. We work with
international companies.
On the other hand, we also have a lot of interesting
technology that needs to be protected, and the NASA
administrator has responsibilities under the Space Act to make
sure of protecting national security interests.
Some of our audits have found that we can do better in
foreign visitors and the security of that and making consistent
policies. We can do better on our export control program.
To NASA's credit, they have stood up to the plate when
we've made these recommendations and pointed these out.
One area of interest, I think, to the committee is we had
looked at funding of some space research. NASA had funded a lot
of Russian space research in order to give some employment to
some of these scientists that were no longer working under the
state. We don't want them working for other countries doing
things that could be hurtful to our own national security.
One of the projects that was identified was funding for
researchers associated with labs called Bioprepret. They used
to do the biochemical warfare research for Russia. While the
State Department is aware of this--we informed them of that,
and one of the things they recommended is that NASA take
vigilance on how we watch to see that that research is not
being used in a dual manner, and we found that, in fact, we
didn't put enough internal controls in there. NASA then has
concurred that they will be much more vigilant when they give
grants to foreign countries, particularly those that may not
have always been aligned with our interests.
Another big issue for NASA, of course, is launch vehicles.
Probably most people's memory of NASA is the space shuttle
going up in a launch, one of the most dramatic views, I think,
that we can see on television. It got reinforced, I think, by
John Glenn's historic flight. I think that made Ohio very
proud, I'm sure.
Indeed, we renamed the center after Glenn. It is now,
instead of Lewis Center, the Glenn Center.
But one of the problems for NASA is that the space shuttle
is very expensive because it is a human rated system. It is
also very old. I mean, previous comments have been about old
systems in the military. It is well over 25 years, and we are
projecting it to go for another 10 to 12 to 15 years. We need
to have cheaper, more accessible access to space, and that's a
major problem for NASA and for the commercial launch industry.
We've had difficulties in some of the technologies applied
for experimental launch vehicles, and that's a major problem
for NASA--how it does its procurement and its oversight on
launch vehicles.
Finally, in terms of program project management, one of the
things I think that is important and is a key project
management indicator is whether we have an independent cost
assessment capability. If you don't have somebody you can look
to as the managers, not always look to the IG or GAO or
Congress, you have got to have an independent estimation and
assessment capability to tell you whether or not you are being
realistic in your cost projection, in your milestones, whether
you are meeting your milestones, and whether or not you need to
reevaluate whether you need to de-spoke or shut down a project.
That's a major concern.
We've done a number of reviews, but we don't think that
NASA has created truly an independent cost assessment
capability, and that's a major concern, from our perspective.
I thank you for the opportunity and would welcome any
questions.
Mr. Shays. Thank you. Thank you, Ms. Gross.
[The prepared statement of Ms. Gross follows:]
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Mr. Shays. Mr. Skinner.
Mr. Skinner. Thank you. Good morning.
Mr. Shays. Good morning.
Mr. Skinner. I've provided this subcommittee with our
written statement for inclusion in the record. I will summarize
it briefly now.
Mr. Shays. Thank you.
Mr. Skinner. Just 8 years ago, Congress actually introduced
legislation to abolish FEMA, due, in a large part, to its poor
performance after Hurricane Hugo and Hurricane Andrew. Today,
FEMA is being called a model of Government success. I don't
think anyone could deny that FEMA has made a remarkable turn-
around. With all its success, however, FEMA is not free of
problems.
Earlier this month, FEMA's financial statement received a
clean opinion from our office. What our report doesn't show,
however, is that FEMA still does not have the capability or
procedures in place to track its financial status on a routine
basis. FEMA needs to work on keeping track of its
appropriations on a regular basis, not just once a year.
Furthermore, FEMA is not providing the oversight that is
needed to ensure that billions of dollars in grant funds that
it awards each year are being adequately safeguarded;
consequently, our audits continue to find millions of dollars
each year that are being misused or wasted.
In the information technology arena, FEMA will be very
hard-pressed to pursue its e-government agenda in the future
and provide adequate security over its cyber-based assets.
Currently, FEMA is very limited, has very limited resources,
both staffing and funding, to invest in new initiatives and new
improvements and new requirements.
Also, as with most Federal agencies, FEMA is having a
difficult time measuring and reporting on its performance, as
required by the Government Performance and Results Act.
Our ongoing audit in this area is revealing that FEMA
management may not be using the GPRA process as a tool to make
decisions, and FEMA staff may not be receiving the support and
direction they need from top management to implement the GPRA.
Now, regarding some program issues, the disaster response
and recovery program has been and continues to be the
cornerstone of FEMA's operations. Improvements in FEMA's public
image can be directly attributed to the success of disaster
response and recovery system. With all of its accolades,
however, FEMA's disaster assistance program is constantly being
challenged. The number of federally declared disasters has
reached a record high over the past 10 years, making it
critical that FEMA find ways to reduce costs, manage its
disaster work force, ensure integrity of its programs, and
improve the delivery of services.
Also, Presidential Decision Directive 39 designates FEMA as
the lead Federal agency for consequence management in domestic
terrorism events.
In recent reports and testimony, GAO has reported that
domestic consequence management exercises were not well
developed, and terrorism preparedness training programs are
sometimes duplicative and not well coordinated among the
various Federal agencies, including FEMA, with those agencies
with the terrorism preparedness responsibilities.
With regards to FEMA's preparedness overall
responsibilities, FEMA still does not include all the data that
is needed, in our opinion, to fairly evaluate the capabilities
of the States to respond to any particular type disaster,
manmade or natural.
Specifically, they do not--FEMA's assessments don't include
local governments and all the applicable State agencies that
would be involved in a Federal/State/local response. They do
not identify State disaster assistance programs, and they do
not assess State and local government response capabilities to
handle disasters without Federal intervention. In other words,
FEMA doesn't always know when it is time to go in.
In our opinion, these elements are important in order to
take a true picture of a State's capability in their ability to
respond to disasters.
In the mitigation arena, FEMA's success depends almost
entirely on the commitment of State and local communities to
embrace mitigation as doing--as a way of doing business, not
just waiting for a disaster and not just as an afterthought to
a disaster.
The recently enacted Mitigation Disaster Act of 2000 offers
the potential to make mitigation a sustained effort, but its
success still is dependent on non-Federal resources.
FEMA's largest mitigation programs, the hazard mitigation
program and the national flood insurance program--over the past
10 years FEMA has awarded over $2.6 billion into the hazard
mitigation grant program. A major component of that program is
buy-outs, which is aimed at removing homes located in
repetitive flood hazard areas. Last month, the OIG issued a
report that highlighted significant problems with the manner in
which FEMA is implementing that program.
Given the significant role of buy-out in FEMA's mitigation
program, it is critical that the program be effectively
executed and addresses national mitigation priorities.
Concerning flood insurance, only about 4.3 million of the 9
million structures in special flood hazard areas throughout the
country have flood coverage, and 40 percent of structures that
are in the flood program are still subsidized by taxpayer
dollars.
Furthermore, of the estimated 200 million in repetitive
losses each year--that is, those policyholders who file claims
again and again, year in, year out--about 96 percent of them
are subsidized structures.
Finally, it should be pointed out approximately 50 percent
of FEMA's 100,000 flood maps are 10 years old. Due to the
importance of current flood maps to emergency managers at all
levels of government, including FEMA's mitigation initiatives,
it is important that FEMA find ways and means to update its
maps in a more-timely fashion.
Mr. Chairman, this concludes my prepared statement. I've
tried to limit my remarks to those critical areas of greatest
concern to the OIG. You can be sure that our office will
continue to place particular emphasis on those issues.
Again, I appreciate your time and attention and welcome any
questions that you might have.
Mr. Kucinich [assuming Chair]. I thank you very much.
[The prepared statement of Mr. Skinner follows:]
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Mr. Kucinich. Mr. Shays has asked me to continue to move
the proceedings along here, so I want to introduce Mr. Clay,
who is also a member of our committee, and go into the
questions phase.
Mr. Griffin, what are the most significant open OIG
recommendations that have not yet been addressed within your
purview?
Mr. Griffin. Well, off the top of my head I would say that
our audit on incarcerated veterans, which I alluded to in my
testimony, which represents over-payments in the amount of
about $170 million. Unfortunately, we're the subject of a 1986
audit that was not properly implemented. We did the work again
in 1998 to come up with the current dollar value of payments
that continue to be made. To this date, there hasn't been
action taken on those.
We have another audit that had addressed the need for
quality standards in nursing homes that veterans are placed in,
which is 2 or 3 years old at this point and there has yet to be
a set of quality standards.
Mr. Kucinich. Do you want to comment further on the
combined assessment program?
Mr. Griffin. Well, the combine assessment program is
something that we initiated as a proactive project to get out
to these medical centers in VHA to try to do a quality control
check prior to an incident occurring.
As I alluded to, we had a case involving a murder up at the
Northport VAMC. It doesn't do any good to learn about these
things after the fact, so we wanted to get to these facilities,
identify problems, share with the medical center directors
those problems that have been identified at the other
facilities in the system, and try and get the proper fix in
place before an incident might occur at their facility.
Mr. Kucinich. OK. I would like to now move to Ms. Gross.
Thank you very much for being here.
What are the most significant open OIG recommendations that
have not been addressed at NASA?
Ms. Gross. What we find oftentimes is that what NASA does
is they will concur and agree with the recommendations. What is
the problem is the lag time between saying yes and actually
doing the implementation.
We have more of a problem of what we call
``dispositioning.'' We keep them open until we actually get
proof that they are actually implementing the recommendations.
There would be things, like in the area of communications
security. There have been a number of inspections that we have
done. Communications security has to do with both the uplink or
command control to destroy a vehicle if it is on a bad path or
something like that. We want to make sure that either the
commands are--if appropriate, should be encrypted, and also
that you have some mechanism to make sure that the commands
that it receives are authentic. That took about 3 years of
talking and talking with the agency, despite the fact that
safety was its No. 1 priority and that included assets.
I think that probably the biggest area of non-concurrence
has been on the pricing policy for the shuttle, and commercial
uses and DOD uses. NASA basically fundamentally disagrees with
our interpretation of the law. They think that you don't need
to have a specific pricing policy; that you can do it case by
case. In some sense they are correct in the sense that if you
read down the statute it says that you can put in incentives,
but that doesn't mean that you can't sort of display what the
basis of your incentives are.
This is an area where we really had a total nonconcurrence
on our audit, on their pricing policy. We think, particularly
if you are ever going to have a commercial space policy, the
private sector would want to know basically so they can plan
and help negotiate. That doesn't mean you can't put in
incentives, but you really do need a pricing policy if you want
to encourage a commercial vehicle.
Mr. Kucinich. Thank you.
Ms. Gross. Policy. Not vehicle, policy.
Mr. Kucinich. Do you have any comments on the faster,
better, cheaper philosophy that has formed a basis of some
missions?
Ms. Gross. Yes. We recently gave the agency an audit. NASA,
as a result of two Mars mission failures, NASA went to re-
evaluate its faster, better, cheaper philosophy and is looking
to see if that, in fact, contributed in some ways to these
mission failures.
We did an audit to try to examine what is faster, better,
cheaper and whether or not the agency has an understanding of
it, and, if not, does that contribute to mission problems.
It is a philosophy, but nobody was able to exactly define
what it means. I think that was also echoed in one of the
independent reports that NASA commissioned on the Mars
failures.
We also made recommendations that if that's going to be
your philosophy, basically it means don't have long-term
missions, do shorter-term missions with more focus so that you
don't have a catastrophic failure that eats up 10 years of
research, and also to have an infusion of technology.
All of that is very, very good, but you need to have a
definition so people know what does that mean in terms of
project management, what does that mean in terms of human
capital, what does that mean in terms of communication.
So we made recommendations, as well as people in the
private sector did. Particularly I'd want to point out the
human capital issue.
One of the problems that was highlighted was at the jet
propulsion lab. They didn't--we had so many missions we may not
have mature project managers on them. You know, when you only
had one 10-year, multi-billion-dollar project, you had a
project manager that was on it from the beginning. That's a
human capital issue that NASA needs to address, particularly in
the light of the current freezes that are going on.
We have a Government-wide freeze on 14s and 15s and SESes
at a time when NASA has been downsizing, and so it has to be an
evaluation. Are you going to make it to be a disrespect to the
Government that nobody gets promotions, that nobody values
their 14s and 15s and SESes, when, in fact, we have a problem
with program managers. That was a safety issue.
Mr. Kucinich. Are you saying, then, that the downsizing
could be counterproductive to NASA's mission?
Ms. Gross. Downsizing can be if it is not done in the right
priorities, if it is not also done with watching your projects,
and if it is also done when you have--unless you are also
allowed to have promotions and recruitments at a level
commensurate with the complexity of your projects.
If you have a hold, basically, on 14s and 15s and SESes--
and that's a Government-wide hold until there is more
reevaluation. Meanwhile, projects are going on, money is being
spent. These are projects that have occurred before and are
continuing to go on. We need project managers.
Mr. Kucinich. Thank you. Thank you very much.
I'd like to turn the question to Mr. Skinner. Could you
indicate what are the most significant open OIG recommendations
that FEMA has not addressed?
Mr. Skinner. Right now I would have to say it is their
attitude toward their financial management systems. I believe
FEMA is in a stage of denial. For the last 9 years, we have
continually and repeatedly reported that the financial
management system is not producing reliable data, timely data,
and data that the project managers can use to operate and
project their expenditures and run their programs. The people
in the Office of Financial Management within FEMA has made
improvements over the years, but they've reached a plateau, and
I think they are intent to operate without making any
additional improvements, and that is going to present a problem
for us down the road.
Mr. Kucinich. Thank you.
As a followup to that--and if you said this, I apologize if
I didn't hear you--what steps should FEMA take to improve
financial management?
Mr. Skinner. First they have to recognize they have a
problem. That's the difficult problem we are facing.
Mr. Kucinich. This is a 10-step program. [Laughter.]
Mr. Skinner. And so we are going to start using different
techniques and approaches to demonstrate and recruit the
project managers and to demonstrate to them that the systems
that they do have in place are going to get--are fraught with
problems. They can produce a financial statement once a year,
but beyond that it is not much real value.
Mr. Kucinich. OK. Thank you. The questions that I have just
asked were at the request of Mr. Shays, who is in a meeting
with the Speaker.
Mr. Weldon is here to Chair the meeting, and I'm grateful
for that.
Mr. Weldon [assuming Chair]. And I believe I am going to
yield to you so you can ask your questions.
Mr. Kucinich. Right. And then we'll get to Mr. Clay.
Thank you very much. We all work together here.
Of course, one of the things that Mr. Weldon and I worked
closely together on is issues relating to NASA. We are both co-
chairs of the Aerospace Caucus. And I just had a few questions
that relate to NASA.
In your prepared remarks, Ms. Gross, you say, ``The
pressure is rising for Government agencies to outsource
activities currently performed by civil servants.'' What kind
of activities are you speaking about where the pressure is
being made to outsource those activities?
Ms. Gross. Well, one large project that NASA was engaged
in--and I think it is probably across the Government--is in
your information systems, your desktops, your laptops, the
whole management of those systems. People do that to save money
and consolidate contracts.
The issue that we have on that is who is controlling your
data. Who are the employees that they are hiring? Have they
done their security checks?
Mr. Kucinich. Security issues.
Ms. Gross. Yes.
Mr. Kucinich. Yes.
Ms. Gross. Absolutely. When you have a criminal intrusion
and we go to--it is no longer at NASA. It is at a different
site, because that's where they are managing the operation. All
of the sudden, if it is on your site you're not trespassing,
but you may have to--it is harder to get onto a site that is
not your own.
Mr. Kucinich. Have there been criminal intrusions in trying
to interfere with launches?
Ms. Gross. We don't have any direct evidence of that. You
can have, by accident, by--we've had actually a youth who was
doing an intrusion. I believe it was in Marshall. He was doing
a denial of service of a computer that secondarily had a
support to a computer that was communicating with a computer
that was talking to astronauts during the MIR docking. Now,
what it did because it was a denial of service, it just
interfered with it. The communication eventually went through.
We also had backup.
This is just to illustrate that you can have unintended
consequences because of the interdependencies of computers.
Mr. Kucinich. In your remarks you talk about concern about
the use of space shuttles to launch payrolls that do not
require the shuttle's unique capabilities.
Ms. Gross. Yes.
Mr. Kucinich. What do you mean?
Ms. Gross. By statute, by congressional legislation, NASA
is supposed to be using expendable launch vehicles to encourage
the commercial launch industry, unless it needs to use the
unique capabilities of the shuttle. The shuttle is a very
expensive way to launch payloads because you have manned space
and you have to have all the safety precautions. So unless you
need to have a manned space or you need to make sure, because
of the security or the timing, by law you are not supposed to
be using the shuttle. You're supposed to use the commercial.
And there are times when NASA said something might be a
secondary--a very undefined term, but it may be a secondary
payload, and that's fine, it can just go along. But if, in
fact, they are not defining the term, they may not be carrying
out congressional legislation to use commercial launches.
Mr. Kucinich. Thank you. And then if you could provide this
committee, with the permission of the chair, some definition of
the Government's involvement of assignment of technology rights
to industry partners with respect to, you know, what the
interests of what the Government might be.
Ms. Gross. Yes.
Mr. Kucinich. I know in your report you have some statement
there.
Ms. Gross. Yes.
Mr. Kucinich. It might be helpful to the committee----
Ms. Gross. OK.
Mr. Kucinich [continuing]. To be able to get some
definition of that, which programs you were talking about.
I have one final question, and that is for Mr. Skinner.
Is the Government involved in any kind of--are you
beginning to interact with any Government policy with respect
to global climate change?
Mr. Skinner. No, sir, I'm not aware that we are involved in
that. Certainly the OIG is not aware of it or not involved.
Mr. Kucinich. In other words, any possible effects of
global climate change, you're not really involved?
Mr. Skinner. Not to my knowledge, sir.
Mr. Kucinich. OK. Thank you.
I yield back to Dr. Weldon, and I guess Mr. Clay at some
point.
Mr. Weldon. Yes. I just had a couple of questions.
Mr. Griffin, the Department of Veterans Affairs' budget for
health expenditures was increased, I think, $1.6 billion in
fiscal year 2000 and $1.4 billion, or in that range. It's about
$3 billion over 2 years, which represents a sizable percentage
increase for that agency.
I realize they had been flat for many years and there were
a lot of needs. From your position as Inspector General, have
you seen that their ability to properly utilize all those
additional funds is proceeding as the taxpayers would want to
see? Has that placed a lot of stress on the Department of
Veterans Affairs in terms of properly managing that kind of a
huge influx of new money?
Mr. Griffin. I would say that in recent years, as you know,
they have switched their focus from inpatient care to
outpatient care, and in that regard they have established some
600 outpatient clinics that supplement the 172 medical centers
that previously existed around the country.
I think those clinics have been very well utilized by
veterans in the outlying areas who previously would have had to
travel great distances to go to a VA medical center, but I'm
not confident that the systems are in place to properly
allocate money to the areas that might necessary have the
greatest demand.
I say that based on an audit that we did. It has been
probably 18 months since we issued this audit report, but the
Veterans Health Administration created a decision support
system which was supposed to capture incidents of patient care
and it was supposed to be the basis for their knowing where the
demand is, what type of health care problems are we dealing
with throughout the system, and then allow them to allocate
their money accordingly.
What our audit showed was half of the facilities roughly
had adopted the DSS methodology, the other half didn't embrace
it, weren't made to embrace it by the administration, and, as a
result, you've got a system that was not properly implemented,
and it made the results--the partial results that were obtained
to be without value.
So I think the VHA could show impressive increases in the
number of veterans served, but I'm not sure that there is a
well-conceived plan for every dollar that they have been given
in those increments that you've----
Mr. Weldon. Was your budget given an incremental increase
to allow you to properly monitor the influx of those funds as
part of that whole package, your staffing?
Mr. Griffin. No. I can say unequivocally that's not the
case. In 1989----
Mr. Weldon. Well, let me just followup with that to ask
you, do you feel like the Office of Inspector General is
adequately provided for the resources to monitor those new----
Mr. Griffin. No.
Mr. Weldon [continuing]. Enterprises that the Veterans
Administration is engaged in?
Mr. Griffin. I don't feel that we are adequately budgeted.
What I was going to mention is that in 1989, when the
Department achieved Cabinet-level status, Congress passed a
bill which created a statutory floor for the OIG. That floor
was 417 FTE. We have not been at the statutory floor in 10
years.
Mr. Weldon. Where are you now?
Mr. Griffin. At 365. In 1989, when that law was passed,
VA's budget was slightly under $30 billion, and at that time
the OIG organization had about 375 FTE. Today the VA's budget
is slightly over $50 billion and we have 10 less FTE. There are
600 additional health care facilities out there that need
oversight. Frankly, it is obvious that there has not been a
proportionate growth compared to what has occurred in the
Department.
I think you pay for that in the end. Final analysis.
Mr. Weldon. Thank you very much. Your testimony has been
very helpful to me.
My time has expired. Maybe we can get into this further,
but I'd like to yield to the gentleman from Missouri, Mr. Clay,
for questions.
Mr. Clay. Doctor, if I may, I'll forego an opening
statement and submit it for the record, if that's OK.
Mr. Weldon. Without objection.
Mr. Clay. I'd like to first ask Mr. Griffin about
procedures that you mentioned in your testimony.
You mentioned that procedures to terminate benefits when
veterans die is not working correctly. Did I understand you
correctly that one problem is that VA thinks veterans have died
when they have not died? Is that correct?
Mr. Griffin. That is part of the problem. What is supposed
to happen is there is supposed to be a data match performed by
VBA with the Social Security Administration. Social Security
Administration is the keeper of the death records, if you will,
for the Federal Government. They have an even greater number of
payees that they have to keep track of.
The problem is that there have been some problems with
accuracy in the Social Security data base. Social Security has
another data base, if I may, that is supposed to track
incarcerated payees, which they use for purposes of suspending
supplemental income payments. The Department needs to match
against that data base also because we know that there are a
number of incarcerated veterans who also are to have their
benefits reduced when they are incarcerated, and there hasn't
been the type of precision in both of those matches that would
serve the taxpayers' interests.
Mr. Clay. OK. So Social Security Administration incorrectly
reports a death to you, or----
Mr. Griffin. Deaths get reported to them by people all
around the country. There's no Federal agency that goes out
and, you know, personally picks up a death certificate every
time somebody in this country dies, so you are dependent upon
that information being sent to Social Security.
What we have experienced is that the matching agreements
have existed, but they haven't always been done, so we started
doing some of that work ourselves with our investigators,
working with individual regional offices in VBA, trying to get
death certificates locally.
It is a very labor-intensive proposition, but it is just
that activity during the last 18 months that has identified
$9.5 million in over-payments just in the cities we have been
able to work in so far.
Mr. Clay. I guess your computers could talk to Social
Security and they could probably talk to the different States
that compile the death certificates, correct?
Mr. Griffin. Well, I think, for purposes of efficiency,
rather than have 15 different Federal departments getting MOUs
with 50 different States, it was established that the
repository for that information would be Social Security
because they have the largest pool of payees.
Mr. Clay. I see. All right. Thank you.
Ms. Gross, you mentioned that the Boeing Corp. had severely
under-estimated its cost estimates for the international space
station. I think you said that their estimate has grown by $708
million over the course of 2 years. We seem to have a similar
problem at DOD with weapons systems acquisition. Do you feel
that NASA leadership is playing an insufficient oversight role
in this respect?
Ms. Gross. I think so. I think that one of the problems
that we pointed out in the audit that we had issued last year--
and actually the audit was at the request of Dan Golden, the
administrator of NASA--they found that the GNA rates have gone
up so high, he wanted to know why was that. And, in looking at
just that, he looked at----
Mr. Weldon. Excuse me. The what rates?
Ms. Gross. It's the overhead rates, basically. And it was
as a result of the consolidation of McDonnell-Douglas, Boeing,
and we found that NASA absorbed a large percentage of that
consolidation as opposed to the private sector and DOD, and
partially that was because NASA wasn't aggressive about
watching that and partially because DOD had a very favorable
statute that said they get a two-to-one advantage of the
consolidation.
But what we also found was, during that period of time,
Boeing's prices were going up and schedule was going down, and
the program people were aware of that but didn't communicate
with the contracting officials and, nevertheless, Boeing got a
fee award and they got to have something like--I believe it was
$16 million. And then NASA said, ``Oh, wait a minute. They are
over budget. We take back that award.''
How they ever got that award when the program officials
were aware that they were over budget and beyond schedule shows
some inefficiencies in the program oversight.
We also think another deficiency in the program oversight
that probably is going to come to fore in the recent issue on
the overrun--which nobody quite has a handle on. I think Dr.
Weldon is probably going to be grappling with this in another
hearing in another setting--is what is the overrun. It goes
anywhere from $4 billion to multi hundreds of millions, and
nobody has a sense of what is this overrun that is about to be
announced and looked at.
Mr. Weldon. If the gentleman would just yield for a second
on that issue.
Mr. Clay. Sure.
Mr. Weldon. Not meaning to be contentious with you, where
were you in all this picture?
Ms. Gross. I think we----
Mr. Weldon. Were you----
Ms. Gross. Yes.
Mr. Weldon [continuing]. Throwing up red flags? Was that a
problem? Do you have the resources to monitor this program
properly? It has been a shock----
Ms. Gross. No.
Mr. Weldon [continuing]. To all of us in the Congress to
hear this kind of a discussion.
Ms. Gross. I think I would----
Mr. Weldon. Were you aware that this was on the horizon?
Ms. Gross. Not to the extent that it was. But let me say
where I was. I was in front of your committee last year is
where I was, and gave testimony that, on the very audit that we
just talked about, and specifically stated to the committee
that there was an overrun, that NASA procurement officials
nevertheless gave a fee award, that we didn't believe that NASA
was applying techniques like earned value management, which
would measure how much you are spending with how much you are
accomplishing, and we made a recommendation, and that, again--I
testified to that--that they would have an independent
assessment team evaluate the next year.
We did the evaluation in 1999 to 2000. NASA needed to do
its own evaluation from an independent source.
They had the Shabro group look at it. If you recall,
because I believe Shabro also testified before your committee,
probably at the same time I was, Shabro had said, ``It's going
to be much, much more, much, much more than NASA was already
projecting.'' They were doing it as an independent cost
assessment.
We recommend NASA has to have an independent cost
assessment group be able to tell its managers--that is, Dan
Golden, Rothenburg, the Program Management Councils--when these
kind of overruns are happening.
What happened is they concurred about having an independent
assessment and it didn't happen.
So we made very, very strong recommendations because we saw
a problem, and what we did is say, you know, ``We are currently
following up on it, but no, I don't have the staff to followup
on it every year.'' But NASA has got to manage its programs.
That's what its responsibility is to do in order to have
internal controls.
It shouldn't be always responding reactively to the
Inspector General's office or to Congress. It has to have its
own capacity. And that was a recommendation we met--we also
said.
But, in terms of the flags, the flags were right up there
in terms of Shabro's estimate was much, much closer than
NASA's, and that was testified before your committee. I also
testified before your committee that there were problems. I was
there.
Mr. Weldon. Thank you for that accommodation. Sorry to step
on your time.
Mr. Clay. I yield back the balance.
Ms. Gross. I appreciate the question.
Mr. Weldon. I'm sure we are going to be hearing more about
this issue in the months ahead.
Ms. Gross. Yes.
Mr. Weldon. Before we adjourn this section of today's
hearings, I just had a few more questions for Mr. Skinner.
What steps has FEMA taken to prepare for its role as the
lead agency for consequence management in domestic terrorist
events? I think you were getting at a little of this earlier.
Mr. Skinner. Yes.
Mr. Weldon. If you could elaborate on that in a little more
detail for me, please.
Mr. Skinner. Fortunately, FEMA had a jump start because of
its role in preparedness and disaster response and recovery for
all types of disasters, and that would include terrorist-type
acts.
Just last year we--FEMA has hired or brought on board John
McCall to be our chief of terrorist activities. Under his
direction and still with a small staff and still growing they
have developed a strategic plan. They have defined what FEMA's
roles and responsibilities will be with regard to training,
exercising, grants, and assistance to States and locals.
They are now beginning--for a couple of years we stumbled
because it wasn't real clear where the programming was going to
go. Was it going to be under DOD? Was it going to be under
Justice? Was it going to be under FBI? We really didn't know
who we had to start coordinating with.
Now that has been defined and clear lines of responsibility
have been set up, there's still some policy issues whether it
should be in Justice, but that's another issue altogether.
FEMA now has someone that they can work with, sit down
with, and start coordinating with. GAO over time has--over the
last 2 or 3 years has been very critical of the lack of
coordination at the Federal level, people stumbling on one
another with regards to delivery of training programs and that
type of thing. That is now starting to clear up.
I think FEMA has made tremendous progress here. I don't
view it as one of the--it is a problem. It is a challenge. It
is something it's going to have to stay on top of. But, as far
as consequence management, FEMA is, I think, headed in the
right direction.
Mr. Weldon. Has the scope of what your agency is going to
be doing been properly defined yet?
Mr. Skinner. Yes. It is going to be consequence management.
It is going to be after the fact, and we're going to be
involved in working with State and local governments and others
and getting them prepared. The Federal Government--if an
incident occurs, the Federal Government is going to be the last
people there because of our mere location. We have to get the
locals and the States prepared to respond--the local fire
departments, the local police, get them the right equipment,
get them the right training, get them an understanding of what
they have to do until Federal assistance can arrive, and
generally that can be anywhere from 4 to 10 hours later.
Mr. Weldon. And is it going to be FEMA or another agency
that will be training local governments in dealing with
nuclear, chemical, biological----
Mr. Skinner. It is going to be a variety of people. FEMA
will be, I think, more involved in just the response
mechanisms. The Department of Justice will have a training
role; the police departments, as far as protecting a crime
scene, for example; I believe other Federal agencies may have
an involvement in training. HHS may have a--be involved in
training the locals and States to recognize what type of
chemical they may be dealing with, and that type of thing, so
it is going to be a variety of people that will be providing
the services.
Ours will be how do we develop a command and control
operation to respond to the consequence of what happened.
Mr. Weldon. Well, I want to thank each of our witnesses.
The hearing is in recess until 1, when we have the third panel
coming in.
[Whereupon, at 11:30 a.m., the subcommittee was recessed,
to reconvene at 1 p.m. the same day.]
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VULNERABILITIES TO WASTE, FRAUD AND ABUSE: INSPECTORS GENERAL VIEWS ON
NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS
----------
THURSDAY, MARCH 15, 2001
House of Representatives,
Subcommittee on National Security, Veterans Affairs
and International Relations,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 1 p.m., in
room 2247, Rayburn House Office Building, Hon. Christopher
Shays (chairman of the subcommittee) presiding.
Present: Representatives Shays, Putnam, Platts, Otter, and
Kucinich.
Staff present: Lawrence J. Halloran, staff director and
counsel; Kristine McElroy and Thomas Costa, professional staff
members; Alex Moore, fellow; Jason M. Chung, clerk; David
Rapallo, minority counsel; and Earley Green, minority assistant
clerk.
Mr. Shays. The Government Reform Subcommittee on National
Security, Veterans Affairs and International Relations will
come to order. This is a continuation of our hearing on
Vulnerabilities to Waste, Fraud, and Abuse: Inspectors General
Views on National Security, International Relations, and Trade
Programs.
We have one panel this afternoon. It is technically a new
hearing, but we have one panel this afternoon of four people. I
will introduce them. We had very eloquent statements by the
Members this morning, so we won't put you through that again.
Mr. Kucinich, do you have anything you would like to say?
Mr. Kucinich. No, thank you, Mr. Chairman.
Mr. Shays. We have Ambassador Anne M. Sigmund. She is the
Acting Inspector General of the Department of State. We have
Mr. Everett L. Mosley who is Inspector General for the U.S.
Agency for International Development. We have Mr. Charles D.
Smith, Inspector General with the Peace Corps. We have another
Acting Inspector General, Mr. Dev Jagadesan, for the U.S.
International Trade Commission.
We will have you give your statements and then we will have
some questions. I would now ask you to stand so we can swear
you in.
[Witnesses sworn.]
Mr. Shays. I will note for the record that all have
responded in the affirmative.
Ambassador, you may proceed.
STATEMENTS OF AMBASSADOR ANNE M. SIGMUND, ACTING INSPECTOR
GENERAL, DEPARTMENT OF STATE; EVERETT L. MOSLEY, INSPECTOR
GENERAL, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT; CHARLES D.
SMITH, INSPECTOR GENERAL, PEACE CORPS; AND DEV JAGADESAN,
ACTING INSPECTOR GENERAL, U.S. INTERNATIONAL TRADE COMMISSION
Ambassador Sigmund. Thank you, Mr. Chairman. Distinguished
members of this subcommittee, thank you for the opportunity to
discuss the major management issues confronting the Department
of State. However you chose to define these challenges, in
reality they can be distilled to three things: people,
security, and technology.
Their successful resolution requires sustained commitment
on the part of senior managers, strategic planning and adequate
resources. State is making real progress in meeting some of
these challenges.
I would just note that Secretary Powell, in his testimony
on the President's fiscal year 2002 budget for the Department
of State identified these issues as his priorities. In the past
the Department has been criticized for a reluctance to change.
Today, the Department is aggressively re-examining itself
with a view to finding new ways to do its job better. Let me
take a moment to highlight a few of the Department's management
vulnerabilities. Protecting our people, our buildings and
information are formidable challenges. A number of our
facilities are falling down around our ears. Many need security
upgrades to make them safer.
In the wake of the 1998 bombings in Nairobi and Dar es
Salaam, the Department has moved rapidly to take advantage of
the Emergency Supplemental Appropriation to improve security
for our staff and buildings.
At that time it was important to move swiftly to deal with
the immediate threat of global terrorism. In OIG's view, the
Department now has an opportunity to re-examine these programs
and to tailor them to the specific security requirements of
individual countries.
The Department is developing an ambitious construction plan
for replacing sub-standard embassies and renovating new ones.
Senior managers must monitor these projects carefully if the
mistakes of the past are to be avoided.
While OIG does not have the resources to evaluate each
project with the same level of scrutiny, we are in close
consultation with the Department to focus our efforts where
they can do the most good.
The Department's information systems are antiquated. This
makes them even more susceptible to penetration attempts.
States financial systems, for example, may be vulnerable to
cyber-base disruptions and have inadequate internal access
controls.
States needs the connectivity Internet provides, but must,
at the same time, protect sensitive information. OIG plans to
consult closely with the Department and the Congress on how
best to address this challenge over the next few years.
Financial management remains a significant problem for the
Department. For the last 4 years, OIG has given the
Department's yearly financial statements a clean opinion. This
year State even filed its financial by the required March 1
deadline.
Nevertheless, there are significant deficiencies to be
dealt with. For example, problems related to the administration
of Foreign Assistance Programs. The Department is keenly aware
of these problems and is working with us to deal with them. OIG
will be tracking the Department's progress in addressing these
questions.
Another important management challenge is Chief of Mission
authority. As the President's representative, the Ambassador is
responsible for the direction, coordination and oversight of
policy and programs for his country. Whether the issue is
intelligence operations, foreign assistance or law enforcement
activity, including narcotics, the buck stops at the
Ambassador's desk.
In a growing number of our embassies around the world,
State operations are dwarfed by the aggregate of new U.S.
Government players in the international arena. Yet, the
Ambassador has responsibility for coordinating and directing it
all.
OIG believes that we need to find more effective ways to
empower our Ambassadors so that they can do their jobs.
With respect to strategic planning, the Department has made
some progress. However, OIG believes that the Department needs
to develop overall priorities for its strategic goals and to
devise a better process for linking resources with these
priorities.
Recruitment, retention, and professional training for
Department Foreign Service and Civil Service employees are
critical issues. The Department's Foreign Service is
significantly short of the numbers needed to do the job.
While the Department is beginning to develop the work force
planning needed, it has a long way to go in this area. These
human resource questions directly affect the Department's
ability to carry out its goals.
Finally, we are also OIG for the Broadcasting Board of
Governors. As with the Department, BBG's efforts to plan
strategically fall short of what is required. In the post-
consolidation period, BBG and the Department are working hard
to develop and define their new relationship. But agreement has
still not been reached on several key issues.
OIG strongly believes that it is in the interest of those
organizations to find solutions to these problems and to
resolve the remaining operational differences as quickly as
possible.
Mr. Chairman and members of the subcommittee, thank you for
your time. I will be happy to answer your questions at the
appropriate time.
Mr. Shays. Thank you. Let me just ask you. How do you
become an ambassador as an Inspector General? Can all these
guys become Ambassadors, too, or do they have to work in State
to get that opportunity?
Ambassador Sigmund. I was an ambassador before I became
Acting Inspector General.
Mr. Shays. So, being State Department Inspector General
does not make you an ambassador?
Ambassador Sigmund. No, it doesn't carry with it. No, it
doesn't.
[The prepared statement of Ambassador Sigmund follows:]
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Mr. Shays. OK.
Mr. Mosley.
Mr. Mosley. Chairman Hays, members of the subcommittee and
subcommittee staff, good afternoon and thank you for the
opportunity to appear before the subcommittee today.
I have entered my full statement for the record, but I
would like to give you a very brief description of what OIG
considers the two most important challenges facing the U.S.
Agency for International Development and actions taken to
address these challenges.
The top management challenge that USAID currently faces is
improving its financial management systems so that they can
provide accurate and timely information with which to manage.
As you know, that is right a series of legislative
initiatives since the 1990's beginning with the CFO Act, the
Government Management Reform Act and the Federal Financial
Information Act, the Federal Government is supposed to produce
and audit financial statements each year.
Unfortunately, USAID cannot currently meet these
requirements. Reliable, timely information has not been
something that USAID is able to produce at this time. USAID
managers have therefore established programs where they can
implement their systems and devise systems that will produce
this type of information.
In the past 3 years, USAID has made considerable progress
toward resolving these problems. USAID has dedicated resources
toward additional improvements. As a result, financial
management procedures are no longer considered a serious
management challenge.
However, USAID still faces the following management
challenges: Implementing an integrated financial management
system; reconciling financial data; reporting accounts
receivables; and implementing new procedures for direct loans.
USAID's goal is to implement an entire suite of integrated
financial management and mixed financial systems in accordance
with requirements by the end of fiscal year 2005. To attain
this goal, USAID established the Office of Financial Systems
Integration to plan for and acquire USAID's financial systems.
This office, under the direction of the Chief Financial
Officer, is also preparing an overall plan to modernize USAID's
legacy systems as components of its integrated financial
system.
USAID is in the process of implementing an integrated
financial management system using commercial off-the-shelf
software that will comply with Federal financial management
systems requirements.
Because USAID's integrated system will include legacy
system information, USAID will need to convert and move data
from its existing systems to the new core financial management
system.
This new system is being implemented in several phases. The
first phase, development of an integrated financial management
core system, called PHOENIX, began December 15, 2000. The
second phase will concentrate on integrating various sub-
systems that will feed procurement and financial information
into the PHOENIX system.
USAID projections estimate that this phase will be
completed by fiscal year 2001. During the third phase, USAID
will develop a secure interface to allow the transfer of data
from overseas missions to Washington, DC. System security will
be enhanced through the use of risk assessments, technology
upgrades, expanded training and data encryption. This work is
scheduled for completion by the end of fiscal year 2002.
The final phase will enable the capability of an integrated
cost accounting function into the PHOENIX financial system.
This phase is estimated for completion by fiscal year 2003.
The OIG had identified several concerns with the PHOENIX
implementation before its scheduled implementation on October
1, 2000. These included: Compressed and limited software
testing of functional requirements and a decision not to begin
operation in a parallel mode; delays in migrating data from the
old to the new system; an incomplete and untested contingency
plan. Such plans would allow the system to continue operation
in the event of serious problems; deferral of some system
functionality; uneven attendance at user participation
training; and no process to document showstoppers and the final
decision to implement the system. Showstoppers are critical
problems that prevent proper functioning of the system.
The OID worked very closely with USAID management on these
concerns and recommended that USAID thoroughly test PHOENIX and
resolve any operational problems.
To address these concerns, USAID delayed the deployment,
took action to conduct more testing, increased user
participation and designed a project tool to assess the
operational readiness of PHOENIX.
The OIG continues to monitor USAID's progress in
implementing PHOENIX.
Human capital management is also a major challenge facing
USAID. Continued staff reductions and limited hiring can
greatly affect USAID's capability to operate effectively.
According to institutions fiscal year 1999 Accountability
Report, USAID staffing levels have declined by 38 percent over
the last 10 years.
In fiscal year 2000, USAID's total work force attrition was
225, compared with projected attrition of 180. Like all public
and private industry, USAID is faced with a maturing work
force. USAID's current figures show that the average age of its
work force is about 48. This is a particularly acute problem
for USAID because about 50 percent of the staff is Foreign
Service. The Foreign Service officers are eligible for
retirement at age 50 with 20 years of service versus
eligibility of Civil Service staff at age 55 with 30 years of
service.
USAID currently has about 100 authorized but unfilled
positions. Many of these unfilled positions are in critical
high-turnover areas such as information management, financial
management, and procurement.
According to its fiscal year 1999 Accountability Report,
USAID has developed new and innovative training courses
stressing management, procurement operations and technical
skills.
In addition, it has delivered the framework for a new
course in leadership and program operations. Through these
courses, USAID plans to target certain key personnel categories
in its effort to address its human capital capabilities.
Accordingly, USAID was conducting training and workshops to
train staff in strategic planning activities, information
implementing, performance monitoring and evaluation, and
acquisition planning.
We have begun an audit of USAID's staff training and
development activities to determine whether USAID provides its
employees with sufficient training to accomplish the agency's
mission. The scope of this audit includes USAID's training
activities conducted during fiscal years 1999 and 2000.
The audit is reviewing controls over the establishment of
core competencies, using those competencies to identify
training needs and evaluating the contribution of staff
training and development activities.
We will also evaluate the strategy that USAID has designed
to deal with the rapid loss of its most important asset, human
capital.
Thank you.
[The prepared statement of Mr. Mosley follows:]
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Mr. Shays. Thank you very much, Mr. Mosely.
Now, we will call on Mr. Charles Smith, Inspector General
with the Peace Corps. Welcome to the committee.
Mr. Smith. Thank you, Mr. Chairman and members of the
subcommittee. I appreciate the opportunity to appear before you
today. I am pleased to report that the Peace Corps is in good
health.
Today, there are 7,800 Peace Corps volunteers and trainees
in 76 countries. Most volunteers serve 2-year tours. Their
average age is 29; 11 percent are over 50; 14 percent are
minorities; 61 percent are female and 39 percent are male.
The newest program is the Crisis Corps. 380 former
volunteers have served as Crisis Corps volunteers for up to 6
months in 26 countries. Their projects principally focus on
natural disasters, refugees, and HIV-AIDS. Soon they will be in
Bosnia and Herzegovina working on small business and
agribusiness and inter-ethnic reconciliation for youth.
The Peace Corps conducts programs with former volunteers in
the United States as well. Peace Corps fellows in the Paul
Coverdell World Wise Schools Program help introduce children
around the Nation to many Peace Corps countries.
One exciting project brings this home. It is the Paul
Coverdell World Wise Schools Water in Africa Project. In this
interactive Web site designed for classroom use, volunteers in
Africa tell how water is important to them and their African
communities. It is located at www.peacecorps.gov/wws/water/
Africa.
We direct major attention to overseas posts because that is
where problems affecting volunteers and their work can be most
pronounced. While the agency's decentralization limits the
potential dollar cost of fraud, it also increases opportunities
for carelessness and failure to adhere to agency rules and
standards.
Our auditors focus on rule compliance, administrative
procedures and the role of managerial and oversight systems.
Our evaluators focus on volunteers themselves, their training,
jobs, living conditions, safety and security and staff support.
Our investigators examine post safety and security,
investigate allegations of fraud and abuse. Although
fortunately infrequent, they also work on cases of assault,
rape and murder of volunteers.
Three very important developments will modernize the Peace
Corps' communications and financial controls. They will greatly
improve our ability to examine the agency's activities.
First, 3 years ago the Peace Corps established in
headquarters the International Financial Office, taking over
many of the functions previously carried out by Embassy
Financial Officers.
Second, a year ago the Peace Corps began migrating to a
standard personal computer network system through a contract
with a private firm. It has completed domestic migration and
will begin overseas installation this year with completion in
fiscal year 2004. Our work in this area will include
implementing the requirements of the Government Information
Security Reform Act.
Third, by the end of this fiscal year, the Peace Corps will
implement a new financial management system. It will modernize
our core accounting system and will link the overseas posts
with the headquarters International Financial Office through
our personal computer network system.
We find that the Peace Corps submits better detailed
Government Performance and Results Act plans each year. Goal
one merges health and safety and security. We have urged that
they be presented as separate distinct goals in the GPRA.
Health on the one hand, and safety and security on the other.
We are especially interested in the Peace Corps' changing
gender profile. In the agency's first decade, approximately two
out of three volunteers were male. Today the reverse is true.
Almost two-thirds are female.
Volunteers are assigned to countries where girls are not
equally educated. Women are accorded few rights. American women
may be harassed and possibly endangered. This suggests that the
agency should explicitly recognize that female volunteers are
subjected to special and increased risks.
Through the Secure Embassy and Counter-Terrorism Act of
1999, Congress directed that all government employees in
overseas missions be co-located within the Embassy Compound.
The Peace Corps believes co-location will compromise separation
from the day-to-day conduct and concerns of foreign policy.
This, they contend, would seriously jeopardize the safety of
all volunteers because they would be identified as part of the
American foreign policy for intelligence functions.
The act includes a waiver provision and the Peace Corps is
discussing this matter with the State Department in order to
achieve the waivers necessary for proper Peace Corps function.
I bring this to your attention as a high priority of the Peace
Corps and to the safety and security measures that are part of
the OIG's concerns.
In closing, I would like to report that 2 weeks ago the
Peace Corps celebrated 40 years of service. President Bush
issued a proclamation urging all Americans to honor the Peace
Corps's 40th anniversary on March 1, 2001. He described Peace
Corps volunteers as exemplifying the great and longstanding
American tradition of voluntary service. He spoke of their
dramatic and far-reaching effect around the world.
His proclamation continued,
Since its inception, more than 161,000 have served as Peace
Corps volunteers in 134 countries. Peace Corps volunteers have
not only helped to fill immediate and direct human needs, but
also have helped promote sustainable long-term development in
agriculture, business, education, urban development, health
care and the environment.
In many countries of the world there exists an intense
hunger for peace, hope and opportunity, for genuine social and
economic development that is rooted in respect for human rights
and a belief in human potential.
Recognizing the dignity and worth of all peoples and
determined to help individuals help themselves, Peace Corps
volunteers serve as our nation's emissaries of hope and good
will. Accordingly, their generous efforts have helped to foster
mutual understanding and respect between the people of the
United States and the citizens of other countries.
Thank you, Mr. Chairman and members of the subcommittee for
the opportunity to testify today. We look forward to working
with you and the subcommittee. I will be pleased to answer any
questions you have.
Mr. Shays. Thank you, Mr. Smith.
[The prepared statement of Mr. Smith follows:]
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Mr. Shays. Mr. Jagadesan, welcome to the committee.
Mr. Jagadesan. Mr. Chairman and members of the
subcommittee, thank you for the opportunity to testify today to
discuss the major management and performance challenges facing
the International Trade Commission.
A brief introduction of the agency is needed for background
purposes. The ITC is an independent, quasi-judicial, Federal
agency with a wide range of trade-related mandates. The ITC has
six commissioners appointed by the President and confirmed by
the Senate.
In fiscal year 2001, the agency had a $48.1 million
appropriation. Approximately 73 percent of the ITC's budget is
for personnel, 12 percent for space rental, 8 percent for
contract services and 7 percent for other support.
The agency does not expend any of its funds for grants or
other non-operating expenses. The fiscal year 2001 staffing
plan consists of 390.5 permanent positions and 11 term
positions. The agency rents one building at 500 E Street, SW.
The major management challenges currently facing the ITC
are: Human capital management, performance management,
information resources management and improving business
processes.
In regard to human capital management, the agency's work
force demographics are in line with the rest of the Federal
Government. Thus, in the near future the ITC will need to
replace the knowledge and skills of a large percentage of its
work force.
For example, in calendar year 2006, 31 percent of the ITC's
current non-supervisory employees and 50 percent of the ITC's
current supervisory employees will be eligible to retire.
On the positive side of this trend, this presents a
significant opportunity for management reform in the next few
years. For example, this affords the ITC a choice not to
replace some retiring supervisors as a part of any management
reform efforts.
Possibilities for reform include moving more toward using
multi-disciplinary teams instead of vertical management
structures and more direct alignment of its organizational
structure with its strategic operations.
The second management challenge is to go beyond
performance-based management as a goal and toward performance
based management as an actual day-to-day management culture
that is interwoven into all aspects of its operations.
There appears to be more recognition on the part of ITC
management that if properly implemented performance management
can contribute to a more effective, more results-oriented
agency.
The ITC has moved from GPRA being a paperwork exercise to
fully embracing the concepts of performance-based management in
certain areas such as performance budget. Clearly the ITC is
improving the quality of its performance management as it
learns from its previous efforts.
Performance management presents a challenge to the ITC
because of the agency's quasi-judicial functions, which do not
readily fit into the GPRA mold.
Information resource management is a major challenge for
the ITC because of the rapid evolution of IT and the
significant cost of IT. IT solutions bring about new
opportunities as well as new security issues. In many areas,
the agency has been able to leverage IT opportunities.
The challenge is to adequately define its future IT
requirements and to effectively manage the acquisition of
hardware and software to meet those requirements. Recently the
ITC has begun to implement some management reform in this area.
In line with an OIG audit recommendation, the agency has
agreed to establish a Chief Information Officer position that
will elevate the priority and attention given to IT.
Most importantly, the CIO may be able to further improve
the management of the agency's limited IT resources as well as
improve business processes with the proper application of IT.
Improving its business process also presents a major
management challenge for the ITC. Current business processes
are still largely paper-centric in regards to receiving public
filings and dissemination of information inside and outside of
the agency.
For example, the ITC currently does not accept electronic
filings. However, the agency is working to add this service,
which is an important part of its GPEA plan.
Additionally, while ITC reports are published on its Web
site, the ITC continues to expend significant resources to
print and distribute hard copies of its reports. While some of
these paper-centric processes such as electronic filing require
additional investments to improve, a significant amount of
paperwork reduction could be achieved without any additional
investment.
The challenge here is to critically self-evaluate ITC's
business processes to improve them in light of advances in IT
instead of merely applying IT to existing business processes.
We note that the ITC, if benchmarked against other Federal
agencies would be an upper echelon agency in terms of
efficiency of its business processes, however, we maintain the
appropriate benchmark should be the private industry which
provides a higher standard to achieve in improving ITC's
business processes.
Once again, thank you for the opportunity to testify this
morning. Mr. Chairman, that concludes my oral statement.
Mr. Otter [assuming Chair]. Thank you, Mr. Jagadesan.
[The prepared statement of Mr. Jagadesan follows:]
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Mr. Otter. The importance of this panel coming before the
subcommittee this afternoon, I think, is demonstrated a great
deal by the testimony that they have just given.
Being a participant in that world theater, I have been to
all 42 countries as a businessman, but also as a politician
because as Lt. Governor of Idaho, I led many trade delegations.
But I spent most of my time working in the field in an effort
to build business in foreign countries.
So, I am getting off the hook right now. Here comes our
chairman. Well, I am still at the bottom of the food chain
here.
Anyway, I just wanted to say that I as a participant, both
as a businessman in the world, and my company was the one who
supplied MacDonald's all over the world. I can tell you how
important it was when I went to work for the company that
supplied french fries to MacDonald's, how important our image
was around the world.
The State Department is very important from that standpoint
and how that country feels about us and how we feel about that
country. The first one we put in was in Canada. That was a
drop-dead success. The last one I remember participating in in
the open house was next door to the Kremlin, which we didn't
think you would ever see, the largest symbol of capitalism, the
Golden Arches, casting a shadow on the wall of the Kremlin. So,
that was very important.
USAID, Mr. Mosley, brings that image to the ground with the
development, with the seeking of opportunities, fulfilling
peoples' dreams in these foreign countries, sometimes through
the eyes of experts from the United States. It is terribly
important.
I work with farmers in order to get through USAID, to get
them to build farming communities and eventually processing
plants so that we could utilize their renewable resources for
the business that we wanted to build in those countries.
Certainly, the Peace Corps continues to offer, not only on
an academic level, but I think equally important, on a level
that makes a community of the world for us from many different
aspects. Some of the programs that the Peace Corps has taken
on, I think, Mr. Smith, have done us proud and done us well in
the world.
Of course, finally, Mr. Jagadesan, your organization has
continued to operate on a very important level simply from the
standpoint that it fills out the need that is required around
the world.
So, with that, I would probably turn my attention, Ms.
Sigmund, to the image that we want around the world. One of the
images that I want around the world is that I don't necessarily
want to be the toughest kid on the block, although most people
would suggest my nickname, ``Butch,'' would suggest that.
But I do know that we have to be strong and act with that
strength to confirm the values that we have and the values that
we built. I don't want to be part of the huddled masses. I
don't want to be afraid to walk the streets of these foreign
countries where we have an opportunity to engage, not only in
keeping the peace, but also in expanding market horizons and
value horizons.
So, tell me a little bit more, if you would, about how not
only brick and mortar FE and I know brick and mortar and fences
and all that are important FE but it seems to me that the image
and the attitude is equally important.
If we build the right image and the right attitude, it
seems to me, maybe the brick and mortar isn't as necessary as
we may think it is.
Ambassador Sigmund. I agree with you, Congressman. One of
the challenges for the State Department and its embassies
overseas is to meet the new needs of Americans working and
traveling overseas.
Embassies become advisors, consultants, sources of
protection and safeguard for Americans who are trying to pursue
a variety of interests overseas.
I think image is terribly important and with the
consolidation of----
Mr. Otter. Excuse me. I apologize.
Ambassador Sigmund. No, that is all right. Am I too loud or
not loud enough?
Mr. Otter. No. I was trying to find out if I am done. I
don't know all the rules here yet.
Mr. Shays [resuming Chair]. Let me just say, when we have
two or three Members we just go on 10 minutes or so. We are not
as strict unless we have more Members. So, you are doing fine.
Mr. Otter. Thank you.
Ambassador Sigmund. Image is very important. With the
consolidation of USIA with the State Department there has been
a recognition that public diplomacy which can contribute to a
positive image for the United States overseas can advance our
interests and our foreign policy goals is going to be more
carefully grafted to the development of policy and its
implementation.
I think one of the things that is detrimental to our
embassy overseas is the often shabby, dilapidated state of our
embassies. Not only are they eyesores in many cases, but they
are not safe places to work.
The Department has recognized this and is developing a
construction plan that will address some of these issues. But
it is going to require sustained commitment on the part of the
Department and it is going to require a partnership with the
OIG to identify problem areas before they become costly
mistakes.
Mr. Otter. Mr. Mosley, I am very aware of many of the good
things that USAID has done mostly in a physical sense, the
construction, if you will, the building of programs and those
sort of things.
I served under President Reagan for 17 months as sort of an
ambassador-at-large at the U.S. Task Force on International
Private Enterprise. Resulting from that, we brought to Congress
a report called the Andres Report because it was chaired by
Dwayne Andres of Archer, Daniels Midland.
I brought the agricultural aspect, I felt, coming from
Idaho, to that. I found an alarming thing, a thing that sort of
alarmed me. USAID was looked on more as a universal or an
international, I guess I should say, ``welfare agency'' as much
as it was looked on in some of the countries and invited in as
a welfare agency rather than as one that was there to really
establish not only the brick and mortar of private enterprise,
but more importantly the concepts, the idealism of private
enterprise, of market discipline and those kinds of things.
I know that the Inspector General, when the Inspector
General looks at things, it is easy to assess the value and the
effectiveness of brick and mortar. It is a little more
difficult the more esoteric, but the esoteric in this case, and
especially your case, is a lot more important.
I would like to have an expression of how you assess that,
the more esoteric, the image of whether we are there for
welfare purposes. Let me speak directly to a couple of
instances. When I was in Turkey, in an operation just South of
Izmir, USAID was very, very effective, because the Turks wanted
free enterprise.
When I was in Manila, I saw just the opposite. They were
sort of there as a welfare agency rather than an agency that
was going to leave a foundation, not only of concrete, but also
of a belief that the marketplace should be the ruler.
Mr. Mosley. You are absolutely right, Congressman. USAID
has to be more than just a welfare agency. I think the agency
has embraced that fully over the last several years. The agency
is working toward what is considered to be sustainable
development, whereas you go into a country and not only do you
help them out of a situation that they are in, but you help to
provide, where they have the technical abilities, to work and
sustain themselves once the U.S. Agency for International
Development has moved on to some other countries.
Hopefully, there will be something called graduation by
these countries. The image of the U.S. Government is never a
problem as long as people understand that the Agency for
International Development is a part of the U.S. Government.
I think they are doing a lot of things these days. For
example, in some of the micro-enterprise programs where they
help people start businesses, including small businesses, help
them manage those businesses and move on and they grow to
graduate from the need to have AID programs.
In addition to that, the Office of the Inspector General is
involved in that same process. We work with a lot of the
supreme audit institutions around the world and those are
comparable to the General Accounting Office in the United
States.
The agency provides funds to those supreme audit
institutions so they can go to training, they can learn what
the requirements are. We provide OIG the technical support to
help them learn the standards and learn how to audit the
dollars that come from not only the U.S. Agency for
International Development, but all the U.S. Government agencies
as well as other donors into their countries, help them account
for those dollars and be able to report and assure that the
funds went to accomplish what their intended purposes were.
That, we consider, to be sustainable development.
Mr. Otter. Thank you, Mr. Mosley. I would agree.
I would like to recognize the presence of Congressman
Platts, who just arrived.
My time is up and so I will turn it over to the ranking
member, Mr. Kucinich.
Mr. Kucinich. Thank you very much, Congressman Otter and
thank you, Mr. Shays, and members of the committee.
First of all, I want to welcome all the Inspectors General
to his hearing. I look forward to working with each and every
one of you in my capacity as the ranking Democrat.
I am looking at the prepared statements here. There are a
couple of questions that I have beginning with Mr. Mosley. On
page 2 of your prepared statement you talk reports identified
approximately $87 million in questioned costs or funds which
could be put to better use.
Would you be able to provide this committee, with the
permission of the Chair, with that information in terms of what
you are talking about in terms of those costs?
Mr. Mosley. Yes, sir. I certainly could.
Mr. Kucinich. With respect to page 20 of your very
comprehensive statement where you speak of accountability in
the international environment, which I think is a principle
that has to apply across the board to government everywhere,
and that, of course, is the nature of this committee, you speak
of the serious management challenge and its vulnerability to
fraud and corruption.
You illustrate it by speaking about this publication by
Transparency International. In it you cite that there are 36
countries in this report that have been getting assistance who
have a rather low rating in terms of issues relating to fraud
and corruption.
Could you provide a list of those countries and also, with
the permission of the Chair, if you have such a list available,
and I imagine you do, of what the major challenges are in those
countries?
Mr. Mosley. Yes, sir. I could certainly provide that. In
addition to that, if you would like, we have established what
we call a fraud awareness program where we are in those
countries. We assess the vulnerabilities at an early point,
when AID goes in to start a program operation. Then we give
them intelligence in terms of contractors or others who have
had problems in the past.
We provide our Fraud Awareness training courses to the
government officials, to the AID officials, the contractors and
grantees so that they know what things to look for where there
might be problems and we make sure they are advised of how they
can advise us when there are problems and we can then followup
to determine where there is a need for an investigation.
I could also provide you a copy of our Fraud Awareness
Program that we put together.
Mr. Kucinich. Thank you.
This question would be for Mr. Jagadesan. You mentioned in
your background material that was provided to this committee
with respect to the description of the powers of the ITC, its
broad investigative powers on matters of trade and its
adjudicative role in making determinations with respect to
unfair trade practices.
I am new to this subcommittee, so I wonder if you have any
kind of publication where you have listed or you have a flow
chart available of the unfair trade practices that are
currently under investigation country by country.
Mr. Jagadesan. I am confident I could provide that to the
committee.
Mr. Kucinich. I am particularly interested in what is going
on with respect to the dumping of steel. I come from a
district, Mr. Chairman, that is being decimated by steel that
is being dumped. It is costing us thousands of jobs. This is in
violation of the trade laws.
Notwithstanding whether an administration asks for an
action under Section 201 of the 1974 Trade Act, I would like to
know what you have in the pipeline with respect to active, if
you can do that. Because most of these are generated, I think,
by public process. Am I correct?
Mr. Jagadesan. Yes.
Mr. Kucinich. I would appreciate it if you could provide
that information.
Mr. Jagadesan. Sure.
Mr. Kucinich. That is it. Thank you, Mr. Chairman.
Mr. Otter. I would ask that the reports or lists that were
requested by the ranking member, that you would supply him FE
you meant that for the permanent record for the committee?
Mr. Kucinich. I would like to have a chance to look at
them, with permission of the Chair, of course. I am not working
unilaterally on anything. I think it would be valuable for the
committee to receive it.
Mr. Otter. I would request that it be made part of the
permanent record of the committee.
Mr. Shays. Thank you, Mr. Otter. Actually, it is probably
fitting that you have control of the floor right now because I
have to confess I have a blatant conflict of interest when it
comes to Mr. Smith, being a former Peace Corps volunteer and
given that my wife works in the World Wise School Program.
So, I have this deep affection for the Peace Corps and it
is hard for me to imagine the Peace Corps could do anything
wrong, that they would even need an Inspector General.
I was fascinated by your testimony, I wasn't here, but your
written testimony that the mix of male to female was 60-40 and
now it is the other way around with 60 percent of the
volunteers being women.
I would say at first pass, and I don't mean this
facetiously in any way, but based on my experience that some of
the best volunteers were women. I am in awe of the women who
could be in some of the most difficult places in the world and
do so well.
In fact, I almost have a standard policy that if a Peace
Corps volunteer, female, comes and is looking for a job, I hire
her because I know that she would be extraordinarily competent.
But it does raise some interesting questions as it relates
to the kinds of countries we are going into. I wonder if you
could just speak to that. A number of the countries we are
going into do not always treat women with the same equality
that they would treat men. I am wondering if that is something
you are looking into and I am wondering if that is something
the women know about before they join the Peace Corps.
Mr. Smith. First, I would draw to your attention that this
proportion between men and women is tending more and more
toward more women. This is what we see on college campuses
today.
Mr. Shays. Do you mean just in terms of the number of
people who go to college?
Mr. Smith. Yes. I think it is like 55-45 now in colleges.
Again, it is growing the direction of more women. I think that
is reflected in the Peace Corps. I expect that the Peace Corps,
will it is 61 percent now, over the next few years we will be
moving up toward 70 percent.
At that point it does seem to me that Peace Corps
management should be asking, first one question. The question
is: What would I do differently if the Peace Corps were all
female? Is there anything that I would change in the way it
operates. I think the answer would be yes. I think that there
would be very explicit changes made, perhaps, in the medical
services.
They would look much more closely and explicitly at the
security questions and the safety questions facing women. The
countries that the Peace Corps is in, there are many countries
where it is difficult for women. They are out in villages and
so forth and they are harassed. Many of these issues, of
course, come through our office. So, it is highlighted more
from the point of view that we bring to it.
Also, the Peace Corps, as part of its training, has
training for women on how to deal with these cultural aspects
of working in countries that are quite different from ours.
They deal with questions of dress and demeanor, of where
volunteers live, whether they live with families, for example,
or alone.
So, there are many things that they really are looking at.
I think it needs to be looked at even more.
Mr. Shays. Now, I am sorry to deal with something I am more
personally involved in, but let me deal with this first. We
love the State Department interaction, but we didn't want to be
part of the State Department.
When we lived in a village, when we spoke their language,
we didn't want them to feel that we were an extension of the
government, though we were proud as can be to be Americans
there. Congress has legislated that during times of crisis,
Ambassador, we need to bring people into the embassy or into a
safe haven.
Do we have that same requirement for Peace Corps
volunteers?
Ambassador Sigmund. The State Department understands that
the Peace Corps is unique and that its ability to function
effectively often requires a certain amount of psychological
and physical distance from the Chancery and the people working
therein.
The coordination between the Peace Corps Director and the
Ambassador is always very close. The safety of the volunteers
is paramount.
Mr. Shays. Do you technically need a waiver, though, to
ignore the mandate of Congress?
Ambassador Sigmund. I am not sure.
Mr. Smith. With respect to the new building program, the
Anti-terrorism Law? It is my understanding there needs to be an
explicit waiver.
Mr. Shays. You see, if you were in Congress, you would have
asked if the gentle lady would yield.
Mr. Smith. Excuse me, Ambassador.
Mr. Shays. I would never interrupt an ambassador. Why don't
you finish, Mr. Smith? I am just having fun.
Ambassador Sigmund. I am sorry, Mr. Chairman, I am not as
familiar as I should be with this.
Mr. Shays. I am not that familiar either. It was just
raised and so I guess it is something we need to look at. But
your point has been that the State Department has traditionally
been very conscious of the distinctions of that.
What I am hearing from your testimony, Mr. Smith, your
written testimony, is that the possibility of needing some kind
of waiver to make sure it is fairly clear that there should be
a little more discretion there. Is that correct?
Mr. Smith. Yes, and that these waivers should be looked at.
But, granted, I would think in all cases, and perhaps placing
some review on the Peace Corps as to how they are handling the
security requirements they face.
But, it would be very dangerous in the Peace Corps to have
volunteers coming in and out of the embassy and being watched
by the intelligence services of the host countries, that they
will be identified there.
Mr. Shays. Are you a former Peace Corps volunteer?
Mr. Smith. I am, yes, sir.
Mr. Shays. You speak like one.
Mr. Jagadesan, let me ask you a question. You are a new
party to our oversight. We wanted very much to have that
oversight because we realize that trade is very much involved.
We are getting involved in chemical and biological agents and
with biological agents, we have to look at what businesses are
doing. We have trade agreements between countries.
There is a whole host of issues that relate to our
committee. So, it is delightful to have the commission be a
part.
You are a fairly small entity. How many basic employees are
we talking about with your total jurisdiction?
Mr. Jagadesan. Our fiscal year 2001 staffing plan has 390.5
permanent positions. But I think we are at somewhere in the
360's of permanent employees on board.
Mr. Shays. What I meant was your total oversight for the
commission.
Mr. Jagadesan. Currently, I think it is about 360.
Mr. Shays. OK. So, it is fairly small.
Mr. Jagadesan. Yes, we are small.
Mr. Shays. So, your office is about how large?
Mr. Jagadesan. Three point five staff, but actually three
on board.
Mr. Shays. How many years have you been doing this?
Mr. Jagadesan. I have been counsel for about 3\1/2\ years.
I have been in the Acting Inspector General for about 2 years.
Mr. Shays. OK, so you have had some history here. Where
would be the area where you have had the biggest disagreement
with the commission where they are the least receptive to your
suggestions and your recommendations and your findings?
I am going to ask each of you that question, but you get it
first.
Mr. Jagadesan. To be honest, we have not had very
significant disagreements. Where we have, we have been able to
come to FE I wouldn't say ``compromise'' FE but come to an
understanding.
Mr. Shays. Would you give me an example?
Mr. Jagadesan. One of our most recent recommendations was
that the commission should establish an office of CIF.
Mr. Shays. Did you say CFO?
Mr. Jagadesan. CIF, Chief Information Officer.
Mr. Shays. OK.
Mr. Jagadesan. There were significant discussion amongst
the Commissioners and the office directors on whether that was
a good recommendation. Ultimately, they have decided that it is
a good recommendation and they intend to implement it.
Mr. Shays. When do they intend to do that?
Mr. Jagadesan. Well, right now, sir, they have decided that
the most appropriate level would be a Senior Executive Service
position. For the agency to obtain a Senior Executive Service
position that is allocated by OPM, they have sought the
approval to have an additional position.
Mr. Shays. When would they do that?
Mr. Jagadesan. My understanding of it is that it has been
sent to OPM for approval.
Mr. Shays. OK. When did you end up with this dialog? When
did you first make the recommendation?
Mr. Jagadesan. Probably about a year ago.
Mr. Shays. Maybe a little longer than a year ago, probably;
right?
Mr. Jagadesan. It is not in the recommendation that is over
a year old yet. It is not in that category.
Mr. Shays. Mr. Chairman, if you don't mind, if I could just
go through each of them and then we will go back.
Mr. Otter. The gentleman has the floor.
Mr. Shays. Mr. Smith, what would be the biggest area where
you have made recommendations and haven't had a receptive
audience?
Mr. Smith. I would point to two areas. One is when we have
made recommendations about the weaknesses in the actual
programs, what volunteers do. We have had some resistance from
the management staff.
Mr. Shays. I am not clear. Where you had what? I am sorry.
Mr. Smith. When we have made recommendations about the work
of volunteers, we have found volunteers, in our view,
inadequately employed.
Mr. Shays. OK. So, there have been occasions where you have
seen a volunteer and you are saying, listen, they are there but
they are not being fully utilized.
Mr. Smith. Exactly.
Mr. Shays. I know from my own experience that we saw that
happening. We almost became an instrument for the government to
say they had seven volunteers here. Sometimes they didn't want
to move them from one district because they didn't want to
offend the country. That kind of thing still happens?
Mr. Smith. Sure it does. We have had some resistance from
the management to change that. The other area is that when we
have found on a few occasions that, in our judgment, the posts
were not prepared to receive new trainees and we have
recommended that they not send a training group, which would
be, let us say, 30 trainees going into a country.
We have had some difficulty in their accepting that.
Mr. Shays. Well, I could say that problem has been there
for years. You answered my next question.
Mr. Mosley.
Mr. Mosely. Well, Mr. Chairman, I think probably the most
significant area where we have had disagreement is our
involvement in the establishment of the financial management
system. Their first attempt at setting up an integrated
financial management system was call the New Management System.
We tried to be involved very early. We were first resisted
and they did not want to provide us information in terms of
systems documentation. Their reaction was, ``We are not ready
for review.''
We were trying to explain, ``We need to review now and let
you know the things you should be aware of before you make
mistakes.''
They basically did not listen to us. That system was a
failure. It received a lot of attention up here in Congress and
they were severely criticized.
With the current system that they are implementing FE
basically, their response was that they didn't think that we
were qualified to give them recommendations in a technology
area FE we were able to show them that we could do those
reviews and provide solid information, that we did have the
expertise on staff to provide that information.
With the current system they are implementing they work
with us very closely. As I have indicated, they even backed off
of their initial implementation date for the PHOENIX system.
Mr. Shays. I have gone almost 15 minutes, so let me just
quickly inquire of Ambassador Sigmund.
Ambassador Sigmund. Let me first say that the OIG's
relationship with the Department, I would characterize it as
critical constructive rather than contentious. The Department's
record of implementing our recommendations is a good one.
Where the Department hasn't implemented those
recommendations tends to be areas where there is a lack of
adequate resources. That being said, I would have to say that
our biggest frustration has been with the Department's slowness
to understand the importance of strategic planning.
The Department has been traditionally reactive. The need to
develop plans for long-term construction, the need to develop
work force plans, the Department has been slow to understand
the importance of these issues.
Mr. Shays. I know the gentleman has to leave. Do you have
any questions before you have to go?
Mr. Otter. I just have one for Mr. Mosley. Let us go back
to my statement relative to sometimes I felt like
philosophically we were exporting more welfare than we were
true business principles under USAID.
Is there anything in your investigations and oversight that
would tell you that we do have a major problem there and that
we should correct that? Then, how should we do that?
Mr. Mosely. I can't say that we have anything right now
which would indicate that. I think the programs the agency has
moved toward, Democracy in Government, is trying to help the
people in those foreign countries try to set up democracies and
improve their operations so that they are sustainable. I think
that has changed tremendously over the years. So, we do not
have anything to indicate that is a problem at this time.
Mr. Otter. I see. I have one followup with that, you know,
USAID, through the World Bank and many other organizations and
then within their own budget generally supplies capital that
can become available for startup entrepreneurs. What is the
rate of success under USAID?
Mr. Mosely. The rate of success in those programs is very
high. I can't give you a percentage, but based on our audit
work, they normally make loans to groups and those groups
monitor themselves and each other. There is embarrassment if
they fail.
Their rate has been very high in terms of success. There
have been very few failures.
Mr. Otter. Is there an area of the world that has a higher
rate of failure?
Mr. Mosely. I can't answer that at this time, sir. I could
find out and let you know.
Mr. Otter. That is all I have, Mr. Chairman.
Mr. Shays. Thank you very much. I appreciate your help
today.
Mr. Otter. Well, you are quite welcome.
Mr. Shays. I think I have about ten more minutes of
questions.
Ms. Sigmund, let me just say this. I am very impressed with
the young State Department employees that we have. I think I
actually applied and didn't get accepted. I applied to CIA and
the State Department and I didn't make the grade.
Ambassador Sigmund. It was our loss, sir.
Mr. Shays. You mentioned unfilled positions. You didn't say
``unfilled positions.'' You actually just said you had a
shortage of staff. Is that because we don't create the
positions, we aren't funding the positions or we can't hire for
positions that are out there?
Ambassador Sigmund. In the mid-1990's, for budgetary
reasons, the State Department stopped hiring young officers.
Mr. Shays. Even though they had the slots, but they didn't
have the dollars.
Ambassador Sigmund. They have what are called the ``FTEs''
but they didn't have the dollars. They chose to deal with
reduced levels by not hiring. That clearly has been a mistake
and it has had an impact on a number of our operations
overseas.
Mr. Shays. Give me an example of a negative impact.
Ambassador Sigmund. Well, an impact on our consular
operations, for example. Traditionally, young officers or new
officers come in and their first assignment is with consular
services. A number of our positions have gone unfilled overseas
because we have not had the officers to put in those positions.
The Department understands its mistake, however. In the
last year or two the Department has aggressively started
recruiting and is trying to develop the kind of work force
planning it needs to ensure that doesn't happen again.
Mr. Shays. But there has been talk, there was a suggestion
made, and I don't know who made the suggestion, so I don't want
to attribute that, that in some countries we combine and have
regional offices or at least regional administrative offices.
Is that something you have given thought to?
Ambassador Sigmund. We have given thought to it. In fact,
as a result of some of our work, regional consular positions
have been established. One most recently is for African posts
where in fact there is a shortage of consular offices to staff
sections in those embassies.
Clearly, looking at how we might use regional
administrative capabilities is something that the Department
needs to consider and in fact has begun to consider. For
example, administrative services for the new independent states
is provided on a regional basis out of Germany.
I think we are going to be seeing more and more serious
study of just what might be handled regionally in order to free
up space and positions in individual bys.
Mr. Shays. Let me just ask these questions because they are
questions that particularly staff and I want to make sure are
on the record.
Is the State Department exercising proper management
controls over funds Congress has allocated for embassy
upgrades?
Ambassador Sigmund. Yes. Their record has been very good.
We have looked into that issue.
Mr. Shays. How do you think the U.S. overseas presence
should be restructured to address security operational and
foreign policy interests?
Ambassador Sigmund. Well, I think one thing that needs to
be done is to increase the Chief of Missions authority to
direct and define what agencies will be working and operating
within his country. He is charged by the President, as his
representative, to provide oversight and policy direction. He
has the responsibility. He needs the authority to run the
operations and agencies.
Mr. Shays. We have visited a number of embassies. At first
I was surprised by the number of different operations we had.
When we spoke to the employees, not in the State Department but
in the State Department domain, about utilizing facilities they
felt their first allegiance was to FE if they were Commerce,
the Secretary of Commerce. They did acknowledge that the
Ambassador has tremendous oversight, but their first response
was to their long-term employer.
Are there opportunities that exist to reduce overseas
staffing at some posts to reduce costs and security
vulnerabilities or is that just simply not possible, not
likely?
Ambassador Sigmund. Clearly, I think, because it is a
security issues as well as a resource issue, the size of our
overseas missions needs to be examined. The work done in that
area is only very preliminary.
Frankly, it is a challenge to get other agencies working in
the international arena to work with the State Department to
right size our embassy.
Mr. Shays. Mr. Mosley, we covered most of the issues that
we wanted to ask about. I may come back on something separate.
But let me to go Peace Corps and just ask this question.
How does the 5-year rule affect the agency and the Office
of Inspector General? The 5-year, I think, is unique to the
Peace Corps. You work for 5 years and then you are out.
Mr. Smith. Yes, the 5-year rule sets a 5-year limit on
employment.
Mr. Shays. You can come back 5 years later, right? But you
can't work continuously for more than that?
Mr. Smith. That is right. You can't extend it every 5
years. There are exemptions to that. You can get a 1-year,
additional 1 year or an additional 2\1/2\ years. It is a
maximum of 8\1/2\, but that 2\1/2\ year extension is very
limited.
What it does to the Office of Inspector General is that it
makes it difficult to develop the expertise that you need that
you get over time with familiarity with the operations of an
agency.
Mr. Shays. You come under that. You are not under the
Inspector General?
Mr. Smith. The Inspector General Act in Section 8(d)
provides for the designated Federal entity, OIGs, that the
personnel policies and rules that the agencies where they work
apply to them. It was in response to the fact that Title V
didn't apply to all of the new agencies being brought in by the
1988 Amendments to the Inspector General Act.
So, for us, we have a 5-year limit. If I want to extend
someone beyond that for 1 year or 2\1/2\ years, I need to go to
the Director of the agency and ask. So, my independence is
limited in that respect.
Mr. Shays. But you could utilize, you can find very
competent employees from other offices who can move in, who
have had experience. They just wouldn't have had experience in
the Peace Corps.
Mr. Smith. From other Peace Corps offices?
Mr. Shays. No.
Mr. Smith. From Inspector General offices?
Mr. Shays. Yes.
Mr. Smith. Sure, sure. They just wouldn't have the Peace
Corps knowledge, but they would have the IG knowledge.
Mr. Shays. Right.
Mr. Jagadesan, let me ask you this question: What is the
current state of ITC's information technology systems? What
must ITC do to modernize these systems and what are the costs
and benefits of such modernization?
Mr. Jagadesan. I would report that the current state is
very good, but I think we are at a point in the commission's
history where we can do some significant improvements that
would affect and improve the agency dramatically.
The issue that is going to be an impediment to this is
going to be funding. In a broader sense it is funding how
smaller agencies are funded in general. What I mean by that is,
if you look at our appropriations over the last several years,
they are pretty much in line with the pay raise.
So, for us to embark on a significant IT project, and
significant for our level is probably a $1 to $2 million
project, when we come up and ask for that in Appropriation, it
looks as though we are asking for a significant increase in our
appropriations. It essentially makes its way to the chopping
block pretty quick.
But, a $1 million investment in an agency of our size can
go a long way in improving our IT infrastructure. When you look
at the way our budget is broken out, the bulk of our expenses
are tied up in personnel and rent.
So, our discretionary funds are very limited and our
ability, even if implementing all OIG recommendations, we are
not going to squeeze a lot of dollars out of there for some of
these big ticket items. When I say ``big ticket items,'' I mean
like electronic filing before the agency and things like that,
which are really very important because some of the other
agencies we deal with are going to be accepting electronic
filing.
If we are not on a par with that, for instance, an attorney
who is filing with the Patent and Trademark Office is going to
file his application electronically. The same supporting
documentation may be forced to come to us on paper, which is
really a backward step in the process.
For instance, when we are appealing our cases to the Court
of International Trade, we are going to be required, because of
the way the administrators of the courts are, to file
electronically. We may have received those supporting documents
on paper in the first place.
So, projects like that have significant price tags. For us
to fund projects like that is going to be crucial in the future
I would hope we have some creative solutions in the Congress to
help us with that.
Mr. Shays. Are the IGs invited to make presentations before
the Appropriations Committee when the agencies go? Are you ever
invited before Appropriations?
Mr. Mosely. Most of the times we do not. I happen to be
testifying before a subcommittee of House Appropriations next
week on the hurricane mix activities and the use of the
supplemental, but normally not for our budgets.
Mr. Shays. That is interesting. I would think that would be
of tremendous importance to the appropriators to have you all
testify. But as a general rule the testimony you all are giving
me is that you don't.
Mr. Mosely, I would like to know what AID has done to
address its recruiting and retention problems.
Mr. Mosely. Basically, they have implemented a new program
where they are trying to hire a lot more people. They call it
the new entry program. They are trying to hire people who are
not necessarily at the entry level, people with some experience
and various skills. They are hiring people at this point. They
put them through an extensive training program. Then they even
send them to the field at some point on a temporary basis.
That is what they are working on most of all. Then, from a
Civil Service standpoint, they are going through the normal
Civil Service rules when they are trying to hire. But it gets
very difficult now to hire people specifically in the areas of
the information technology and some of the financial management
areas. That is just a difficulty that everybody is facing. It
takes time.
Mr. Shays. You could almost have a boilerplate for all IGs.
You print it in your document. We just give it out to all IGs
and they can all print it as something that is not unique to
any agency.
Mr. Mosely. That is correct.
Mr. Shays. I am going to close with my specific question
with you, Ambassador, and just ask you the same basic question.
I realize I asked you the question if you have a problem. But I
don't know how you are solving the problem.
Ambassador Sigmund. In fact, we are more aggressively
recruiting. We are also looking at retention and Director-
General Grossman has instituted some real improvements in
making Foreign Service more attractive.
Mr. Shays. But you have up and out. You can be out real
quick if you have not moved up in a certain period. It is
somewhat like the military, I guess. I met some employees in
their early 50's who are no longer working for the Department
and yet they are very capable people.
Ambassador Sigmund. That is true. OIG hasn't looked at
that. I am a Foreign Service Officer, so I guess I would have
to say that personally I understand, if not always sympathize,
with the up and out approach.
It has served DOD and, I think, the State Department well
in testing officers for both management and policy skills for
the Senior Foreign Service.
Mr. Shays. But think about it. We all can think of somebody
who is ideal for that position, but not necessarily ideal for
the position above. Yet, you lose them.
Ambassador Sigmund. I think that the time has come for us
to re-examine all of those sacred cows and shibboleths.
Mr. Shays. That is something you can examine; correct?
Ambassador Sigmund. We can examine it, yes.
Mr. Shays. Let me just ask you, is there a question that
you had stayed up all night preparing for that we didn't ask
that you wish we had asked? Then ask yourself the question and
then answer it.
I am being, obviously, a little more facetious than I need
to be.
Is there a question that I should put on the record that
you need to answer? We are going to close up, so I am just
going to give you the opportunity to respond to any particular
question that you really think we should have asked and you
wanted on the record. I am asking that of all of you. Do you
want to start?
Ambassador Sigmund. You could have asked if we have
sufficient to do our job.
Mr. Shays. Do you have sufficient resources to do your job?
Ambassador Sigmund. No, Mr. Chairman, we don't. The
Department is about to embark on a very ambitious embassy
construction project. We will be giving it close scrutiny,
particularly the major building projects such as Beijing.
The problem is that our ability to provide oversight for
those projects is very limited.
The other area where we are in as much disarray as the
Department itself is in the area of information technology. We
are dealing with the same problem of antiquated, antediluvian
information systems that make our work very difficult.
Mr. Shays. Thank you. Is there any question you wanted on
the table, Mr. Mosley?
Mr. Mosely. Mr. Chairman, I would just like to agree with
my distinguished colleague from the Department of State. We do
not have sufficient resources to do all the things that we
really do need to do.
I think the one thing that I would like to emphasize, and
this is not necessarily the question, but we have in the Office
of Inspector General at AID, we have embarked on a vigorous
program of proactive activities rather than the traditional
audit and investigative work at the end of projects.
That has taken a lot of our resources. Yet, we still have
to do our traditional work. So, we certainly could use some
additional resources to do that.
Mr. Shays. So, the traditional work gets done, but there
are lost opportunities in some other areas.
Mr. Mosely. There are lost opportunities simply because we
involved early on with the programs that the agency is doing
and trying to give them input for corrective action before the
money is out the door.
Mr. Shays. Mr. Smith, I realize I said that we don't need
an IG because the Peace Corps does everything perfectly. But
what I realize is that your job is not a gotcha, so you can
always make an agency more efficient.
What question should I have asked you?
Mr. Smith. The same. There is always a resource issue. In
our case we have a total staff of 15.
Mr. Shays. Fifteen out of how many employees?
Mr. Smith. We have a total of 15 staff in the IG's office.
Mr. Shays. You are talking about how many, 7,000 plus?
Mr. Smith. 7,000 volunteers in 76 countries.
Mr. Shays. Yes, when you think about that, you clearly
can't be out there.
Mr. Smith. It is very difficult. When I started working in
the IGs office, the goal was to visit every country in some
fashion every 3 years. We now aim every 5 years because we just
don't have the staff to do that.
Mr. Shays. And once you are there, you don't have much time
to spend, obviously.
Mr. Smith. That is the other issue.
Mr. Shays. You only have 15 employees?
Mr. Smith. Fifteen employees. I have tried to hire people
at mid and late career levels because we don't have the time to
train people. When you have a 5-year period, you really can't
spend that time. So, we have an excellent staff, but they are
spread very thinly.
The impact, I think, affects our ability to examine larger
issues that affect the agency as a whole, particularly
headquarters issues.
Mr. Shays. It could have tremendous pay-back.
Mr. Smith. I think so.
Mr. Jagadesan. When we are fully staffed, I think our
resources are right for the size of our agency. However, if you
encourage Mr. Smith to take our most seasoned people, we would
be in trouble.
Mr. Shays. Thank you. I am going to conclude. I would just
point out that in the back of the room we had students from, I
think, Monroe, Stamford, New Canaan and Fairfield participating
in the Congress Youth Leadership Council Program. They stayed
and listened to a great deal of this, which surprised me. Some
students come in and out.
This is the kind of technical conversation isn't always
interesting, though the work you are doing is fascinating.
I thank you all for being here. Please stay in touch. You
are our right arms. You are very important to the agencies and
you are very important to the work of this committee. We enjoy
the good working relationship we have with all of you.
Thank you for what you do and for what your staff does as
well.
With that, I thank our recorders. We will hit the gavel and
end this hearing.
[Whereupon, at 2:25 p.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[The prepared statements of Hon. Bernard Sanders, Hon. Wm.
Lacy Clay, and additional information submitted for the hearing
record follow:]
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