[Senate Hearing 105-757]
[From the U.S. Government Publishing Office]
S. Hrg. 105-757
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
on
H.R. 4104/S. 2312
AN ACT MAKING APPROPRIATIONS FOR THE TREASURY DEPARTMENT, THE UNITED
STATES POSTAL SERVICE, THE EXECUTIVE OFFICE OF THE PRESIDENT, AND
CERTAIN INDEPENDENT AGENCIES FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
1999, AND FOR OTHER PURPOSES
__________
Department of the Treasury
Executive Office of the President
Nondepartmental witnesses
U.S. Postal Service
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
______
U.S. GOVERNMENT PRINTING OFFICE
46-121 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
ISBN 0-16-057868-X
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington DALE BUMPERS, Arkansas
MITCH McCONNELL, Kentucky FRANK R. LAUTENBERG, New Jersey
CONRAD BURNS, Montana TOM HARKIN, Iowa
RICHARD C. SHELBY, Alabama BARBARA A. MIKULSKI, Maryland
JUDD GREGG, New Hampshire HARRY REID, Nevada
ROBERT F. BENNETT, Utah HERB KOHL, Wisconsin
BEN NIGHTHORSE CAMPBELL, Colorado PATTY MURRAY, Washington
LARRY CRAIG, Idaho BYRON DORGAN, North Dakota
LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
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Subcommittee on Treasury and General Government
BEN NIGHTHORSE CAMPBELL, Colorado, Chairman
RICHARD C. SHELBY, Alabama HERB KOHL, Wisconsin
LAUCH FAIRCLOTH, North Carolina BARBARA A. MIKULSKI, Maryland
TED STEVENS, Alaska ROBERT C. BYRD, West Virginia
ex officio ex officio
Professional Staff
Patricia A. Raymond
Tammy Perrin
Lula Edwards
Barbara A. Retzlaff (Minority)
Elizabeth Blevins
C O N T E N T S
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Thursday, February 26, 1998
Page
Department of the Treasury:
Bureau of Alcohol, Tobacco and Firearms...................... 1
U.S. Secret Service.......................................... 1
U.S. Customs Service......................................... 1
Internal Revenue Service..................................... 75
Federal Law Enforcement Training Center...................... 75
Financial Crimes Enforcement Network......................... 75
Thursday, March 5, 1998
Department of the Treasury: Internal Revenue Service............. 163
Thursday, March 12, 1998
Department of the Treasury: Office of the Secretary.............. 269
Thursday, March 26, 1998
Executive Office of the President: Office of National Drug
Control Policy................................................. 313
Thursday, April 30, 1998
Department of the Treasury: U.S. Customs Service................. 361
Material submitted subsequent to the conclusion of the hearing... 391
Thursday, May 7, 1998
Executive Office of the President: Office of Administration...... 393
Nondepartmenal witness........................................... 415
Material submitted subsequent to the conclusion of the hearing... 423
Thursday, May 14, 1998
Department of the Treasury: Bureau of Alcohol, Tobacco and
Firearms....................................................... 465
Nondepartmental witnesses......................................465, 485
Material submitted by independent agency not appearing for formal
hear- ings..................................................... 519
Nondepartmental witnesses........................................ 523
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
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THURSDAY, FEBRUARY 26, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:35 p.m., in room SD-124, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Faircloth, and Kohl.
DEPARTMENT OF THE TREASURY
STATEMENT OF RAYMOND W. KELLY, UNDER SECRETARY, LAW
ENFORCEMENT DIVISION
Bureau of Alcohol, Tobacco and Firearms
STATEMENT OF JOHN W. MAGAW, DIRECTOR
U.S. Secret Service
STATEMENT OF LEWIS C. MERLETTI, DIRECTOR
U.S. Customs Service
STATEMENT OF SAMUEL H. BANKS, ACTING COMMISSIONER
Opening Remarks
Senator Campbell. The Treasury Subcommittee will be in
order.
Good afternoon. Today is the first hearing on the fiscal
year 1999 budget for the Subcommittee on Treasury and General
Government. We are focusing on the law enforcement component of
the Department of the Treasury, 40 percent of all the Federal
law enforcement moneys within Treasury.
There are some new faces with us this morning. Lew Merletti
was appointed Director of the Secret Service in June of last
year. We welcome him. Sam Banks is Acting Commissioner of the
Customs Service, until the President's nominee can be confirmed
by the Senate. Ralph Basham took over at the helm of the
Federal Law Enforcement Training Center just this month, and
William Baity is with us representing the Financial Crimes
Enforcement Network.
As you can tell from the witness list this afternoon, the
Treasury Law Enforcement Bureau will cover a very wide scope.
As some of you know, I was in law enforcement myself years
ago as a deputy sheriff and a volunteer counselor in a Federal
penitentiary, and I was the head of the board of directors for
a halfway house years ago back in Sacramento. I have perhaps a
little broader outlook on what we should be doing in law
enforcement, and it is just as difficult now as it was back
then for law enforcement officers who face many new threats.
The technology that is coming online is getting more and more
expensive.
Today, we will hear from the agencies on the front lines
about their needs for fiscal year 1999. Some of them will have
new initiatives for consideration, while others are requesting
funding just to continue current operations.
On our first panel today, they are already seated, are Mr.
Raymond Kelly, Mr. Magaw, Mr. Banks, and Mr. Merletti.
Prepared Statement
I know that my colleague, Senator Kohl, has to open another
hearing in a little while. So I am going to put my total
statement in the record, and I will just go ahead and yield to
you, Senator.
[The statement follows:]
Prepared Statement of Senator Campbell
Good afternoon. Today is the first hearing on the fiscal
year 1999 budget for the Subcommittee on Treasury and General
Government. We are focusing on the law enforcement component of
the Department of the Treasury--40 percent of all Federal law
enforcement is within Treasury.
There are some new faces with us this morning. Lew Merletti
was appointed Director of the Secret Service in June of last
year.
Sam Banks is Acting Commissioner of the Customs Service
until the President's nominee can be confirmed by the Senate.
Ralph Basham took over the helm at the Federal Law
Enforcement Training Center just this month. And William Baity
is with us representing the Financial Crimes Enforcement
Network.
As I mentioned before, 40 percent of all Federal law
enforcement is part of the Department of the Treasury. As you
can tell from our witness list this afternoon, the Treasury law
enforcement bureaus cover a wide scope.
As some of you know, I have been in law enforcement myself.
I was a deputy sheriff and a volunteer counselor at Folsom. I
was head of the board of directors of a halfway house in
Sacramento. As difficult as it was back then, our law
enforcement officers face many new threats now--and the
technology to fight crimes is getting more and more expensive.
Today we will hear from the agencies on the front lines
about their needs for fiscal year 1999. Some of them have new
initiatives for consideration while others are requesting
funding just to continue current operations.
On our first panel today will be Treasury Under Secretary
Raymond W. Kelly. This position was created only a few years
ago as a way to emphasize the importance of law enforcement
within Treasury. Mr. Kelly oversees the Treasury law
enforcement bureaus and agencies, with the exception of the IRS
Criminal Investigation Division. As a side note, Mr. Kelly has
been nominated by the President to be the new Commissioner of
the Customs Service.
With us again this year is John W. Magaw, Director of the
Bureau of Alcohol, Tobacco and Firearms. Most people think of
ATF in terms of guns, but they have many other
responsibilities. ATF collects about $13 billion per year in
alcohol and tobacco taxes as well as firearms and explosives
fees. They regulate wine, beer, and distilled spirits to
protect the American public.
We welcome the new Director of the Secret Service, Lewis C.
Merletti. Most people think that the Secret Service just
provides protection for the President and Vice President. But,
they have many more responsibilities--counterfeiting and
securities forgery investigations, electronic fund transfer
fraud, debit and credit card fraud, and computer fraud.
Representing the Customs Service is Samuel Banks, Acting
Commissioner. Customs is the primary border enforcement agency,
responsible for making sure that importers properly label their
goods and pay the correct fees--the Customs Service generates
$23 billion per year. They protect Americans by stopping the
import of counterfeit goods and they are the primary drug
interdiction agency.
Leading off panel two is Ted F. Brown, Assistant
Commissioner of the IRS for Criminal Investigation. Most people
forget that IRS has a law enforcement function. IRS CID is
responsible for enforcing criminal statutes relating to
violation of the Internal Revenue laws and the Bank Secrecy
Act. CID investigates suspected fraud and recommends
prosecution in some cases. Then, they assist in the preparation
and trial of criminal tax cases. CID also investigates money
laundering schemes associated with narcotics organizations.
Ralph Basham is the new Director of the Federal Law
Enforcement Training Center, known as FLETC. There are two
permanent locations--Glynco, Georgia and Artesia, New Mexico.
FLETC provides comprehensive and consistent basic training for
Federal law enforcement personnel. Currently about 70 Federal
agencies send their employees to FLETC for training, either
basic or specialized advanced, or in some cases both. FLETC
estimates that this consolidated training saves the Federal
Government approximately $160 million per year.
William Baity is representing the Financial Crimes
Enforcement Network, commonly called FinCEN. FinCEN is a
central collection point for financial information used in the
investigation of money laundering. FinCEN receives activity
reports from banks and other financial institutions which are
included in a database for easier access by investigators--
Federal, State, and local law enforcement.
It should be an interesting afternoon. Senator Kohl, do you
have an opening statement?
Statement of Senator Kohl
Senator Kohl. That is very kind of you. Thank you very
much, Senator Campbell.
Gentlemen, over the past year, I have had the pleasure of
meeting with many of you on numerous occasions to discuss the
critical role that the Federal Government plays in protecting
the public. The agencies represented here are crucial to the
success of this effort, and we know that we must help all of
you to do the important work that you do by identifying and
funding those programs that keep our streets safe, and
especially when those efforts are protecting our most important
resource, obviously our young people.
Mr. Chairman, as you know, I come from the business world
which focuses on practical solutions to real problems,
solutions that can be measured day in and day out. I also know
that long-term investments can have significant payoffs. So,
when we review these budget requests, we need to make sure that
the taxpayers' investment is being well spent, and we must also
take a long-term view, keeping in mind that investments in
young people can and do pay off in many years.
Fortunately, the agencies before us today have a proven
track record in combating crime, and through last year's
appropriations, we together made a strong commitment to
investing in the young people of our country.
For example, this subcommittee provided increased funding
for the youth crime gun interdiction initiative, a program that
brings Federal and local law enforcement agencies together to
trace guns used in crimes, shut down gun traffickers, and get
guns out of the hands of our young people.
Over the last 2 years, this program has stopped gun
traffickers throughout the country, including my own town of
Milwaukee. In one Milwaukee case, a few handguns were recovered
from juvenile crime scenes and then, thanks to the ATF, were
traced to a security guard at a shopping mall. Apparently, he
did not take his security work very seriously. He was illegally
selling handguns to kids from the trunk of his car.
The youth crime initiative gave Milwaukee law enforcement
officers the Federal help they needed to trace more than 25
weapons to this one security guard. Most importantly, they were
able to get him and his guns off our streets.
Due to an increase in funding for this initiative last
year, ATF is now able to add 10 cities to the original 17
cities in the youth crime initiative. It is my hope that we can
continue to expand this initiative so that more cities and more
hometowns can get help in fighting against juvenile crime.
Last year, the subcommittee also provided full funding for
an important investment in our young people, the Gang
Resistance Education and Training Program [GREAT]. This
promising education program provides children with information
they need to make decisions about their future.
It is my hope that we will continue to invest in this and
other youth-oriented crime prevention programs, programs that
provide our young people with positive incentives that will
assist them in making the right choices throughout their lives.
I know that each of these agencies has valuable law
enforcement initiatives to discuss with us. I look forward to
hearing from them, and I am glad that we are giving them this
opportunity to tell us what is working and what we need to keep
funding and what will help keep criminals off the streets.
So we are happy to have you with us here, gentlemen, and we
look forward to our discussion with you.
Thank you, Mr. Chairman.
Prepared Statement
Senator Campbell. Before we start, with the unanimous
consent to be included for the record a statement by Senator
Coverdell, who wanted to be here with us, but could not today.
[The statement follows:]
Prepared Statement of Senator Coverdell
Chairman Campbell, members of the Subcommittee, and guests,
I appreciate the opportunity to submit testimony as you
consider the fiscal year 1999 Treasury Postal Appropriation
bill. Although I would very much like to deliver these remarks
in person, I am unable due to a scheduling conflict.
As you are aware, I am currently chairing the Foreign
Relations Subcommittee on the Western Hemisphere. Part of this
Subcommittee's jurisdiction, which I have made as one of my
highest priorities, is to reignite the nation's drug
interdiction efforts, as well as protect our citizens from
terrorist activities. Through this Chairmanship, I have had the
opportunity to obtain direct feedback from our nation's law
enforcement officers on what they feel is needed in their day-
to-day activities in protecting our borders and citizens.
Although they have mentioned several immediate needs, the one
that is continually brought to my attention is the deployment
of more federal law enforcement officers.
As you know, Congress has committed to increase the number
of federal agents on the job. As we move forward in this
effort, we must also fulfill our obligation to the U.S.
taxpayers by making sure these new agents are properly trained
in the most cost-effective manner.
As you know, prior to 1970, training of our federal law
enforcement agents was divided between respective agencies.
After the completion of two studies, the federal government
came to the realization that this fragmented system had
discrepancies in training, duplication in efforts, and
inefficient use of funds. As a result, Congress authorized the
creation of the Consolidated Federal Law Enforcement Training
Center, whose purpose was to create high quality, standardized,
and cost-effective training for our federal officers.
This new organization was temporarily headquartered in
Washington, D.C. until 1975 when, after much study, a permanent
location was found at the former Naval Air Station in
Brunswick, Georgia. Since then, the Consolidated Federal Law
Enforcement Training Center has been renamed the Federal Law
Enforcement Training Center [FLETC], and has been training and
graduating the many men and women who continue to fight for our
safety.
As you consider your bill, I would like to express my
support for the agency's appropriation request of $100,283,000.
As you know, this request not only includes the administrative
cost in running FLETC, but also includes training and
construction funds for the 70 federal agencies, including the
INS and Border Patrol, whose roles are currently expanding,
that utilize the facility.
I would also like to bring to your attention the need to
complete the master construction plan at FLETC and express my
support for the agency's appropriation request of $13 million
to be applied towards the completion of this plan.
Approximately 51 percent of the master plan has been completed
and additional appropriations would allow FLETC to again move
closer toward its goal of being the centralized training center
for our federal agencies.
Whether traveling in my home state of Georgia, or chairing
a Subcommittee hearing on drug interdiction, as I am today, the
need to address the crisis we face with drugs and crime is
constantly brought to my attention. Through continued funding
and support of the Federal Law Enforcement Training Center we
will be able to take the necessary steps to achieve this goal
for all Americans.
Once again, thank you for allowing me to testify today and
for all you and your colleagues on the Subcommittee are doing
for our country.
Statement of Raymond W. Kelly
Senator Campbell. We will start in the order that I
mentioned them. So, if Under Secretary Kelly would start, we
will get going.
Mr. Kelly. Thank you, Mr. Chairman.
Senator Campbell. And, by the way, all of your complete
testimony will be included in the record. So, if you want to
abbreviate your comments, that will be fine.
Mr. Kelly. Yes, sir.
Mr. Chairman, Senator Kohl, it is, indeed, a pleasure to be
with you today to speak about the fiscal year 1999 budget
request for Treasury's law enforcement functions.
As you said, Mr. Chairman, I have submitted my testimony
for the record, and I request that it be inserted.
Senator Campbell. Without objection, it will be.
Mr. Kelly. We in the Treasury Department greatly appreciate
the support this committee has given Treasury law enforcement.
I am here today with all of our bureau heads, some at the table
and some who will be testifying at the next panel.
As you said, we have two new Directors since we appeared
before the committee last year, Lew Merletti, who took over as
the head of the Secret Service and Ralph Basham, who is our new
Director of the Federal Law Enforcement Training Center.
As the members of this committee know well, Treasury has
wide-ranging law enforcement responsibilities, from protecting
the President and other public figures to preventing the flow
of drugs into the country, enforcing Federal firearms laws,
investigating violent crimes such as the bombing in Atlanta at
the Olympics, enforcing the tax laws, and investigating
financial crimes, counterfeiting and money laundering. The men
and women who serve the public in these law enforcement
capacities, and who often place their lives in danger by doing
so, do an extraordinary job.
To strengthen these critical efforts for fiscal year 1999,
the President is requesting $3.204 billion, an increase of $172
million, or 5.7 percent above last year, for Treasury law
enforcement bureaus.
We need this increase to meet certain mandatory costs, to
enhance initiatives in combating narcotics trafficking, to
reduce illegal firearms trafficking to young people, to improve
Presidential protection and White House security, to
investigate financial crimes, and to train law enforcement
officers.
The heads of each of the law enforcement agencies can
provide more detail on these budget requests, but I just want
to take a moment to highlight a few items.
Drug Interdiction Initiative
First, we are requesting additional resources to help the
Customs Service with the critical mission of drug interdiction.
In cooperation with the Office of National Drug Control Policy,
the U.S. Customs Service has formulated a 5-year technology
plan, which is designed to deploy an array of technologies to
enable Customs to effectively fulfill both of its missions,
preventing the illegal contraband coming into the country--
particularly drugs--and processing the massive flow of trade
that plays a central role in our economy.
Funding for implementation of the first phase of this plan
has been requested for fiscal year 1999. As you know, Mr.
Chairman, it is critically important to constantly monitor the
integrity functions of law enforcement, especially in an era
when the criminal environment is awash in narcotics money.
It raises the stakes and the corruption potential
everywhere, posing a threat to every nation's interdiction
efforts. That is why we are also seeking an additional $6
million in the 1999 budget for the internal affairs functions
at the Customs Service.
Customs is on the frontline of narcotics interdiction. That
is why we want to make certain that Customs gets all the
training, equipment, and case management support it needs to
make its internal affairs' capabilities second to none.
Money Laundering
Second, a major priority at Treasury is to combat money
laundering. Our antimoney laundering efforts provide a unique
vantage point for getting at the leadership of organized crime
and drug lords by going after their Achilles' heel, the profits
from their illegal activities.
In addition, since money laundering poses a real economic
danger by affecting markets and undermining financial systems,
especially in developing countries, our promotion of stronger
measures internationally will strengthen those systems.
Money laundering is a very sophisticated business that is
international in nature and utilizes state-of-the-art
technology. To be effective, our efforts need to be
international and to use state-of-the-art technology as well.
FinCEN is applying the latest technology to tracing flows
of money that are exceedingly complex. Its budget includes an
initiative for the Gateway Program to coordinate the Federal,
State, and local efforts.
We need these resources to stay on the cutting edge of this
effort by using more innovative technologies and techniques and
fostering better international cooperation. This is
particularly important since money laundering is increasingly
difficult to detect and enforce due to constantly evolving
techniques and the fluidity and organization of capital
markets.
Youth Crime Gun Interdiction
Third, we are asking for resources to support an effort
that the Department and ATF have led over the past 2 years to
prevent violent firearms crime by our Nation's youth.
The youth crime gun interdiction initiative is a
collaborative law enforcement effort between ATF, local police
departments, and prosecutors. Its goal is to develop and share
better information about how juveniles and gang offenders are
illegally obtaining firearms, thereby reducing the illegal
supply of firearms to youth by investigating, arresting,
prosecuting, and incarcerating illegal gun traffickers. A
preliminary analysis indicates this program shows significant
promise.
With these resources, ATF will be able to expand its
initiative to 27 cities and potentially to more cities in the
following years. It will also permit ATF to field new agents in
each of these cities to work with police departments to arrest
the illegal traffickers supplying firearms to juveniles, gang
offenders, and other violent criminals in those jurisdictions.
2000 Presidential Campaign
Fourth, in fiscal year 1999, the Secret Service must begin
to build its capacity to protect candidates and nominees for
the Presidential election in the year 2000. Additional funds
have been requested to meet this mandatory workload increase,
in addition to ongoing White House security and other
protection initiatives.
Federal Law Enforcement Training Center
Finally, we are asking for additional resources to support
the Federal Law Enforcement Training Center in its critical
work.
Over the last 2 years, FLETC has seen an unprecedented
increase in its workload. Current projections indicate that
this increase will continue for the foreseeable future. We need
to move forward on construction of FLETC facilities in order to
meet this need.
Office of Enforcement
Before I conclude, I want to mention the status of some
activities in my Office of Enforcement. We have moved forward,
certainly not as quickly as we would have liked, with the
filling of the OPR slots authorized by this committee. About
one-half of the positions are now filled, including the slot
focussing on internal affairs issues across the bureaus. As I
mentioned earlier, this is a key enforcement area that we must
vigilantly monitor.
Prepared Statement
Mr. Chairman, again, I want to thank you for the
opportunity to appear today and will be happy to answer any
questions that you have.
[The statement follows:]
Prepared Statement of Raymond W. Kelly
Chairman Campbell, Senator Kohl, Members of the Committee, it is a
pleasure for me to be here before you today to highlight the fiscal
year 1999 budget request for Treasury's law enforcement bureaus and
offices. With me today are the heads of the Treasury law enforcement
bureaus, several of whom are new additions to the Treasury team since
the last appropriations hearing: Lewis Merletti, Director of the U.S.
Secret Service (USSS), who was appointed by Secretary Rubin on June 6,
1997; Samuel Banks, Acting Commissioner of the U.S. Customs Service
(USCS); and Ralph Basham, Director of the Federal Law Enforcement
Training Center (FLETC), our newest Director. We are pleased to have
these new Directors joining today with John Magaw, Director of the
Bureau of Alcohol, Tobacco and Firearms (ATF), William Baity, Deputy
Director of the Financial Crimes Enforcement Network (FinCEN), and Ted
Brown, Assistant Commissioner for Internal Revenue Service Criminal
Investigation (IRS/CID).
Each year, Treasury's mission grows in complexity, scope and
importance. Treasury Enforcement performs a critical role in serving
the nation's law enforcement priorities. Treasury bureaus protect our
leaders, safeguard our financial institutions from money launderers and
fraud, and collect taxes. Treasury agents and inspectors protect our
borders from drug traffickers and every day our agents fight to protect
our streets from the threat of bombs, arson and gun violence.
To ensure excellence in achieving these missions, and in keeping
with the spirit of the National Performance Review and the Government
Performance and Results Act, Treasury engaged in a thorough strategic
management process. The Treasury Strategic Plan, which was submitted to
Congress last fall, is the capstone of this planning and analysis
process. The purpose of this plan, and of our other efforts, is to
improve the results which we deliver to the American people.
Treasury's strategic plan provides an overview for the Department
as a whole. In addition, each of Treasury's bureaus developed its own
strategic plan for its operations in support of the overall plan.
Collectively, these strategic plans describe what the Department
intends to accomplish over the next five years and how we will
accomplish it. Our bureaus' and offices' fiscal year 1999 budget
submissions provide a program level description of the annual resources
and actions needed to achieve these goals. The fiscal year 1999
President's budget seeks $3.2 billion for 26,580 direct FTE Treasury
Enforcement personnel, strategic investments, and other operational
costs. This does not include the Internal Revenue Service Criminal
Investigation Division (IRS/CID). IRS/CID, however, plays an integral
role in Treasury law enforcement efforts with their fiscal year 1999
$373 million request for 4,103 law enforcement personnel. We believe
the Treasury law enforcement budget request strikes an appropriate
balance permitting Treasury to contribute substantially towards
balancing the federal budget while supporting new and more effective
approaches to law enforcement. I would like to note that Treasury
enforcement's $3.2 billion request will allow us to combat crime while
making a $33 billion revenue deposit to the U.S. Treasury. By all
counts, this is a tremendous return on investment. The budget
submissions also set specific annual performance goals for each of our
programs and report on our achievements against prior year goals.
Treasury's Office of Enforcement has developed a five-part mission
statement which describes the purposes of our broad law enforcement
functions. We are committed to ensuring that this strategic plan is a
living document. We will use it to guide our operations, and will
continue to update and revise it periodically to make certain it
remains relevant. Our plan was developed with the active involvement of
officials throughout Treasury, and we have sought input from many of
our stakeholders in Congress, elsewhere in the government, and in the
private sector. We continue to welcome input from all of our
stakeholders.
The following describes the goals of our strategic plan, in a
format designed to highlight our bureaus' specific expertise,
activities and budget requests, as well as our cross-cutting expertise
on financial crimes matters. Thereafter, I will discuss the important
role that is played by the Office of Enforcement in enabling our
bureaus to meet their goals and fulfill their missions.
goal: reduce the trafficking, smuggling and use of illicit drugs
Treasury brings essential counter-narcotics and money laundering
expertise to the implementation of all aspects of the President's
comprehensive anti-drug strategy. Our anti-smuggling efforts at the
border and our substantial air support to interdict illegal narcotics
at the source places Treasury in a leading role in the fight against
illicit drugs. For example, this anti-narcotics role is pursued through
anti-money laundering measures, reduction of narcotics-related violent
crime, and demand reduction programs.
U.S. Customs Service
The Customs Service has the primary role for the Treasury
Department and one of the primary roles for the U.S. in interdicting
drugs and other contraband at the border, and ensuring that all goods
and persons entering and exiting the United States do so in accordance
with the law. The Customs Service discovers or seizes, on average, more
than half of the narcotics seized by all Federal authorities in the
United States each year.
Customs has tremendous responsibilities. We need to recount some of
what Customs must confront in order to put the drug interdiction
challenge into perspective: Last year, Customs processed over 442
million people, 118 million vehicles, 320,000 rail cars, and $854
billion worth of merchandise. Customs performed the initial checks,
processes, and enforcement functions for over 40 Federal agencies and
applied hundreds of laws and regulations. It performed these tasks by
servicing more than 300 ports of entry sprawled across 7,000 miles of
land border. It also provided air support to the U.S. Government's
source control efforts in South and Central America. Customs pursued
all of these enforcement missions while collecting approximately $23
billion in revenue for the United States in the form of duties, taxes,
and fees.
Customs constantly strives to improve its ability to stem the flow
of drugs while dealing with the increasing volumes of cargo and
passengers into and out of the United States. Indeed, the number one
operational priority for the Customs Service is preventing the
smuggling of narcotics into the United States. It pursues this mission
through interdiction, intelligence and investigative capabilities that
disrupt and dismantle smuggling organizations. Although Customs seized
nearly one million pounds of illegal drugs in fiscal year 1997, through
programs such as Operation Hard Line at the Southwest border and
Operation Gateway in the Caribbean, the quantity of cocaine seized last
year dropped 12 percent. To counter this decline, Customs recently
embarked upon a program to utilize innovative approaches and will focus
on the most high-risk ports of entry.
Customs will continue to develop the capabilities to meet the
ongoing smuggling threats, on our southwest land borders, in the
Caribbean, and at all borders and ports of entry across the country.
Customs actively participates in multi-agency criminal investigations,
and will continue to strengthen its partnerships with the private
sector, cooperative foreign governments and other Federal agencies in
order to continue its active role to counter narcotics smuggling.
Customs' budget proposal for fiscal year 1999 includes increases
for drug smuggling and money laundering enforcement, integrity
awareness, non-intrusive inspection technology and automation, all of
which will help us achieve our goal of reducing the trafficking,
smuggling and use of illicit drugs.
In addition to Customs many and varied contributions to the drug
fight, we also are proud of such efforts as ATF's campaign against
armed narcotics traffickers through its Achilles Program, the work of
all of our bureaus on HIDTA and ICDE task forces, the use of our
financial crimes expertise to attack the financial underpinnings of the
drug trade, and valuable prevention such as ATF's GREAT program.
goal: combat financial crimes and money laundering
One of the most important missions of the Treasury law enforcement
bureaus is the investigation of financial crimes and money laundering.
Treasury's unique structure permits us to use both our regulatory and
investigatory expertise to follow the money trail and thus undermine
criminal enterprises. We intend to strengthen the capability of our
bureaus to fight money laundering and will continue our international
efforts to promote stronger anti-money laundering laws abroad. As
advances in technology and the removal of barriers allow money to move
with increasing speed among nations, an effective, long term anti-money
laundering strategy will require other nations to adopt strong anti-
money laundering measures in the legal, regulatory, and law enforcement
areas. We will also seek to improve our regulatory functions to protect
financial systems from illicit assets.
Additionally, we are developing anti-counterfeiting strategies that
employ all appropriate technological and investigatory methods to
combat designers and traffickers in counterfeit currency and
instruments. Working with the State Department, we are expanding our
overseas presence to more effectively combat the burgeoning
international criminal threat to our financial systems. We are also
enhancing our leadership role by continuing to develop partnerships
with the financial community and others in the private and public
sectors.
Treasury is working in a number of ways to engage both the public
and private sectors in a common effort to deny money launderers access
to legitimate avenues of finance and commerce. We are continuing to
emphasize the importance of interagency cooperation to pool resources
and share experiences and information. The Committee is aware of the
successes achieved by the El Dorado Interagency Task Force and FinCEN
which were responsible for implementing the Geographical Targeting
Orders (GTO's) directed towards Colombian and Dominican Republic drug-
related money laundering operations.
Treasury held two conferences over the last year, along with
representatives from the Department of Justice, which brought together
the experts from both our Departments--prosecutors, regulators, and law
enforcement agents, all sharing their insights into the problem.
Additional conferences are planned both at the national and regional
level in order to further shut down the avenues available to money
launderers.
The Customs Service, Secret Service, the Financial Crimes
Enforcement Network, and the Internal Revenue Service Criminal
Investigation Division all play a vital role in accomplishing our money
laundering and financial crimes goals. The Office of Enforcement will
seek to enhance the individual and collective work of these bureaus
through completion of a Departmental financial crimes review, which is
currently being undertaken jointly with the Treasury bureaus and
offices.
The following are some of our bureaus' individual efforts in the
current fight against money laundering and financial crimes.
Customs Service
In addition to its substantial efforts to counter illicit drugs,
Customs also plays a vitally important role in combating money
laundering. During fiscal year 1997, Customs' money laundering
investigations resulted in 1,054 arrests and 905 criminal indictments.
Its investigative strategy is focused on disrupting two key business
functions that are necessary for sophisticated international money
laundering operations to function: laundering profits and investing the
proceeds of their criminal activity. Customs' money laundering
coordination center will become operational in 1998 and will coordinate
Customs' nationwide undercover money laundering operations and follow-
up investigations.
Secret Service
The Secret Service is the nation's lead agency in investigating
counterfeiting, forgery, and access device fraud. As the nation's
counterfeiting expert, the Secret Service has investigated fictitious
financial instruments, counterfeit currency and credit card schemes
both domestically and internationally. United States currency is
counterfeited around the globe. Indeed, approximately 70 percent of all
counterfeit currency detected domestically is of foreign origin.
Therefore, it is only prudent that the Secret Service devotes a large
portion of its investigative resources to battling international
counterfeiting issues.
The Secret Service has learned through experience that the best
method to manage this problem is to address counterfeit issues at their
source, with the permanent stationing of Secret Service agents in
foreign posts. In addition, the Secret Service leverages its resources
by enlisting international law enforcement agencies to identify
counterfeit currency and suppress counterfeiting plates. These efforts,
primarily carried out through counterfeit detection seminars, have
promoted a cooperative international law enforcement effort to detect,
suppress and prosecute counterfeit violations.
Moreover, to prevent financial fraud schemes, the Secret Service
has developed and implemented longstanding and effective partnerships
with private industry to better understand various financial systems
and combat significant losses. Assisting the industry and their
financial systems with ``systemic fixes,'' aggressive analysis, and
proactive security enhancement measures has increased the overall
security of these financial systems. Proactive joint initiatives with
the industry, such as public awareness campaigns, media programs,
speeches, seminars, and security training are having a positive impact.
These partnerships have reduced the ability of criminal organizations
to target financial institutions.
FinCEN
While Customs, Secret Service and IRS-CID are the financial crime
investigators, FinCEN serves as Treasury's principal support arm for
such investigative efforts. As its name states, FinCEN is a network, a
link between the law enforcement, financial, and regulatory
communities. It brings together government agencies and the private
sector, in this country and around the world. It works to maximize
information-sharing among these communities thereby furthering efforts
to prevent and detect money laundering activities. The intelligence
derived from the GTO's and other efforts has also contributed to the
work of an interagency coordinating group (ICG) which is located at
FinCEN. The group includes the Internal Revenue Service, the Customs
Service, the Drug Enforcement Administration, the Federal Bureau of
Investigation, and the U.S. Postal Service. The ICG has been building
on knowledge which its members, especially the Criminal Investigation
Division of the IRS and the Customs Service, have developed about a
highly complex money laundering system used by the Colombian Cartel,
known as the Black Market Peso Exchange.
The initiatives in FinCEN's budget request will strengthen the
quality of the support that it provides to law enforcement.
IRS-CID
I want to say a few words about the important contribution to
Treasury's law enforcement efforts made by IRS-CID. Fighting financial
crime is a job well suited for the special agents of IRS-CID. They are
known for their ability to ``follow the money trail'' and stop the
criminal when no one else can. IRS-CID agents are financial experts in
combating money laundering and tax evasion. Their expertise is sought
in investigations of all types of financial crimes, including health
care fraud, pension fraud, insurance fraud, bankruptcy fraud,
telemarketing fraud, gaming, narcotics, and public corruption.
Today, IRS-CID is combating the increased use of computers for
committing financial crimes with its latest weapon * * * a new type of
special agent known as the Computer Investigative Specialist (CIS).
Through IRS-CID's national Computer Investigative Specialist Program,
the CIS continuously receives training in cutting edge investigation
automation and evidence seizure and data recovery methods. Combining
its unique financial expertise with advanced computer skills permits
IRS-CID to optimize its ability to investigate and solve computer based
and computer related financial crimes. IRS-CID is taking the lead in
providing this specialized computer investigative training to agents
from the other Treasury bureaus.
goal: fight violent crime
Treasury is working to fight violent crime by arresting the most
violent armed offenders, denying criminals and juveniles access to
firearms, reducing the risk of violent crime in our communities,
safeguarding the public from arson and explosive incidents and
strengthening our capability to fight terrorist threats to the United
States. To enhance our efforts to reduce and prevent violent crime with
firearms, Treasury has fully supported the Administration's and
Congress' efforts to prevent criminals, gang offenders, and juveniles
from illegally obtaining firearms. These efforts have been built on
three foundations: implementation of the first phase of the Brady law,
to stop felons and other prohibited persons from buying handguns from
licensed dealers; reform of the firearms dealer licensing systems to
ensure a high level of commercial integrity and compliance with local
laws; and a tough, focused illegal firearms trafficking program aimed
at stopping trafficking to criminals, gang offenders, and juveniles.
Additionally, we are working to maintain appropriate firearms
importation and international illegal firearms trafficking policies and
to share crime gun tracing and anti-smuggling expertise with the
international community in order to combat the illegal firearms
trafficking.
To safeguard the public from arson and explosives incidents, we
will maintain the highest standards of investigative expertise and
state-of-the-art technology to most effectively respond to those
incidents. Our studies on the use of tracer elements in explosives
materials will continue and we will enhance the national repository for
arson and explosives information to assist in the investigation of
explosives incidents. We will endeavor to prevent criminal misuse of
explosives in crimes of arson through enforcement, regulation, and
community outreach and investigate thefts and illegal diversion of
explosives.
ATF
The Bureau of Alcohol, Tobacco, and Firearms (ATF) plays the
leading role for Treasury, indeed the entire Federal government, in the
fight against armed violent crime. ATF is responsible for enforcement
of the Federal firearms laws as well as for regulation of the firearms
and explosives industries. It investigates some of the most
destructive, dangerous, and controversial crimes in the United States,
including bombings of abortion and family planning clinics, church
arson, firearms crimes and illegal trafficking, and firearms and
explosives violations.
In an effort to reduce armed violent crime, ATF focuses its
investigative efforts on armed violent criminals, career criminals,
armed narcotics traffickers, violent gang offenders, and domestic and
international firearms traffickers that supply the illegal firearms
market. It strives to deny criminals, gang offenders and juveniles
access to firearms, safeguard the public from bombings and arson, and
imprison violent criminals.
Through its Violent Crime Coordinators (VCC's), ATF is focusing its
investigations on armed recidivist and violent career criminals. The
VCC's will continue to assist in removing the armed criminals that pose
the greatest threat to society by identifying and investigating the
most violent offenders, analyzing the best route to prosecution and
working closely with the United States Attorneys' Offices to maximize
the effectiveness of our investigative efforts.
Through its Youth Crime Gun Interdiction Initiative (YCGII), which
began as a small pilot effort in 1996, ATF is working to further reduce
the illegal trafficking of firearms to gang offenders and juveniles.
Due to the positive reception of the program in the 17 pilot cities and
to ATF's first comprehensive trace analysis report designed for agents
and police departments, the President confirmed his support by
announcing that 10 additional cities would be included in fiscal year
1998. We are grateful for the support you have already provided to this
program, which is designed to supplement and strengthen ATF's illegal
firearms trafficking program. Through YCGII, ATF is developing new
methods of identifying the illegal sources of firearms being supplied
to gang offenders, juveniles, and criminals and to prosecute the
traffickers responsible for providing these guns. ATF will work with
the nation's police departments to provide comprehensive crime gun
tracing, illegal market analysis, investigative information and
training to the 27 cities. To break the chain of illegal supply of
crime guns to violent gang offenders and juveniles, we will hire more
than 160 agents to collaborate with U.S. Attorneys and police
departments in investigating and arresting the illegal firearms
traffickers.
ATF is also renowned for its expertise in the areas of arson and
explosives. Through its certified fire investigators, National and
International Response Teams, accelerant and explosives detection
canine program, its accredited laboratory, its arson and explosives
repository, and numerous other programs, ATF maintains its role as the
leader and innovator in these areas. Its expert work on the National
Church Arson Task Force has helped produce a 33 percent clearance rate
for the arsons under investigation, a rate that is more than twice the
average rate for arson crimes in general. ATF assists State and local
authorities with arson investigations falling under Federal
jurisdiction and having a significant impact on their community,
particularly when the nature or extent of the problem extends beyond
the available resources or expertise of the locale involved. ATF also
provides training to other Federal, State, and local enforcement
agencies in the detection and investigation of arson, particularly
arson-for-profit, and post-blast bombing investigation.
As Director Magaw will explain in greater detail, the additional
funds requested in ATF's budget for the VCC's and YCGII will permit it
to better fulfill the goal of countering violent crime.
goal: protect our nation's leaders and visiting world leaders
Treasury is striving to manage the ever changing nature of threats
by developing, acquiring and deploying necessary countermeasures. One
aspect of this proactive approach is developing a formal risk
assessment-based decision making process to enhance protective
capabilities. Toward this end, we will identify emerging technologies
that pose a threat to those we are entrusted with protecting and
develop defenses against them. We will also exploit technology that can
be used to lower risk to protectees and ensure their safety. To help
fulfill the vital protective mission and to provide the safest possible
environment for all protectees, we will continue to develop
partnerships between the law enforcement agencies inside and outside
Treasury.
Secret Service
As you know, the United States Secret Service has the critical
responsibility of protecting the President, Vice President, and other
specially designated protectees. It accomplishes this protective and
investigative mission effectively in an increasingly hostile society.
During the past fiscal year, the Service successfully managed
protective security for several major events, as well as the
implementation of numerous, ongoing security enhancements at the White
House complex and the Vice President's residence. The Secret Service's
White House Emergency Plan was revised to include enhanced procedures
in the event of a crisis situation at the White House complex. The
Service also continued its efforts to combat the increasing threats
from chemical/biological weapons. To respond to this threat, the
Service has formulated a chemical/biological detection and protective
program which combines multiple systems: fixed detectors, collective
protection systems, and portable detection equipment for deployment at
critical protective sites. Additionally, the Service's ultimate goal is
to provide immediate chemical/biological detection, mitigation and
decontamination support for all Presidential movements.
During fiscal year 1999, the Service begins the build-up for the
Presidential campaign of the Year 2000. As it begins planning for the
Presidential campaign and the inauguration of January 2001, the Secret
Service's budget request will further advance its ability to maintain
the highest level of physical protection possible for its protectees
through the effective use of human resources, protective intelligence,
risk assessment and technology.
goal: provide high quality training for law enforcement personnel
Assuring the excellence of training of Federal law enforcement is
of vital importance to the future effectiveness of our law enforcement
efforts. As the training agent for the majority of all Federal law
enforcement agencies, we currently have 70 Federal agencies
participating in training programs at the FLETC. We are committed to
enhancing basic and in-service training programs to meet the changing
needs and increasing demands of Federal law enforcement as we combat
increasingly sophisticated, technologically advanced and globally
linked crime. Our objective is to develop and operate state-of-the-art
facilities and systems responsive to interagency training needs.
To meet the goal of quality training within a limited budget, to
meet current training needs and to prepare for the future, we will
maintain and improve FLETC's physical plant by implementing the master
plan to guide the expansion of facilities to meet projected training
needs. We will also develop alternative training delivery systems, such
as distance learning capabilities, thereby effecting long term cost
savings. Additionally, we will expand the use of advanced technology in
training and support, especially in the areas of computer-based
training and simulation, to provide not only state-of-the-art training
but long-term budget savings as well. We will also provide
international training in support of the International Law Enforcement
Academy (ILEA) in Budapest and the ILEA being developed for Latin
America (ILEA South).
FLETC
One of the reasons that Treasury law enforcement is so successful
is the quality of training that its agents and inspectors receive at
the Federal Law Enforcement Training Center (FLETC). Since its
establishment by a memorandum of understanding in 1970, FLETC has built
a reputation for providing high quality, cost effective law enforcement
training. As you know, there are many advantages to consolidated
training for Federal law enforcement personnel, not the least of which
is an enormous cost savings to the Government. Seventy agencies in 200
different training programs now train at FLETC. Additionally, FLETC has
been involved in providing law enforcement training overseas for over
20 years and has trained more than 5,000 foreign law enforcement
officials from more than 102 different countries. We expect this growth
to continue as more agencies recognize the many benefits of
consolidated training.
Over the last two years, the FLETC has seen an unprecedented
increase in its workload. Current projections indicate continued
workload growth through fiscal year 1999 and beyond. During fiscal year
1997, the FLETC provided training to 23,329 students representing
109,116 student-weeks of training, the largest workload in the history
of the Center. In fiscal year 1998 the workload is expected to grow to
32,404 students. The majority of this growth is attributable to recent
Congressional and Administration initiatives to control immigration
along our Nation's borders and to provide a safe workplace for Federal
employees.
To permit FLETC to train the law enforcement agents in the skills
needed for the future, it has continued to implement its master plan
for facilities. This plan was first introduced in 1989 and when fully
implemented will permit FLETC to achieve its goal of further
developing, operating, and maintaining state-of-the-art facilities and
systems responsive to interagency training needs. Indeed, a major
portion of FLETC's budget request is the continued implementation of
the facilities master plan for new construction at FLETC's two centers
in Glynco and Artesia. This funding will ensure that less efficient
temporary facilities, now relied upon to meet workload requirements,
are phased out as soon as possible. Since early 1996, FLETC has been
operating at full capacity and we expect that this workload will
continue through fiscal year 1999. To accommodate this increasing
demand, FLETC has been utilizing temporary buildings and contracted or
licensed facilities. In addition, some Border Patrol training is
occurring at a temporary facility in Charleston, South Carolina. As
FLETC's capacity increases, the need for a temporary site at Charleston
can be phased out.
In addition to its domestic training responsibilities, the FLETC is
also being called upon to play a larger and more important role in
support of the Administration's and Congress' foreign policy
initiatives involving the training of foreign law enforcement
officials. We estimate that there will be a 36 percent increase in
FLETC's fiscal year 1998 international training workload as compared
with fiscal year 1997. A key provision in the FLETC's fiscal year 1999
budget request and central to FLETC's ability to meet these increased
training needs is the ILEA South initiative.
At the San Jose Summit on May 8, 1997, President Clinton announced
that an international law enforcement training academy would be created
in Latin America (i.e., ILEA South) before the end of 1997. Patterned
after ILEA Budapest, the goals of ILEA South are to expand
relationships with and among foreign law enforcement officials from
Latin America and the Caribbean, support democracy by stressing the
rule of law in international and domestic police operations, foster
international cooperation and raise the professionalism of law
enforcement judicial officials.
The Department of State selected the Department of the Treasury as
the lead agency to establish ILEA South. In turn, the Department is
relying on the FLETC to provide operational management oversight and
administrative support to guide program development for ILEA-South. The
first ILEA South training program was recently conducted in Panama
City, Panama, during November and December 1997. Thirty-two students
from eight Central American countries attended the program. The program
was extremely well received and was considered by all those involved to
be a great success.
office of enforcement
We recognize that the work of our law enforcement bureaus can only
be enhanced through the oversight and support provided at the
Departmental level. In this regard, I am pleased to report that the
Office of Enforcement has worked diligently over the past year to
fulfill these responsibilities, and has a plan in place for maximizing
such efforts over the next year. This Committee's support in the
creation of an Office of Professional Responsibility (OPR) will help us
meet these goals. Since receiving funds in last year's appropriations,
we have developed a precise staffing and hiring plan for the OPR
positions to provide direct oversight on such important matters as
internal affairs, training, and inspection issues. The process included
extensive outreach to expand the pool of qualified applicants, as well
as thorough reviews of applications and several rounds of interviews
for select candidates, including interviews with our bureau heads.
While the process continues, we have selected a number of impressive
members of the OPR team. They are on board, and we are confident that
they will help our bureaus perform their missions as safely,
professionally, and well as possible. On one issue in particular--
integrity--Treasury and its bureaus share the Committee's strong
commitment, and have made it a priority for OPR.
The Office of Enforcement also has taken other measures to enhance
its support and oversight missions. Among other activities, we worked
closely with Customs, ONDCP, and others to ensure close cooperation on
anti-narcotics matters; solidified the Department's vital role on anti-
money laundering issues through such activities as the geographic
targeting orders and the anti-money laundering conferences hosted
jointly with the Justice Department; coordinated all enforcement-
related strategic planning activities for Treasury as it fulfilled its
GPRA responsibilities; maintained a lead role within the Administration
on the National Church Arson Task Force, as well as international money
laundering and financial crime issues; performed a complete management
assessment at FLETC by working with an outside consultant, expanded the
Youth Crime Gun Interdiction Initiative to 10 additional cities; and
established ILEA South in conjunction with the State Department and
others.
conclusion
In summary, the Treasury Department is proud of the contributions
that its law enforcement bureaus have made and continue to make to this
nation. Treasury and its bureaus have defined goals and objectives to
ensure our excellence in protecting our borders, fighting violent
crime, protecting our nation's leaders, defeating financial crimes, and
training our law enforcement agents for the challenges of countering
increasingly sophisticated criminals. This budget request will enable
Treasury's law enforcement bureaus to meet the current challenges and
to begin preparations for the challenges of the 2lst century. I am
confident you will find this to be a responsible budget, as it
considers the growing demands of the law enforcement in a constrained
budget environment.
With your permission Mr. Chairman, I would like to ask the
Directors of the Treasury law enforcement bureaus to describe in more
detail those strategies and goals we see as playing a key role in the
coming fiscal year, as well as our recent accomplishments. After which
we would be pleased to answer any questions you or Members of this
Committee may have. Thank You.
Congratulations on Pending Nomination
Senator Campbell. Thank you. I appreciate that, Mr. Kelly,
and congratulations on your pending nomination.
Mr. Kelly. Thank you.
Senator Campbell. Good luck on protecting the Presidential
candidates for the year 2000. There should be about 40 of them,
and 2 of them are not here, however, are they?
Before we go on to the next person, I would like to also
welcome the people in the back of the room, the youngsters who
are from Closeup. I am sorry we do not have enough chairs for
you, but I hope your visit here in the Capitol and this
committee is enjoyable, and educational, too. We are glad you
are here.
We will just go in that order. Next is John Magaw, please.
John, nice to see you.
Statement of John W. Magaw
Mr. Magaw. Nice to see you, too.
Thank you, Mr. Chairman and Senator Kohl.
I am pleased to represent all the men and women of ATF.
They are outstanding in their abilities and in their
dedication.
Once again, I have asked the ATF executive staff to be here
today. We find that it helps for them to hear your questions
and comments firsthand so that we can all better respond to
your concerns.
ATF Budget Request
ATF's 1999 budget request is $586,324,000 and 4,038 full-
time-equivalent positions. This budget includes $32 million for
the relocation of Bureau headquarters, which is essential for
the protection of our employees and our customers. The other
major increases are found in the $16 million and 81 FTE's to
expand the President's Youth Crime Gun Interdiction Program,
and $2 million to expand our Violent Crime Coordinator Program.
ATF Strategic Plan
Our request and the 1999 performance plan for this Bureau
are directly linked to the elements of our strategic plan to
include protecting the public, reducing violent crime, and
collecting the revenue.
As we implement our key programs, we will utilize the full
array of enforcement tools to carry out our interwoven mission.
That blends tax and regulatory and criminal investigation
functions. Not only does this unique mix serve ATF's own
operational responsibilities, but it allows us to provide
otherwise unavailable expertise to State and local and other
Federal agencies.
Youth Crime Gun Interdiction Initiative
The youth crime gun interdiction initiative typifies the
driving collaborative spirit behind our strategic plan of
partnership and technology that merge together to provide
maximum value for the citizens that we serve. Twenty-seven
major cities are employing ATF's expertise in resources to
trace firearms used by juveniles in crime, to identify sources
and patterns of illegal firearms trafficking, and to develop
strategies to reduce the flow of weapons to the youngest and
the most volatile members of our society.
Violent Crime Coordinator Program
ATF's Violent Crime Coordinator Program, for which we are
also requesting additional funding, is yet another
collaborative effort, but one that concentrates on the most
hardened members of our society. Because many Federal firearms
laws contain provisions for mandatory extended sentences, ATF
strives to increase State and local awareness of the available
Federal prosecution under these statutes.
ATF's violent crime coordinators will work closely with
local prosecutors and the U.S. Attorney's Office to provide the
investigative component to the Department of Justice
Triggerlock Program. We will focus on ensuring that the violent
career criminals are appropriately matched to the criminal
charges that will remove them from our communities for the
longest period of time.
Personnel Levels
While the demands on ATF have increased dramatically, it is
of special note that we are only 100 people above the personnel
levels of 25 years ago. Moreover, in the past 3 years, our
special agent population has decreased by over 200. This puts
an enormous strain on our personnel and limits the incidents
that we can respond to with State and local enforcement. While
we descended from roughly 2,000 agents to 1,800, a case could
be made that we should have been increasing to approximately
2,600. Also, our inspector ranks have a shortfall of
approximately 250 personnel.
Few days pass that we do not receive pleas from U.S.
attorneys or State and local law enforcement for additional ATF
agents. The 2,600 figure would put only a few more agents in
each city.
You can be confident as we move along that ATF is able to
fully account for the funding that you have provided. I am
pleased to report that for the third consecutive year, we have
received the highest possible rating on the annual inspector
general audit of our finances and our internal controls. The
audit this year was conducted by Price Waterhouse.
Mr. Chairman, that concludes my statement.
Prepared Statement
Senator Campbell. Thank you, Mr. Magaw. I am proud that
somebody is watching the money around here. We will insert your
prepared statement in the record.
[The statement follows:]
Prepared Statement of John W. Magaw
Thank you Mr. Chairman, Senator Kohl, and members of the
Subcommittee. I welcome this opportunity to appear before this
subcommittee and further acquaint you with ATF and the value we bring
to the American public. I am here today to support the Bureau's fiscal
year 1999 budget request of $586,324,000 and 4,038 full-time equivalent
positions (FTE). When compared to fiscal year 1998, this request
represents a net increase of $22,947,000 and 100 FTE's. This increase
consists primarily of $32,000,000 for the relocation of the Bureau
headquarters and $16,000,000 with 81 FTE's for the President's Youth
Crime Gun Interdiction Initiative.
With me today are my executive staff members:
Mr. Bradley Buckles, Deputy Director; Mr. William Earle, Assistant
Director for Management and Chief Financial Officer; Mr. Andrew Vita,
Assistant Director for Field Operations; and Mr. Jimmy Wooten,
Assistant Director for Firearms, Explosives and Arson; Mr. Arthur
Libertucci, Assistant Director for Alcohol and Tobacco; Mr. Stephen
McHale, Chief Counsel; Ms. Gale Rossides, Assistant Director for
Training and Professional Development; Mr. Patrick Schambach, Assistant
Director for Science and Technology and Chief Information Officer
(CIO); Mr. Patrick Hynes, Assistant Director for Liaison and Public
Information; Ms. Marjorie Kornegay, Executive Assistant for Equal
Opportunity;
progress in strategic planning
As you are aware, starting in 1997, the Government Performance and
Results Act, commonly referred to as ``GPRA'' requires us to: publish
strategic plans covering at least 5 years, publish annual performance
plans that include measurable goals, and report on actual performance.
With our fiscal year 1999 budget, we are including a performance
plan and a set of performance targets for each of our three major
activities. We have made progress in developing meaningful,
quantifiable measures for our programs and will continue to look for
improvements. We welcome Congress' feedback on measures we have
submitted.
During fiscal year 1996, ATF aligned its planning and budget
structure to conform to the three major activities identified in the 5
year Strategic Plan that the Bureau published in March 1995. During
fiscal year 1997, ATF's Strategic Management Team revised the Strategic
Plan and enhanced the planning and budget structure based on the
results of interviews and surveys of our customers and stakeholders
regarding their expectations and needs. The revised activities are:
Activity 1: Reduce Violent Crime.--Effectively contribute to a
safer America by reducing the future number and costs of violent
crimes, complement enforcement with training and prevention strategies
through community, law enforcement, and industry partnerships.
Key Indicators: Crime Related Costs Avoided; Future Crimes Avoided;
Number of Persons Trained/Developed (non-ATF); Number of Firearms
Traces; Number of Inspections (Explosives); and Percent Population
Inspected (Firearms).
Activity 2. Collect Revenue.--Maintain a sound revenue management
and regulatory system that continues reducing taxpayer burden, improves
service, collect the revenue, and prevents illegal diversion.
Key Indicators: Taxes and Fees Collected from Alcohol, Tobacco,
Firearms, and Explosives Industries; Ratio of Taxes and Fees Collected
vs. Resources Expended to Collect; and Burden Hours Reduced.
Activity 3. Protect the Public.--Protect the public and prevent
consumer deception in ATF's regulated commodities.
Key Indicators: Response to Unsafe Conditions and Product
Deficiencies Discovered (Explosives); and Number of Commodity Seminars
Conducted.
ATF is committed to defining its Federal role, setting long term
strategic and annual performance goals, managing our resources and
investments to achieve those goals, instituting measures, and reporting
annually on our performance. ATF will continue to work throughout
fiscal year 1998 to make sure our measures for success are carefully
defined and tracked.
atf's unique programs
ATF is a law enforcement organization within the United States
Department of the Treasury with a combination of responsibilities
dedicated to reducing violent crime, collecting revenue, and protecting
the public. We use our jurisdiction, skills, and assets to assist
Federal, State, and local law enforcement in the fight against crime
and violence. We accomplish this through an integrated approach of
effective enforcement of the Federal firearms, explosives, and arson
laws.
Year after year, ATF works to make America a safer place for all of
us by fighting violent crime. ATF's position of being vested with the
enforcement and regulation of the Federal firearms and explosives laws
as well as the regulation of those industries puts it at the forefront
of violent crime enforcement.
The statutes ATF enforces involve a blend of tax, regulatory, and
criminal investigation functions that the Treasury Department is suited
to handle. Treasury law enforcement functions have always involved
criminal laws inseparably linked to revenue laws and regulatory
controls, whether in the enforcement of tax or trade law, currency
protection, or firearms regulations. In the case of the firearms and
explosives industries, the criminal investigative responsibilities
cannot effectively be separated from the tax and regulatory
responsibilities because they are so technically and practically
interwoven.
ATF achieves tax compliance by focusing inspections on production
facilities offering the greatest risk to revenue based on the volume of
operations, history of violations, poor internal controls, or
questionable financial conditions. Teams of ATF special agents,
inspectors and auditors perform complex investigations of interstate
and international criminal violations of the Federal Alcohol
Administration Act and sections of the Internal Revenue Code and the
Contraband Cigarette Act. In the past five years, we have noted a
marked increase in the diversion of alcohol and tobacco products by
organized criminal groups.
ATF inspectors maintain regulatory oversight of the legal
explosives industry, including 10,548 explosives licensees and
permitees. ATF's jurisdiction and specialized expertise provide
invaluable services to the public through enforcement, regulation, and
cooperative industry partnerships.
ATF provides a wide range of services to local communities to
investigate explosives incidents and arson. For instance, our National
Response Teams (NRT's) include special agents, certified fire
investigators, explosives technicians, fire protection engineers, and
forensic scientists who respond to major incidents within 24 hours of a
request to assist in large-scale fire and explosives scene
investigations. Additionally, ATF: 1) has been at the forefront as a
leader in the Church Fire Investigations, 2) uniquely trains canines in
accelerant-detection and explosives detection, 3) is the catalyst and
principal engineer of several ongoing explosives studies, 4) provides
the only Federal investigative expertise in solving arson-for-profit
schemes, and 5) is seeking to enhance the level of expertise of all
fire investigators through an innovative CD ROM virtual reality
training tool that is being developed.
In the area of firearms, our mission is simple--to reduce gun
violence and to fairly and effectively regulate the legitimate firearms
industry. Our targets are criminals who illegally use and/or supply
guns to other criminals or our children. The almost daily acts of
firearms violence reported in the media remind us of the dangerous
times in which we live. Our National Tracing Center provides 24-hour
assistance to Federal, State, local and foreign enforcement agencies in
tracing guns used in crimes. It is the only facility of its kind in the
world. To enhance ATF's ability to trace crime guns, the National
Tracing Center is partnering with members of the gun wholesale firearms
industry through electronic linkups that are greatly enhancing trace
completion time, while at the same time saving the firearms industry
money. This joint government/industry partnership is helping to fight
crime nationally.
fiscal year 1997 highlights
I would like to share with the Committee those successes in fiscal
year 1997 that demonstrate ATF's mission accomplishments and our
efforts for more effective government. During our 25th anniversary as a
Bureau, we:
--Refined ATF's strategic plan based on an environmental assessment
survey issued to customers, stakeholders, and ATF personnel.
--Developed an illegal firearms trafficking guidebook that is the
definitive reference for ATF special agents and conducted
firearms trafficking schools and interstate nexus schools to
provide firearms trafficking training for Federal, State, local
and international law enforcement personnel.
--Received four Hammer Awards for Innovation in Government from the
Vice President's National Performance Review. The awards were
given to the Partnership Formula Approval Process Team,
CEASEFIRE Team, Out-of Business Records Management Team, and
Project LEAD Team. The ``Disarming the Criminal Program,''
ATF's firearms trafficking enforcement effort, was a finalist
in the Innovations in American Government Awards Program
sponsored by Harvard University's Kennedy School of Government.
--Established the Arson and Explosives National Repository which will
serve as a statistical data base for arson and explosives
incidents and as a valuable investigation tool for other
Federal, State and local law enforcement agencies. The
information will be available to authorized Federal, State and
local agencies.
--Published the Department of the Treasury ``Odor Recognition
Proficiency Standard'' for explosives detecting canines. This
is the first Federally Published standard for these types of
canines.
--The National Church Arson Task Force issued a report to the
President outlining the accomplishments of its second year.
--Deployed Integrated Ballistic Identification System (IBIS)
technology in eight new sites to further strengthen the ability
of State and local law enforcement to reduce violent crime
through technological innovations that help target the violent
offender.
--Traced over 37,000 recovered crime guns involved with the Youth
Crime Gun Interdiction Initiative.
--Began the development of a joint explosives detection canine pilot
program with the Federal Aviation Administration for use at
Washington National Airport and Dulles International Airport.
--Initiated a major effort to hire special agents and inspectors for
our Office of Field Operations. ATF received, screened, and
processed approximately 4,334 special agent applications and
1,072 inspector applications. ATF is currently conducting
interviews with plans to hire over 100 special agents and
inspectors. We are committed to remaining on a regular hiring
schedule, due in part to a significant number of expected
retirements, and to prevent the loss of critical expertise.
--Significantly increased the number of crime gun traces (190,000);
continued to develop Project LEAD, the illegal firearms
trafficking information system; deployed new trace related
hardware to more field offices; developed comprehensive,
community-based crime gun trace analysis as a new strategic
tool for Federal, State, and local law enforcement; and piloted
it in 17 sites through the Youth Crime Gun Interdiction
Initiative.
--Expanded Project LEAD, a state-of-the-art computer software program
which analyzes firearms trace data maintained by the National
Tracing Center.
--Established the National Revenue Center in Cincinnati. We have
reduced from five to three the regional Technical Services
centers in which ATF employees perform tax and permit
functions; consolidated resources; and improved the consistency
of work products and services.
--Hosted an international conference on fire research that was
attended by 65 world experts on the subject. The ideas and
information exchanged will enhance our development of the ATF
Fire Investigation Research and Education Center in partnership
with the academic community.
--Conducted 22 ``train-the-trainer'' classes with 665 police officers
participating from across the United States in ATF's Gang
Resistance Education and Training Program (G.R.E.A.T.). The
program curriculum, designed to decrease gang violence across
the nation, is taught by trained, uniformed police officers and
ATF special agents to children in the sixth, seventh and eighth
grades. In fiscal year 1997, 471 State and local agencies
sponsored G.R.E.A.T. classes for over 314,000 school children.
--Continued development and deployment of a fully integrated state-
of-the-art information technology infrastructure via our
Enterprise System Architecture which in fiscal year 1997
deployed 1,049 desktop and notebook personal computers to six
of twenty three field operations divisions, a total of 58 field
offices. All hardware and software meets Enterprise System
Architecture standards designed to fulfill our critical
business requirements. This is a part of our preparation for
the year 2000 requirements.
--Created the Diversion Branch to deal with diversion of cigarettes
and distilled spirits across State and national borders in
violation of law. The new branch combines investigative,
regulatory and intelligence gathering expertise to combat loss
of revenue in partnership with State, international and other
Federal agencies.
--Designed and commissioned the construction of a Rapid Response
Laboratory, a mobile crime laboratory, that provides the
versatility required for the uniqueness of each crime scene and
will facilitate field analysis.
--Standardized and distributed hand held portable radio units to all
special agents for the first time in ATF's history; procured
and outfitted two self sustaining mobile radio communications
platforms with secure communications capability to support
critical incident responses.
--Redesigned and implemented the third generation of our Internet
World Wide Web service and ATF homepage, (http://
www.atf.treas.gov). ATF web offerings were expanded to include
secure Internet services such as a search engine, news groups,
and downloadable electronic forms for internal use by our
customers and work force.
--Completed the first phase of a procurement subsystem (Procurement
Desktop and Program Office Desktop) with the intention of
creating an electronic desktop environment for processing all
future requisitions.
--Provided 15,893 training opportunities for ATF employees and 34,824
training opportunities for other Federal, State, local, and
foreign law enforcement officers, as well as industry
personnel.
--Initiated a partnership with the American Re-Insurance Company,
U.S. Fire Administration, and the National Fire Protection
Association to develop a CD-ROM virtual reality training tool
which will raise the base level of knowledge of fire
investigators nationwide.
the year in progress
ATF and its predecessor agencies have rendered honorable and
effective service for generations. As with all organizations, we have
gone through changes. Effective organizations continuously re-examine
the way they do business. Over the last several years, we have sought
to improve internal controls, accountability, management training and
operational processes and systems. These changes have provided the
framework for making ATF a stronger more effective organization. With
the strong support and encouragement of the Committee, we have begun to
make significant strides in these areas.
When I appeared before this subcommittee last year, I talked about
implementing a series of operational changes. I feel we have made
substantial progress in implementing these changes. As part of our
continued work to build a sound and safer America through innovation
and partnerships, we face several important issues throughout fiscal
year 1998 and into fiscal year 1999:
Headquarters Relocation.--ATF has been pursuing a suitable, secure
site to relocate its headquarters, that will provide a safe environment
for its employees and mission.
Restoration of Base Budget (Direct Appropriation).--ATF's base
budget had a disproportionate share of pay, fixed and operational
resources. ATF has made strides to correct this problem in fiscal year
1997 and 1998. We appreciate the Committee's support. With the
Committee's continued support, ATF will meet its goal of continuing to
correct this problem in fiscal year 1999.
------------------------------------------------------------------------
Percent--
--------------------------------------
1997 1998 1999
------------------------------------------------------------------------
Pay.............................. 69.58 64.74 60.46
Fixed............................ 16.17 16.62 15.91
Operational...................... 14.25 18.64 23.63
--------------------------------------
Total...................... 100.00 100.00 100.00
------------------------------------------------------------------------
Construction of ATF's National Laboratory Center With the Addition
of the Fire Investigation, Research and Education (FIRE) Center.--ATF
received approval for funding for site acquisition, design and
construction. Implementation anticipates that the site and development
planning, design, architecture, and a large percentage of the
engineering will be completed in fiscal year 1998. In addition, the
private development partner through GSA will begin site development
activities.
Implement GPRA.--During fiscal year 1997, the Bureau identified
some outcome oriented performance measures for fiscal year 1998,
integrated its strategic plan with the budgeting process, and refined
its budget activity structure to accommodate its business strategies.
In fiscal year 1998, the Bureau will continue to develop systems and
collect data to report on these performance measures.
Canine Explosives Detection Program.--The Bureau has initiated the
infrastructure necessary to provide training for up to 100 canines for
State, local and Federal agencies annually.
Increase Number of Annual Explosives Inspections.--ATF's goal is to
increase the annual inspection coverage to 65-70 percent of all
explosive storage facilities and to this end will add 26 new
inspectors.
National Arson and Explosives Repository.--The Bureau expects to
complete the second year requirements for systems development, hardware
requirements, and field office on-line access to this information.
Illegal Firearms Trafficking.--A strategy to expand Project LEAD
from a personal computer/local area network to a nation wide network by
linking the local area networks via a wide area networks is being
deployed as part of the Enterprise System Architecture. This should be
completed by mid fiscal year 1998.
Continuation of G.R.E.A.T. Program.--The partnership originally
established between ATF, the Phoenix Police Department and the Federal
Law Enforcement Training Center has been expanded to include the
Portland, Oregon Police Department, the Philadelphia, Pennsylvania
Police Department, and the Orange County Florida Sheriff's office. The
expanded partnership will allow for regional management of the program
while continuing to utilize the expertise of each agency to provide
gang resistance and anti-violence instruction to children in a
classroom setting. ATF will provide funding to approximately 74
different law enforcement agencies through cooperative agreements to
support their participation in this community outreach program.
Youth Crime Gun Interdiction Initiative.--ATF's goal is to ensure
and support comprehensive tracing in 10 new police departments, to
provide a mid year report on city based crime gun trace analysis for
all 27 participating sites, and to continue to develop collaborative
enforcement strategies and operations against illegal gun traffickers
supplying juveniles, gang offenders, and criminals.
fiscal year 1999 resource request
Before I move to more details of our program activities, I will
highlight the following key budget changes for fiscal year 1999 which
will move us closer to reaching our strategic goals, strengthening the
management infrastructure, as well as providing the tools necessary to
carry out our unique missions.
In addition to $47,373,000 for maintaining current service levels,
our salaries and expenses appropriation request includes the following:
President's Youth Crime Gun Interdiction Initiative: $16,000,000
The President's Youth Crime Gun Interdiction Initiative (YCGII), a
component of ATF's illegal firearms trafficking program, includes ATF's
firearms records, tracing, and reporting system, associated equipment
and training, and additional agents to follow up on investigative
information generated by this system. Specifically, ATF is requesting
funds to break the chain of illegal supply of crime guns to youth and
minors. The initiative proposes to expand the successful pilot program
now in 17 cities to a total of 27 cities, including six agents for each
of the 27 YCGII field cities (a total of 162 agents). Additionally, the
funding is included to:
--Provide comprehensive crime gun tracing by State and local law
enforcement;
--Provide rapid high volume crime gun tracing and crime gun market
analysis by the National Tracing Center (NTC); and
--Train ATF, State and local law enforcement personnel.
Violent Crime Coordinators: $2,000,000
This project consists of Violent Crime Coordinators (VCC's) to
address effectively investigations of recidivist and violent career
criminals. The VCC's will assist in ridding American society of those
armed criminals that pose the greatest threat to its well being by
successfully identifying the best route for prosecution of a case
involving firearms violations. Additionally, in support of the
effective enforcement of the Federal firearms laws, the VCC's will be
able to work closely with representatives from the U.S. Attorney's
Office to identify and assist in processing initiatives that are
instituted by the Department of Justice, e.g., Triggerlock. Numerous
representatives from various U.S. Attorney's offices around the country
have met with ATF management requesting these positions and
highlighting their importance.
Headquarters Relocation: $32,000,000
ATF's current primary headquarters locations do not meet the
security guidelines as described in the Department of Justice's (DOJ)
Vulnerability Assessment, dated June 28, 1995. The President directed
that ``* * * each Federal Facility shall, where feasible, be upgraded
to the minimum security standards recommended for security level by
DOJ's study.'' The existing lessor is unable to implement the changes
necessary to meet the enhanced security requirements. Therefore, ATF
must be moved to a new location to ensure adequate security for ATF
employees, pursuant to the President's Directive.
Our fiscal year 1999 budget is the cornerstone for creating a
sound, fully balanced Bureau. It balances our pay, fixed and
operational costs, while at the same time ensures we have acquired the
necessary tools to face the law enforcement challenges of the twenty
first century.
reduce violent crime activity
Firearms, explosives, and arson play a prominent role in violent
crimes, ATF--with primary enforcement jurisdiction for Federal
firearms, explosives, and arson laws--enforces provisions of the Gun
Control Act of 1968, the National Firearms Act, the Brady Law, and the
Violent Crime Control and Law Enforcement Act of 1994 to combat these
types of crimes.
Many Federal laws contain provisions for mandatory extended
sentences, and ATF strives to increase State and local awareness of
available Federal prosecution under these statutes. To accomplish all
of this, ATF pursues an integrated enforcement strategy through four
major programs supporting the Reduce Violent Crime activity: Deny
Criminals Access to Firearms, Safeguard the Public from Arson and
Explosives Incidents, Remove Violent Offenders from our Communities,
and Prevent Violence Through Community Outreach. Each of these programs
is supported by projects detailed in the following discussion.
deny criminals access to firearms program
The Deny Criminals Access to Firearms program involves projects and
services that identify, deter, and stop the sources of and
participation in illegal firearms trafficking.
Illegal Firearms Trafficking
ATF reduces the availability of illegal firearms to criminals by
identifying illegal sources of firearms and prosecuting illegal
firearms traffickers. Overall goals include recommending for
prosecution the most active illegal firearms traffickers, preventing
future firearms crimes, and reducing crime-associated costs by
incarcerating illegal firearms traffickers who supply firearms to
criminals, gang offenders, and juveniles. In fiscal year 1997, ATF
accomplished the following in support of the nationwide illegal
firearms trafficking strategy:
--traced over 190,000 crime guns to supply investigative leads about
illegal traffickers;
--developed an illegal firearms trafficking guidebook that is the
definitive reference for ATF special agents, as well as State
and local investigators, to use during the course of illegal
firearms trafficking investigations;
--held illegal firearms trafficking schools for a total of 245 ATF
students and 22 State, local and other Federal law enforcement
students;
--conducted basic firearms interstate nexus schools and advanced
firearms interstate nexus schools for a total of 53 ATF
students;
--provided onsite refresher training to field divisions for
approximately 450 ATF students; and
--conducted a joint Canadian/ATF firearms school for 35 ATF employees
and 55 Canadian law enforcement officers.
Youth Crime Gun Interdiction Initiative
The Youth Crime Gun Interdiction Initiative is a focused component
of ATF's nationwide Illegal Firearms Trafficking Program which
identifies and investigates the illegal sources of guns to youths and
juveniles. In response to increased crimes involving America's youth,
ATF developed and deployed the Youth Crime Gun Interdiction Initiative
in fiscal year 1996. In fiscal year 1997, the Youth Crime Gun
Interdiction Initiative was deployed in 17 cities including Atlanta,
Georgia; Baltimore, Maryland; Birmingham, Alabama; Boston,
Massachusetts; Bridgeport, Connecticut; Cleveland, Ohio; Inglewood,
California; Jersey City, New Jersey; Memphis, Tennessee; Milwaukee,
Wisconsin; New York, New York; Richmond, Virginia; St. Louis, Missouri;
Salinas, California; San Antonio, Texas; Seattle, Washington; and
Washington, DC. Eighty-six criminal investigations were initiated in
the 17 sites which resulted in the recommendation of 90 defendants for
prosecution, 61 arrests, and 15 sentencings. Many of these
investigations are ongoing. A major goal of the Youth Crime Gun
Interdiction Initiative is to trace all recovered crime guns in order
to identify illegal firearms sources. This goal was met in fiscal year
1997 with approximately 37,000 recovered crime guns traced in the 17
cities.
In July 1997, due to the successful tracing efforts, 17
comprehensive trace analysis reports were produced and released for use
by law enforcement to develop community level enforcement strategies.
Also in July 1997, the President of the United States announced the
expansion of the Youth Crime Gun Interdiction Initiative to 10
additional cities. Efforts in those cities will begin in fiscal year
1998. A more detailed description of the focus and resource request is
outlined on page 9 of this statement. On January 30, 1998, the
President confirmed his support for ATF's trafficking program
announcing to the US Conference of Mayors that he was requesting $28
million to crack down on illegal firearms trafficking, to trace more
crime guns, and hire up to 162 law enforcement personnel to arrest
those who illegally supply guns to gangs and juveniles.
National Tracing Center
The ATF National Tracing Center is the only operation of its kind
in the world. This facility traces firearms associated recovered by Law
enforcement in any Federal, State, local or foreign law enforcement
agency. A firearms trace result is frequently the crucial piece of
evidence that can link a criminal to a firearms-related crime and allow
law enforcement officials to make an arrest. Firearms trace information
also provides investigators with leads on illegal sources of the crime-
related firearms in their investigations. The Tracing Center is also
the only repository for all Federal firearms licensee out-of-business
records, where millions of records are currently stored. Specific goals
for fiscal year 1997 were to increase the number of trace requests
responded to through efficiency improvements involving increased
electronic access to the tracing center. All specific National Tracing
Center goals for fiscal year 1997 were accomplished, to include the
following:
--increased electronic access to the National Tracing Center for
State, local, and other Federal law enforcement agencies by
establishing electronic batch downloading in six cities and
ensuring 18 States placed a crime gun trace request screen on
the National Law Enforcement Telecommunications System;
--increased by 60 percent the number of crime gun trace requests
received at the National Tracing Center as a result of
increased electronic access;
--developed and deployed a new crime gun trace request form, Crime
Gun Information Referral/Request Form (ATF F 3312.1), which
serves as a trace request, suspect gun entry, stolen firearms
information referral, and firearms with obliterated serial
number information referral; and
--deployed a new crime gun trace results form which provides the
trace requester with enhanced value by supplying an
intelligence information in addition to trace results.
Stolen Firearms
The Stolen Firearms initiative seeks to reduce thefts of firearms
from Federal firearms licensees and interstate carriers transporting
firearms. This initiative is an aggressive enforcement effort
determined to reduce the number of stolen firearms from interstate
carriers and Federal firearms licensees, which by their very nature are
destined to become crime guns.
safeguard the public from arson and explosives incidents program
As an integral part of the Bureau's overall violent crime reduction
strategy, ATF's arson and explosives projects are directed toward
preventing the criminal misuse of explosives and the crime of arson, as
well as providing effective post-incident response. ATF evaluates its
success, in part, by the amount of savings to the public resulting from
proactive investigations. This is particularly true with arson-for-
profit schemes where ATF's efforts have produced tremendous financial
savings for the insurance industry, and ultimately the American public,
by exposing millions of dollars in fraudulent claims annually.
Prevent Criminal Misuse of Explosives
Through this program, ATF provides resources to identify and pursue
those who criminally misuse explosive materials in bombings and arson
fires.
ATF maintains the Explosives Incidents System, which is a
computerized repository for historical and technical data on reported
arson and explosives incidents that is helpful in determining motives,
trends, and similarities. Statistical data is available in ATF's annual
Arson and Explosives Incidents Report and Arson Case Briefs
publications. In addition, ATF is the only agency through which other
Federal, State, and local law enforcement agencies can initiate traces
of explosives in order to determine their source. This capability is
also applicable to foreign commercial and military explosives,
ordnance, and munitions.
In ATF resides the only Federal cadre of explosives technology
specialists with unique capabilities in the explosives, bomb disposal
and arson fields. They construct facsimiles of explosive and incendiary
devices; prepare destructive device determinations for court purposes;
conduct render safe procedures on destructive devices, improvised
incendiary and explosives devices and booby traps; provide expert
analyses of intact and functioning explosive/incendiary devices;
provide onsite technical investigative assistance during tactical
operations, and bombing and arson scene examinations; issue
classifications for new explosives and incendiary devices and
materials; and keep abreast of the latest technology related to
explosives.
In addition, ATF Inspectors, Special Agents and Explosives
Enforcement officers provide technical advice on Federal explosives
storage regulations; provide training and instruction in all aspects of
explosives handling, storage, and destruction for Federal, State,
local, and foreign law enforcement officers, and members of the
explosives and pyrotechnics industries; participate as explosives
origin and cause experts in all National Response Team and
International Response Team activations; conduct explosives threat
assessments; and assist the Department of State and the Diplomatic
Security Service in conducting antiterrorism capability assessments
outside the continental United States.
In fiscal year 1997, ATF experts provided onsite technical
investigative assistance on 300 incidents; conducted explosive device
or booby trap render safe procedures in connection with 25
investigations; prepared 232 written expert witness explosive device
determinations; participated in Department of State antiterrorism
capability assessments in 14 foreign countries; and provided
instruction on explosives investigative and regulatory matters to other
Federal, State, local, and foreign law enforcement officers, and
members of the explosives and pyrotechnic industries.
Church Fires
ATF established a church fire major case team during 1996 in
response to a dramatic increase in church arsons nationwide. The team
maintained a central repository for collecting, analyzing, and
disseminating information while coordinating and monitoring all aspects
of each investigation. This team became the foundation for the
President's National Church Arson Task Force. In June 1997, the task
force consisting of ATF, Federal Bureau of Investigation, Federal
Emergency Management Agency, Community Relations Service, Department of
Housing and Urban Development, and Department of Justice, completed its
first year of operation and prepared its first year's report for the
President outlining the year's accomplishments.
ATF and its major case team were instrumental in the success of the
task force and the accomplishments achieved during the first year. ATF
was asked to determine the origin and cause of each church fire
incident investigated by the task force because of its expertise in
arson and explosives investigations. The major case team was asked to
provide investigative oversight to ensure each investigation received
the necessary resources and priorities. The task force has coordinated
the efforts of Federal, State and local law enforcement agencies
investigating church fires. By the conclusion of the first year, the
task force had opened 429 arson and bombing investigations that
occurred at houses of worship. Federal, State and local authorities
have arrested 199 suspects since January 1995, in connection with 150
of the 429 investigations. The task force has a 35 percent solution
rate, a rate that is more than double the 16 percent solution rate for
arson in general.
ATF continues to promote church arson awareness and arson
prevention by making outreach presentations to community leaders,
churches, and organizations throughout the country. In addition to the
outreach activities, the task force distributes the Church Threat
Assessment Guide which contains valuable information on the steps that
can be taken to prevent fires at houses of worship; the steps to follow
after an incident has occurred; and the toll-free numbers to call with
information 1-888-ATF-FIRE and 1-888-ATF-BOMB. Originally developed and
distributed by ATF, the Task Force has adopted the guide and now
distributes it nationwide. The guide continues to be accessible to the
public on the ATF web site (http://www.atf.treas.gov). ATF and the task
force continue to investigate and recommend prosecution of those
responsible for burning our Nation's houses of worship.
Canines
In 1989, ATF and the Connecticut State Police began a formal
training program for accelerant-detecting canines to support State and
local jurisdictions (accelerant-detecting canines search for liquid
catalysts that can be used to speed up the spread of fire). Through
fiscal year 1997, a total of 56 accelerant-detecting canines have been
trained and certified by ATF for State and local agencies. In fiscal
year 1997, ATF recertified 44 canine teams. In March 1998, six
additional accelerant detection canine teams will be trained by ATF at
the Canine Enforcement Training Center in Front Royal, Virginia.
In 1990, ATF entered into an agreement with the U.S. Department of
State, Office of Antiterrorism Assistance to train explosive detection
canines for foreign countries. ATF has trained 150 canine teams for the
program, which are deployed in eight countries worldwide. In fiscal
year 1997, ATF trained 35 canine teams and eight canine trainers for
the Department of State, Office of Antiterrorism Assistance. ATF
continues to perform assessments of additional foreign countries for
placement in this program. ATF has eight special agent/canine teams
stationed in Atlanta, Chicago, Dallas, Miami, Los Angeles, San
Francisco, and two teams stationed in Washington, DC.
ATF has developed a national odor recognition proficiency standard
for explosives detection canines, published by the Department of the
Treasury. ATF will continue to work in conjunction with other Federal
agencies employing explosives detection canines to validate and test
this standard over the next year. The report of the White House
Commission on Aviation Safety and Security, dated September 12, 1997,
recommended that ATF continue to work on developing Government-wide
standards for canine teams.
Further, the House Committee on Appropriations requested that ATF
and the Federal Aviation Administration conduct a joint explosives
detection canine pilot program at Washington National Airport and/or
Dulles International Airport. ATF, the Federal Aviation Administration
and the Metropolitan Washington Airport Authority (MWAA), have signed a
cooperative agreement that will allow this canine pilot program to be
conducted at Washington National and Dulles International Airports. The
goal of the agreement is to allow for the successful execution of a
joint agency evaluation of explosives detection canines trained in
different ways for use in the airport environment. The pilot program
will last from 1 to 2 years and will involve the use of four handler/
canine teams.
ATF has trained one special agent handler/canine team and one MWAA
handler/canine team to participate in this pilot.
Research Initiatives
In fiscal year 1997, in conjunction with the U.S. Army Corps of
Engineers, the National Security Council, and the Defense Nuclear
Agency, ATF continued to participate in and direct a project known as
Dipole Might. Its objective is to create a computer data base and
investigate protocol to assist investigators when processing large car
bomb scenes. Several tests were performed in fiscal year 1997.
Currently, ATF has two full-time fire protection engineers, making
it the only Federal enforcement agency that employs this level of
expertise in conjunction with the CFI program. ATF's fire protection
engineers are dedicated solely to the analyses of origins and dynamics
of fire as it pertains to criminal investigations.
In fiscal year 1996, President Clinton signed the Anti-terrorism
and Effective Death Penalty Act which authorized the Department of
Treasury, who has delegated responsibility to ATF, to conduct a study
of explosive detection devices. ATF continues to use an Explosive Study
Group to study the tagging of explosive materials for purposes of
detection and identification; the feasibility and practicability of
rendering common chemicals used to manufacture explosive materials
inert; the feasibility and practicability of imposing controls on
certain precursor chemicals used to manufacture explosives materials;
and State licensing requirements for the purchase and use of commercial
high explosives. An interim report has been prepared and is currently
under review.
In fiscal year 1996, Congress approved funding for the construction
of a new National Laboratory Center and Fire Investigation, Research
and Education Center. ATF is currently involved in site negotiations
and programming for the facility. This stage should be completed by
April 1998. The building design is expected to be completed between
April 1998 and April 1999. Both buildings will be fully operational by
2001.
Effective Post-Incident Response
ATF has proven through years of practical application that a
coordinated and rapid deployment of highly trained and well-equipped
individuals and related support functions is critical to the
investigation of any arson or explosives incident. This ATF developed
``team approach'' is the basis for our National Response Team (NRT),
Our International Response Team (IRT), division response teams, and
arson task forces and is so highly successful that the FBI and other
State and local authorities are modeling their teams efforts after
ATF's concept. ATF's NRT can respond within 24 hours to major bombing
and fire scenes anywhere in the United States. In fiscal year 1997, the
team provided effective post-incident response in 36 activations a 60
percent increase from fiscal year 1996. These incidents resulted in
$243.2 million in damages, 54 deaths, and 107 injuries. The NRT also
provided continued assistance in the investigation of the Olympic
Centennial Park bombing, the TWA Flight 800 crash, and most recently,
the Birmingham, Alabama abortion clinic bombing.
In fiscal year 1997, ATF issued a customer satisfaction survey to
users of the NRT that year. To date, ATF has received 19 of the 28
surveys, all of which have been positive. When all surveys are
received, ATF will tabulate the data and use it as a tool to determine
the effectiveness of the NRT.
ATF also maintains the IRT formed as a result of an agreement with
the Department of State has been deployed to such countries as Peru,
Argentina, Pakistan, El Salvador, and Macedonia. Since its inception in
1991, the IRT has been activated 13 times for incidents involving
explosives and fires. In fiscal year 1997, the IRT was activated to
Suriname to assist in the investigation of an explosion in Paramaribo,
believed to be the result of a package bomb.
ATF provides vital resources to local communities in the wake of
arson and explosives incidents. ATF pioneered the development of local
multi-agency task forces designed to pool resources and expertise in
areas experiencing significant arson problems. In fiscal year 1997, ATF
led formal arson task forces in 15 major metropolitan areas throughout
the United States, and participated in several others. In fiscal year
1997, ATF responded to 763 arson incidents that were responsible for 78
deaths and 166 injuries.
Most recently, ATF is participating in a D.C. Task Force with the
DC Fire Investigation Unit. Fire Investigations Unit personnel will
have arrest authority after they are trained by the police academy. ATF
will be providing investigative support until all personnel are fully
trained.
A certified fire investigator and a certified explosives specialist
are critical to the success of a comprehensive post-incident response.
ATF's certified fire investigators are the only investigators trained
by a Federal law enforcement agency to qualify as expert witnesses in
fire cause determinations. In fiscal year 1997, 48 of these
investigators were stationed throughout the United States. Twenty-nine
certified fire investigator candidates are scheduled to complete
training in January 1998 and thirteen are scheduled to complete
training in April 1999. This will provide strategic placement of these
investigators throughout the country to investigate Federal arson
crimes and assist Federal, State and local agencies with fire origin
and cause determinations and training.
Because many arson crimes involve insurance fraud, these
investigations often require complex financial analysis. ATF also
brings comprehensive forensic science services, financial auditing
services, information systems and equipment, and high-speed data
communications to these investigations. This includes Internet access
to facilitate the research and exchange of national and international
technical data and intelligence.
In fiscal year 1997, there were four certified explosives
specialist (CES) training classes through which 96 CES's were fully
certified. As of fiscal year 1997, ATF employed a total of 270 CES's.
remove violent offenders from our communities program
Imprison Violent Offenders
The Imprison Violent Offenders program involves projects and
services to investigate, arrest and recommend for prosecution, the most
violent criminals who use firearms and explosives in furtherance of
their criminal activity. The Violent Crime Coordinators (VCC) project
is one such program. A more detailed description of the focus and
resource request for VCC's is outlined on page 9 of this statement.
Achilles
The Achilles program uses specific Federal firearms laws that
mandate extended mandatory periods of incarceration to remove the most
dangerous armed career criminals and armed drug traffickers from the
streets. ATF's Achilles project is the primary foundation and source of
the Department of Justice's & U.S. Attorney's ``TRIGGERLOCK''
prosecution. Firearms use and possession by these violent criminals
becomes their ``Achilles heel'' as they are exposed to lengthy prison
sentences under these Federal laws. The firearms they possess yield
valuable information regarding their previous criminal acts and
criminal associates. Further, the illegal firearms sources for these
violent criminals are investigated under ATF's Illegal Firearms
Trafficking project.
A major goal is to incarcerate armed violent criminals for long
periods of time to prevent future crimes of violence and the costs of
those crimes to the American public. An indication of ATF's success in
focusing limited resources against only the most violent armed
criminals can be seen in the increases in the average length of
sentence. The average length of sentence received by defendants under
924(e), the armed career criminal statute, went from 18 years in fiscal
years 1992 through 1995, to 19 years in fiscal years 1996 and 1997. The
average length of sentence received by defendants under 924(c), the
armed crime of violence statute went from 6 years in fiscal years 1992
through 1995, to 7 years in fiscal year 1996, and to 11 years in fiscal
year 1997. The sentence received by a defendant is due, in part, to the
defendant's criminal history or level of violence during the actual
offense. Sentences have substantially increased because ATF special
agents have more effectively focused on the most dangerous and violent
armed criminals. ATF is putting the most violent criminals in prison
for longer periods of time.
Violent Offender
In fiscal year 1992, ATF initiated the Violent Offender Program.
This program is an aggressive, proactive approach to identify,
investigate, and recommend prosecution of the most violent career
criminals nationwide. The program was designed to work as an early
safety warning and notification system for law enforcement officers in
the field. Information concerning violent career criminals, who meet
certain criteria and are currently free in society is entered, into the
National Crime Information Center (NCIC) system. If any law enforcement
official encounters one of these individuals, and queries the NCIC, the
officer will receive a safety advisory that the person is a career
offender. If the offender is in possession of a firearm, the officer is
advised to contact ATF.
There are currently 1,000 individuals identified as most violent
offenders in the NCIC violent offender file. In fiscal year 1996, each
violent offender encountered with a firearm had an average of 5.7 prior
felony convictions and 30.4 years in prior prison sentences. In
addition, 8 of the 17 subjects had previously received life sentences,
but were released or paroled early. In fiscal year 1997, each violent
offender encountered with a firearm had an average of 4.88 prior felony
convictions and 33.29 years in prior prison sentences. In addition, 1
of the 18 subjects had previously received a life sentence, but was
released or paroled early. When convicted, these criminals receive
mandatory sentencing of 15 years to life in prison, without the
possibility of probation or parole.
In fiscal year 1997, based on the above statistics, ATF began to
evaluate the violent offender program to determine if modifications
were needed or to identify a more efficient method of accomplishing the
same desired outcome. To assist in this evaluation process, the Office
of Inspector General has completed an independent audit and review at
the request of ATF. ATF looks forward to the forthcoming findings and
recommendations contained in the final report.
CEASEFIRE
The CEASEFIRE project is centered around the use of state-of-the-
art ballistics technology. This technology, the Integrated Ballistic
Identification System (IBIS), consists of ``Bulletproof'' which
examines projectiles, and ``Brasscatcher,'' which examines shell
casings. The overall CEASEFIRE project goals are to increase the
efficiency of firearms examiners, reduce costs associated with the
hiring of additional firearms examiners, and to identify those
criminals who repeatedly use the same firearm in multiple crimes.
Program goals for fiscal year 1997 were to deploy the IBIS technology
to eight new sites and increase the use of the technology. Both goals
were accomplished.
In an effort to unify Federal resources to deploy ballistics
technology, there is an existing proposal to combine IBIS and the
Federal Bureau of Investigation's Drugfire System into a federally
sponsored program called the National Integrated Ballistics Information
Network (NIBIN). The two systems will not be combined into one platform
but will make data from the two systems inter-changeable. As proposed,
the National Integrated Ballistics Network will create a partnership
between ATF, the Federal Bureau of Investigation, and State and local
law enforcement that makes the most efficient use of all available
resources in reducing firearms-related violent crime. This combined
network will be directed by a three-member board, which is currently
being formed.
prevent violence through community outreach program
Community Outreach
This program focuses on community efforts designed to encourage and
participate in the prevention of violence.
G.R.E.A.T.
The Gang Resistance Education and Training (G.R.E.A.T.) is a
school-based gang and violence prevention program taught by uniformed
law enforcement officers to elementary and middle school children. ATF
administers the program in partnership with the Phoenix Police
Department, National Sheriffs' Association, International Association
of Chiefs of Police, and Federal Law Enforcement Training Center.
ATF has provided funding to 74 different agencies to support their
participation in the G.R.E.A.T. program. Over 800 different localities
are currently receiving the G.R.E.A.T. curriculum in classrooms around
the country.
This program has been highly successful in educating young children
about the dangers of gangs and violence. A cross-sectional evaluation
conducted by the University of Nebraska in Omaha was completed in 1996
and concluded that the G.R.E.A.T. program has had a significant,
positive impact on the participants.
collect the revenue
The goal of the Collect Revenue activity is to maintain efficient
and effective revenue management and regulatory system that continues
to reduce taxpayer burden and Government oversight, and collects the
revenue due under Federal laws administered by ATF. Under this
activity, there are three major programs: Collect Revenue Rightfully
Due, National Revenue Center, and Use Electronic Commerce.
collect all revenue rightfully due program
Using processes and systems designed to effect maximum revenue
collections while imposing minimum taxpayer burden, ATF collected $12.7
billion, before refunds and credits, in taxes, interest, penalties, and
fees in fiscal year 1997. Ninety-eight percent of collections are
derived from alcohol and tobacco excise taxes. On-site inspections of
those who pay alcohol, tobacco, firearms, and ammunition taxes are
focused on facilities offering the greatest risk to the revenue based
on the volume of operations, history of violations, relative strength
of internal controls, and financial condition. Enhanced computers (ESA)
and access to National Revenue Center (NRC) record systems will give
on-line access to all permittee and license records to field inspectors
conducting tax or other compliance inspections. These same systems will
allow NRC employees to analyze industry reports and make more accurate
projections and trend analyses to identify taxpayers for future
inspections.
ATF employees continuously monitor tax collections by auditing tax
returns and assessments; initiating enforced collection action;
analyzing required reports; and accounting for tax payments, licensing
fees, and related refunds and credits. ATF also reviews and approves or
disapproves applications and surety bonds submitted by companies that
produce or sell alcohol or tobacco products.
When criminal conduct is suspected--as with diversion or label
fraud cases--teams of ATF special agents, auditors, and inspectors
conduct complex investigations of violations of the Federal Alcohol
Administration Act and the Internal Revenue Code. ATF also investigates
domestic trafficking in contraband tobacco products. This trafficking
deprives states of needed tax revenue and violates Federal law. Also,
certain direct shipments of alcohol beverages to consumers without
payment of taxes are in violation of both State and Federal laws.
ATF instructed foreign tax police on the U.S. alcohol and tobacco
licensing and taxation system. In fiscal year 1997, 203 students from
Russia, Ukraine, Belarus, and the Baltic States received this training
in order to assist them in combating the spread of organized crime.
national revenue center
ATF's revenue management program includes a variety of functions
based on the processing, auditing, and recording of tax returns and
monthly operating reports, as well as the accounting for all deposits
and payments for taxes, licenses, permits, and fees from the alcohol,
tobacco, firearms, ammunition, and explosives industries.
Effective management of taxpayer accounts and proper receipt of tax
returns and payments ensure accurate collections and reporting of all
receivables. ATF's collection systems include work by the technical
services staffs located in the districts and the Tax Processing Center
in Cincinnati. The principal activities of these entities are office
audits of tax returns and reports, audits of claims, collection
actions, review and approval of applications for permits, registration
of plants and surety bonds, and processing and custody of official case
files.
During fiscal year 1997, ATF continued efforts to reduce the number
of technical services offices, ultimately leading to a single NRC which
will process all tax and permit matters nationwide from Cincinnati. The
Atlanta office will be closed by the end of fiscal year 1997 and much
of the work from the remaining Philadelphia and San Francisco offices
has already been transferred to Cincinnati. All functions of the Tax
Processing Center will be absorbed into the NRC by the end of fiscal
year 1998.
In fiscal year 1997, in the process of centralizing and
streamlining the NRC, ATF implemented various technological
improvements. Document imaging operations commenced, which will reduce
the volume of paper files stored and improve accessibility of
information. ATF also began fully automating the processing and
analysis of industry operational reports. ATF is working with industry
members to provide more timely industry statistics and to provide
increased use of electronic commerce for filing and compiling monthly
reports at the NRC. A full time customer service representative
position was also created to provide a channel for resolving problems
and getting customer input and buy-in on the new changes taking place.
Diversion and Smuggling
ATF is engaged in an ongoing endeavor to reduce the rising trend of
illegal diversion activities involving cigarettes and distilled
spirits.
Criminal violations committed in these diversion schemes include
violations of the Internal Revenue Code record keeping requirements,
Federal Alcohol Administration Act permit requirements, Trafficking in
Contraband Cigarettes Act, wire and/or mail fraud, money laundering,
and conspiracy. ATF's goal is to achieve compliance with U.S. laws that
will greatly reduce the illegal diversion of alcohol and tobacco
products.
Diversion activities may defraud the United States of tax revenues,
such as when non-tax-paid cigarettes and distilled spirits are
fraudulently claimed for export markets (for which there is no tax
liability) when in fact they may be illegally diverted back into the
U.S. domestic market for sale where taxes should apply.
ATF pursues tax assessments against any domestic producer where the
documentation offered to ATF to support the tax-free exportation of
these products often is either counterfeit or absent. ATF considers
administrative action or criminal prosecution against retailers,
wholesalers, and manufacturers who knowingly supply smuggling
organizations.
ATF participates in joint investigations with the Internal Revenue
Service, U.S. Customs Service, Revenue Canada, and State and local law
enforcement. These investigations focus on significant tobacco and
distilled spirits-related criminal diversion activities in the United
States and Canada. ATF is developing a Northeast border strategy to
stop the large-scale diversion of alcohol, tobacco, and firearms to
Canada.
The seizure of alcohol beverages and tobacco products by ATF agents
and inspectors in 1997 has resulted in over $1.1 million being credited
to the Treasury Forfeiture Fund. Through our efforts, several members
of organized crime groups have been successfully prosecuted. Also, in
fiscal year 1997, ATF accepted $405 thousand from distilleries and
wholesalers to settle cases involving in illegal activity. There are
currently 114 open diversion cases.
Illegal commerce also occurs when alcohol and tobacco are
trafficked from States with a low excise tax to States with a high
excise tax. As a result of this activity, ATF has experienced an
unprecedented increase in alcohol and tobacco investigations. During
fiscal year 1997, ATF recommended 70 defendants for prosecution. The
possible Tobacco lawsuit settlement currently pending implementation,
could include a significant tax increase on tobacco products. Such a
tax increase could further exacerbate the tobacco diversion problems by
increasing the profit to be made from excise tax evasion schemes.
In an effort to combat the widespread problem of alcohol and
tobacco products diverted from legal destinations to illegal
destinations, ATF created the Diversion Branch. Its responsibilities
are to coordinate the national Alcohol and Tobacco Diversion and
Trafficking Enforcement programs; set policies; monitor investigations;
track intelligence; provide assistance to field personnel; assist in
determining targets; seek assistance from Chief Counsel; maintain
liaisons with foreign governments; coordinate with FINCEN to track and
identify financial transactions generated by illegal activity; and to
work closely with other law enforcement agencies.
Alcohol Trade Issues
The solidification of the European Union, the emergence of new
Pacific Rim economies, and the movement of former Soviet States to
market economies have had a major influence on the world economy. While
this global economy provides new opportunities for U.S. producers of
alcohol beverages, the changing political economic landscape also
produces discriminatory trade barriers that limit market access to U.S.
manufacturers.
ATF assists U.S. businesses in overcoming trade barriers through
direct intervention with foreign governments by supporting the United
States Trade Representative in negotiations concerning the North
American Free Trade Agreement, and with the European Union and
deliberations with the World Trade Organization. ATF also monitors and
analyzes changes in foreign trade and political policies to anticipate
and overcome potential barriers to U.S. interests. ATF represents the
U.S. wine and brandy interests through membership and participation in
the International Organization of Vine and Wine.
ATF assists the governments of these developing world market
economies to establish effective revenue collection models through
training courses offered in cooperation with the Department of State.
use electronic commerce program
In fiscal year 1997, many ATF applications and other forms were
made available to the public on the Internet, as well as information,
facts and statistics about ATF and the Regulated industry operations.
Imaging operations were launched at the National Revenue Center to
reduce storage and manual processing by ATF and to make statistical
information more accessible to the public on-line.
In fiscal year 1998, we anticipate commencing the imaging of label
approval files. ATF will also explore the feasibility of Optical
Character Recognition forms for returns. Streamlined processing of
industry reports and returns paves the way for more electronic
submissions by ATF's customers.
protect the public
ATF's Protect the Public activity includes goals to complement
enforcement with training and prevention strategies through law
enforcement and industry partnerships, and reduce public safety risk
and consumer deception on regulated commodities. This is accomplished
through three major programs: Assure the Integrity of the Products,
People, and Companies in the Marketplace; Ensure Compliance With Laws
and Regulations Through Education, Inspection, and Investigation; and
Inform the Public.
assure the integrity of the products, people, and companies in the
marketplace
This program ensures that commodities meet safety and product
identity standards, and also focuses on keeping ineligible or
prohibited persons out of the regulated industries.
Assuring Alcohol Product Integrity
ATF conducts a full range of regulatory functions in the alcohol
beverage industry. The Federal Alcohol Administration Act, passed
shortly after the repeal of Prohibition, coupled with certain Internal
Revenue Code provisions, authorizes ATF to fully regulate the industry
and to provide protection to consumers of alcohol beverages.
Each year, through the market basket sampling program, ATF collects
thousands of alcohol products from the marketplace for several analyses
by ATF laboratories. If any problems or unsafe conditions are found,
they are investigated by ATF inspectors. ATF's laboratories work
closely with counterparts at the U.S. Food and Drug Administration and
with regulatory agencies in many foreign countries. The laboratories
exchange information on existing and new analytical methods and on
product contamination or adulteration issues discovered by governmental
laboratories, both domestic and foreign. This level of cooperation
enhances ATF's proactive stance to ensure that contaminated or
adulterated products do not reach the U.S. marketplace. In 1997, ATF
issued an advisory to consumers sensitive to alcohol that certain
ginseng products contain alcohol.
Certificates of Label Approval
ATF is charged with protecting the consumer by preventing false or
misleading claims on beverage labels and in advertising. The Bureau
enforces the Government Health Warning Statement requirements,
prohibits unbalanced and unsubstantiated health claims or misleading
and deceptive claims, monitors industry advertising, and conducts
investigations of suspected label fraud. ATF is working with industry
to develop guidelines under which beverage alcohol products labels will
contain consumer advisories to consult with an appropriate authority
concerning the health effects of alcohol consumption. With limited
exceptions, ATF issues Certificates of Label Approval for every alcohol
beverage offered for sale in the United States. There are currently
more than 1.5 million approved labels on file.
The Bureau remains strongly committed to customer service standards
for label approval processing. At the end of fiscal year 1996, ATF
mailed approximately 1,400 customer satisfaction surveys to industry
members. In fiscal year 1997, the survey results were tabulated and the
feedback provided will be used to streamline the efficiency of the
label approval process. ATF and industry are working together to
streamline the process by which flavoring ingredients used in beverage
alcohol products are reported.
Deny Prohibited or Ineligible Persons Entry into Regulated Industries
Alcohol producers and wholesalers and other users of bulk alcohol
are required to obtain a Federal permit. ATF reviews applications,
bonds and other documents, checks on the applicants' background, and
conducts field investigations to determine eligibility.
The Gun Control Act of 1968 mandates that every manufacturer,
importer, or dealer firearms obtain a Federal firearms license. ATF
conducts inspections of applicants for Federal firearms licenses.
During these inspections, ATF inspectors explain the Federal firearms
laws and regulations, and determine if the applicants are bona fide
candidates for a license. Where inspection reveals conflicts with State
laws and local ordinances, inspectors make referrals to the appropriate
regulatory agency; such as a zoning, occupancy, fire code, or law
enforcement agency.
ATF recognizes the value of averting accidents and keeping
explosives from the hands of those who are prohibited from possessing
them. ATF enforcement provides a system of industry regulation,
emphasizing a proactive approach to the problem. Similar to the
firearms industry, all manufacturers, importers, and dealers are
required to obtain a Federal license from ATF to conduct business and
certain users of explosives are required to obtain a Federal permit.
ensuring compliance with laws and regulations through education,
inspection, and investigation
Once a person or entity is licensed or obtains a permit to conduct
a regulated business, ATF monitors and enforces compliance. Inspections
of firearms licensees focus on assuring that firearms are properly
accounted for. In the explosives industry, the emphasis is on safe and
secure storage of explosives as well as accountability. Alcohol and
tobacco inspections check on compliance with product and trade practice
provisions. Education initiatives such as industry seminars are
utilized in all industries.
Federal Firearms Licenses and Inspections
Once a licensee is engaged in business, inspectors ensure the
licensee's compliance with Federal laws and specific record keeping
regulations. ATF enforces the licensing provisions of the Gun Control
Act of 1968 by conducting on-premises inspections.
ATF implemented procedures for routinely providing the Chief Law
Enforcement Officer in each jurisdiction information on the status of
Federal Firearms Licensees in that area. Working in partnership with
State and local law enforcement officials, ATF can effectively address
licensing and illegal firearms trafficking problems.
Explosives Licenses/Permits and Inspections
ATF maintains a regular program of on-site inspections to ensure
that explosives are stored in approved facilities, which are secure
from theft and located at prescribed distances from inhabited
buildings, railways, and roads. These inspections ensure that the
licensees and permits keep accurate records of the receipt and
disposition of explosive material which are verified through actual
inventories of explosives in storage. Unusual discrepancies in records
are referred immediately to the appropriate office for further
investigation. Inspectors also conduct ``forward trace'' inquiries on
persons who purchase explosives without benefit of a license or permit
for ``same day use with no overnight storage.''
ATF initiated a program that requires each regulatory enforcement
area office to notify the local fire department of licensees/permits
storing explosive materials and the location of the storage. This was
done to aid in minimizing accidental injury to fire officials fighting
fires in buildings or structures that may house explosive materials.
Alcohol Industry Inspections
ATF inspects alcohol plants to assure that products are
manufactured in keeping with approved formulas and processes, which
assure that the actual product fulfills labeling and advertising
claims. ATF investigates anti-competitive business practices between
alcohol beverage suppliers and retailers to preserve the retailers'
economic independence. Attention has focussed recently on the
allegations of illegal wholesale payments to retailers to place their
products on retailer shelves. The Bureau also investigates consumer
complaints or tainted of adulterated alcohol beverages.
Industry Seminars
ATF conducts seminars for firearms and explosives permits and
licensees, providing current information on the laws and regulations
pertaining to these commodities. Through these seminars, ATF has
fostered partnerships with firearms and explosive industry members to
prevent tragedies stemming from the illegal use of firearms and
explosives. Seminar attendees include industry officials, licensees,
permits, and State and local law enforcement officials.
ATF also conducts seminars for alcohol and tobacco permits. These
seminars focus on current market trends, compliance concerns, changes
in laws, regulations or Bureau policies, and industry-raised issues. In
partnership with the States, the seminars are conducted jointly with
the State alcohol beverage control agencies to provide the total
compliance enforcement picture to those in attendance. In fiscal year
1997, ATF conducted seven seminars reaching approximately 500
attendees. These seminars will continue throughout 1998 and the future.
National Firearms Act
The National Firearms Act requires that certain firearms be
registered in what is known as the National Firearms Registration and
Transfer Record. The firearms required to be registered are machine
guns, silencers, short-barreled rifles, destructive devices, and
certain concealable weapons classified as ``any other weapons.'' ATF
processes all applications to make, export, transfer, transport, and
register National Firearms Act firearms, as well as notices of the
National Firearms Act firearms manufactured or imported.
ATF's firearms technology experts provide expert technical support
to ATF in all matters relating to the technical aspects of firearms and
their classification under Federal laws. Most workload is devoted to
supporting law enforcement investigations and programs. The remaining
operations focus on technical support to regulatory operations, Chief
Counsel, Office of Liaison and Public Information, other Federal
agencies, State and local law enforcement, the firearms industry, and
the general public.
Firearms and Ammunition Importation
ATF regulates the importation of firearms, ammunition, and other
defense-related articles through the issuance of import permits.
ATF maintains close liaison with the Department of State to ensure
that the permits it issues do not conflict with the foreign policy and
national security interests of the United States. At the direction of
the Department of State, ATF lifted the arms trade restrictions imposed
against the Russian Federation. Additionally, the Department of State
subsequently directed ATF to lift the arms trade restrictions imposed
against the Ukraine, Georgia, Kazakstan, Kyrgyztan, Moldova,
Turkmenistan, and Uzbekistan.
ATF is currently studying modified semiautomatic assault weapons to
determine whether they are importable under the statutory sporting
purpose test defined by the 1994 assault weapons law and the standards
developed in 1989 by the ATF Working Group. Both the 1989 standards and
the 1994 law identify semiautomatic assault rifles by their military
features.
inform the public
This program publicizes information on ATF policies and
regulations, product safety and theft prevention using the Internet,
trade publications, seminars, and industry meetings. Such educational
efforts promote field understanding and voluntary compliance with
regulations. The program also works in partnership with others to
better inform, advise, and educate the public.
Industry and State Partnerships
The Industry and State Partnerships Program focuses on working with
the industry to help educate the public on ATF's regulated commodities.
The Bureau continues to expand partnerships with regulated
industries and State governments. For example, the Office of Science
and Technology initiated the Partnership Formula Approval Process,
which was instituted for all beverage and flavor manufacturers after a
successful trial program. This new business process was a result of a
joint effort of ATF, the alcohol beverage industry, and the flavor
industry. The result of this collective effort was a dramatic reduction
in the average approval time required for flavored beverage alcohol
products from eight weeks to less than two weeks. ATF and industry are
currently working together to further streamline the process by which
flavor ingredients used in beverage alcohol products are reported.
ATF established liaison with several governmental agencies working
toward a common goal of public safety in the explosives industry. The
Department of Transportation is supplying ATF with a list of its
product approval numbers for use in determining the appropriate
classification of explosive materials entering into commerce either
through domestic production or through importation.
ATF furthered its relationship with industry associations such as
the Institute of Manufacturers of Explosives and the American
Pyrotechnic Association to develop an Advanced Explosives Training
class for all ATF inspectors. The Institute of Manufacturers of
Explosives and the American Pyrotechnic Association have been
instrumental in providing instruction to inspectors at ATF's training
sessions. All classes are conducted at Ft. McClellan, Alabama. Since
June 1997, ATF has trained approximately 71 inspectors. More training
classes are scheduled for calendar year 1998.
ATF established relationships with the Federal Aviation
Administration to explore the mutual regulatory oversight required in
the interaction of commercial site operators for commercial space
launchers. Launch site operators may include State government agencies,
State-chartered entities, State sponsored entities, and commercial
entities. At the request of the Federal Aviation Administration, ATF
has been inspecting explosive storage magazines at specified major
airports. ATF has established a relationship with the Consumer Products
Safety Commission to more effectively regulate the fireworks industry.
The Consumer Products Safety Commission and Department of
Transportation have also been instrumental in providing instruction at
the Advanced Explosives Training sessions. The Bureau is also exploring
refinement of its relationship with the Mine Safety and Health Agency
to further share information regarding explosives and the coal mining
industry.
Because of the nature of Federal/State alcohol regulation rooted in
the Twenty-First Amendment, ATF works closely with counterpart State
liquor control and taxation agencies and industry groups. Current
cooperative efforts focus on making ATF a center for industry-related
information by making a wide range of data, including pictures of
approved alcohol beverage labels, available through automated systems.
The goal is to enable States to decrease parallel requirements and
systems, to provide more efficient and timely access to data, and to
reduce delays to industry in marketing new products. ATF continues to
benefit from the cooperation of many State agencies in notifying retail
liquor dealers of the liability for payment of Special Occupational
Tax. Special Occupational Tax collections totaled $107 million for
fiscal year 1997. The 60-year-old Pittman-Robertson Act levies a 10
percent excise tax on handgun sales and long guns and ammunition. In
fiscal year 1997, ATF collaborated with the Department of the Interior
to distribute $149 million from this tax to States for wildlife
restoration projects.
investments in information technology
In fiscal year 1995 and fiscal year 1996, ATF commissioned external
reviews of our data communications network, information systems
security, and ATF's overall information technology (IT) infrastructure.
The studies, several of which were conducted by personnel from the
National Security Agency, confirmed to ATF's Strategic Management Team
the pressing need for investments supportive of upgrades in our IT
environment.
In fiscal year 1996, ATF's Chief Information Officer (CIO), working
with the membership of ATF's Information Resources Management (IRM)
Council and with ATF's Information Technology Advisory Board, developed
a concept for the acquisition and deployment of an Enterprise Systems
Architecture (ESA). In fiscal year 1997, ATF created and staffed an ESA
Program Office to work with the Information Technology Standards
Working Group, a subcommittee of the IRM Council, in evaluating IT
hardware and software offerings in order to define standards for ESA.
In early fiscal year 1997, the IRM Council endorsed and the
Strategic Management Team in its role as ATF's Investment Review Board,
funded the CIO's recommendation to implement Frame Relay Service for
ATF's nation-wide ``backbone'' data communications network. The ESA
Program Manager was able to identify and solicit bids for a ``lease to
purchase'' acquisitions vehicle using an existing GSA contract. ATF was
able to end operation of its mainframe at the National Data Center in
Falling Waters, WV. Also, ATF, using the ESA hardware and software
standards, was able to purchase and deploy 1,049 ``ESA-compliant''
personal computers to employee workstations in Bureau Headquarters and
six of twenty-three Field Operations division offices in 58 city
locations nationwide. In early fiscal year 1998, ATF awarded the ESA
contract which calls for full deployment by mid-fiscal year 1998.
The Enterprise Systems Architecture is a mix of hardware and
software that forms the infrastructure on which a suite of continually
evolving application services will be installed to support ATF's
Firearms, Arson and Explosives, Intelligence, Integrated Ballistics
Identification, Collections, Financial Management, and Personnel and
Performance Measurement systems.
The infrastructure consists of:
--a ``backbone'' communications network capable of transmitting and
sharing data instantaneously within and among organizational
segments via local, metropolitan, and wide area networks;
--deployment of a mix of desktop and notebook personal computers with
simultaneous delivery of training in their use to ATF's
approximately 4,000 employees;
--a standardized suite of software consisting of operating systems,
telecommunications software, database management systems,
applications development tools; and
--upgrades to ATF's mainframe computer so that it can continue to be
the host platform for legacy applications, provide a base for
client/server applications, and provide archival data storage
for recovery purposes for all servers in the configuration.
In fiscal year 1998, ATF will be able to:
--Complete the deployment of the Enterprise Systems Architecture to
over 4,000 employee workstations located in Bureau Headquarters
and the remaining seventeen Field Operations division offices
in 170 city locations nation-wide.
--Provide a standardized office suite, secure electronic mail
service, virus detection, encryption, and secure transmissions
of data communication via a nation-wide area network supporting
228 ATF office locations.
--Provide authorized users secure electronic access to existing
Bureau information systems as well as new Year 2000 date
compliant systems in development or pilots.
--Provide a means of gathering, transmitting, collecting, analyzing,
and sharing intelligence data nation-wide.
Another mission-critical part of ATF's information technology
infrastructure is the Tactical Radio Communications Program. With
supplemental funding authorized in fiscal year 1997, we were able to
replace 900 mobile radios out of an inventory of 2,500 and 122 fixed
stations out of an inventory of 410 nationwide.
training activities
With the support of This Committee, the Bureau has undertaken a
number of new training initiatives and enhancements to existing
training programs. We have allocated significant resources to support
our training efforts and have focused primarily on arson, explosives,
and firearms trafficking training projects.
One of our greatest assets is our ability to share that knowledge
worldwide with law enforcement and industry personnel. We continue to
offer a number of post-blast and general explosives proficiency
training courses for both ATF personnel and State, local and
international law enforcement personnel. In addition to these
activities, the Bureau has developed, under the auspices of the Vice
President's White House Committee on Aviation Security and in Concert
with the Federal Aviation Administration, a series of four training
videos on bomb threat management and improvised explosive device
recognition. These videos will assist State, local, and other Federal,
and airline industry personnel in improving airline security and
airport safety throughout the country. With the support of the
Department of State, we continue to conduct post-blast and firearms
trafficking training for international law enforcement officers in both
Eastern Europe and Latin America.
In fiscal year 1998, ATF has planned for regional training
exercises in crisis management. These exercises will consist of
realistic crisis scenarios and will allow us to refine the training
provided to manage crisis situations.
In concert with the President's Youth Crime Gun Interdiction
Initiative (YCGII), ATF has expanded its firearms trafficking training
activities with a specific emphasis on agents and local law enforcement
in the cities involved in the YCGII program. During fiscal year 1998,
we will develop and conduct training on firearms trafficking for each
of these sites as well as training on interstate nexus and prosecution
issues.
In addition to our classroom activities, we continue to pursue a
number of systemic changes designed to improve the quality and
effectiveness of our training programs. Our training management
database system now provides us with an unprecedented level of
information on the amount and type of training provided to each ATF
employee. We have undertaken a review of the training provided to new
professional employees upon entering on duty with ATF. This review has
led to a revised curriculum for training agents, inspectors and other
professionals that emphasizes the complimentary and cooperative nature
of the work these employees will be doing at ATF. We continue to pursue
the instructor development system and the enhancement of the skills and
techniques of ATF instructors which elevates the quality of the
training courses ATF delivers. We recognize that training is an ongoing
process, and are implementing systems designed to ensure that process
is meaningful, effective, supports ATF's mission and will advance the
ATF's efforts and those with whom we partner.
equal employment opportunity
Career Development
ATF has continued to make progress in providing career development
opportunities for women and minorities. Over the past ten years, ATF
has seen significant increases in the representation of women and
minorities throughout the work force. In 1987, women held 5.4 percent
of GS 13-15 positions in ATF; in 1997, that figure was 17 percent. In
1987, minorities held only .01 percent of all GS 13-15 positions; in
1997, that figure was 19 percent. Minorities and women are also gaining
greater representation in the SES arena. While they currently hold 18
percent of the SES positions, minorities and women comprise 34 percent
of the SES candidate pool.
Recruitment and Hiring
The development of a strong and effective recruitment process is a
top priority. For the first time in many years, ATF is in a hiring mode
in order to backfill vacancies and keep pace with anticipated
retirements. In fiscal year 1997, ATF launched an extensive recruitment
program to attract highly qualified applicants reflecting the nation's
diversity. Our announcements generated more than 6,000 applications.
The first selections began in fiscal year 1997, and will continue into
fiscal year 1998. We expect to be in a hiring mode for the next several
years to fill these and other critical positions within ATF.
To provide our new employees with a firm footing in ATF, a new two-
week orientation training program has been instituted, focusing on the
various aspects of our work and mission, as well as ethics, equal
opportunity, and diversity.
ATF Early Complaint Resolution Program (ECRP)
The Early Complaint Resolution Program was introduced in December,
1996, as an 18 month pilot program. The program employs outside
mediation at the informal stage of the EEO complaint process to help
employees and management resolve their differences quickly and
efficiently in a non-adversarial setting. It offers an alternative to
the traditional Equal Employment Opportunity formal process, which is
often lengthy, costly, and contentious. From January 1997 to January
1998, eight cases have been referred for mediation. Five were resolved
successfully. As word of the program's advantages spreads, we hope to
draw a greater percentage of cases into mediation at the early stage of
the complaint process. We have also trained approximately 20 ATF
managers, attorneys, labor and employee relations specialists, and
equal employment opportunity officials in mediation techniques to
enable them to better perform their jobs and assist others in resolving
disputes.
professional review board and atf/nteu partnership
Illustrating our commitment to ensuring a fair and equitable
workplace for our employees, ATF established a Professional Review
Board (PRB) and the ATF/NTEU Partnership Council.
The PRB addresses issues of timeliness and consistency in
disciplinary actions for all non-bargaining unit employees. Working
with the Employee and Labor Relations Branch and Chief Counsel, the PRB
(composed of senior Headquarters managers representing a cross section
of the Bureau) determines and issues proposals for disciplinary and
adverse actions resulting from Office of Inspection investigations.
The ATF/NTEU National Partnership Council, which meets on a
quarterly basis, provides a forum to address and resolve issues of
mutual concern between ATF management and the National Treasury
Employees Union. In the almost 3 years since its inception, the
National Council has worked together in reaching solutions to Bureau-
wide issues. Feedback received from the facilitator who works with our
Council, as well as those of other Federal agencies, indicates that
ATF's partnership is one of the most productive and successful
organizations of its type. Due largely to the success of the ATF/NTEU
Partnership Council in headquarters, a local Partnership Council will
also be established within the new National Revenue Center in
Cincinnati, Ohio.
management and administrative efforts
The Executive Staff and I chartered a group comprised of
Headquarters and field senior managers to re-evaluate our identity as
an agency, our mission, and how we work. The Focus Group also assessed
our field structure and identified core processes. Most of the group's
recommendations are being implemented in some form, and serve as a
basis for a recent field restructuring proposal geared toward achieving
a more effective and unified agency.
Further, as a result of information obtained from our stakeholders
and customers, every directorate is now in the process of reviewing all
services provided. This involves looking for ways to improve programs,
services, and several delivery processes. In addition, a
``vulnerabilities review team'' was formed to recommend ways to
minimize the risk of critical weaknesses which could severely harm or
destroy ATF, our employees, or others due to an oversight, inaction, or
improper action. To their credit, the team identified (among other
findings) inadequate controls and safeguards surrounding dynamic
entries by ATF agents of residences or other facilities. Treasury's
Office of Inspector General concurred with every team recommendation in
a report of their independent review of our dynamic entry procedures
and controls. Several other administrative and management initiatives
are noteworthy. They are in the areas of security, field structure,
accountability, and customer service plans.
As a result of the Oklahoma bombing, ATF was provided funding to
enhance physical security, both in the field and at Bureau
Headquarters. Immediate steps were taken to safeguard employees, and
plans are underway to relocate Bureau Headquarters so that we may have
more control over our security. In addition, after completion of a
security needs study, a number of security enhancements have been
implemented in our field installations. ATF has:
--Purchased and installed X-ray machines in 5 facilities where large
volumes of mail and deliveries are processed;
--Provided additional guard service and upgraded CCTV coverage at the
Headquarters building; and
--Upgraded security equipment at more than 70 field installations.
We will continue to upgrade security equipment at field
installations. More than 20 upgrade projects are scheduled for
completions during the next fiscal year.
ATF will also continue its drive to become a customer focused
organization, which is directly in line with the guiding principles of
our strategic plan:
--We created a new position in the Office of the Ombudsman to
develop, support, and oversee a problem resolution program for
external customers.
--We established the new position of Customer Service Specialist at
the Firearms and Explosives Licensing Center in Atlanta and
Technical Services in Cincinnati.
--Annually, we publish customer satisfaction reports telling our
customers how well we did in meeting our previously published
service standards.
--Several groups within ATF, including our labeling section, have
sent their customers surveys, the results of which are used to
improve service.
Other management support accomplishments include:
--continuing aggressive efforts to maintain an unqualified opinion on
financial statements and to successfully address the Office of
Inspector general fiscal year 1997 reportable conditions. To
date, ATF has received three unqualified financial audit
opinions;
--continuing refinement of the budget activity structure that has
resulted in a stronger and clearer alignment with the ATF's
strategic plan;
--assisting with the development of bureau-wide performance measures
in accordance with the requirements contained in the Chief
Financial Officers Act of 1990 and Government Performance and
Results Act of 1993;
--renewing an agreement with the Department of Defense to access the
automated Injury and Unemployment Compensation Tracking System,
which will continue to yield new efficiencies and cost savings
for the Bureau;
--continuing to meet the Prompt Payment standard of paying 98 percent
of all invoices within 30 days;
--ending the fiscal year with a record number of contract actions
completed and the dollars saved;
--starting the planning process for implementing a cost accounting
system; and
--effectively converting administrative systems to support
Headquarters restructuring.
This completes my statement. I will be happy to answer any
questions you may have and I would like to express my sincere
appreciation of the support that the Committee has provided us. I look
forward to working with the Committee to further our mutual goals of
safeguarding the public and reducing violent crime.
Statement of Senator Faircloth
Senator Campbell. Before we continue, I think Mr. Merletti
was next, Senator, do you have an opening statement?
Senator Faircloth. I do, if I may, please, Senator
Campbell.
Senator Campbell. Senator Faircloth, go ahead.
Senator Faircloth. Mr. Chairman, I want to thank you for
the leadership you have given to this Treasury Appropriations
Subcommittee, and I look forward to working with you in the
years to come.
Mr. Chairman, as you know, I have very strong feelings
about one of the agencies testifying before us this afternoon,
the Internal Revenue Service.
I understand that Commissioner Rossotti will testify at a
later date about the IRS budget as a whole, but given that Mr.
Brown of the IRS Criminal Investigation Division is here today
to discuss a part of the IRS budget, I want to take this
opportunity to announce legislation I plan on offering to
reduce the size of the IRS staff and, correspondingly, increase
in size the Drug Enforcement Administration.
Later today, I will introduce the American Priorities Act
to restructure these two agencies. It is my intention, Mr.
Chairman, to offer a similar bill as a rider to this year's
Treasury appropriation bill.
First, and most importantly, this bill corrects a serious
imbalance in our national priorities by transferring one-third
of the enforcement agents at the Internal Revenue Service to
the Drug Enforcement Administration by January 1999, and,
second, by the same date, the bill establishes a Cabinet-level
department to marshal the resources necessary to adequately
fight a real war on drugs. By so doing, we would affirm our
resolve to the American people and those people abroad that
this is a war we intend to win.
Over the last 5 years, drug use, which slowed in the 1980's
and early 1990's, has increased with a vengeance. Particularly
hard hit have been children. Schools are not safe. Children are
born addicted to crack and other hard drugs, which are now
cheap and plentiful throughout our Nation.
Drug-related violent crime is soaring. Most troubling of
all has been the creation of a class of violent drug-addicted
youth predators who terrorize our citizens with almost
irrational and depraved violent crimes, from car-jacking in
shopping malls to drive-by shootings on city streets and gang
violence in schools.
Yet, what is the administration's reaction? It claims the
so-called war on drugs cannot be easily won; that it will take
10 or more years to even begin to control the drug trade.
Such a piecemeal application of resources is not a recipe
for victory. We need a bold and dramatic shift in Federal
resources to end the drugs taking over our young people, and
that is simply what is happening. If this is to be a true war
on drugs, then we need a Desert Storm, not a Vietnam.
Where expertise has been developed within the IRS to fight
drugs, that expertise will be retained, but shifted to an
agency whose mission is fighting the war on drugs, not waging a
war on law-abiding taxpayers. The IRS has over 100,000
employees, 46,000 of whom are enforcement officials.
Recently, congressional oversight has revealed the agency
has excess enforcement resources which are not serving the
public interest. Now, this is a congressional oversight
committee. Instead, these excess resources are being engaged in
the bullying of law-abiding American citizens, and it is no
wonder that with over 100,000 employees, 46,000 of which are
enforcement agents, the IRS is running out of things to do.
By contrast, the DEA, which is at the forefront of stemming
the drug trade, has only 8,500 personnel, only one-half or less
of whom are special agents, or about 4,000 DEA special agents
as compared to 46,000 in enforcement in the IRS.
If the war on drugs is to be won, we need to radically
reallocate our natural resources. I would suggest that moving
about one-third of the IRS enforcement agents to the DEA is a
good first step.
Further, as a member of the Treasury and General Government
Appropriations Subcommittee, I plan to offer a version of this
bill as a rider to this year's budget.
Mr. Chairman, I held hearings last December on IRS abuses.
I can tell you from my own conversations with hundreds of North
Carolina taxpayers that the American people live in fear of the
IRS like no other agency. I only wish that the drug traffickers
who plague our nations were as frightened.
Mr. Chairman, it is time that the Federal Government start
investigating drug dealers as intensely and with equal
intensity as the IRS investigates American taxpayers.
Thank you, Mr. Chairman.
Senator Campbell. We will now proceed.
Director Merletti, since you are here to testify on behalf
of the Secret Service and not the IRS, I think you are safe to
proceed. [Laughter.]
Go.
Statement of Lewis C. Merletti
Mr. Merletti. Thank you.
Mr. Chairman, Senator Kohl, Senator Faircloth, I am
privileged to come before you today for the first time in my
capacity as Director of the U.S. Secret Service.
Present with me today is my executive staff. Among them are
my Deputy Director, Bruce Bowen; and my newly appointed
Assistant Director for Administration, Jane Vezeris.
While this is my first appearance as Director, my career in
the Secret Service spans 23 years, and I am well aware of the
historically strong relationship between this committee and the
Secret Service. This committee has been most supportive of the
agency's people and their mission, and I intend on continuing
my agency's tradition of working with all of its members,
cooperatively and honestly.
As you know, my agency is charged with the vital mission of
protecting the President, the Vice President, foreign heads of
state, and others. It also contributes to the protection of the
Nation's financial stability by ensuring the integrity of the
Nation's currency, financial obligations, and institutions.
Having worked as a special agent in three field offices,
and as a supervisor on the protective details of Presidents
Ronald Reagan, George Bush, and Bill Clinton, I know firsthand
that the protective and investigative missions appear distinct,
but are, in fact, inseparable.
The skills developed by agents during their investigative
and protective assignments are invaluable to both missions.
Most, if not all, of our training carries with it dual
applicability. The Service's unique forensic and technical
capabilities are also applied regularly to both our
investigative and protective missions.
The Secret Service will work vigorously to meet the unique
challenges posed by our protective and investigative missions.
The fiscal year 1999 budget request totals $612.8 million and
provides the funding necessary to meet those challenges.
New technologies present sophisticated threats to our
protectees, and we continue to meet those challenges by
developing and applying appropriate countermeasures to detect
and neutralize those threats.
By studying assassination attempts worldwide, the Secret
Service can assess an assassin's method of attack, weapons of
choice, and motivations. These assessments influence our
training, resource allocation, security methods, and equipment
needs.
In fact, on February 9, 1998, just 17 days ago, a group of
terrorists attacked a motorcade of President Shevardnadze of
the Republic of Georgia. Within 3 days, a Secret Service team
was dispatched to Tbilisi, Georgia, to evaluate that attack.
The team returned this past weekend with information which will
prove invaluable to our armored limousine project.
As a matter of fact, just made available to me were some
photographs which we brought back from that assessment, and I
offer these photos, if you would like to take a look at them.
Senator Campbell. Why don't we have those brought up here
while you are continuing your testimony.
Mr. Merletti. Further, our trip enforced our belief that we
must stay current in technology, equipment, and training in
order to deal with these threats.
Protection-related initiatives in our 1999 budget request
are driven predominantly by three major factors. First, we must
be continually vigilant in uncovering and investigating threats
through a comprehensive intelligence program. New methods of
attack and the emergence of new terrorist group demands
additional resources to address this problem.
Second, as previously mentioned, we must combat the new
threats with new technology. This will require not only
acquiring the new technology itself, but also hiring the
employees to operate it.
Third, and perhaps most significant, we must ensure that
our agents are properly trained and are at their optimum
physical and mental capacities.
This past year, agents working on permanent protective
details were working hours the equivalent of one and one-half
agents. Incredible work demands resulted in these agents often
working weekends and weeks without days off, and longer periods
without training. For the safety of both the protectees and
agents, it is absolutely essential that protective details are
properly staffed.
In fiscal year 1999, we must begin to prepare for the
Presidential campaign in the year 2000. Absent an incumbent
candidate, we anticipate, as you said, Mr. Chairman, a far
greater number of candidates.
Our investigative mission is also being challenged. With
the development of highly innovative technologies related to
financial transactions such as electronic banking, the
Internet, and wireless telecommunications, there has emerged
new methods of defrauding financial institutions, commercial
enterprises, and individuals.
Here, too, in the investigative arena, we make every effort
to study emerging technological trends in criminal activity in
an effort to accurately assess the adequacy of our resources.
We had hoped for the inclusion of several investigative
initiatives, but we recognized that hard decisions had to be
made by others, and, hopefully, we can address those
initiatives in the future.
As an agency, we will meet our investigative and protective
challenges, as we have throughout our 133-year history. We have
been conducting criminal investigations since our inception in
1865 and have provided protection to the Presidents and others
for nearly a century.
During the past 8 months that I have served as Director, I
have become stronger in my long-held belief that the strength
of the U.S. Secret Service lies in its people.
The Secret Service personnel are career civil servants.
They carry out their duties with commitment, dedication,
professionalism, and competence, day in and day out, in the
United States and throughout the world. They take great pride
in their agency's history and mission. For that, I am proud of
them.
I again wish to thank this committee for its support and,
as the Director, pledge my continued commitment and
cooperation.
Prepared Statement
Mr. Chairman, with your permission, I am submitting a more
detailed statement for the record and would be glad to answer
your questions.
Senator Campbell. Your complete statement will be included
in the record.
[The statement follows:]
Prepared Statement of Lewis C. Merletti
Mr. Chairman and members of the Subcommittee, I am pleased to be
here today. This is my first appearance before this Subcommittee as
Director of the Secret Service and I want to let you know that my
colleagues and I pledge to continue the forthright, effective, and
cooperative working relationship that exists between the Subcommittee
and the Service.
With me today, Mr. Chairman, are Bruce J. Bowen, Deputy Director;
Jane E. Vezeris, Assistant Director for Administration; Brian L.
Stafford, Assistant Director for Protective Operations; Stephen M.
Sergek, Assistant Director for Protective Research; Kevin T. Foley,
Assistant Director for Investigations; Stephen V. Iannucci, Deputy
Assistant Director for Inspection; Charles N. DeVita, Assistant
Director for Training; Terrence Samway, Assistant Director for
Government Liaison and Public Affairs; and John Kelleher, Chief
Counsel.
fiscal year 1999 appropriation request
The Service's fiscal year 1999 funding request totals $612.8
million and 5,042 FTE's, and is comprised of three separate
appropriation accounts: the Salaries and Expenses account; the
Acquisition, Construction, Improvement and Related Expenses account;
and the Violent Crime Reduction Trust Fund account. In addition,
funding is to be made available from the Department's Asset Forfeiture
Fund. Together, the total funding requested is $23.3 million, or 4.0
percent, above the level of funding the Service received this fiscal
year.
With this funding, the Service expects to further advance the
attainment of its two mission goals, which are: to maintain the highest
level of physical protection possible through the effective use of
human resources, protective intelligence, risk assessment, and
technology; and to protect the integrity of the nation's financial
systems through aggressive criminal investigations and assessing trends
and patterns to identify preventive measures to counter systemic
weaknesses.
salaries and expenses (s&e)
The Service's Salaries and Expenses appropriation request for
fiscal year 1999 totals $606,357,000 and 5,042 FTE positions, of which
$11,700,000 shall be derived from the Violent Crime Reduction Trust
Fund (VCRTF). This is an increase of $25,676,000 and 42 FTE's over the
fiscal year 1998 appropriated level of $580,681,000 and 5,000 FTE's.
This request includes: $6,973,000 and 35 FTE's in program increases;
$19,552,000 in upward adjustments necessary to maintain current program
performance levels; a net increase of $323,000 transferred from the
Acquisition, Construction, Improvement and Related Expenses (ACIRE)
account; $7,732,000 in mandatory workload changes; 27 FTE's and
$7,864,000 for initiative annualization; and $3,427,000 for a base
program initiative. These increases are partially offset by $20,195,000
and 20 FTE's in non-recurring costs.
s&e program changes
The Service is requesting $5,049,000 and a total of 25 special
agents for assignment to the Presidential, Vice Presidential, and
Former Presidential Protective Divisions, and the Special Services
Division. The threat of terrorist activity directed at the United
States and its interests continue to be a significant concern to the
Secret Service. As a result, the Service's security measures are
continually reviewed and enhanced as necessary.
The Service is also requesting $1,924,000 and 10 FTE's for critical
support in providing Protective Intelligence (PI) Advances required for
protection of the President when he travels; the Foreign/Domestic
Counterterrorism Program; and the Exceptional Case Study Project in
direct support of the risk assessment strategy. These additional
positions will enable the Intelligence Division to achieve its goal of
conducting all Presidential PI advances, domestic and abroad.
acquisition, construction, improvement, and related expenses (acire)
The Service's fiscal year 1999 request for the Acquisition,
Construction, Improvement, and Related Expenses (ACIRE) account is
$6,445,000; a reduction of $2,354,000 from the fiscal year 1998
appropriation of $8,799,000.
Of this amount, $3,145,000 is required for technical support
services, dual operations, moving services, Computer Aided Drawing and
Design-Computer Aided Facility Management, building operations
contractor support, health and fitness services, and lease-to-own
copiers relative to the Service's headquarters relocation. Funding for
these fiscal year 1999 requirements is the responsibility of the
Service, and is not covered with the construction of the building
through the GSA's Federal Buildings Fund.
Also budgeted under this account is $3,300,000 required for
operations and maintenance of the physical plant of the Service's James
J. Rowley Training Center.
results act
The Performance Report for fiscal year 1997 is included in the
fiscal year 1999 budget request. This report presents actual fiscal
year 1997 performance results.
Fiscal year 1997 was an extremely productive and demanding year for
the Secret Service. The total number of trips for all protectees was
higher than the number estimated. Although permanent protectee travel
was slightly under that which was estimated, protection of foreign
dignitaries was significantly higher. In addition to the normal demands
of protection, other significant protection activities during the past
fiscal year included the Presidential Inauguration, the Environmental
Summit in New York City, the Denver Economic Summit, and the United
Nations General Assembly.
With resources being redirected from last fiscal year's
Presidential Campaign protective activities back to investigative
areas, the Secret Service closed nearly 5,000 more criminal cases
during fiscal year 1997 than in fiscal year 1996 for a total of 32,430
criminal cases closed. Continued emphasis on significant cases resulted
in 13,649 arrests, an all-time high for the Secret Service. Further,
the Secret Service Uniformed Division reported an additional 1,019
arrests.
In accordance with overall Treasury Department goals, the Secret
Service continues to place an emphasis on the investigation of
financial crime. These cases have a significant impact upon the public
and financial institutions. During fiscal year 1997, a total of 2,462
financial institution fraud cases and 2,497 access device fraud cases
were closed.
For fiscal year 1996, the dollar value of counterfeit money passed
per million dollars of genuine currency was $88. For fiscal year 1997,
the volume of counterfeit money passed dropped to $77 per million
dollars of genuine currency. This drop means a substantial savings in
dollars lost to counterfeiting for the American public.
We continue to focus our efforts to curb the counterfeiting of U.S.
currency in foreign countries. A total of $2,938,170 in counterfeit
currency was passed and $61,130,551 was seized in foreign countries
during fiscal year 1997. This level of counterfeit currency passed is
52 percent below the level of last year.
protective program
The Secret Service protective operations program provides security
for the President, the Vice President and other dignitaries and
designated individuals, as well as the protection of the White House
complex and foreign missions within the Washington, D.C. area.
The President and Mrs. Clinton, and Vice President Gore, continued
their extensive domestic travel schedules. The President's
international travel included visits to 13 countries and Mrs. Clinton
visited 10. The Vice President visited five countries last year. In
addition, there were 87 foreign trips completed by the former
Presidents and their spouses.
With the tremendous support and outstanding work performed by all
of the staff within the Service, the Office of Protective Operations
successfully coordinated a number of major protective events. The
Presidential Inauguration in January 1997 is an excellent example of
how the strong working relationships developed by the Service with
other federal and local agencies ensured a safe and memorable day for
the entire country. The Secret Service also provided security for 168
protectees at a number of major events such as the Caribbean
Conference, Volunteer Summit, America's Summit, Economic Summit,
Environmental Summit, and the 52nd annual United Nations General
Assembly. These events take significant planning, deployment of
resources, and coordination with local law enforcement to be
successful.
To address the threats of international and domestic terrorism,
each of these events required that the Service develop a comprehensive
security plan. This placed a tremendous burden on the Service's
resources. The Service's preparatory efforts contributed to the success
of each and every event. Nevertheless, technological advances
throughout the world only enhance the opportunities for terrorists
activity. To meet these challenges, the Secret Service must continue
its aggressive approach to integrating the latest developments in
technology. The compromise of Presidential security is not an option
for this agency or the nation.
The Secret Service was faced with a unique situation this past year
when First Daughter Chelsea Clinton began her freshman year at Stanford
University in California. The effort to provide appropriate and
necessary security for Ms. Clinton under these circumstances is an
ongoing challenge for the Service.
Progress was made on several projects that are underway for the
White House complex, including the new White House Access Control
system, construction of booths and barriers along Pennsylvania Avenue,
and the installation of additional ballistic windows. At the Main
Treasury Building and Annex, additional security cameras were installed
to assist with alarm assessment. New perimeter alarms were installed at
the New Executive Office Building. Additional security lighting was
installed at the Vice President's residence at the Naval Observatory.
Additionally, a new Service command post with enhanced security has
been constructed at Vice President Gore's Carthage, Tennessee,
residence. Currently, a new middle perimeter fence, a guard booth, and
an upgraded alarm system are also being installed at this residence.
The Office of Protective Operations is also continuing a process to
obtain state-of-the-art primary armored vehicles in support of the
protective mission. A contractor has been selected to work with the
Service on this effort.
During fiscal year 1999, the Service will commence planning for the
2000 Presidential Campaign and subsequent Inauguration which will take
place in January 2001.
protective research program
The Office of Protective Research has oversight of the Service's
protective intelligence, technical security, communications, and
information technology resource management support for both the
protective and investigative missions.
Protective intelligence serves a critical role in the Secret
Service's protective mission. The Intelligence Division develops threat
assessments in support of protectee visits to domestic and foreign
settings; provides warning indicators for specific and generalized
threat environments; maintains liaison with the mental health, law
enforcement, and intelligence communities; and conducts operational
studies that are needed to stay at the forefront in the effort to
predict the likelihood of danger.
The recently-completed Exceptional Case Study Project (ECSP) will
enhance the Secret Service's ability to identify, assess, and manage
persons who might pose a risk of violence toward its protectees. The
ECSP also developed information relevant to the Service's risk
assessment procedures, physical protection techniques and training
methodologies. The study analyzed the thinking and behavior of persons
known to have attacked, or approached with a weapon, a prominent public
official or figure in the United States since 1949.
The Service continued to upgrade its Protective Intelligence
Information Systems. This will enhance our capability to search text
and report protective intelligence activity. Completion of the upgrade
is scheduled for this fiscal year.
The technical security program was instrumental in completing the
construction of the U.S. Secret Service Joint Operations Center and the
Emergency Operations Center. The facility provides a centralized
command, control, and communications center of all physical and
electronic security for protection of the White House complex. The
Emergency Operations Center provides a single coordination site for
multiple-agency response during catastrophic or other emergency
situations. This center includes a computerized radio communications
system, emergency notification system, multiple-site monitoring of
perimeter security systems, video teleconferencing, electronic event
recording system, and event data collection and dissemination.
The Service has made significant progress in converting its
information technology systems to ensure Year 2000 compliance. A major
effort was completed with the conversion of the Financial Management
and Accounting System. Also, conversion of 85 percent of all other
major mainframe applications was completed. A Year 2000 compliant
version of the Service's mainframe operating system is on target for
completion by March 1998. The Service will soon establish a Year 2000
compliant mainframe test environment, and begin final certification of
all mainframe systems. The Year 2000 compliance issue is the highest
priority for the Service's Chief Information Officer (CIO).
The Service is in the final phase of transferring its wide area
communications network to the Treasury Communications System (TCS)
network. The TCS network architecture is designed to support the
Service's planned future information technology architecture. All
domestic field offices have been transitioned to TCS. Headquarters and
overseas offices are scheduled to be completed by May 1998.
investigative program
The Secret Service's primary investigative mission is the
safeguarding of the payment and financial systems of the United States.
Historically, this has been accomplished through the enforcement of
counterfeiting statutes to preserve the integrity of the United States'
currency, coin, and financial obligations, and subsequently in
enforcement efforts directed at ensuring the integrity of alternative
payment and financial devices supplanting currency.
In modern day society, electronic and computer technologies
facilitate many essential activities of everyday life. Their importance
to the United States and global financial infrastructures is an
illustration of just how dependent society has become on these
innovations.
The world's economies continue to merge into one borderless and
seamless web, powered by the development of impressive technologies
like electronic banking and commerce, electronic payment systems, smart
cards and digital currencies. Consequently, all facets of this nation's
economy will become inextricably linked.
The Secret Service believes that its primary enforcement
jurisdictions will continue to be crucially important in the 21st
century. Thus, it has adopted a proactive approach to monitoring the
development of powerful new technologies, and has continued to develop
partnerships with industry to identify potential vulnerabilities to
financial systems.
The Secret Service routinely encounters a number of ``non-
traditional'' organized criminal groups operating on a transnational
basis. These diversified criminal groups emanate from the West African,
Asian, Middle Eastern, Central/South American, and Eastern European
populations. The use of the computer has given these criminals a means
to expand globally, coordinating their illicit activities and
generating counterfeit and fictitious financial obligations such as
Federal Reserve Notes, commercial checks, traveler's checks and credit
cards. In his National Security Strategy for a New Century, President
Clinton, recognized international organized crime as a threat to vital
national economic interests and pledged that the U.S. would use
whatever means are necessary to secure its vital interests.
With the emerging technology and popularity of the Internet, the
Secret Service has seen an alarming increase in identity fraud.
Accordingly, the Internet will continue to have vulnerabilities which
can allow confidential business information and sensitive personal
information to be compromised. It is well known that the major Internet
Service Providers (ISP's) are constantly updating security measures and
have been receptive in establishing liaison with law enforcement in an
effort to preserve the integrity of the Internet. Discussions are
currently underway between the law enforcement and ISP communities to
establish an association designed to share concerns and discuss
security issues.
According to the President's Commission on Critical Infrastructure
Protection, the U.S. financial system is central not only to domestic
and global commerce but also to 10 million jobs and the daily lives of
virtually all Americans. That system processes $3 trillion in daily
payment transactions, represents $4.5 trillion of bank holdings and $8
trillion in capital and investments. It is increasingly dependent upon
various telecommunication systems. Private industry is interested in
utilizing the Internet to conduct electronic commerce. This may
revolutionize the way business is conducted and continue to promote a
more global economy. By the year 2000, there could be one billion users
on the Internet. This equates to one billion potential customers. A
number of banks are utilizing the Internet to offer on-line banking
services. In addition, many retailers are using the Internet to allow
customers access to goods and services in exchange for payment by
credit card. Such transactions result in the electronic transfer not
only of credit card numbers, but also of the subscriber's personal
information.
Unfortunately, ``hackers'' have demonstrated an ability to access
and download this information for account takeover schemes and other
similar fraud. A criminal can literally take over someone's credit card
or bank account, without the victim's knowledge. A criminal's
fraudulent use of an individual's personal information to perpetrate a
separate fraud can ruin the victims's credit history as well as thwart
law enforcement's ability to investigate such activities. As a result,
banks and credit card associations have been developing methods of
encrypting credit card numbers and customer personal identification
information to facilitate secure Internet payments. These precautionary
measures notwithstanding, identify fraud remains a problem to the
degree that persons with unauthorized knowledge of Internet access
codes can still penetrate computer infrastructures.
The Secret Service, through its partnership with private industry,
is examining new vulnerabilities associated with ``smart cards.'' In
Europe, smart cards used for pay telephones have already been
counterfeited. A laptop computer was used to reprogram phone card chips
to allow unlimited free calls. This type of chip manipulation is of
serious concern to the Secret Service as we move closer to global
implementation of this technology in the international financial arena.
Nigerian Advance Fee Fraud has arguably become the most lucrative
financial crime committed by Nigerian criminals worldwide. Conservative
estimates place the annual financial loss associated with these frauds
in the hundreds of millions.
The Secret Service hosts an annual International Nigerian Crime
Conference. The most recent conference held in Atlanta, Georgia, was
attended by more than 700 representatives of law enforcement (including
police officials from more than 20 countries) and the private sector.
This typifies the ``success through partnerships'' philosophy adopted
by law enforcement agencies to combat Nigerian and other organized
criminal groups. The Secret Service operates under the belief that
investigation, interdiction, public education, and partnerships are the
building blocks for suppressing criminal activity.
As I mentioned earlier, United States currency is the currency of
choice throughout the world. Maintaining confidence in the integrity of
the U.S. Federal Reserve Note is of paramount importance to the nation.
Today, thanks in part to the Service's efforts, U.S. currency
enjoys worldwide confidence and acceptance. The Federal Reserve
estimates that of the $380 billion of U.S. currency circulating, about
two-thirds ($250 billion) circulates abroad. GAO testified, before the
House, that the willingness of foreigners to hold U.S. currency
represents an interest free loan of over $10 billion annually to
America's taxpayers. I am very proud of the key role the women and men
of the Secret Service play in upholding that confidence and generating
that savings.
Counterfeiting production methods have evolved over the years, from
the traditional method of offset printing to color copiers and, more
recently, to scanners, computers and inkjet printers. Today's
counterfeiter with little training, skill or experience, can produce
counterfeit currency with computer skills obtained through trial and
error and public information. Counterfeiters using computers could
transmit quality images of U.S. currency anywhere, via the internet.
Of the domestic counterfeit currency printing operations suppressed
during fiscal year 1997, 73 percent were inkjet in nature, as compared
to 19 percent in fiscal year 1995. Currency counterfeiting through the
use of computers is likely to increase, since these instruments of
production are readily available and continue to improve.
The Secret Service's strategy in combating this counterfeiting
trend is threefold. The first concerns legislative proposals. Secretary
Rubin has asked the Justice Department to join Treasury in working with
the United States Sentencing Commission to review the guideline ranges
of imprisonment for counterfeiting cases. The Department will also
address the issue of providing the Secret Service administrative
forfeiture authority related to instrumentalities of counterfeiting.
The second part of the strategy involves cooperation with computer-
related industries to suppress computer-generated counterfeiting of
U.S. currency. A meeting with industry representatives is planned to
discuss this issue to develop a working plan to identify technological
solutions. The Secret Service sees this meeting as the first step in
maintaining a continuing dialogue with computer hardware and software
manufacturers.
The third part of the strategy involves a public education campaign
highlighting the security features in the new currency. In addition,
the importance of the public's scrutiny of the currency they receive,
as well as the detection of counterfeit currency, will be stressed. We
expect to undertake this campaign in conjunction with the introduction
of the new $20 Bill.
rowley training center
The Service's Office of Training has consolidated the construction
of the Administration and Classroom Buildings at the Rowley Training
Center into a single, cost-effective project that will be presented for
competitive bids this March. The anticipated construction start date is
this summer, with completion expected next fall.
A state-of-the art close quarters tactical range building (shoot
house) has been planned, designed, and approved. It will be offered for
competitive construction bids early this spring.
The Service continues to utilize state-of-the-art modeling software
for the Security and Incident Modeling Laboratory (SIMLAB) necessary
for the development of realistic protective scenarios for training
purposes. The Service has begun the SIMLAB pilot training programs for
the Presidential Protective Division and the Vice Presidential
Protective Division. A major benefit of the SIMLAB program is its
utility in the risk assessment process. SIMLAB will ultimately enable
the Service to tailor protective manpower to protective threats and to
equip detail personnel with protective equipment that matches the
expected threat.
The Secret Service has entered into a formal partnership with Johns
Hopkins University to pursue cooperative projects that will enhance and
validate the efficiency and effectiveness of the Service's law
enforcement training. Faculty from Johns Hopkins will participate with
the staff of the Rowley Training Center to provide comprehensive
instruction in the most innovative police management principles and
techniques. This partnership will have a direct impact on curriculum
review and will result in modifications to the basic agent training
course.
The Office of Training, in cooperation with the American Bankers
Association, has designed and developed a pilot financial crimes
training course for special agent personnel. In addition, two financial
crimes seminars were presented exclusively to U.S. Attorneys from
around the nation. Also, six Dignitary Protection Seminars were
presented to command level police personnel from various agencies. All
of these classes served to enhance investigative and protective
cooperation throughout the law enforcement community. In addition, in
cooperation with the U.S. Customs Service, the Secret Service has
expanded its Counter Assault Team training program to include air
interdiction training to accomplish our protective mission.
secret service headquarters consolidation
Work on the Service's new headquarters building is proceeding on
schedule, with construction expected to be complete in the summer of
1999; occupancy is expected to begin shortly thereafter. Concrete slab
and column construction is complete to the 7th floor, with the building
expected to reach its full height of 110' this spring. Once the
concrete structure is in place, the addition of glass window panels and
exterior brick will commence. Interior systems and drywall work will
immediately follow the completion of the building's exterior. We are
very much looking forward to having our own facility.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions that you or other members of the subcommittee may
have.
Statement of Samuel H. Banks
Senator Campbell. And, last, Mr. Banks, if you would
continue.
Mr. Banks. Thank you, Mr. Chairman.
It is a pleasure to be here today before this subcommittee
with Under Secretary Kelly and my colleagues.
The fiscal year 1999 budget request for the Customs Service
totals $1.8 billion and 16,766 FTE's. This is an increase of
about $125 million and 111 FTE's over the current year. About
one-half of that increase is dedicated primarily to maintaining
current levels of operation. The other one-half, $68 million
and 31 FTE's, is going to be focused in the areas of narcotics,
money laundering, integrity enhancement, child labor
enforcement, and narcotics detection technology.
Customs' foremost priority continues to be narcotics
interdiction. This agency is the first line of defense against
drug smuggling into the United States, and the opportunities
for smuggling are daunting.
Each and every day, Customs processes 1.2 million people at
our ports. That is almost twice the population of the District
of Columbia. Each year, we check 18 million commercial
shipments and 4.5 million sea containers.
A truck crosses the Southwest border into the United States
every 5 seconds. We enforce a myriad of trade laws on those
people and goods coming into the country, and, incidentally, we
collect over $22 billion in revenue, a 15-to-1 return on our
S&E budget. We will also match our enforcement record against
anyone, seizing 982,000 pounds of narcotics, $240 million in
currency and negotiable instruments, and over 20,000 arrests
last year.
How do we face such an enormous workload without a doubling
in size? Basically by trying to make careful investment
decisions.
With our proposed budget for 1999, $54 million will enable
us to continue implementing our 5-year technology plan. That
will deploy narcotics enforcement technology at high-risk sea
and land border ports. We are going to expand our automated
targeting system, a computerized system to help us focus in on
those high-risk shipments, and to install large-scale mobile x
rays and gamma ray equipment to help sort through and inspect
the 129 million conveyances and the 850 billion dollars' worth
of trade that crosses our border.
In fiscal year 1999, we will add 54 agents, intelligence
analysts, and marine enforcement officers to target and
interdict drug smuggling cells and enhance money laundering
operations. This modest increase in resources will be focused
only on the most high risk and high impact areas.
The sum of $6 million will be dedicated to implement the
Integrity Assurance Program, which includes revamping our
recruitment screening process, conducting polygraphs, running
more undercover operations, and, last, $3 million is to
initiate a child labor enforcement program. Mr. Chairman, we
believe this is a modest, reasonable, responsible budget, and
it will help us to ensure that the Nation's borders are
protected.
If you talk to our officers in the field, I think you will
find them to be incredibly dedicated and committed to the
mission. We need to support them with the right tools, the
automation, and the technology to sort through the massive
cargo and humanity, to find those violators without impeding
legitimate traffic. It is a big job, but not an impossible one.
We will do our best to ensure the money appropriated to us
is well spent and that we give you and the American taxpayer
the highest return on your investment.
Thank you very much.
Prepared Statement
Senator Campbell. I thank you for your testimony, Mr.
Banks. We will insert your complete statement in the record.
[The statement follows:]
Prepared Statement of Samuel H. Banks
Good afternoon, Mr. Chairman and Members of the Subcommittee. I am
pleased to be here today and present to you Customs successes from the
past year, the current strategies we are undertaking to accomplish our
multi-faceted mission, and our fiscal year 1999 budget request. It is
our goal over the next year to continue to build upon the excellent
working relationship we have with this Committee. Your strong support
of the Customs Service has been vital to our success as one of the
Nation's primary border interdiction agencies.
While much of our past year's success is the direct result of the
ingenuity, dedication and hard work of Customs employees, we have also
enjoyed many successes working cooperatively with other Federal, state,
and local law enforcement agencies, the trade community, and foreign
governments. We will look to strengthen these important partnerships
further in the future.
narcotics enforcement
Similar to past years, Customs remains in the forefront of our
Nation's narcotics interdiction and investigative efforts. Our foremost
priority continues to be narcotics interdiction. In fiscal year 1997,
Customs nearly matched its all time high seizure record set in fiscal
year 1996, by seizing 982,815 pounds of narcotics.
In order to meet the challenge of policing the Nation's borders
against drugs, Customs has continued to develop and wed new
technologies with conventional inspectional and investigative
techniques. Last fiscal year, over 118 million automobiles, 9.3 million
trucks, 321,000 railcars, and 4.5 million sea containers entered the
United States creating an enormous window of opportunity for drug
smugglers and a massive drug enforcement dilemma for Customs. Each
year, drug smugglers probe for and exploit weaknesses in Customs
enforcement shield in, around, over and under our air, land, and sea
ports of entry. Drug Smuggling Organizations continue to diversify
their smuggling routes and have increased the sophistication of their
smuggling techniques. They have established elaborate front companies,
both foreign and domestic, to facilitate the movement of illicit drugs;
conspired with dock workers and baggage handlers to form internal
conspiracies to circumvent the Customs inspection process; deployed
stealth boats and sophisticated air drop procedures to go around
established ports of entry; and established sizable spotter networks in
and around our ports of entry to ``pick and choose'' smuggling times
and routes.
In fiscal year 1997, Customs continued its efforts to fight
smuggling along the Southern Tier of the U.S., including Puerto Rico
and the Virgin Islands. Through Operations HARD LINE and GATEWAY, which
were made possible with this Committee's support, we have hired,
trained, and placed 677 new employees along the Southern border and
Caribbean Basin.
In fiscal year 1997, Southwest border seizures under Operation HARD
LINE were 33,106 pounds of cocaine, 602,549 pounds of marijuana, and
197 pounds of heroin. Operation GATEWAY, the multi-staged operation
designed to address the air and maritime threat in Puerto Rico, the
Virgin Islands, and their surrounding waters, also continued to show
positive results. Since the start of the second year of operation,
March 1, 1997, through January 31, 1998, GATEWAY has resulted in the
seizure of $3.4 million in currency, 16,693 pounds of cocaine, 376
pounds of marijuana, and 92 pounds of heroin.
Customs has developed an investigative strategy that focuses
activity and resources in those areas where it is estimated the
majority of the illegal drugs enter the U.S. The strategy also targets
those areas where our intelligence indicates Drug Smuggling
Organizations' ``command and control'' structures are centered. The
approach is designed to enhance both internal and external cooperation
and intelligence sharing, while maximizing the unique investigative and
interdiction capabilities of Customs.
Industry partnerships
To assist in deterring narcotics smuggling, Customs developed and
deployed a number of innovative programs and detection technologies
that act as force multipliers to meet our enforcement goals. Customs
continues to expand its Carrier Initiative Program (CIP) with the truck
industry and with Southwest border railroads as well. This program is a
joint effort by Customs and the transportation industry to reduce
smuggling in commercial conveyances. Presently, 3,900 carriers (875
land, 110 air, and 2,915 sea) have signed agreements with Customs.
Building on the CIP, Customs established the Business Anti-Smuggling
Coalition (BASC) with Southwest border importers. In fiscal year 1997,
information from these two programs resulted in 74 seizures totaling
12,700 pounds of narcotics. We believe these partnerships play an
important role in combating narcotics smuggling. Last year alone, 43
percent of the cocaine seizures that were made by Customs as a result
of prior intelligence, came from information that was provided to
Customs by the trade community.
Building on the success of these programs, Customs has developed
the Americas Counter Smuggling Initiative (ACSI), which will expand our
anti-narcotics security programs with industry and government
throughout Central and South America. This initiative is designed to:
strengthen cooperative efforts with legitimate businesses involved in
international trade; increase actionable intelligence on narcotics and
contraband interdiction; increase participation in CIP and BASC;
prevent narcotics from entering the U.S. via commercial cargo and
conveyances; increase narcotics seizures throughout the region; disrupt
smuggling by an aggressive attack on internal conspiracies; and force
smugglers to use riskier methods such as air drops and speed boats.
Beginning in January 1998, the Offices of Field Operations,
Investigations, International Affairs, and Intelligence began detailing
Customs officers to South America to assist exporters, carriers,
manufacturers, and other businesses. These employees will perform
security site surveys, develop and implement security programs, conduct
post-seizure analyses, foster information exchange and follow up
activities, and provide guidance on technology deployment and
application to safeguard legitimate trade from being used to smuggle
narcotics. Target countries include Venezuela, Colombia, Peru, Ecuador,
Panama, Costa Rica, and Mexico.
Operation BRASS RING
Although Customs seized nearly 1 million pounds of illegal drugs in
fiscal year 1997, more than all other Federal agencies combined, the
quantity of cocaine seized nationwide dropped 12 percent and the amount
of cocaine seized in Southwest border cargo dropped significantly last
year. To address this, Customs is undertaking a tough, new approach in
fiscal year 1998 to combat narcotics smuggling called Operation BRASS
RING.
BRASS RING builds upon the enforcement momentum Customs has
generated through the use of technology, information systems, and
trained personnel. Forty-two high risk ports of entry along the
Southern Tier and high threat airports and seaports have developed and
begun implementing 180-day action plans which incorporate innovative
approaches such as mobile blitz teams, cargo movement from small to
larger locations which have x-ray technology, railroad inspections, and
anti-smuggling spotter initiatives. BRASS RING is also innovative in
that it was developed by field personnel and in partnership with the
National Treasury Employees Union.
Technology
Technology plays an important role in all Customs counterdrug
activities. It provides new capabilities to allow inspections to keep
up with changing smuggling techniques, acts as a force multiplier,
increases enforcement effectiveness and efficiency and allows us to
cope with growing trade and traffic.
With the support of the Administration, Customs has developed a
comprehensive and structured 5-year plan to deploy counterdrug
technology to the ports of entry, subject to budget resources, to
significantly increase the smugglers' risk of detection along the
entire Southern Tier of the U.S. This technology includes: non-
intrusive technologies (e.g., fixed and mobile truck x-ray systems,
gamma-ray inspection systems for trucks and railcars, and higher energy
heavy pallet x-ray systems) to counter the entry of narcotics along the
Southern Tier; technology for outbound currency and weapons at ports
along the Southern tier; dedicated commuter lanes which depend on
technologies such as voice recognition, biometric identification,
``smart cards'' (a chip on a credit card-sized card which stores
information about the individual), and vehicle movement control
technologies along the Southwest border; investigative, intelligence,
and encrypted, digital, voice communications technology; and automated
targeting systems. In addition, over the next five years, we intend to
deploy similar non-intrusive inspection technology to high-risk
airports and seaports which are not located along the Southern Tier,
such as John F. Kennedy International Airport in New York and the
Newark Seaport. Recent accomplishments in the development of new and
larger-scale non-intrusive inspection systems will provide Customs with
the opportunity for unprecedented improvement in the intensity and
quantity of inbound inspections of cargo and conveyances.
Customs currently operates four truck x-ray systems in El Paso and
Pharr, Texas and Otay Mesa and Calexico, California. In addition, one
prototype mobile truck x-ray system and one prototype gamma-ray system
are in place at Laredo and El Paso, Texas, respectively. The prototype
gamma-ray system uses gamma-ray radiation to penetrate the structure of
heavier-bodied trucks, such as propane tankers, to allow Customs to
examine both the conveyance and some cargoes for the presence of
contraband. Since the first truck x-ray system became operational in
August 1995, this system, and the three others that have become
operational since March 1997, have been involved in 150 drug seizures
totaling over 38,000 pounds of narcotics. By December of 1998, Customs
will have four additional fixed site truck x-ray systems operational in
El Paso, Laredo, and Brownsville, Texas; and Nogales, Arizona.
We believe this type of technology is invaluable in enhancing
Customs narcotics enforcement capabilities without impeding the flow of
legitimate commercial traffic. The fixed site truck x-ray and mobile
truck x-ray systems can inspect approximately eight full size tractor-
trailer trucks per hour. The gamma-ray system can inspect 12-15
tractor-trailer trucks per hour. Both of these systems can inspect any
vehicle that is legal for operation on public roadways.
Air and Marine Programs
In fiscal year 1997, the Customs Air Program contributed to the
seizure of 51,908 pounds of cocaine, 64,595 pounds of marijuana and 50
pounds of heroin. It also continued assistance to Mexico in the air
transit zone and to South American countries in the narcotics source
zone.
Since the implementation of HARD LINE and the strengthening of the
ports of entry, the marine threat has risen dramatically from its
previous levels. Over the past few years, the Marine Program has been
scaled back to focus Customs efforts on other methods of deterring
narcotics smuggling. In fiscal year 1997, the Customs Marine Program
contributed to the seizure of 31,538 pounds of cocaine, 25,040 pounds
of marijuana, and 39 pounds of heroin. It is imperative to sustain this
successful program.
The Customs National Marine Strategy places an emphasis on
intelligence-driven interdiction operations and investigations.
Smuggling methods have changed from the very simplistic (boats with
bulk marijuana thrown on the decks or in cabins) to the very
sophisticated (cleverly engineered hidden compartments, as well as air
drops). The contraband has also changed from large, easily detectable
cargoes of marijuana to smaller loads of cocaine. Customs future air
and marine interdiction successes will be based on a flexible response
in meeting new external challenges like those mentioned above.
Railroad inspections
In fiscal year 1997, Customs processed more than 320,000 rail cars
at eight major crossings along the Southwest border--Laredo,
Brownsville, Eagle Pass, Presidio and El Paso, Texas; Nogales, Arizona;
and Calexico and San Ysidro, California. Approximately half this volume
crossed at Laredo, Texas. In response to the emerging threat of
narcotics smuggling via rail, Customs is increasing its intensive
inspections of railroad equipment and is testing non-intrusive
technology on railcars. Customs recently completed successful tests of
the Vessel and Container Inspection System (VACIS), a gamma-ray imaging
system that has been modified for use in the rail environment. Customs
also plans to deploy 47 positions to increase rail inspections by
Contraband Enforcement Teams, add rail inspection training to its
existing Southern Border Interdiction Training course, and perform
joint operations with other agencies.
Recently, Customs and Border Patrol officials met to coordinate
joint inspection operations on Southwest border railcars. Since the
summer of 1997, joint operations have been held at each of the eight
major rail crossings with successful results. To date, these efforts
have produced several marijuana seizures totaling more than 700 pounds
as well as the discovery of 17 railcars with false compartments. Custom
is also an active participant in a multi-agency working group formed by
Attorney General Reno to address the threat of narcotics smuggling via
rail.
money laundering
Fiscal year 1997 was one of dynamic change in the investigative
approach taken in the area of money laundering investigations and
initiatives. As a result of the programs implemented in fiscal year
1997, Customs money laundering strategy is now more focused on the
disruption and incapacitation of the two key business functions that
are the lifeblood of most sophisticated international criminal
organizations: laundering and investing the proceeds and profits of
their criminal activity. Asset Removal Teams, undercover operations,
training foreign counterparts, and the establishment of the Money
Laundering Coordination Center, discussed below, have all contributed
to improving our money laundering strategy.
In fiscal year 1997, our money laundering efforts resulted in
seizures of $257 million in monetary instruments, most of which were
related to narcotics trafficking. The Customs-led El Dorado Task Force
in New York met with tremendous results in disrupting money laundering
in the wire remitter industry. Using a combination of undercover
operations and regulatory interventions, such as Geographic Targeting
Orders (GTO's), the task force targeted 12 remitters that sent over
$1.2 billion a year to South America--$800 million of it to Colombia.
Their efforts have reduced the amounts remitted to Colombia by over 30
percent, driving the drug proceeds out of this system and contributing
to the overall rise in the cost of laundering drug money.
On legislative and regulatory matters, Customs worked closely with
the Department of Treasury and the Financial Crimes Enforcement
Network, which resulted in several notices of proposed rule making for
enhanced reporting for money services businesses, wire transfer record
keeping requirements, and currency and monetary instruments reporting
on foreign bank drafts.
For fiscal year 1998, our money laundering strategy will build upon
the successes from the previous year. Our Money Laundering Coordination
Center will become operational in fiscal year 1998 and will coordinate
Customs nationwide undercover money laundering operations and follow-up
investigations. Customs also plans to expand the use of covert
undercover money laundering operations and continue to increase the use
of non-traditional law enforcement methods, such as GTO's, in
coordination with the Internal Revenue Service, the Department of
Justice, the Financial Crimes Enforcement Network, and state and local
law enforcement.
integrity
While there is no systemic problem of corruption at Customs, it is
necessary to develop a strong integrity assurance program to counter
perceived and potential threats of corruption. In fiscal year 1997,
Customs began an enhanced integrity program to address these issues and
redirected resources to strengthen the Office of Internal Affairs (IA).
Of the 45 positions identified for this critical program, 35 have been
filled or selections made. These employees will be devoted to the new
Computer Analysis Division (which will perform forensics, analysis, and
assessments of the integrity of automated systems), special operations,
inspection and audit, and other similar functions. Activities, such as
inspections and audits, will also increase current employee awareness
of integrity issues.
Pending funding availability requested for fiscal year 1999, IA
will also develop ways to complete background investigations more
quickly with a higher degree of reliability, expand its own polygraph
capability to address internal investigations of alleged misconduct,
and acquire the specialized hardware and software to accommodate the
FBI's change to electronic fingerprint technology. Working in concert
with the State Department, IA plans to continue to accommodate other
countries' requests for integrity and internal investigative training.
This effort fosters better coordination with other countries' customs
services, and the development of initiatives of mutual benefit in
thwarting international corruption of law enforcement personnel.
Customs is exploring changes to its hiring mechanisms to ensure that
the highest level of integrity in its work force is maintained.
automation
Customs has embarked on an aggressive strategy to improve its
management of information technology in response to legislative
mandates, such as the Clinger-Cohen Act and Government Performance and
Results Act, the Federal Acquisition Streamlining Act, and guidance
from OMB and GAO. Over the past year, Customs has developed an
investment management process that considers the risks, costs and
benefits associated with potential information technology (IT)
investments. This provides a systematic process within which Customs
Investment Review Board (IRB) can make funding decisions and exercise
oversight of Customs IT projects. The process instills discipline by
making the business sponsors responsible for IT projects, by
integrating business and technical risk considerations, and by ensuring
adherence to Customs systems development guidelines.
In addition, major Customs IT projects are under ongoing review by
the Treasury IRB in order to ensure that these investments meet the
criteria of the Clinger-Cohen Act and the goals and strategies of the
Treasury Department. One such project, the Automated Commercial
Environment (ACE) is reviewed by the Treasury IRB every month. The
Treasury IRB evaluates the project's progress against established
milestones and performance measures, reviews and approves Customs IRB's
ACE funding release requests, approves every status report that is sent
to GAO and Congress, and ensures that ACE, as well as Customs
enterprise architecture follows GAO's best practices.
Also during the past year, Customs has undertaken an extensive
self-examination of how its IT operations support business needs. This
effort has enabled Customs to establish the foundation for developing
both an enterprise architecture, which defines how information systems
and applications support business needs, as well as a technical
architecture describing the components of the IT infrastructure. As a
result of this effort, Customs has strengthened its ability to develop
comprehensive and integrated IT infrastructure assessments and budget
proposals. Further, Customs is proceeding with an effort to more fully
develop an enterprise architecture and a process for renewing that
architecture in conformance with Treasury guidelines and industry best
practices.
Finally, Customs is intensively attacking the problem of Year 2000
compliance. Customs recognizes the gravity of the situation of our
automated trade and enforcement systems, on which the trade and other
law enforcement agencies depend, if our systems are not ready for the
Year 2000. Customs is devoting considerable attention and has shifted
resources to support the necessary renovation and testing of IT
systems; the replacement of IT software, hardware and
telecommunications that is not capable of operating in the Year 2000;
and in addressing Year 2000 problems in such non-IT areas as laboratory
equipment, x-ray machines, and building infrastructure.
While much work needs to be done and many problems can be
anticipated, the Year 2000 conversion effort is meeting with some
success. As of January, Customs is slightly ahead of schedule for
ensuring that mainframe mission critical trade, enforcement and
administrative systems are renovated and tested by October 1998.
Further, these efforts are currently within budget, although Customs
remains concerned about the rising costs of IT professionals in the
current tight labor market.
trade compliance
Through a complete redesign of the trade process and a focus on key
industries and importers, Customs has made good progress toward
attaining its goal of 90 percent overall compliance and 95 percent
compliance for Primary Focus Industries (PFI). PFI's are industries
which are of sufficient trade sensitivity to warrant a heightened
degree of attention by Customs with respect to imported goods. The
agency also has been able to sustain a close to 99 percent duty
collection rate.
However, with the substantial growth in world trade, coupled with
limited resources, it is becoming clear that Customs ability to meet or
sustain all of the goals for trade compliance is increasingly
challenged. Customs is continuing to move forward by constantly
refocusing its resources on the vital industries and imports, but has
adjusted its performance targets to reflect limited resources.
For fiscal year 1998, Customs has set forth an ambitious agenda. In
the trade compliance area, Customs will initiate a number of positive
initiatives. Included are: an initial prototype of elements of the
modernization of Customs automated commercial operations at three land
border ports; finalizing and implementing new drawback regulations to
tighten control over this program (which was previously identified as a
Federal Managers Financial Integrity Act weakness); instituting multi-
port compliance efforts focused on three compliance areas (bearings,
production equipment, and gloves) to see if greater organizational
focus will result in higher levels of compliance sooner; continuing the
informed compliance program with more focus on high impact areas; and
continuing efforts to improve Customs compliance measurement program.
Trade Compliance also plans to expand the account based-approach to 150
accounts; initiate over 100 compliance assessments of companies;
develop a similar compliance approach for Mexican and Canadian NAFTA
goods; increase focus on our international cooperation efforts with
other countries, the World Trade Organization, and the World Customs
Organization; and finally continue improvement of our commercial
financial systems to improve compliance with the Chief Financial
Officers (CFO) Act. The $11 million appropriated to the Department of
Treasury's Automation Enhancement account in fiscal year 1998, and
subsequently transferred to Customs, will continue efforts to modernize
Customs automated commercial operations.
Account Management
Customs has prototyped the concept of Account Management. The
Account Manager is assigned an account (importer) or group of accounts
and is responsible for overseeing the efficient application of Customs
processes to the account(s). By viewing import practices from a
corporate or account level, Customs can craft strategies to maximize
compliance which are reflective of developing business practices. The
importer benefits by having a single point of contact within Customs.
In fiscal year 1997, Customs had 25 full-time National Account
Managers in place and a growing list of accounts participating in the
program. In addition, the prototype of Port Account Management was
implemented. The Port Account concept also focuses on major accounts--
importers with annual trade value in excess of $10 million. Successful
prototyping has led to a January 1998 expansion of the program which
now numbers 120 accounts, and further expansion is planned for later in
1998. The Account Management approach, as exemplified by these
programs, is the cornerstone for the future of the trade compliance
process. While analysis of trade patterns and determination of
compliance levels for industries and countries of origin will remain
critical for effective operations, an account focus is the means for
implementing strategies resulting from such analysis. Customs believes
that the vast majority of companies who import goods wish to do so in
compliance with laws, rules, and regulations. The Account approach
enables Customs to assist compliant companies to maintain compliance,
while better using its resources and processes to focus on non-
compliant activities. Such a focus will enable Customs to maximize the
enforcement of laws and further develop risk management.
passenger
In fiscal year 1997, the performance target of 60 percent of the
arriving flights providing Customs advance passenger information was
met, and Customs continued to attain a 5 minute or less processing rate
for 95 percent of arriving air passengers. Informed compliance projects
continued with the establishment of additional self-service
informational kiosks at 12 airport departure lounges, production of
brief television public service announcements for 8 airport television
networks, and AM radio loops at the land borders.
Passenger targeting and identification were enhanced through
continued airport analytical unit training, additional automation
improvements to the Advance Passenger Information System (APIS), and
improvements to APIS primary processing screens. Port Quality
Improvement Committees (PQIC's), which are multi-agency, empowered
teams established to increase coordination on local passenger
processing issues, are in place at numerous land border ports and
airports, and are used to coordinate operations between government
agencies and industry.
Over the next year, improvements will be made to the passenger
compliance measurement program in the commercial air program area.
Customs will continue efforts to obtain advance passenger information
for 65 percent of all international flights. This will be accomplished
by working with various airlines and the Immigration and Naturalization
Service.
Customs will also continue to expand automated targeting
capabilities; test or install several new technologies, such as
automated license plate readers, at the land borders; and continue
efforts to increase the compliance levels of non-willful violators.
Most arriving persons choose to be compliant when information for
compliance is easily available. If the number of inadvertent violations
can be significantly reduced, inspectional resources can focus more
fully on serious violators.
outbound
In fiscal year 1997, the Outbound Process made significant outbound
interdictions of currency, stolen vehicles, and Exodus violations.
Outbound seized more than $55 million in undeclared outbound currency.
The majority of undeclared currency going out of the U.S. involved
proceeds from illicit activities, with the majority being proceeds from
narcotics smuggling into the U.S. Outbound also recovered 2,119 stolen
vehicles worth an estimated $35.3 million. In fiscal year 1997, Customs
Exodus Program, an intensified enforcement program intended to
intercept illegal exportation of strategic technology and data,
interdicted 1,034 shipments of weapons, munitions, and critical
technology illegally leaving the United States, valued at more than $59
million.
Customs will continue to enforce a wide range of international laws
related to illegal trafficking in materials and technologies which
threaten U.S. national and economic security and impact on U.S. foreign
policy.
To the extent that funds are available, Customs will work to
improve the compliance measurement program started last year; continue
to work with the trade community to address their concerns in
conjunction with the development of the Automated Export System (AES)
which will capture all export information; initiate an automated export
license system in AES; standardize used car export procedures; and
further a number of initiatives to deal with willful violators (e.g.,
test new outbound examination facilities funded by increased
appropriations). Outbound will also evaluate new technologies; support
Department of Defense and Department of Energy foreign export control
programs; evaluate a stolen vehicle initiative started in the Port of
Miami; work with our intelligence units to improve outbound currency
interdictions; and continue efforts to implement a credible
antiterrorism program in conjunction with the airlines, airport
authorities and with the other Federal agencies tasked with this
responsibility.
Antiterrorism
In fiscal year 1997, Customs received $62.3 million for
antiterrorism initiatives to be used to meet the recommendations issued
by the White House Commission on Aviation Safety and Security. To date,
Customs has filled 137 of the 140 positions (100 inspectors, 33 agents,
6 intelligence analysts, and 1 technical support position) authorized
under the antiterrorism legislation. One hundred inspectors and 10
special agent positions have been assigned to 14 of the largest
international airports. In addition, 20 special agents and the
intelligence research specialists are working jointly with the Federal
Bureau of Investigation and the Central Intelligence Agency at both
field and Headquarters locations.
To support efforts to screen baggage and cargo at international
airports, $35 million was specifically authorized to purchase equipment
under this appropriation. Of this amount, $26.4 million has been
designated to purchase joint-use equipment that can be shared with
airports, airlines and cargo authorities. Equipment procurement will be
accomplished over a three year period. Planned use of the funding
includes the acquisition of: mobile x-ray vans with explosive and
radiation detection technology; tool trucks; mail x-ray systems;
explosive particle detectors; and radiation detection pagers. Also, for
joint-use with airport entities, the heavy cargo pallet x-ray will be
tested in July 1998 in Miami, Florida.
An additional $16 million is available to further develop the
Automated Targeting System (ATS) to identify cargo shipments that may
pose terrorist threats. A prototype test of this system is scheduled to
take place at New York's JFK Airport in June 1998.
Since October 1, 1997, Customs made many significant interdictions
that support aviation safety and security at 17 international airports
that have received resources under this initiative. Customs has
assisted in three terrorist related arrests, made 65 firearm seizures
in baggage and cargo, and made 56 seizures of violative shipments of
hazardous materials and dangerous goods that would have been placed on
aircraft.
fiscal year 1999 budget request
Customs proposed appropriation for fiscal year 1999 totals
$1,804,025,000 and 16,766 Full Time Equivalent (FTE) positions.
Budget Highlights
Our Narcotics and Money Laundering Strategy will provide essential
resources which will enhance our investigative and intelligence
capabilities while enabling Customs to better anticipate and respond to
changes in drug smuggling behavior. The $5 million and 27 FTE requested
will provide us with additional personnel and investigative assets
needed to exploit seizures made at the border and effectively identify
and disrupt the transportation and distribution cells of Drug Smuggling
Organizations (DSO's) within the U.S.
The Customs Integrity Assurance Program (CIAP) Initiative of $6
million requested for fiscal year 1999 will allow Customs to conduct
more special operations in partnership with other Federal agencies,
place a much stronger emphasis on intelligence and the analysis of
investigative data, and increase contract and computer fraud
investigations. In addition, Customs will change the process for hiring
law enforcement officers by requiring increased emphasis on pre-
employment screening.
The quality recruitment component of the initiative will insure
that applicants of the highest quality and integrity are hired by using
written tests, suitability assessments, structured interviews, and the
redesigned pre-employment process. Customs will use the requested funds
to develop ways to expedite background investigations with a higher
degree of reliability, expand polygraph capability in order to address
internal investigations of alleged misconduct, and acquire specialized
hardware and software to accommodate the FBI's change to electronic
fingerprint technology.
In order to fully implement an effective child labor enforcement
plan, Customs is requesting $3 million and 4 FTE (7 positions) to fund
the three main components of the Child Labor Enforcement Initiative:
The first component is the establishment of the Child Labor Command
Center which will be located at Customs headquarters and staffed by two
special agents and two intelligence research specialists. The Command
Center will act as a clearinghouse for information and provide 24 hour
``hotline'' telephone service to a wide variety of audiences in order
to provide a venue for allegations about prohibited importations. The
second component is the increase in crucial foreign staffing by
assigning three additional special agents to areas where forced child
labor is the most common. The third component is Customs engagement in
outreach programs with the trade, government, and non-government
organizations, taken in concert with in-house programs, to achieve
successful enforcement of the Sanders amendment to Customs fiscal year
1998 appropriations act (Public Law 105-61, 111 Stat. 1316).
Our fiscal year 1999 budget request also includes a $54 million
Non-Intrusive Inspection Technology Initiative for land and sea ports.
As growth in trade and traffic volumes increase, tools to rapidly
screen and comprehensively inspect arriving conveyances and cargo must
be deployed. This technology will allow Customs to effectively target
and detect high-risk traffic without impeding the flow of legitimate
commercial traffic. This funding will allow Customs to acquire two
higher energy container inspection systems for sea-going containers
($10 million), 12 automated targeting systems for Land and Sea Ports
($3.4 million), and multiple technologies for the Southern land border
($40.6 million). This investment in proven technologies is essential
and critical for enabling Customs to blend state-of-the-art equipment
with law enforcement intelligence, thereby enhancing counter-narcotics
capability.
Congress' fiscal year 1998 enactment of $9.5 million for the Land
Border Automation Initiative is recurred in this budget. This will have
the ancillary benefit of improving targeting of arriving vehicles for
enforcement purposes. This is the second phase of a joint initiative
with INS which began in fiscal year 1998. The automated targeting
systems, license plate readers, and Treasury Enforcement Communications
System replacement program, will free up inspectors to do more careful
visual screening and questioning of vehicle occupants for enforcement
purposes, thereby resulting in increases in detections of violations
and subsequent seizures and arrests.
In addition, Customs is requesting $7.252 million and 80 FTE as
part of base resources in response to several mandates. The National
Performance Review (NPR) goal to clear most travelers on the southern
border in 30 minutes or less and on the northern border in 20 minutes
or less by the year 2000 for land border travelers by vehicle, and the
legislative mandate contained in the Illegal Immigration Reform and
Immigrant Responsibility Act (IIRIRA) of 1996 account for $4.185
million and 46 FTE. The NPR customer service goal is a joint initiative
with the Immigration and Naturalization Service (INS) and the
Department of Agriculture. The Immigration law authorizes Customs and
INS to cover all primary lanes during peak processing hours and in
equal numbers. This staffing and the staffing requested for the new
border crossings, ($2.706 million/30 FTE) will help to support both
requirements. Finally, the adjustments reflect the completion of
resource levels for the requirement to staff an additional dedicated
commuter lane in El Paso, Texas ($0.361 million/4 FTE).
While we have much to be proud of, Customs is still keenly aware of
the importance of continuing to explore new and innovative strategies
for improving its performance in protecting our Nation's borders. This
concludes my statement for the record. Thank you again for this
opportunity to appear before the Committee.
Office of Professional Responsibility
Senator Campbell. Let me ask a few questions, and I think
we may have some that we will submit, if you could answer them
for the record if we do not get to all of them.
Secretary Kelly, the Office of Professional Responsibility
was created by Congress as a way for the Department to maintain
oversight over the Treasury law enforcement bureaus. Funding
was provided in the fiscal year 1997 and again in 1998 for this
office, and I am told that it has been somewhat slowgoing.
Could you tell me the current status of that Office of
Professional Responsibility?
Mr. Kelly. Yes, Mr. Chairman; we have brought six people on
board to date, two administrative personnel and four
professional-level people.
Again, the process was certainly much slower than we wanted
it to be. It was partly as a result of receiving a very large
number of applications. We had over 400 applications for the
positions that we advertised for. So just processing those----
Senator Campbell. What was the total manpower you were
going to include?
Mr. Kelly. A total of 13.
Senator Campbell. Thirteen.
Mr. Kelly. We are underway now. Hopefully, we will have all
of the positions filled by the end of the fiscal year.
Senator Campbell. During consideration of the fiscal year
1998 bill, you requested and received additional statutory
authority to allow the Department to become involved in the
International Law Enforcement Training Academies. And how is
that effort going?
Mr. Kelly. Yes, Mr. Chairman; I think it is going well.
We have established ILEA South, we call it, which is in
Panama. We had our first class in Panama started in November.
Thirty-two midlevel law enforcement personnel from Central
America attended the course. The feedback was very positive. I
went to the graduation, and I was very much impressed with the
quality of the personnel and their enthusiasm.
Senator Campbell. How long was the course?
Mr. Kelly. The course was 6 weeks, I believe.
Senator Campbell. Is there mostly American instructors?
Mr. Kelly. American instructors from both Justice and the
Treasury Department.
We are now going to have another class starting March 9. It
is also going to be in Panama. It is going to be in a hotel. We
are looking still for a permanent home. We hope to have the
facility located at Howard Air Force Base, which, of course, is
in a transition stage now.
It is contingent on negotiations between the Department of
State, DOD, and Panama to get a central antinarcotics training
center located there as well, but we are asking for an
additional five FTE's for ILEA South because the FLETC staff
is, quite frankly, thin, and we believe we need that type of
permanent cadre to be in place as far as ILEA South is
concerned.
We also look to staff the Deputy Director's position in
ILEA Budapest. We have an agreement with both the State
Department and the Justice Department to have kind of rotating
positions in the two current ILEA's and a third one proposed
for Thailand. So we think that those positions would be
necessary to help us move this initiative forward.
Senator Campbell. If we could name the Panama Center the
Noriega Center, there would be some poetic in that, wouldn't
there? I am just kidding.
Office of Foreign Assets Control
The Office of Foreign Assets Control falls also under your
jurisdiction, and you are requesting additional employees for
that function. Could you tell me where they will be located and
primarily what they will be doing?
Mr. Kelly. Yes, Mr. Chairman; their workload has gone up
significantly in the last 2-year period. They are particularly
involved in the specialty-designated narcotics traffickers
initiative coming out of Colombia. We look to put at least two
OFAC personnel in Colombia to help do on-the-ground research--
--
Senator Campbell. These would be Americans?
Mr. Kelly. Yes, sir.
And, in general, to address investigations and research
that has to be in the area of narcotics-trafficking.
Senator Campbell. You are getting good cooperation with the
Colombian authorities and not too much danger to the agents?
Mr. Kelly. No; and this has been very much supported by the
Ambassador and the DCM there. They are looking for OFAC
involvement.
Death of Customs Agent
Senator Campbell. During the first week of January, there
was a very unfortunate accident that ultimately resulted in the
death of a U.S. Customs agent. I do not know if that question
should be for you, but perhaps you can answer it.
I understood that the agent was unable to get critical
medical attention in a timely manner. Can you comment on that?
Mr. Kelly. Yes; I can. I actually responded to the scene,
and Commissioner Banks and I went to the funeral of Manny
Zurita, who was the senior special agent.
The accident occurred about 8:30 at night off the coast of
the Virgin Islands. The boat ran into a rock, and three agents
were seriously injured. Two others were injured attempting to
rescue them.
They ultimately made their way to shore, through other
boats, on the Virgin Islands. There was a determination made
there that the most seriously injured agent, Agent Zurita,
should be medivaced to Puerto Rico. He was, in fact, medivaced.
This took, of course, a period of time, several hours, and he
was not medivaced until about 11:30 at night.
He went to Central Medical Hospital in San Juan, PR. That
hospital is a trauma center, but it has a very high volume of
patients to deal with. It is the only trauma center on the
island of Puerto Rico.
As a result, a certain triage regime was in place when they
arrived, and there was some delay in giving adequate medical
attention.
We arrived the next day. Agent Zurita had been treated, but
one of the other agents who had a compound fracture of his arm
had not yet been treated. That was about 4 o'clock in the
afternoon. So it was an area of concern for us.
Senator Campbell. Was the area where they were picked up an
isolated location, too?
Mr. Kelly. Yes; it was an isolated location. Again, it was
in the dark of night. They had to be brought back to the Virgin
Islands and then medivaced by helicopter to Puerto Rico.
They did not arrive at the hospital until about 2 o'clock
in the morning. This is roughly a 6-hour period of time where
they were not in an adequate medical facility, and then, again,
they ran into the triage issue.
Senator Campbell. Well, they are dangerous jobs. That is
for sure, and we certainly appreciate the courage of people
that put their life on the line for us in doing that.
Let me ask a couple of questions. From that experience,
have you learned anything that would help in a future
operation, if we have any future agents hurt like that or
injured in firefights and so on?
Mr. Kelly. I think one of the things that we have to look
at is having adequate medical personnel close by during all
operations. These are dangerous operations by their very
nature, being out on the water in high-speed boats at night,
for instance, and I think Secret Service and ATF, they do a
fine job in having medical personnel available.
One of the things--all the time, when they are doing, say,
tactical operations--I think one of the areas that we want to
explore is having, let us say, Customs personnel trained as
emergency medical technicians, a certain ratio.
Senator Campbell. As it is now, do the other members of
these teams have training in anything other than pure first
aid?
Mr. Kelly. To the best of my knowledge, no. There may be
some that are trained, but not as a result of a program.
Senator Campbell. Let me go on to Mr. Magaw.
Gang Resistance Education and Training Program
I am aware of the Gang Resistance Education and Training
Program [GREAT]. It has been very successful in Colorado, but
we have some questions about how local jurisdictions can get
involved with that.
Mr. Magaw. Well, local jurisdictions that are interested in
the program--and we do spread the information around so that
there would not be any major jurisdictions or even minor
jurisdictions unaware--would be aware of the GREAT Program, and
they make application. There is a set of guidelines because
there are only a reasonable number----
Senator Campbell. So you notify them first that there are
applications available----
Mr. Magaw. Yes, sir.
Senator Campbell [continuing]. And that they can get
involved in it?
Mr. Magaw. Yes, sir; and we are forwarding those out almost
daily upon request, and it is being passed along by
instructors.
There are almost 3,000 officers trained throughout the
country and some in every State, and, as you know, last year we
had trained quite a few in your State.
Senator Campbell. Sure.
Mr. Magaw. And as a result, the word spreads.
Historically, GREAT was in Phoenix and in FLETC where
police officers were trained. And now, because of the demand,
we are spreading to three other areas in the country. We are
going to go to a regional approach. There will be a unit in
Oregon, one in Philadelphia, in Orange County, FL, and then the
ones that we have now. We hope to continually meet those needs.
Some of those cities are funded by their own funds, and then
others are funded by the Federal moneys.
Senator Campbell. As you know, there is sort of an exodus
of some of the inner-city gangs going out on Indian
reservations that are in the proximity of the cities. We have
talked about that before.
Are tribal groups also aware of the GREAT Program, and can
they avail themselves to the GREAT Program?
Mr. Magaw. Are you talking about on an Indian reservation,
sir?
Senator Campbell. Yes; on Indian reservations.
Mr. Magaw. Yes, sir; in fact, we are in the process of
arranging for and training Indian police officers to perform
just that task.
Senator Campbell. Thank you.
Federal Firearms License Security Measures
At the January ATF briefing to the firearms industry in Las
Vegas, the ATF representatives said at that time that they were
preparing some recommendations to license firearms dealers
regarding acceptable security measures. When will the committee
be able to get a copy of that, and when would it be available
to the industry?
Mr. Magaw. I know it is fairly near final preparation. It
will go to the Office of Enforcement and Treasury within a
short period of time and be out. I cannot put weeks or months
on it, but it is not going to be very long. I would say 60 to
90 days.
Senator Campbell. Sixty to ninety, perhaps. OK. I would
appreciate it if the committee could get a copy of that when it
is done.
Mr. Magaw. Yes, sir.
Senator Campbell. Thank you.
Was the industry involved in helping develop those
guidelines?
Mr. Magaw. The industry is conferred with in this
particular matter and has been conferred with in the 4 years
since I have been here on virtually every firearms or explosive
or alcohol study that we are doing.
Senator Campbell. So these are basically guidelines, but
not necessarily mandatory recommendations. Is that the way you
see it?
Mr. Magaw. That is right. They are basically guidelines,
not mandatory.
They are being drawn up from our experience in collecting
information from police departments and others as to how these
weapons are being stolen and what are some of the security
things that they can take.
Senator Campbell. All right. Thank you.
Perhaps I should ask Under Secretary Kelly. Does the
Department of the Treasury have plans to impose mandatory
security requirements on firearms dealers or other industry
entities?
Mr. Kelly. Not to my knowledge. Obviously, we await
recommendations from ATF, but, to my knowledge, there is no
such plan.
Senator Campbell. Thank you.
Year 2000 Program
Also, Mr. Magaw, funding was provided last year to deal
with costs associated with the year 2000 transition problem.
Currently, it is called Y2K. Could you tell me a little bit
about that conversion in your agencies?
Mr. Magaw. Well, the Y2K program is actually very rigid and
strict. A timeline program has been set up by Treasury looking
at all of their bureaus and units, and we have been involved
from the very beginning with that. There are schedules to meet,
and we are meeting each one of those schedules. We anticipate
that we will meet every requirement in preparation for that
Y2K.
Revenue Collection
Senator Campbell. Most people think of ATF only in terms of
guns or tobacco, I guess, but there are a lot of
responsibilities. I know you are more aware of them than I am,
including the collection of alcohol and tobacco taxes, how much
revenue was generated by the ATF in fiscal year 1997, and do
you have a projection for fiscal year 1998?
Mr. Magaw. In fiscal year 1997, there was $12.7 billion.
Senator Campbell. $12.7 billion?
Mr. Magaw. Yes; and we expect that this year, it will go
slightly up to about $12.8 billion.
Senator Campbell. Thank you.
Birmingham Bombing
This question, you might not be able to speak about in
public, but in your responsibility for the investigations of
bombings--I read the newspaper like everybody else, and the
recent incident in Birmingham, the man that was identified, it
appears that he was the bomber. I know there is pretty much a
nationwide search for him. Is there anything you can share with
the committee in dealing with that search?
Mr. Magaw. What I can share, clearly, is that all of the
law enforcement entities are working very, very close together.
We are using different units of ATF, different units of local
police departments, and the FBI. There are over 3,000 leads
that have come in.
Senator Campbell. Are there calls that they think they saw
him or things of that nature?
Mr. Magaw. Well, bits and pieces of information, and as
they are pieced together and as places are located where this
individual and maybe some others involved, where they lived,
where they stored things, and as we have probable cause to get
search warrants--and when I say we, I am talking all of law
enforcement as a team----
Senator Campbell. Sure.
Mr. Magaw [continuing]. And those searches take place,
additional evidence is showing up. So that, the case is
progressing very, very well.
Senator Campbell. Thank you.
I would like to go to Mr. Merletti now. This is your first
appearance here before the committee. I am sure you have had an
interesting first few months in your new appointment.
Your budget request includes a significant amount of
additional protection and protective intelligence, $7 million
and 35 new employees, for about a 2-percent increase. These, I
assume, are very necessary, and you have looked into that. Can
you justify those?
Mr. Merletti. Yes, Mr. Chairman; staffing on both the
Presidential and Vice Presidential protective divisions has
been increased due to operational changes necessary to meet an
increased threat level.
We in the Secret Service continually reexamine ourselves,
and look at how we do our business. We compare ourselves to
other worldwide security agencies, and we take a look at what
the threat level is.
We found that on the President and Vice President's
details, every employee, every FTE, was working the equivalent
of one and one-half FTE's. This was having an impact in our
ability to train. It was also having an impact as far as our
overall effectiveness.
We actually had agents that would go for 30 days out of
district, away from home, often in foreign countries, without a
day off, return and go back out for a few more weeks. We
believe that the impact was largely felt in the area of
training.
The training that we provide to the protective details, we
term as ``perishable training''; if you are not continually
redoing these phases of training they will not be second
nature.
We ask our agents to do things that may really go against
what all natural instinct would be when having to step in the
line of fire. So those perishable skills are necessary, and the
repetitive nature of training is absolutely essential.
Senator Campbell. Perishable skills, that is an interesting
way to describe it.
Was that an American car?
Mr. Merletti. That is a Mercedes Benz. That is an armored
limo.
Senator Campbell. That was armored, and it blew up? I mean,
it got torn apart that----
Mr. Merletti. I would like to explain a bit about that
particular photograph. As you can see, there was quite a bit of
damage done to the front end of the limousine.
Senator Campbell. Yes; right under the hood. It looks like
something was set directly under the hood.
Mr. Merletti. Well, what actually happened, it was struck
with two rocket-propelled grenades, two antitank devices, and
the limousine was immediately crippled. It burst into flames.
Senator Campbell. This is a different car. Was this in the
entourage?
Mr. Merletti. That was the security vehicle, and as you can
see, it has been impacted with hundreds of rounds of small arms
fire.
Senator Campbell. Small arms.
Armored Limousines
Mr. Merletti. But the pertinent point on the limousine is
that the limousine failed. That is a commercially available
limousine, and they are produced as any normal car is off the
assembly line, and then armored subsequent to production.
Our limousines are built differently. Ours are made from
the ground up, and that allows us to add extra mass, extra
armament. Also, because we build them from the ground up, we
are able to protect the critical electronic components that
keep a car running. That particular car, that is what happened
there. The electronics were knocked out, and the engine failed.
We are able to relocate those critical electronic
compartments into our armored compartment. Our vehicle probably
would have survived that attack and would have driven away.
Senator Campbell. You order them from the factory with
certain specifications, and they build them at the factory for
you?
Mr. Merletti. Right. There is quite a bit of R&D that goes
into it. In fact, it is years of R&D, and then we work as a
team in partnership with the corporation that wins the contract
and build the vehicle in that manner, but it takes years.
Four vehicles that we are in the process of designing now,
the first one will be delivered in the year 2000, and the other
three will be delivered in 2001.
Senator Campbell. These limos, we appropriated the moneys
in 1997 and 1998 for that R&D that you talked about for the new
technology that is going to go into them, in the manufacture of
the cars, and we are going to provide additional money in 1999.
Will that complete the project for these new series of cars?
Mr. Merletti. No; that will not complete the project. There
is a shortfall in total funding required of about $3 million.
It is a unique funding situation, and we are working with the
Treasury Department to resolve that issue.
Senator Campbell. I am inclined to think that costs a
little more than your average car, wouldn't you?
Mr. Merletti. A few dollars more.
Travel Budget
Senator Campbell. Last year, there was a problem with
closing out the Secret Service travel account. I know you guys
have it tough, particularly in a Presidential year when you
have everybody running and you have to change your plans almost
hourly because of late commitments. I know the difficulty of
doing that, and I admire you for trying to keep up with it, but
that resulted in the need to transfer funds from other accounts
to cover those expenses.
Your staff has been very forthright about the need for
change and to more closely account for the travel expenses.
Having heard that already, it is already clear that we might
not be providing enough money this year. Would you like to
comment on that?
Mr. Merletti. Yes; we are looking at a possible shortfall
this year, also, and we have----
Senator Campbell. What is your estimate for the shortfall?
Mr. Merletti. At this time, I would say about a $13 million
shortfall.
I would like to address that issue a little further. Right
after I became Director, I personally came to visit with you,
and we did discuss that I would see that we put into effect
certain mechanisms that would have better accountability and
sooner notification. In this instance, we certainly have come
to you right when we noticed a problem.
Senator Campbell. Yes; you have.
Mr. Merletti. The increase in travel is due not to one
particular set of circumstances, but a convergence of
circumstances.
No. 1, we are doing business differently. There are new
threats that we have developed new countermeasures for. This
new technology requires that we send the people out that have
the expertise to implement this technology as we travel on our
protective assignments. So we do have an increase in the number
of people going out on our stops.
There is also an overall increase in the number of
protectee stops, and that is due to a number of factors.
We see that a number of foreign heads of states have been
visiting the United States, and we have been trying to get an
idea as to why that is occurring. Some of the poignant factors
that are coming back to us are that the United States is now
the sole superpower. Also, the strength of our economy is such
that foreign leaders want to visit the United States in order
to enter into business ventures in order to boost economies. It
is now a global economy.
They are also coming in order to foster international
cooperation, and a number of them come here to take advantage
of our medical treatment.
So these foreign heads of state that visit our country, we
do protect them, and they travel throughout the United States.
We have, again, no control of them coming or the number of
times that they come.
Eighty percent of our travel budget is directly in support
of protection. Twenty percent is nonprotective, and we are
certainly able to have total control of it, but the 80 percent
is really not within our control.
It is the convergence of those factors that impact us, as
well as increased costs that are associated with travel, such
as hotel rates and car rentals.
For example, we took a look at the hotel rates in New York
City, a place visited by the majority of our protectees,
especially foreign heads of state. Last year, we found that the
hotel rates increased by approximately 20 percent. So it is
factors such as this, all of the added expenses that go into
travel, that are all coming together, and are causing a the
shortfall in our budget.
Privilege for Not Giving Testimony
Senator Campbell. This may be somewhat rhetorical, but you
have been pretty much unwavering in your position that Secret
Service agents should not be compelled to testify with what
they may or may not have seen on duty.
I am certainly a big supporter of the Secret Service, and
it brings to mind, what kind of protections they would have if
they did and how far we should go with that. Should an agent
remain silent, for instance, if he saw a crime being committed
while he was on duty? Do you have any comments about where you
fall out on that, when they should and should not testify?
Mr. Merletti. Absolutely, Mr. Chairman.
The word that is being used, is ``privilege''--I like to
use the word ``confidentiality.'' I firmly believe that we
should have a privilege or confidentiality. However, that would
not apply when it comes to a crime. We are not talking about
crime.
What we are discussing is everyday activity and
conversations that we overhear or see because of our proximity
to our protectees. Proximity is the heart and soul of our
protective mission. We are there, as I said earlier, to step
into the line of fire. If we would be moved away from our
protectees, that would have a critical impact upon our ability
to perform our mission.
Mexico's New Drug Force
Senator Campbell. Thank you.
Mr. Banks, in today's Washington Post, there is an article
that talks about the training of Mexico's new drug force, which
once trained in the United States. They will then return to
Mexico to become a force in that country's counternarcotics
efforts. What is your view on that? Do you think that is going
to be successful?
Mr. Banks. Well, I think it can be successful. I read it
this morning, Mr. Chairman, and I think it could become a force
in that country's counternarcotics efforts.
We have actually worked with the military. I went down to
Camp Lejeune with the military, and we worked with a number of
countries in Central and South America to kind of look at
coordinating and integrating both their military and police
organizations so that they are prepared to interact not just
within one nation, but even across borders. I have to say that
I was fairly well impressed by the efforts being made to
integrate those operations.
Custom's Weapons Restrictions in Mexico
Senator Campbell. What is the disposition of our agents
carrying weapons in Mexico?
Mr. Banks. We still cannot carry weapons in Mexico.
Senator Campbell. Still cannot do it?
Mr. Banks. No, sir.
Nonintrusive Inspection Technology
Senator Campbell. There is a $54 million request in your
budget for 1999 on nonintrusive inspection technology. I have
seen some of these things, and I will tell you what, they are
marvelous. ONDCP, I have seen a number of them.
I was talking to somebody today that said they have
developed one that does not measure particles in the air and it
does not do it by x ray, but it has a way of--you have to be a
scientist just to understand this thing, but, apparently, all
chemicals when they are subjected to some kind of rays, gamma
rays, whatever it is----
Mr. Banks. Gamma rays.
Senator Campbell [continuing]. Leaves a signature of what
that chemical is, and these people who are developing this have
a way of measuring, for instance, what is inside of a landmine,
what kind of chemicals are in there. It sounds like something
we ought to look into.
Mr. Banks. It is astounding. We are even looking at a
potassium-40 reader because marijuana has large amounts of
potassium in it. You can actually gauge that chemically.
There is a lot of spectrograph type----
Senator Campbell. It has got some dope in it, too, huh?
Mr. Banks. Yes; it does.
Narcotics and Money Laundering Strategy
Senator Campbell. OK, because I know the traffickers are
very good at identifying our resources. More power to us.
There is also a $5 million request for narcotics and money
laundering strategy to enhance this Customs investigation and
intelligence capabilities. Can you describe that a little bit
to us?
Mr. Banks. We are trying to put the agents heavily into
money laundering efforts and some undercover narcotics areas.
There is also a piece for intelligence research specialists,
and what we have done is establish what we call intelligence
collection and analysis teams, especially along that Southwest
border to try to integrate tactical intelligence. So they are
going there.
And then the last piece of it is on the marine program, and
you mentioned what happened in the Virgin Islands with the
marine program. The work is dangerous, difficult.
The threat is increasing significantly in the Small Boat
Program. The Coast Guard and Customs have really done a decent
job of stopping a lot of commercial traffic into Puerto Rico,
but now we are getting lots of small boats in from Haiti and
the Dominican Republic. So it is a real growth area in terms of
the threat.
Seizure Rate
Senator Campbell. Mr. Kelly's testimony mentioned that 1
million pounds of illegal drugs were seized in fiscal year 1997
through programs like Hard Line and Gateway, but, as I
understand it, the seized cocaine has dropped by 12 percent. Do
you have any reasoning for that?
Mr. Banks. Our numbers in 1997 did indeed drop by 12
percent nationally, and it actually dropped in the Miami area.
That is, south Florida is where we saw the drop.
Senator Campbell. Yes.
Mr. Banks. A lot of people have read the article and think
that our cocaine seizures dropped on the Southwest border, and
that is not the case. They changed where the traffickers were
moving the drugs.
Senator Campbell. Yes; they flow like water. The land of
least resistance is where they move to.
Mr. Banks. That is absolutely correct.
Now, in south Florida, the concern we have is that they are
moving into smaller, deeper concealed loads. We are seeing
that.
Some of it is in Coast Guard seizures. Their seizures
tripled last year in the transit zone. This is actually where
we would like to have the seizures happen. We would like to
take the drugs before they ever get to the U.S. shores, and we
have got our air program and marine program working in tandem
with the Coast Guard. So they have done a dynamite job.
So there is no question. The flux is changing continually.
Methamphetamine Seizures
Senator Campbell. Well, I live in the Southwest, and one of
the things we are seeing is a huge increase of
methamphetamines, as you probably know, and it is also in small
lots and apparently very small, movable labs, and all the
problems. Are you seizing more of the chemicals along the
border that go into the manufacture of meth, or are you seeing
more methamphetamines that have already been concocted?
Mr. Banks. Actually, we are seizing more of both.
Senator Campbell. Both.
Mr. Banks. This year, we seized more in the first 4 months
than we seized all of last year in both methamphetamine and
ephedrine, which is the precursor to make methamphetamine, and
it is not huge amounts. So far, this year, we have made 154
seizures of 655 pounds. Most of it----
Senator Campbell. Say that again?
Mr. Banks. 655 pounds.
Most of it is in California; however, we have seized some
in New Mexico and some, the smallest amount, in Arizona.
Senator Campbell. The border States.
Mr. Banks. It is primarily toward the border States and
toward the West. Yes, sir.
Senator Campbell. OK, I thank you.
Senator Kohl, did you have some additional questions?
Senator Kohl. Yes; thank you, Mr. Chairman.
Senator Campbell. I may have touched on a few already, but
feel free.
Child Labor Enforcement
Senator Kohl. I just want to ask a few Customs questions,
if I may.
I was pleased to work last year with Senator Harkin on a
provision that requires Customs to include forced or indentured
child labor and its interpretation of section 307 of the Smoot-
Hawley Tariff Act of 1930.
Senator Harkin had hoped to be here today to ask some
questions about child labor enforcement and the new proposal to
establish a child labor command center, but he had to be in
South Korea. So I have included some of his questions with my
own.
It is my understanding that Customs is requesting $3
million and four employees to establish a child labor command
center. Would you please explain what services this center will
provide and how the center will be staffed?
Mr. Banks. Senator Kohl, first of all, I would like to say
this is going to be a very difficult issue to enforce, since it
is so difficult to try to determine what products entering the
United States are made by child labor. I do not want to
underestimate the complexity and the difficulty of doing this
job.
The way that we are trying to approach this is in a very
collaborative way, especially where there are a lot of advocacy
groups out there that have information in terms of where child
labor products might exist.
The first thing that we are setting up is the child labor
command center in Washington. We have two intelligence research
specialists, and we are setting up a hotline to be able to get
basic information to do research. For instance, we were
provided some information about hand-knotted rugs, especially
out of central Asia. We are trying to do analysis with that
information to see if we can trace it down to find an actual
violation that we can take legal action on in the United
States.
The second thing that we are looking to do with that money
is we would like to station three agents overseas to
specifically work on trying to identify factories, products,
and locations where child labor occurs, so that we can attempt
to work with overseas countries on this issue to see if we can
gain their support.
And then, last, we will try to build a coalition with labor
groups, and with child protection groups. It is kind of like
trying to deal with the clothing and the wearing apparel that
is made by groups. You cannot do it through law enforcement
alone. This has got to be a coalition of groups trying to do
this, and there has got to be a lot of education on it. There
has to be a lot of communication and building support on a
broad basis if we are truly going to impact this issue of
products being made by child labor coming into this country.
Senator Kohl. All right. Well, then----
Mr. Banks. I can provide you a more detailed breakdown in
terms of exactly our strategy and our tactics for approaching
this issue.
[The information follows:]
Child Labor Command Center
The Child Labor Command Center will be staffed by two
Special agents and two Intelligence Research analysts. In
addition, verification teams drawn from the field offices will
be used to travel to suspect countries and examine suspect
child labor facilities to confirm information as it is
developed by the command center. The command center will also
conduct conferences within the government and with private
industry to sensitize these groups to this issue and to
facilitate the development of information. Confidential sources
will be used in connection with the development of information
about criminal involvement in child labor. In addition, the
foreign offices covering countries suspected of exporting
forced child labor made products to the United States will
receive additional staffing.
An outreach program is planned in order to build support on
a broad based initiative to identify violative sources of
merchandise. This program is also expected to support United
States importers' efforts to preempt such merchandise from
reaching the United States. A public relations effort will
involve various media. Including international and national
websites, foreign and domestic toll-free numbers,
advertisements in the Asian Wall Street Journal and other
foreign public service announcements.
Senator Kohl. What can Customs agents actually do in the
event that they identify forced child labor?
Mr. Banks. What we can actually do is detain the products,
and then if we can prove that the products were made by forced
labor, then we can take action to seize those products.
Customs Authority
Senator Kohl. Is there a need to expand the authority of
Customs?
Mr. Banks. I think that our first point on this is we would
like to gain better experience in trying to work with
coalitions to prove the case so that we can do something about
it. We would like to make sure we can operate effectively in
this area before we would ask for additional resources.
Child Labor Hotline
Senator Kohl. All right. Let us talk about the hotline in
the United States for the public to report child labor
importation violations. How will consumers be able to identify
goods purchased with forced child labor?
Mr. Banks. Well, it is going to be very difficult for
consumers to specifically identify it.
One of the things that we are talking about, obviously, is
to meet with manufacturers and to get them to perhaps tag their
goods to say that this is not made with child labor. If we can,
we will try to get them to label some of their products and get
those manufacturers to take a stronger measures, because they
actually do factory visits for quality control and a variety of
other things. We would like them to go out and check to ensure
that those factories that they are buying their products from
are not using child labor to manufacture those products.
Senator Kohl. Well, on that point, don't we already have
documentation of goods produced with forced child labor
entering the U.S. market?
For example, in the case of hand-knotted carpets, shouldn't
we be focusing our efforts on preventing these goods from
entering the U.S. market in the first place?
For example, does Customs plan on communicating with the
hand-knotted carpet importers about abusive child labor in
their industry?
Mr. Banks. Yes, sir.
Senator Kohl. What do you----
Mr. Banks. That is precisely part of what we need to do: an
education effort.
The difficulty is in trying to convert a generic allegation
into actual evidence that we can take a legal action on. That
has been the most difficult part of this whole enforcement
area.
Confiscating Forced Child Labor Products
Senator Kohl. What kind of additional information does
Customs need to bring a case against importers who violate the
law or to issue a detention order on goods made with forced
child labor?
Mr. Banks. The first issue is that we have to prove the
case that it was made by forced labor, which is very difficult
to do. As soon as we have our people go out and start going
into factories, they disappear.
We go out and we do this kind of work on textile
transshipment. We can go in and take a look at the types of
equipment that they have, and we can look at their employment
records and even their payroll records, but with child labor,
you cannot just do that. It is even more complex.
When we have put our agents out on the ground overseas, the
word spreads unbelievably quickly, and they just scatter on us.
Trying to come up with the actual hard evidence so that we have
a case that we can take action on is very difficult to do.
Importation of Child Labor Goods
Senator Kohl. Senator Harkin has been particularly
concerned about the past reluctance of Customs to block the
import of goods produced with child labor. Do you believe that
the Harkin provision is a reasonable interpretation of section
307? Is child labor enforcement an appropriate task for
Customs?
Mr. Banks. Yes, sir; I think that it is an action that,
obviously, the Congress wants us to take, that we should take.
We want to be able to ensure that we can deliver on this
requirement.
Child Labor and Other Forced Labor
Senator Kohl. Well, how does child labor differ from the
forced labor found in Chinese prison camps and Customs efforts
to prevent goods made by prison labor from reaching U.S.
markets?
Mr. Banks. Well, some of it is the same in terms of the
reluctance of some of the countries to let us into the
factories. In that case, it is the same.
Some of the differences with the forced labor is if you can
actually get to the factory, they are there. You can see them.
You can see who is working. You can check them.
There are also other indicators in terms of, if you go into
a prison labor environment, shaved heads. There are a lot of
telltale signs that you can see.
The difficulty of walking into a factory overseas that is
using child labor is they just scatter the kids that are
underage. As soon as they know you are in the area, they
scatter those kids. They either go out of business or they just
have other workers there. That is where it gets much more
difficult, when you actually get on the ground and try to do
this enforcement work.
Child Labor Regulations
Senator Kohl. When can we expect additional regulations
relating to child labor enforcement, or do existing regulations
for section 307 apply?
Mr. Banks. We would like to continue to work with this
package that you have provided us. We would like to come back
with some experiences that we have run into, brief you in terms
of the progress that we are making on this and what we can
deliver, and then jointly decide where we should take it.
Senator Kohl. Mr. Banks, on November 5, 1997, the
International Labor Rights Fund filed a complaint with Customs
seeking enforcement of a ban on hand-knotted carpets made with
child labor in south Asia. The complaint was based on data from
the U.S. Department of Labor's report on child labor. Yet, it
is my understanding that there has been no response to the
complaint. What is the status of this complaint, and why has it
taken so long now for Customs to respond?
Mr. Banks. Well, it is still a lot of the things that we
have talked about in terms of being able to come up with the
hard evidence and which shipments have been made by child
labor.
We have had a lot of discussions of whether we should go
forward with a general ban on all hand-knotted carpets; whether
that is equitable and fair to people legitimately trying to
bring goods into the country or whether to go with a specific
ban or try to get it nailed down in terms of which
manufacturers could be involved; is there any complicity on the
part of the U.S. importers involved in this, et cetera. These
are the difficulties of trying to chase this thing down.
Senator Kohl. Can you give us some hope as to when we can
see a resolution of this particular complaint, Mr. Banks?
Mr. Banks. I would rather have a private briefing with you
in terms of exactly where we are with that investigation.
Child Pornography Detection
Senator Kohl. All right. I would like to ask some questions
on the child pornography detection. Customs enforces the Child
Protection Act and investigates trafficking in child
pornography into and throughout the United States. Through the
use of the Customs-established Child Pornography Investigation
and Coordination Center, special agents assist the field
offices with cases and coordinate Customs efforts to combat
child pornography. Can you explain how Customs gets brought
into these cases?
Mr. Banks. I would be happy to.
Actually, there is a variety of ways that we can be brought
into a child pornography case. One of the ways it has
traditionally been done in the past is we actually intercepted
the mail coming into the country. We would intercept magazines
and videotapes of child pornography, and I believe we seized
last year 325 or so items that came in that were child
pornography, either by videotape or by magazine, but the bulk
of the work today is actually on the Internet.
We have got 300-plus investigations going on today on
Internet child pornography cases. We had 145 arrests last year
of people engaging in child pornography--some were family
physicians, some were police officers. We have a whole variety
of people that are involved in youth programs around the
country.
We have set up, as you said, our International Child
Pornography Investigation Center in Washington. It is staffed
with five agents. We receive tips through a variety of sources.
We use confidential informants. We do a lot of the cyber-
smuggling-type work through the Internet and then they support
field agents around the country to actually work these cases.
We are also working with the National Center for Missing
and Exploited Children and have supported their cyber tipline.
When this thing gets up and running, the estimate is that we
can get between 300 to 400 leads a day. It is being supported
by both the FBI and ourselves. FBI handles mostly the domestic
cases. We handle mainly the international cases, the ones
across the border.
Senator Kohl. What is your level of funding for these
activities, Mr. Banks?
Mr. Banks. I am not sure if I could give you a precise
level of funding. I would have to research that a little bit
for you further, sir, because of the investigative hours in the
field. I would have to give you that for the record, if I
could.
[The information follows:]
Child Pornography and Exploitation
Customs has approximately 50 Special Agents in the field
dedicated to Child Pornography investigations along with non-
personnel costs of $100,000 for fiscal year 1996, $190,000 for
fiscal year 1997 and $327,000 for fiscal year 1998. The Customs
Child Pornography Enforcement Center has a current staffing
level of eight Special Agents which coordinate the
investigative activities of the field offices as well as
liaison with other federal, state and local law enforcement
agencies.
In addition, Customs fiscal year 1998 appropriation
included $275,000 for the National Center for Missing and
Exploited Children to promote public awareness of the child
pornography tipline ($75,000) and to train retired law
enforcement officers to assist in the investigation of unsolved
missing children cases nationwide (Project Alert) ($200,000).
Child Pornography Tipline
Senator Kohl. OK. Mr. Banks, funding has been provided
since 1995 to promote the child pornography tipline. In fiscal
year 1999, funds were also requested to coordinate Customs
efforts with the National Center for Missing and Exploited
Children, the U.S. Postal Service, the U.S. Secret Service, and
the GSA.
Obviously, the tipline is an effort that we and the House
support. Have additional resources for the tipline been
requested in fiscal year 1999, and if not, why not? Isn't this
something that Customs considers important?
Mr. Banks. Yes, sir; we consider it extremely important,
and there were some requests made for this. We did not receive
those requests. We did receive in fiscal year 1998 the $25,000
which we gave to the Center for Missing and Exploited Children
to help them, and that amount, along with the $50,000 level
prior to fiscal year 1998, is recurred in fiscal year 1999 for
a total of $95,000 for the tipline.
As a matter of fact, they just recently had an event up on
the Hill advertising some of the public education campaign, and
along with Under Secretary Kelly, we participated with them in
that effort, but, no, sir, we do not have anything added to the
$75,000 base in our fiscal year 1999 budget to further enhance
our enforcement efforts on child pornography.
Senator Kohl. What is the status of the effort to
coordinate Customs efforts on child pornography with the other
Government and non-Government entities?
Mr. Banks. Again, we work with everyone. We work with other
law enforcement agencies, including State and locals. They have
been really wonderful.
We just had an Internet case in Spokane, where a physician
actually engaged in a conversation with an undercover police
officer about his desire to have sex with a minor. We got the
Spokane policewoman to volunteer to act as the mother in this
particular effort, and she did a wonderful job and we made the
arrest.
We get tremendous support from State and local police. We
get tremendous support working in tandem with the FBI. We have
gotten the Postal Service involved. The Secret Service has also
been involved in some of these cases.
So this is one area where--when you come up with a specific
case--almost everyone is willing to pitch in.
White House Security Clearance Process
Senator Kohl. OK. Mr. Merletti, I would like to ask you a
question.
Last year, when visiting the White House with a staffer, we
were ushered into the White House without showing any
identification. When I later asked about this, I was told the
White House was expecting me. I guess they were also expecting
my staff.
Last week, I read that Alice Rivlin, Vice Chairman of the
Federal Reserve, was ushered into the White House complex
without going through any security clearance. When she
questioned why this occurred, she was told that the guards were
expecting her, Donna Shalala.
There have been numerous requests to acquire additional
security measures around the White House. What good is it to
acquire these security devices if people are allowed into the
complex without going through the security clearance process?
Mr. Merletti. Senator Kohl, we do attempt to facilitate a
member and staff of the Senate coming into the White House. We
would want to make sure that you were there for your
appointment and received a welcome and were easily processed
into the White House complex. That really does not impact our
security in that we are looking for those that would be
attempting to enter to attempt some type of physical harm, and
present a danger to the President or to the White House.
The circumstances you referred to regarding Donna Shalala,
I am not familiar with the facts. It would be difficult for me
to comment on that, but did you say that she came into the
complex?
Senator Kohl. Alice Rivlin entered without any security
clearance, and then she was told that the guards were expecting
her, Donna Shalala.
Mr. Merletti. I see. I would have to look into that set of
circumstances.
Senator Campbell. Senator Kohl, I think it has something to
do with the vehicle you go over there on. I went over there on
my motorcycle one time, and I had to answer a whole lot of
questions. I will tell you, I thought I was going to be spread-
eagle from you guys, but if you are in a big, black Town car,
you are probably a little safer.
Senator Kohl. If I were in your situation, I would be
worried stiff that something awfully sinister could happen,
just in the way in which we are discussing it, and it would be
so inexcusable, with all the money and all the security that we
have to protect our President, and the White House, of all
places, that security systems and regulations would not be the
toughest anywhere in the world, and I think everybody in this
room would expect security at the White House to be the
toughest anywhere in the world.
When you have an experience like mine, as I say, my staff
and I got through, and we were simply told that they were
expecting us. And then, Alice Rivlin goes through security
and--and does not go through security, but is told that it is
fine because we were expecting you, Donna Shalala; that that
would be--and there must be other incidents that that would be
a huge red flag to the Secret Service with respect to security
around the White House. What is your thought?
Mr. Merletti. Well, Senator, I do not want to have
misinterpreted what I said as a lack of concern about security
at the White House.
Senator Kohl. I do not. I do not.
White House Security Clearance Process
Mr. Merletti. I am extremely sensitive to all security at
the White House. We will always continue to look at new methods
and new technology.
If there was a mistake made, we will find out about that
very soon, and I will get the details of that.
However, we do try to have a balance between members of
Congress coming up and just someone that would be showing up
unexpectedly. We really do quite a bit of training. I mean,
training is critical to our mission, and we train our personnel
to show proper respect for those that, as we said, are coming
for a proper appointment with the President or other members of
the administration.
However, if a mistake took place, it is unacceptable and we
will look into it and make the necessary adjustments. As I
said, I am not aware of that set of circumstances, but I do
know about when you came to visit, because after I had visited
with you after becoming the Director you had mentioned this,
and I did check into that, and we do have photographs of all
Senators and Members of the House of Representatives. If you
are on the schedule, or if you are coming and we receive a call
from the Capitol Police, we do want to expedite your entry.
Now, the other set of circumstances, I will have to look
into that.
Senator Campbell. Capitol Police have photographs like
that, and I think they are required to memorize the new
Senators and Congressmen coming in. Do you have a book like
that over there----
Mr. Merletti. Yes; we do.
Senator Campbell [continuing]. That you have at the gates
so people can recognize you before you came through?
Mr. Merletti. Absolutely. We require our people to look at
these photographs and try to memorize them.
Actually, I am very glad you brought this up today because,
normally, what I am being addressed on is that someone was held
up maybe 5 minutes and they did not like being held up when, in
fact, they did have an appointment, and people were saying,
``Well, can't you make this process faster? I have an
appointment.'' It is refreshing to hear the other side of this,
that someone is actually concerned about our security. So I do
thank you for that, sir.
Senator Campbell. Would you put glasses and a helmet on my
picture so I do not get any more hassles over there?
Mr. Merletti. Yes, sir, Mr. Chairman; we will do that.
Senator Campbell. OK. Well, I have no further questions.
Senator Kohl, do you?
Senator Kohl. No.
Senator Campbell. OK. With that, I appreciate your
appearance to this whole panel, and, Under Secretary Kelly, we
will be looking forward to working with you and all of your
other divisions. Thanks for coming.
Internal Revenue Service
STATEMENT OF TED F. BROWN, ASSISTANT COMMISSIONER,
CRIMINAL INVESTIGATION
Federal Law Enforcement Training Center
STATEMENT OF W. RALPH BASHAM, DIRECTOR
Financial Crimes Enforcement Network
STATEMENT OF WILLIAM BAITY, DEPUTY DIRECTOR
Introduction of Witnesses
Senator Campbell. We will now move right along here. I have
another commitment. So, hopefully, this next panel can move
along a little quicker.
Panel II will be Ted Brown, Assistant Commissioner for
Criminal Investigation with the Internal Revenue Service [IRS];
Ralph Basham, Director of the Federal Law Enforcement Training
Center [FLETC]; and William Baity, Director of the Financial
Crimes Enforcement Network [FinCEN].
All right. If we can move right along.
Were you also staying with this panel, Under Secretary
Kelly?
Mr. Kelly. Yes, Mr. Chairman.
Senator Campbell. Did you want to make any additional
statements?
[No response.]
We will just go on, then, with Assistant Commissioner
Brown. Then we will go to Ralph Basham and William Baity.
We are running out of time a little bit. We have about 30
or 45 minutes in here. So you might like to abbreviate your
comments. All the testimony will be included in the record, and
we will study it copiously.
Statement of Ted F. Brown
Mr. Brown. Thank you, Mr. Chairman. My name is Ted Brown. I
am the Assistant Commissioner with IRS Criminal Investigation.
Senator Campbell. You are safe, too, by the way. Our
colleague from the Carolinas is not here now.
Mr. Brown. Yes, sir; I did not expect the target to be
painted on me quite that fast.
IRS Criminal Investigation
I appreciate the opportunity to be here today to discuss
the Criminal Investigation Division of the Internal Revenue
Service. We have unique financial investigative skills which
allow us to meet criminal tax enforcement challenges in support
of the overall IRS mission. I also welcome this opportunity to
describe the contributions which the fine agents and employees
of the Division make to the Federal law enforcement community.
For over 79 years, IRS Criminal Investigation has been
solving financial crimes. Our investigations take us to
corporate boardrooms, as well as crackhouses. This is because
IRS Criminal Investigation special agents fill a unique niche
in the law enforcement community, that of financial
investigators. The special agent's combination of accounting
and law enforcement skills are essential qualities in
conducting investigations which have led to the conviction of
high-profile criminals who commit sophisticated financial
crimes.
It has been our experience that whenever greed leads to
crime, whether income tax evasion or international money
laundering, IRS Criminal Investigation should be involved.
Further, the success of our investigations enhances
voluntary compliance with the tax system, increasing confidence
of the American taxpayers in that administration, as well as
deterring others from similar conduct.
There is a great demand for the expertise of my agents by
other Federal law enforcement agencies and by the offices of
the U.S. attorneys. Therefore, it is incumbent upon us to
marshal our resources to ensure that our law enforcement
program is balanced, not only to protect the revenue and our
tax administration system, but to combat financial crime. We
deliver this balanced law enforcement program through three
mutually supportive strategies: tax gap, money laundering, and
international.
Tax Gap Strategy
The tax gap strategy enables CI to pursue comprehensive
financial investigations that have the greatest impact on
narrowing the tax gap. That is a phrase that we have coined to
describe the difference between the amount of tax owed and the
amount paid. The income tax gap was last estimated to be in
excess of $127 billion, and our tax gap investigations
encompassed the entire spectrum of legitimate industries.
Voluntary compliance with the tax laws relies heavily on
the deterrent effect of successful prosecutions. It is critical
for Criminal Investigation to identify and investigate cases
which would generate the maximum deterrent effect and, thus,
have the most impact on voluntary compliance. Our objective in
this strategy is to increase the rate of voluntary compliance,
which will reduce the tax gap.
Money Laundering Strategy
In our money laundering strategy and in concert with our
mission of increasing voluntary compliance, we are responsible
for enforcing title 31 of the United States Criminal Code and
using its financial investigative expertise to investigate the
most complex types of money laundering. By doing this, we
financially disrupt and dismantle criminal organizations in
cooperation with other Federal law enforcement agencies. Our
objective is to identify, investigate, and prosecute the most
significant tax, currency, and money laundering offenders, and
to pursue the assets of those offenders both domestically and
internationally for tax and asset forfeiture purposes.
Due to our limited resources and the increasing need for
our expertise, CI prioritizes its efforts in currency reporting
and money laundering enforcement to address investigations
whose size, scope, and complexity require the value-added
expertise of our agents.
International Strategy
Recognizing that financial crimes do not stop at the U.S.
border, our international strategy places special agents in
strategic foreign countries. These agents are responsible for
developing financial information obtained from host governments
relating to U.S. income tax violations or money laundering
schemes.
The placement of these agents allows us flexibility to
gather evidence to support ongoing domestic investigations with
international implications. With State and Treasury Department
approval, IRS special agents are permanently placed in Mexico,
Colombia, Germany, Canada, and Hong Kong. The international
strategy enables special agents to work more closely with our
foreign counterparts.
Working within these three strategies, we devote our
resources to two major programs. The first one described is the
fraud program. It encompasses a broad range of illegal activity
primarily involving legitimate industries. All statutes under
our jurisdiction may be utilized in these investigations. This
includes not only criminal provisions of the Internal Revenue
Code, but also violations of the Bank Secrecy Act and the Money
Laundering Control Act.
Fraud Program
The fraud program consists of investigations relating to
tax violations, such as failure to file, tax evasion, and money
laundering. In this area, we work investigations involving
general tax crimes, excise tax violations, illegal tax
protestors, illegal return preparers, and questionable refunds.
Other fraud programs involving tax and money laundering
violations include bankruptcy fraud, financial institution
fraud, illegal gaming, health care fraud, insurance fraud,
telemarketing fraud, and public corruption.
Narcotics Program
Our other major program is narcotics. The first IRS
narcotics investigation was a tax case completed in 1920 when
an opium grower failed to claim the income earned from his
product. Today, we utilize all available statutes within our
jurisdiction to dismantle or disrupt the financial operations
of targeted narcotics organizations. Part of the narcotics
program includes our participation in the Organized Crime Drug
Enforcement Task Force. In fact, in fiscal year 1997, we were a
principal partner in nearly 56 percent of all OCDETF
investigations nationwide, a level of participation second only
to the Drug Enforcement Administration.
During fiscal year 1997, 87 percent of all narcotics
investigations initiated by CI involved money laundering or
currency crime violations. The quality of the investigations
conducted by my agents was evident during fiscal 1997, with 84
percent of our cases resulting in prosecution recommendations
and 89 percent of those with convictions being sentenced to
prison.
I will be glad to take your questions when you are ready,
sir.
Prepared Statement
Senator Campbell. Thank you, Mr. Brown. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of Ted F. Brown
Mr. Chairman and Distinguished Members of the Subcommittee:
I appreciate the opportunity to be here today to discuss the
Internal Revenue Service Criminal Investigation Division's mission and
its ability to meet criminal tax enforcement challenges in support of
the overall IRS mission. I also welcome this opportunity to demonstrate
the unique contributions which the Criminal Investigation Division
makes to the federal law enforcement community.
For over 79 years IRS Criminal Investigation has been solving
financial crimes. And for nearly that long, IRS Criminal Investigation
has been answering the question, ``Why is IRS Involved?''
Our investigations take us to corporate boardrooms as well as crack
houses. This is because IRS Criminal Investigation special agents fill
a unique niche in the law enforcement community: that of financial
investigators. The special agent's combination of accounting and law
enforcement skills are essential qualities in conducting investigations
which have led to the conviction of high profile criminals who commit
increasingly sophisticated financial crimes. It has been our experience
that whenever greed leads to crime, whether income tax evasion or
international money laundering, IRS Criminal Investigation is likely to
be involved. Further, the success of our investigations enhances
voluntary compliance, increasing confidence in the federal tax system
and deterring others from engaging in similar conduct.
There is a great demand for the expertise of IRS special agents by
other Federal law enforcement agencies and by the offices of the United
States Attorneys. Therefore, it is incumbent upon us to marshal our
resources to ensure that our law enforcement program is balanced to not
only protect the revenue but to combat worldwide financial crime. We
deliver this balanced law enforcement program through three mutually
supportive strategies: tax gap, money laundering, and international.
tax gap strategy
The Tax Gap Strategy enables Criminal Investigation to pursue
comprehensive financial investigations that have the greatest impact on
narrowing the tax gap. The TAX GAP is a phrase coined to describe the
difference between the amount of tax owed on all sources of income and
the amount paid. The Income Tax Gap is estimated to be in excess of
$127 billion.
Tax Gap investigations encompass the entire spectrum of legitimate
industries. The focus of these investigations is to detect violations
of all statutes under Title 26 of the Internal Revenue Code and Title
18, Sections 286, 287, and 371 of the United States Criminal Code.
Voluntary compliance with the tax laws relies heavily on the
deterrent effect of successful prosecutions. It is critical for
Criminal Investigation to identify and investigate cases which will
generate the maximum deterrent effect and thus, have the most impact on
voluntary compliance.
Criminal Investigation's objective in this strategy is to increase
the rate of voluntary compliance which will reduce the tax gap. We can
best achieve this through high impact tax fraud investigations.
money laundering strategy
In concert with our mission of increasing voluntary compliance with
the tax laws, IRS Criminal Investigation is responsible for enforcing
Title 31 of the United States Criminal Code and using its financial
investigative expertise to investigate the most complex types of money
laundering. By doing this, we financially disrupt and dismantle
criminal organizations in cooperation with other federal law
enforcement agencies.
Our objective is to identify, investigate and prosecute the most
significant tax, currency and money laundering offenders and to pursue
the assets of those offenders both domestically and internationally for
tax and asset forfeiture purposes.
Due to our limited resources and the increasing need for the
financial investigative expertise of our special agents, Criminal
Investigation prioritizes its efforts in currency reporting and money
laundering enforcement to address investigations whose size, scope and
complexity require the value-added expertise of our special agents.
international strategy
Recognizing that financial crimes do not stop at the United States
border, Criminal Investigation's International Strategy places special
agents in strategic foreign countries. These special agents are
responsible for developing financial information obtained from host
governments relating to U.S. income tax violations or money laundering
schemes. The placement of these special agents allows us flexibility to
gather evidence to support ongoing domestic investigations with
international implications. With State and Treasury Department
approval, IRS special agents are permanently placed in Mexico,
Colombia, Germany, Canada and Hong Kong.
The International Strategy enables special agents to work more
closely with their foreign counterparts. The obvious benefit of such
relationships is to stop the infusion of money from illegal financial
crimes into the global economy. The movement of such funds creates a
major concern regarding the underground economy in America as well as
in foreign economies.
As a result of our International Strategy, we have been able to
help some foreign governments in the drafting of money laundering laws
that will assist the entire international law enforcement community in
its money laundering investigative efforts. This type of close working
relationship, coupled with our money laundering and financial
investigative training efforts at the International Law Enforcement
Academies, has led to an increase in international cooperation and
understanding of the complexities surrounding money laundering
activities.
criminal investigation programs
Working within these three strategies, Criminal Investigation
devotes its resources to two major programs: Fraud and Narcotics.
the fraud program
The Fraud Program encompasses a broad range of illegal activity,
primarily involving legitimate industries. In this area we work
investigations involving; General Tax Crimes, Excise Tax, Illegal Tax
Protesters, Return Preparers and Questionable Refunds. Other fraud
programs involving tax and money laundering violations include:
Bankruptcy Fraud, Financial Institution Fraud, Gaming, Health Care,
Insurance, Telemarketing, and Public Corruption. All statutes under
Criminal Investigation's jurisdiction may be utilized in these
investigations; this includes the criminal provisions of the Internal
Revenue Code as well as violations of the Bank Secrecy Act (also known
as the Bank Records and Foreign Transactions Act) and the Money
Laundering Control Act (also known as the Anti-Drug Abuse Act which
included substantive amendments to Title 31).
narcotics program
The mission of the IRS Criminal Investigation narcotics law
enforcement program is to identify, investigate, and assist in
prosecuting members of significant narcotics organizations and related
enterprises. In fact, the first IRS narcotics investigation was a tax
case completed in 1920 when an opium grower failed to claim the income
earned from his product.
IRS Criminal Investigation utilizes all available statutes within
its jurisdiction to dismantle or disrupt the financial operations of
the targeted organizations. Part of the Criminal Investigation
Narcotics program includes Organized Crime Drug Enforcement Task Force
(OCDETF) investigations. Criminal Investigation Special Agents are a
principal partner in nearly 56 percent of all OCDETF investigations
nationwide, second only to the Drug Enforcement Administration (DEA).
During fiscal year 1997, 87 percent of all narcotics investigations
initiated by Criminal Investigation involved money laundering or
currency crimes violations. The quality of investigations conducted by
Criminal Investigation was evident during fiscal year 1997, with 84
percent of our narcotics cases resulting in prosecution recommendations
and almost 89 percent of those convicted of narcotics crimes being
sentenced to prison.
training, expertise and work force
IRS Criminal Investigation is very much aware of consequences of
rapidly changing technology, particularly in the field of information
systems. Therefore, our training for IRS special agents continues to
evolve so that their skills as computer investigative specialists keep
their pursuit of financial evidence on the cutting edge of technology.
It is interesting to note that with the support of the Under Secretary
for Enforcement at Treasury, Criminal Investigation initiated a program
to share our expertise in this area with the other Treasury Enforcement
Bureaus.
Our Financial Investigative Techniques Course is taught at
Treasury's Law Enforcement Training Center in Brunswick, Georgia. The
unique investigative techniques utilized in conducting financial
investigations make our training in high demand by Federal, state,
local and even international law enforcement agencies. Other courses
taught to state and local law enforcement agents include: Special Agent
Basic Training and Special Agent Investigative Techniques.
We also recognize that the well-rounded law enforcement officer of
the future must have the ability to follow a financial trail. This,
coupled with our need to recruit a diverse work force, prompted IRS
Criminal Investigation to develop a college curriculum course geared
toward the college sophomore to pique his/her interest in law
enforcement and the investigation of financial crimes. This course is
currently being taught in over 20 colleges throughout the United
States.
We accomplish our mission with nearly 3,200 special agents and
1,500 support personnel. Some of these special agents and support
personnel assist our field agents through forensics at our National
Forensic Laboratory in Chicago; through our two permanent employees at
INTERPOL; our Trial Illustration Team in Kentucky; the Detroit
Computing Center where our Currency Transaction Reports and Forms 8300
are filed and analyzed; and through our Criminal Investigation
employees stationed at the El Paso Intelligence Center (EPIC), the
Financial Crimes Enforcement Network (FinCEN) and at the Federal Law
Enforcement Training Center (FLETC) in Brunswick, Georgia.
conclusion
This brief overview of our strategies and programs provides some
insight into the role of the Internal Revenue Service Criminal
Investigation Division.
Thank you Mr. Chairman for this opportunity to brief you and the
members of the subcommittee on the important role of Internal Revenue
Service Criminal Investigation. I will be glad to answer any questions
you might have.
Statement of W. Ralph Basham
Senator Campbell. OK. We will continue with Mr. Basham,
please.
Mr. Basham. Mr. Chairman, Senator Kohl, I am pleased to be
here today to report on the current operations and performance
of the Federal Law Enforcement Training Center and to support
our appropriations for fiscal year 1999.
Even though I am new to this position, I am well aware of
the outstanding reputation this organization has acquired over
nearly three decades of delivering high-quality training to law
enforcement officers from across the country and around the
world, and I assure you that I will continue to preserve and
build on that reputation.
I would also like to acknowledge my predecessor, Charlie
Rankovich. Under Mr. Rankovich's leadership, the Center
experienced tremendous growth and came to be recognized as the
Nation's premier law enforcement training organization.
While he was at the Center, FLETC grew into a partnership
of over 70 participating agencies providing the best law
enforcement training available anywhere in the world. Mr.
Rankovich leaves behind an organization with a highly motivated
and talented staff dedicated to the mission of providing
quality, cost-effective training for law enforcement
professionals.
I would like to express my deep respect and sincere
appreciation for the outstanding and selfless leadership
provided by Mr. Rankovich over the last 15 years.
Under the leadership of Secretary Rubin and Under Secretary
Kelly, the Center has received strong support and active
assistance for carrying out its responsibilities, and
throughout the Center's 28-year history, this committee has
also been most supportive in its funding of consolidated
training and discerning in its oversight role. The success
enjoyed by the Center and the success of the consolidated
training concept are directly attributable to this committee's
strong and consistent support.
Today, I am prepared to discuss the initiatives in our
request, which include mandatory workload increases, master
plan staffing, the International Law Enforcement Academy, and
master plan implementation.
Mandatory Workload Increases
The Center continues to face an unprecedented increase in
its training workload. Last year, the Center delivered more
student weeks of training than any other time in its history.
The majority of the increase in training workload results from
initiatives by the administration and Congress to improve the
effectiveness of INS and protecting our Nation's borders. Other
factors contributing to the Center's increased workload are
security enhancements at Federal facilities, new Federal
prisons coming online, and a significant increase in the
workload of the Bureau of Indian Affairs.
The initiatives outlined in our request are targeted at
increasing the Center's training capacity in response to this
growing workload, and they tie directly to the goals outlined
in the Center's current strategic plan. As you are aware, I
have only been Director for a few days, and, therefore, I have
not had sufficient time to review and assess all the goals and
measures in the plan. I will be looking at the plan over the
next few weeks, and I will be asking the Department, OMB, and
this committee for input and support in determining the future
of FLETC as we move into the new millennium.
I would like to take a few minutes and discuss in more
detail two of the initiatives I mentioned earlier, the master
plan and the International Law Enforcement Training Academy for
the Latin American and Caribbean region, otherwise known as
ILEA South.
Master Plan Construction
To meet the dramatic rise in this training workload, the
Center is moving forward on its master plan construction
program to increase capacity at both Glynco and Artesia.
Through 1998, the Congress has appropriated nearly $83 million
for master plan construction projects. By necessity, the master
plan has been updated several times over the last few years,
and copies of these updates have been furnished to this
committee.
It should be recognized, however, that the cost of fully
implementing the master plan has increased over time because of
inflation and changes necessary to meet the training
requirements of our customers. I want to assure you that the
FLETC will continue to work through Treasury, OMB, and Congress
in dealing with any additional master plan changes.
In the past 2 fiscal years, the Center has completed
construction on two additions to the main classroom building at
Glynco and has expanded the driver training complex.
Additionally, construction is underway on a new dormitory and
administration building at Glynco, and a contract was recently
awarded for the construction of a new dormitory in Artesia.
Our 1999 request includes just over $16 million to continue
implementation of the plan. These funds will be used to
construct another dormitory and classroom building at Glynco
and for expansion of the cafeteria, construction of a laundry
facility, and infrastructure improvements at Artesia. These
additional facilities are vital if the closure of the temporary
facility in Charleston is ultimately to be realized. However, I
must tell you that workload projections have increased since
the submission of our budget, and we are now in the process of
further analyzing facility requirements to meet this additional
workload increase.
International Law Enforcement Training Academy
Our request for ILEA South is aimed at building strong and
lasting relationships with and among law enforcement officials
from Latin America and the Caribbean. Current demand for
training assistance for the international community resulting
from congressional administrative initiatives already exceed
the FLETC's available resources. That demand coupled with the
added responsibility for management oversight and
administrative support of ILEA South make it essential that
additional resources be provided.
Mr. Chairman, men and women of the Federal Law Enforcement
Training Center are proud of the contribution that they make in
providing our Nation's law enforcement officers the training
necessary to carry out their vital mission.
I look forward to working with you in the future, and that
concludes my comments.
Prepared Statement
Senator Campbell. Thank you, Mr. Basham. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of W. Ralph Basham
Mr. Chairman and Members of the Committee, I am pleased to be here
today to report on the current operations and performance of the FLETC
and to support our appropriations request for fiscal year 1999. As you
know, Secretary Rubin appointed me as Director of the FLETC effective
February 15, 1998. I am honored by this appointment. While I am new to
this position, I can report to you that I am very well aware of the
outstanding reputation this organization has acquired over nearly three
decades of providing high quality training to law enforcement officers
across the country and around the world. My 27 years with the U. S.
Secret Service as an Agent, Special-Agent-In-Charge of several field
offices, Deputy Assistant Director for Training and most recently as
Assistant Director for Administration, have helped prepare me for this
challenging assignment. I consider myself most fortunate to have had a
long career with a great organization, the U. S. Secret Service, and
now the opportunity to lead another great organization, the FLETC, into
the next century.
The Center has seen tremendous growth since its establishment in
1970 when a handful of agencies joined together and established the
Consolidated Federal Law Enforcement Training Center. The Department of
Treasury has been the lead agency for the United States Government in
providing the administrative oversight and day-to-day direction for the
FLETC since its creation. Under the leadership of Secretary of the
Treasury Robert E. Rubin, and Under Secretary for Enforcement Raymond
W. Kelly, the FLETC has received strong support and active assistance
for carrying out its responsibilities. This Committee, Mr. Chairman, is
owed a debt of gratitude. Throughout the Center's 28 years of service
to Federal law enforcement, this Committee has been most supportive in
its funding of consolidated training and insightful in its oversight
role. Although I have been at the Center for only a short time, it is
obvious to me the strong and active role you have played in the success
of the Center, and I am looking forward to working with you in the
future.
There are now 70 agencies which train at the Center and we expect
this growth to continue as more agencies recognize the many benefits of
consolidated training, not the least of which is a tremendous cost
savings to participating agencies and the Government. Congress can be
proud of the quality of the training being provided at the FLETC and
the savings realized through consolidation. FLETC's success is the
direct result of the strong support we have received from Treasury
leadership, this Committee and our participating organizations.
Today, I am prepared to discuss a number of our initiatives
outlined in the President's fiscal year 1999 budget. The Center's
fiscal year 1999 request is for a Salaries & Expenses (S&E)
appropriation of $71,923,000 and 553 FTE, an increase of $6,260,000 and
27 FTE from the fiscal year 1998 level. Our request for Acquisition,
Construction, Improvements & Related Expenses (ACI&RE) is $28,360,000,
a decrease of $4,188,000 from the fiscal year 1998 level. The S&E and
ACI&RE funding requested will support four important initiatives:
Mandatory Workload Increase ($1,614,000 and 10 FTE); new construction
support ($1,400,000 and 12 FTE); an International Law Enforcement
Academy for the Southern hemisphere ($1,500,000 and 5 FTE); and new
construction pursuant to our facilities Master Plan ($13,000,000).
In addition to our budget request, the Department of the Treasury
will provide the FLETC with $900,000 from the Asset Forfeiture Fund for
the purchase of 30 front-wheel-drive driver training vehicles. This is
the beginning of a five year phased initiative that will convert our
driver training vehicle fleet from rear-wheel drive sedans to front-
wheel drive sedans and is necessary to meet the training needs of our
participating agencies. I will discuss this and the other initiatives
in more detail later in my testimony.
The S&E and ACI&RE request represents an increase of $2,072,000
over the fiscal year 1998 level. Coupled with $900,000 from the Asset
Forfeiture Fund and $29,000,000 in funds to be reimbursed to us by our
agencies for training related services, our total budget for fiscal
year 1999 is $130,183,000.
Before providing this Committee with an overview of Center
operations and discussing each of our initiatives in more detail, I
would like to take a moment and address progress being made in
complying with the requirements of the Government Performance and
Results Act (GPRA). As you know the GPRA requires agencies to publish
strategic plans covering five years, publish annual performance plans
which include measurable goals, and, after the year is completed, to
report on actual performance.
In the Center's testimony last year, it was mentioned that the
Center embraced GPRA early. At that time the FLETC was working with the
Department and the Office of Management and Budget (OMB) to ensure that
the Center's strategic plan, development of which began in 1994, was in
full compliance with GPRA requirements. Since that time the Center's
plan has been shared with this Committee and comments made by this
Committee, OMB and the Department to improve the plan have been
addressed. Our plan is a part of the Department of the Treasury's
strategic plan and was submitted to Congress on September 30, 1997 in
accordance with GPRA requirements.
Performance plans required by GPRA are now an integral part of the
budget documents sent to you each year. In our fiscal year 1998 budget
request last year, we incorporated measures of program performance in
addition to the traditional output-oriented workload measures. As you
know, good measures of program performance are not always available.
Ours are not perfect. However, we are making progress in developing
meaningful, quantifiable measures for our programs. As we gain more
experience, we hope to improve on the performance measures we use, and
we would welcome your continued feedback and suggestions in this area.
Included in our budget request this year is a report on whether or
not we achieved each of the targets we proposed for the most recently
completed fiscal year (fiscal year 1997). The performance measures used
for law enforcement training in fiscal year 1997 included: (1) results
of our student quality of training survey, (2) number of student-weeks
trained, (3) number of students trained, and (4) variable unit cost per
basic student-week of training funded. Plant operations performance
measures include results of our student quality of services survey.
The student quality of services survey and student quality of
training survey performance measures are outcome measures. The overall
student quality of training index is based on a six point scale, and
the overall student quality of services index is based on a five point
scale. Both indices are computed using evaluations completed by
students attending Center programs. The variable unit cost per basic
student-week of training funded is also an outcome measure and is based
on training dollars divided by funded student-weeks of training. The
final two measures--students trained and student-weeks of training--are
output measures and show the student workload at the Center.
I am pleased to report that the Center's performance against
established targets was excellent overall. The index for the most
critical performance measure in our plan, the student quality of
training survey measure, was ``5.4''. This exceeded the Center's
existing standard and performance plan target of ``5.0''. The student
quality of services actual performance index was ``4.0'' which equals
our performance target measure of ``4.0''. Additionally the FLETC's
training costs were below the cost figure established for the variable
unit cost per basic student-week of training.
The performance targets for students trained and student-weeks
trained as shown in the performance plan were not met. While the
workload conducted was somewhat less than the initial projections and
the targets in our performance plan, the FLETC did conduct 100 percent
of the basic training requested by our agencies in fiscal year 1997.
Because workload estimates used in the performance plan are based on
Spring 1995 estimates of our customers, it is not surprising to find
that there is a variance between the targets and actual workload. The
budget process requires that the Center's participating agencies
provide these estimates well in advance of funding actions by the
Congress and Administration. Although estimates are based on the best
available data and the agencies' best guess at the time, changes in
Congressional and Administration policy and initiatives that occur in
the interim can and do have a dramatic impact on the outcome of actual
workload. Therefore, the best measure of the FLETC's performance in
this area is whether the Center provided 100 percent of the basic
training requested, which in this case we did.
As stated earlier and in the Center's testimony last year, the
FLETC will continue to refine existing performance measures and/or
identify new performance measures in an effort to more accurately
reflect its performance. In the fiscal year 1999 budget request you
will find that the Center has revised and added to its performance
measures to ensure better linkage between the performance measures
being used and the Center's strategic goals. This is part of our
continuing effort to provide this Committee with the information it
needs to make informed budget decisions.
I believe that this system--setting strategic goals and strategies
for the long term, setting annual targets, managing to achieve those
targets, and reporting on annual performance--will help all of us
manage the Center's programs more efficiently and effectively.
In reviewing our request, and later in our discussions today, I am
sure you will find that there is a strong and direct relationship
between our budget initiatives and the mission and goals outlined in
the Center's Strategic Plan. That mission is to provide quality, cost
effective training for law enforcement professionals. It is a vitally
important mission and is essential if we are to equip our law
enforcement personnel with the skills necessary to deal with
increasingly sophisticated and violent crimes.
Four key strategic goals guide the Center in fulfilling its
mission. They are:
--Provide high quality training for law enforcement;
--Develop, operate, and maintain state-of-the-art facilities and
systems responsive to interagency training needs;
--Effectively organize, develop, and lead FLETC's personnel in
support of the Center's mission; and,
--Strengthen partnerships among participating organizations and the
FLETC.
The initiatives outlined in our fiscal year 1999 request directly
support the mission of the Center and can be tied to one or more of the
goals in the Center's strategic plan. Equipment and FTE's requested
under S&E for mandatory workload, Master Plan implementation, and the
International Law Enforcement Training Academy, are essential if the
Center is to provide quality training that is responsive to the needs
of its customers. Failure to fund these initiatives could result in a
degradation of the services and jeopardize training, putting the Center
in a position where it could not meet its customers' training
requirements.
For example, if the FTE requested in the mandatory workload
initiative are not provided, the Center will not have the instructor
resources required to meet the basic training requirements projected by
our customers.
Funding requested in the ACI&RE account will allow the Center to
continue implementation of its Master Plan. Continued implementation of
the Master Plan is necessary if, in the future, we are to avoid the
need to invest in costly temporary facilities to meet the training
needs of our customers during periods of peak demand. Additionally,
temporary facilities adversely impact on the quality of training
provided and the quality of life of the student, even though we take
steps to mitigate that impact as much as we can. I will discuss this
issue more fully, later in my testimony.
overview of operations
Now Mr. Chairman, I would like to provide the Committee with a
brief overview of the operations of the Federal Law Enforcement
Training Center.
The Center was established by a Memorandum of Understanding in 1970
and has experienced tremendous growth over the last 28 years. We
currently conduct basic and advanced training for the majority of the
Federal Government's law enforcement personnel. We also provide
training for state, local and international law enforcement personnel
in specialized areas and support the training provided by our
participating agencies that is specific to their needs. Currently, 70
Federal agencies participate in more than 200 different basic and
advanced training programs at the Center.
There are entry level programs in basic law enforcement for police
officers and criminal investigators along with advanced training
programs in areas such as marine law enforcement, anti-terrorism,
financial and computer fraud, and white-collar crime. Training is
conducted at either the main training center in Glynco, Georgia, our
training center in Artesia, New Mexico, a temporary training facility
in Charleston, South Carolina, or on an export basis at sites across
the country.
The temporary training site in Charleston was established in fiscal
year 1996 to accommodate an unprecedented increase in the demand for
basic training by the participating agencies, particularly that of the
Immigration and Naturalization Service (INS) and United States Border
Patrol (USBP). Charleston is the direct result of recent Administration
and Congressional initiatives to control illegal immigration along the
United States borders. Cost for the site's operation and facility
maintenance are being funded by the INS.
In addition to the training conducted on-site at one of the FLETC's
residential facilities, some advanced training, particularly that for
state, local and international law enforcement, is exported to regional
sites to make it more convenient and/or cost efficient for our
customers. The tremendous demand for basic training over the next four
years will increase the FLETC's reliance on export training sites to
meet these advanced training requirements. The Center's driver,
firearms and physical techniques training facilities cannot accommodate
all of the training being requested. Therefore, much of the advanced
training requiring the use of special training facilities will have to
be accommodated elsewhere.
Realizing that a short-term solution was needed to meet the
advanced training needs of our customers until additional facilities
are completed under the Master Plan, the FLETC began to identify state
and local facilities that could be used to accommodate this training.
Several sites have now been identified, and the Center will seek this
Committee's permission to enter into agreements with these non-Federal
organizations for the use of their facilities on a reimbursable basis.
No funding of the FLETC will be used to make capital improvements at
the sites. Essentially, FLETC will serve as a ``broker'' in setting up
training arrangements with select non-Federal sites that can
accommodate only training that cannot otherwise be conducted at a FLETC
site. If approved, the Center will be able to assist its customers in
meeting their advanced training needs by facilitating the scheduling of
their training at one of these sites. At the same time, with the Center
serving as the mechanism for the use of these facilities, the concept
of consolidated training through the FLETC will be protected.
Additionally, continued implementation of the Master Plan will
eventually allow this advanced training to be returned and conducted at
the Glynco and Artesia training centers.
Over the years, the FLETC has become known as an organization that
provides high quality and cost efficient training with a ``can do''
attitude and state-of-the-art programs and facilities. There are many
substantial advantages of consolidated training for Federal law
enforcement personnel, not the least of which is an enormous cost
savings to the Government. Consolidated training avoids the duplication
of overhead costs that would be incurred by the operation of multiple
agency training sites. Furthermore, we estimate that consolidated
training will save the Government $114 million in per diem costs alone
during fiscal year 1999. This estimate is based on projected fiscal
year 1999 workload and per diem rates in Washington and other major
cities of $152/day versus the cost of housing, feeding, and agency
miscellaneous per diem of $29.95/day for a student at Glynco.
Consolidation also ensures consistent high quality training and fosters
interagency cooperation and camaraderie in Federal law enforcement.
FLETC and consolidated training can be viewed as a National
Performance Review concept ahead of its time. Quality, standardized,
cost-effective training in state-of-the-art facilities, interagency
cooperation, and networking are indisputable results of consolidation.
However, the concept of consolidated training is fragile and needs
constant nourishment and support if it is to remain intact.
workload
As I mentioned earlier, the Center is facing an unprecedented
increase in its training workload that began in fiscal year 1996 and is
projected to continue through fiscal year 2002. The majority of the
increase in training workload is the result of the fiscal year 1995
initiative by the Administration and Congress to increase the
effectiveness of the Immigration and Naturalization Service (INS) in
controlling our borders by increasing the number of INS and United
States Border Patrol (USBP) law enforcement personnel. Other factors
contributing to the increase include security enhancements at Federal
facilities and new Federal prisons coming on-line. Additionally, the
Bureau of Indian Affairs (BIA) is also projecting a dramatic increase
in the number of students it will need trained beginning in fiscal year
1999.
During fiscal year 1997 the Center graduated 23,329 students,
representing 109,116 student-weeks of training. This total included
16,628 students who were trained at Glynco, Georgia, 2,962 students
trained at Artesia, New Mexico, 861 students trained at Charleston,
South Carolina, and 2,878 students trained in export programs conducted
at various locations throughout the United States. There were 10,741
basic students, 9,226 advanced students, 2,562 state and local
students, and 800 international students trained, equating to an
average resident student population (ARSP) of 2,098. Although the total
number of students and student-weeks trained were below the performance
targets established for fiscal year 1997, the Center did provide 100
percent of the basic training requested by its customers. The
performance targets established for fiscal year 1997 were based on
Spring 1995 projections of the 70 agencies we serve. These projections
are made in advance of appropriations. Because of circumstances beyond
the control of the agencies or the FLETC, the projections changed by
the start of the fiscal year, and fewer training requests materialized.
This performance measure has been revised in the fiscal year 1999
budget submission and now is based on FLETC providing 100 percent of
the basic training requested by the participating agencies.
The Center has seen enormous growth in the training demanded by its
participating agencies over the past decade. We have been able to
accommodate many, but not all, of these increased training demands by
being innovative and undertaking extraordinary measures.
To accommodate training during fiscal year 1985 and again in fiscal
year 1989, the Center had to temporarily expand its capacity for
housing, dining, classroom, office space, storage, and special training
facilities by using temporary buildings and contracted or licensed
temporary facilities. Further, the Center has not always had space to
accommodate all of our students in on-Center housing and has used
contractual arrangements with local motels to house our overload. Many
of the temporary measures taken to meet these training demands were
costly, and they adversely impacted the Center's operations.
As you are aware, a temporary training facility was established in
Charleston, South Carolina, during 1996 because our current facilities
do not have the capacity to accommodate all of the training being
requested. Principally used to conduct USBP training that cannot be
accommodated at the Glynco and Artesia training centers, this facility
will be closed once requirements for the Border Patrol buildup are
completed. We expect that in fiscal year 2000, sufficient capacity will
exist at Glynco and Artesia to meet most or all of the projected
training requirements of our participating agencies and Charleston can
be closed.
This is the third time since fiscal year 1985 that FLETC has taken
extraordinary measures to meet the training demands of its
participating agencies. More importantly, it is the second time in the
last nine years that a temporary training facility has had to be
established. A temporary training facility was established at Ft.
McClellan, Alabama, in 1989 to meet a similar increase in the USBP
training workload.
Opening temporary training facilities is a time-consuming and
expensive process. Capital improvements must be made to bring the
facility on line and, unlike capital improvements made at Glynco or
Artesia, there is no permanent return on that investment. The dollars
expended are lost when the facility is closed. It also impacts on the
cost effectiveness of the training provided and on the student's
quality of life and overall training experience. However, as was done
in 1989, the Center is taking steps to mitigate any impact the
temporary training facility might have on the quality of training
provided. We are extremely proud of our reputation for providing high
quality, cost effective training and will take the steps necessary to
ensure that the quality of training provided at Charleston remains
high.
facilities master plan
Now, Mr. Chairman, if I may, I would like to brief you and the
other Committee members on progress being made in expanding the FLETC's
facilities. The Master Plan, presented to Congress in June 1989,
provided a basis for the efficient and orderly development of the
Center's land and facilities resources. It was and is a comprehensive
blueprint to guide the expansion of the Center so that it can more
effectively support the present training workload as well as the
workload projected for the future. The original plan called for a total
investment of $86,010,000.
The Center has recently completed an update of the Master Plan. The
update, which is being reviewed by the Department and the Office of
Management and Budget, will be provided to the Congress when that
review is completed. Through fiscal year 1998, Congress has
appropriated $82,717,000 for Master Plan construction. Of this amount
$66,960,000 was for Glynco projects and $15,207,000 was for Artesia
projects.
At Artesia, major projects that have been completed include:
rehabilitation of the cafeteria/student center complex and main
classroom building; construction of a physical training complex,
completed in October 1991; interim driver/firearms ranges, completed in
1991; a much needed road and sidewalk network at the Artesia main
campus, completed in 1992; permanent firearms ranges, completed in
1993; and a driver/firearms administrative support/classroom building,
completed in 1996. At Glynco, completed projects include: a dormitory,
completed in April 1993; an expansion of the indoor firearms range
complex, completed in August 1993; consolidation/expansion of the
physical techniques facility, completed in October 1993; an expansion
of the cafeteria, completed during 1994; construction of two 25 firing
point outdoor ranges completed in 1994; an addition to the Steed
classroom building (two state-of-the-art classroom buildings),
completed in May 1996; and an expansion of our driver training complex
(the addition of control tower, defensive driving and highway response
ranges), completed in February 1997.
In addition to those MP projects already completed, construction
recently began on a new dormitory and an administrative building at
Glynco. These projects are expected to be completed in fiscal year
1999. A contract was also awarded in late January for construction of a
dormitory in Artesia. Construction on this project will begin in early
March and should be completed in early fiscal year 2000.
The Center's fiscal year 1999 ACI&RE request is in the amount of
$28,360,000 and includes $16,124,000 to continue implementation of the
Master Plan. The remaining funds in the ACI&RE account are for
environmental projects necessary to comply with laws and regulations
and to support the minor construction and maintenance projects
necessary to protect the Government's investment. Additionally a small
amount of the S&E appropriation is used to meet certain facility
maintenance requirements.
The $13,000,000 in Master Plan funds requested in our fiscal year
1999 initiative will provide funding to construct a classroom building
and a dormitory at Glynco. These facilities are necessary to support
the increased basic training workload of the participating agencies.
Except for a small amount ($308,000) that will be used for a classroom
at Glynco, the remaining $3,124,000 contained in the base will be used
for expansion of the cafeteria, a commercial laundry and infrastructure
improvements at the Artesia center.
Our Master Plan initiative directly supports goal two in FLETC's
strategic plan. That goal is to develop, operate, and maintain state-
of-the-art facilities and systems responsive to interagency training
needs. Funding is required if the Center is to meet the training needs
of its customers. Not funding these initiatives will result in the
continued reliance on the more costly method of establishing temporary
training facilities to meet training requirements. It also endangers
the concept of consolidated training as the larger agencies look at
alternatives, such as individual agency sites, to meet their training
requirements.
The Center continues to consult closely with its participating
agencies so that the design features of each project will meet current
and future needs. This close consultation sometimes prolongs the period
it takes to design and construct facilities; however, we feel the time
and effort are well spent because it ensures that funds are efficiently
and wisely used.
Obviously, changing events have and will continue to dictate
modifications to the various projects outlined in the Master Plan. For
example, the Center's unprecedented workload has resulted in
adjustments to the priority and the reprogramming of funds between some
of the projects at Glynco to ensure that the temporary facility in
Charleston is closed as soon as possible. However, I want to assure you
that the FLETC will continue to work through the Treasury Department,
Office of Management and Budget, and the Congress in dealing with these
changes.
Mr. Chairman, I want to thank you and members of the Subcommittee
for the support given the Center in its Master Plan development and
implementation. We are pleased and grateful that Congress has seen fit
to appropriate the funds necessary to expand our facilities and better
equip the Center to meet the training needs of our customers. Only by
doing so is the concept of consolidated training nurtured and
strengthened.
Now, if I may, Mr. Chairman, I would like to take this opportunity
to further discuss the four remaining initiatives in the Center's
fiscal year 1999 budget request which I briefly referred to earlier in
my testimony.
mandatory basic training workload increase
In our fiscal year 1999 request the Center is asking for $1,614,000
and 10 FTE to support the direct cost of basic training resulting from
workload increases. As I discussed in some detail already, the Center
is faced with an unprecedented increase in its workload. This
initiative will allow the Center to fund 100 percent of the direct cost
of the discounted projected basic training in fiscal year 1999
(excluding recently updated projections in INS/BIA's workload) and
supports goal one in FLETC's strategic plan--to provide high quality
law enforcement training.
Our request is in accordance with the current Treasury/FLETC policy
that requires funding of the direct cost of basic training. The
participating agencies do not request funding for these costs in their
budget submissions and are fully expecting and relying upon the FLETC
to provide that funding.
master plan fte
As I touched on in my testimony earlier, the Center is requesting
$1,400,000 and 12 FTE in support of the Master Plan implementation.
Master Plan construction funding provided in fiscal year 1998 and that
contained in our fiscal year 1999 request totals nearly $35,000,000.
Because FLETC's current administrative staff, including engineering and
procurement specialists, are already fully utilized on existing Master
Plan and minor construction and maintenance projects, we need
additional resources to ensure the prompt processing and completion of
these projects. The Master Plan FTE contained in this request will give
the Center the additional support personnel necessary for management
and oversight of these projects from design through construction and
will ensure their timely completion.
This initiative supports goal two of the FLETC's strategic plan
which is to develop, operate, and maintain state-of-the-art facilities.
international law enforcement academy
The FLETC has been involved in foreign training for more than 20
years. Since 1979 the FLETC has provided training to more than 4,000
foreign law enforcement officials from more than 102 countries.
The Center's Office of State, Local and International Training
(OSI) serves as the focal point for all foreign training requests
received by the FLETC. OSLI, originally established in 1982 by the
President to provide much needed training for state and local law
enforcement agencies, has proven to be the ideal conduit for FLETC's
international training efforts. Since its inception, the OSLI has
received broad support from the Federal, state, and local law
enforcement communities. They provide subject matter experts for course
and program development as well as instructional services. The same
network and support structure in place to assist state and local
agencies in meeting their training needs made the OSLI a logical focal
point for international training at the FLETC.
Two Administration and Congressional initiatives, the Freedom
Support Act and the Support for Eastern European Democracies Act, are
responsible for much of the upswing in foreign training. As you know,
these acts provide law enforcement technical assistance in combating
organized crime, financial crime, and narcotics trafficking to Russia,
the newly independent states of the former Soviet Union, and other
eastern European countries.
The majority of recent training has been provided under the
sponsorship of the Department of State's Office of Antiterrorism
Assistance and Bureau for International Narcotics and Law Enforcement
Affairs. During the last three years programs have been conducted in
Russia, Poland, Hungary, Romania and Moldavia. In addition to this
training, the FLETC also provides instruction in financial crimes to
students attending each session of the program conducted at the
International Law Enforcement Academy (ILEA) in Budapest, Hungary.
Requests for training have grown substantially in the last few
years, with student weeks of training increasing by more than 200
percent since 1994. During fiscal year 1997 the Center trained 800
foreign students, representing 1,300 student-weeks of training.
In fiscal year 1998 the Center expects to train 1,132 students,
representing 2,084 student-weeks of training. The growth in foreign
training has been so explosive that FLETC now finds it must deny or
delay in responding to some of these requests because facilities or
staff to support the request are not available.
Adding to this already heavy international training workload are
other Congressional and Administrative initiatives also aimed at
increasing international cooperation in combating crime. These
initiatives are out pacing FLETC's resources and its ability to support
training in the international arena.
In 1995, as part of Congress' and the Administration's objective to
enhance cooperation and strengthening international law enforcement
efforts, the Department of State established the ILEA in Budapest,
Hungary. Drawing on the expertise of U.S. law enforcement agencies and
participating nations, ILEA has proven to be a successful model.
Although FLETC does not have the lead responsibility for ILEA, FLETC
has been actively involved in supporting the training requirements of
ILEA since its inception, providing instructional and program
development support.
The ILEA in Budapest has enhanced cooperation and strengthened
international law enforcement efforts. The great success of the ILEA
model has encouraged the Administration to expand on this concept by
establishing international law enforcement academies in Latin America
and the Far East. At the San Jose Summit on May 8, 1997, President
Clinton announced that an international law enforcement training
academy would be created in Latin America (ILEA-South) before the end
of 1997. Patterned after ILEA-Budapest, the goals of ILEA-South are to
expand relationships with and among foreign law enforcement officials
from Latin America and the Caribbean, support democracy by stressing
the rule of law in international and domestic police operations, foster
international cooperation and raise the professionalism of law
enforcement judicial officials.
The Department of State selected the Department of the Treasury as
the lead agency to establish ILEA-South. In turn, the Department, at
the request of the Under Secretary for Enforcement, selected the FLETC
to provide management oversight, administrative support, and guide
program development for ILEA-South.
The FLETC will serve as the coordinator for this effort on behalf
of all the Treasury law enforcement bureaus who are joined together in
support of ILEA. A pilot training program, the Criminal Justice
Managers Training Program (CJMTP), was recently conducted in Panama
City, Panama, during November and December 1997.
Thirty-two students attended the first program offering of the
CJMTP. The program was well received and was considered by all those
involved to be a great success. Countries represented by students
included Belize, Costa Rica, Dominican Republic, El Salvador,
Guatemala, Honduras, Nicaragua, and Panama.
Our fiscal year 1999 request includes $1,500,000 and 5 FTE for the
management of the ILEA-South. Current demand for training assistance
from the international community already exceeds the FLETC's available
resources. That demand coupled with the added responsibility for
management oversight and administrative support of ILEA-South makes it
critical that additional resources be provided.
The ILEA-South initiative contained in our request supports goal
one in FLETC's strategic plan. That goal is to provide high quality
training for law enforcement.
conversion of the fletc driver training vehicle fleet
Now, Mr. Chairman, I would like to brief this Committee on the need
to begin conversion of FLETC's driver training vehicle fleet from rear-
wheel drive to front-wheel drive sedans. Although not part of the
Center's budget request, this $900,000 initiative will allow the Center
to purchase 30 front-wheel drive police package training vehicles and
begin the conversion of its driver training vehicle fleet. It will be
funded from the Department of Treasury's Asset Forfeiture Fund.
Over the last few years American automobile manufacturers have
slowly converted their production from rear-wheel drive to front-wheel
drive vehicles. Because of this change, U.S. manufactured police
package automobiles are now predominantly based on front-wheel drive
car platforms. As agency fleets age, older rear-wheel drive vehicles
are now being replaced by the newer front-wheel drive vehicles. Nearly
half of FLETC's 20 on-site participating agencies have started to
convert their vehicle fleets to front-wheel drive vehicles, and GSA
advises that 96 percent of the cars they purchased in 1996 were front-
wheel drive cars.
Since front-wheel drive cars handle differently from rear-wheel
drive cars, the FLETC must begin to update its fleet if it is to meet
the training needs of the participating agencies. Students must be
trained with the same type of equipment they will use when they
graduate. This is the only way they can master skills that are
essential for them to perform well in their jobs. Failure to provide
this training will increase the potential that accidents may occur
because the officers were not trained using the appropriate vehicle.
With the funding requested the FLETC will purchase 30 vehicles in
fiscal year 1999. Smaller numbers of front-wheel drive vehicles cannot
be added to the driver training fleet, as a class cannot have mixed
vehicle types during evaluation exercises that require different
reactions based on the vehicle type. Thirty is the minimum number of
vehicles needed to integrate a different type vehicle into the training
and provide continuity as a class rotates through the various special
driving ranges.
Currently there are approximately 150 driver training vehicles in
the FLETC fleet, and by fiscal year 1999 the average age of these
vehicles will be nine years old. This is a five-year initiative with a
total cost of $4,500,000.
The FLETC's heavy workload, the addition of two new driving ranges,
the aging of the FLETC's driver training vehicle fleet, and the need to
train students with the same type of equipment they will use in the
field makes it imperative that FLETC begin the conversion of its driver
training vehicles from rear-wheel drive to front-wheel drive in fiscal
year 1999. This initiative directly supports FLETC's strategic plan
goal one which is to provide high quality law enforcement training.
Now, Mr. Chairman, if I may, I would like to take a moment and
briefly update the Committee on activities of our satellite training
center in Artesia, New Mexico, and the activities of our National
Center for State, Local and International Training.
artesia operations
The Artesia center was purchased and became operational in 1989.
Training facilities at Artesia include a 164-room dormitory (of which 4
rooms are utilized as a library and snack bar), a cafeteria capable of
serving 275 students per sitting, two auditoriums--one with seating for
166 and the other with seating for 85, and a physical training complex.
There are 23 general purpose classrooms which will accommodate up to
740 students. Special purpose classrooms include a 24-person computer
classroom and a 24-person fraudulent document lab. Other specialized
facilities at Artesia include practical exercise areas, a mock
courtroom, 3 matted rooms for physical techniques training, driver
training and firearms ranges, an obstacle course, 36 breakout rooms, a
heliport and a rappelling tower.
The Department of Interior's Bureau of Indian Affairs (BIA) Indian
Police Academy moved to Artesia during 1993. In addition to the BIA
training that is conducted, Artesia also serves as an advanced training
site for students posted in the western United States. Additionally,
because of its diverse special training facilities, it can accommodate
overflow basic training that cannot be done at Glynco due to space
limitations. Artesia is playing and will continue to play an important
role in meeting the training requirements of the BIA and INS over the
next few years.
During fiscal year 1997, the Center trained 2,962 students at
Artesia. In fiscal year 1998 we expect to train 4,493 students based on
April 1997 and later projections of our participating agencies and we
estimate that 5,791 students will be trained at Artesia in fiscal year
1999. The majority of the increase in the fiscal year 1999 training
workload is due to the advanced training requirements of the INS, USBP,
and Bureau of Prisons.
Other users of Artesia in addition to those already mentioned above
include the Bureau of Land Management, National Marine Fisheries
Service, and the FLETC's National Center for State, Local and
International Training.
The expansion of the Artesia center as authorized by the Congress
is continuing essentially as planned. As I mentioned earlier in my
testimony when discussing the Master Plan, many of the Artesia Master
Plan projects have been completed and are in use. Nine modular
buildings have also been installed to accommodate the increase in
training workload resulting from the INS buildup and a contract for the
expansion of the Artesia dormitory to add an additional 76 rooms was
awarded in January of this year. In fiscal year 1998, the Center
received Master Plan funding for expansion of the Physical Training
Complex, construction of an Office Building and the balance of funds
needed for a Classroom/Practical Exercise Complex. Initial planning for
those projects is underway.
national center for state, local, and international training
Mr. Chairman, earlier in my testimony I discussed Glynco's National
Center's role in supporting the Administration's and Congress'
international training initiatives. However, we must not forget the
important role played by OSLI in meeting the training needs of State
and local law enforcement agencies. If I may, I would like to take a
few minutes and brief this Committee on OSLI's state and local training
activities.
As I mentioned previously the National Center was established in
1982 by the President to provide much needed training for state and
local law enforcement agencies. Since its inception, the National
Center has received broad support from the Federal, state, and local
law enforcement communities. They provide subject matter experts for
course and program development as well as instructional services.
In addition to its international training responsibilities, the
National Center is charged with training personnel from state and local
agencies in advanced topics designed to develop specialized law
enforcement skills.
By combining the staff expertise of the participating agencies and
the FLETC with the specialized training facilities already available at
the FLETC, the Center is able to provide participants with instruction
in advanced programs meeting their specific needs. In most cases the
training enables these agencies to be more supportive of Federal
agencies and their missions.
During fiscal year 1997, there were 2,562 state and local students
trained through the National Center in more than 40 advanced training
programs. In fiscal year 1998 we project that 1,812 state and local
students will receive training through the National Center.
Because of the success of the National Center, many of these
programs are being conducted on an export basis at sites across the
country, including our Artesia center. This has proven to be a cost
effective method to provide training to state and local agencies.
Additionally, exporting training to state and local academies and other
locations throughout the country increases the Center's visibility and
leads to improved cooperation between the Center and state and local
agencies.
In fiscal year 1998, the Center received $1,000,000 and 3 FTE for
its Rural Drug Training initiative. The initiative provided funding for
the delivery of training programs to state, local, suburban and rural
jurisdictions to enhance their effort in combating the flow and sale of
illicit narcotics. These programs, the Small Town and Rural Training
Series (STAR) were developed in response to an identified need for low
cost or no cost training to be provided to small town and rural law
enforcement.
Originally the STAR series consisted of four programs: Airborne
Counterdrug Operations Training Program, Advanced Airborne Counterdrug
Operations Training Program, Drug Enforcement Training Program, and
Rural Crime and Drug Enforcement Task Force Training Program. However,
in keeping with the original intent of the initiative and as crimes
associated with the flow, sale, and use of illicit narcotics continue
to grow in numbers and complexity, the STAR series has been expanded to
address the many varied elements that contribute to these types of
crimes. Programs added to the STAR series by the National Center
include: Community Policing Training Program, First Response Training
Program, Gangs in Indian Country, and Hate and Bias Crimes Training
Program.
I am pleased to report that the Center will conduct approximately
57 STAR series programs and reach approximately 1,500 students during
fiscal year 1998. These numbers are even more significant since STAR
programs are train-the-trainer programs. They are directed toward
either managers or trainers/facilitators who upon completion of a
program are capable of replicating the training in their local
jurisdictions using the techniques and the materials provided. This has
the effect of substantially reducing the cost of training to local
jurisdictions and increasing the number of people reached by the
training--a multiplier effect.
closing
Mr. Chairman, I am committed to the mission of the Center to
provide high quality training at the lowest possible cost. Substantial
savings are being realized through the operation of the Center as a
consolidated training facility. I look forward to the continued support
of this Committee as the FLETC strives to remain a partnership
committed to excellence.
I am available to answer any questions you may have concerning this
appropriation request.
Statement of William Baity
Senator Campbell. Mr. Baity.
Mr. Baity. Thank you, Mr. Chairman, Senator Kohl.
On behalf of the men and women of FinCEN and especially our
Director, Stan Morris, who as you know will be retiring this
Friday after 30 years of Federal service, we want to thank you
for the opportunity to discuss the mission and our fiscal year
1999 budget request of the Financial Crimes Enforcement Network
[FinCEN].
Fiscal Year 1999 Budget Request
The fiscal year 1999 budget request of $24 million
continues FinCEN's support to law enforcement investigations,
regulatory efforts, and international coordination. In
addition, we are proposing that the violent crime reduction
trust fund support three program initiatives, $500,000 to
produce a statistically based model to measure the magnitude of
money laundering, $200,000 to continue training for State and
local law enforcement under our Gateway program, and $300,000
to more effectively analyze reports filed by banks and other
financial institutions under our regulatory program.
As its name states, FinCEN is a network, a link between the
law enforcement, regulatory, and the financial communities. Our
strategy, therefore, is to maximize information sharing among
our partners in these communities and to foster cost-effective
and efficient measures to address the complex problem of money
laundering.
As you have heard us before describe to this committee,
FinCEN provides case support to more than 150 Federal, State,
and local law enforcement agencies. Using advanced technology,
specialized analysis, and a variety of data sources, FinCEN
links together various elements of the crime, helping
investigators find the missing pieces of the criminal puzzle.
To perform this analysis, FinCEN accesses a variety of data
bases, one of the largest repositories of information available
to law enforcement in this country. Critical information
collected in these data bases comes from the financial
community, another part of FinCEN's network.
Bank Secrecy Act
The Bank Secrecy Act, known as the BSA and administered by
FinCEN, requires banks and other financial institutions to
report and keep records on certain financial transactions.
To further close off avenues to money launderers, FinCEN
has ongoing efforts to bring nonbank financial institutions,
known as NBFI's, under the umbrella of the Bank Secrecy Act.
NBFI's include casinos, broker/dealers, money transmitters, and
other financial service providers.
By necessity, FinCEN's network extends to the international
community. Building international cooperation, both in the
private and public sector, is imperative for two reasons.
First, the Federal law enforcement cases involving
international crime that we support frequently spill over into
multiple national jurisdictions. The only way we can adequately
assist our Federal law enforcement counterparts in following
the trail of the multinational money launderer is through
linkages through multinational arrangements, such as the G-7
financial action task force and building alliances with
financial intelligence units [FIU's], organizations similar to
FinCEN that have been established throughout the world.
Second, criminals seek out countries with weak money
laundering controls; if antimoney laundering laws are strong in
one country, criminals run to another one with weaker links.
Organizations like FATF and the FIU's help establish and
strengthen laws against money laundering. Building a global
consensus in this area is essential.
Magnitude of Money Laundering
FinCEN's program initiatives of fiscal year 1999 will
further support its network capabilities and strategies. The
first initiative under the proposed fiscal year 1999 budget
request is to construct a viable model for measuring the
magnitude of money laundering. This will provide information
that is indispensable for measuring our performance. We will
know whether we are making a difference. With adequate measures
of the extent of the problem, it also becomes easier for the
Congress, law enforcement authorities, and international
organizations to determine the amount and allocation of
resources which should be devoted to antimoney laundering and
to identify where it fits in national and international
enforcement and regulatory agendas.
Although attempts have been made over the years by a number
of countries and organizations to estimate the extent of money
laundering, these studies have only exposed the lack of
sufficient, available data and highlighted the need to develop
a model or models for using this data. FinCEN's overriding
objective over the next few years, therefore, will be to
construct a viable model for measuring the magnitude of money
laundering.
Gateway Program
A second initiative addresses one of our most important
networking functions, our Gateway Program. State and local
enforcement agencies, working with the designated State
coordinators, trained on FinCEN-designed software, have direct
access to BSA reports, information not readily available from
any other source.
Gateway also saves investigative time and money because
user agencies can conduct their own research and not rely on
the resources of intermediary agencies to obtain BSA reports.
All States and the District of Columbia are now online with
this system.
In addition, Gateway enables FinCEN to assist State and
local agencies in coordinating their investigations among
themselves and with Federal agencies through information
sharing and exchange of case data.
FinCEN has worked diligently to make this system accessible
to as many people as possible. The Gateway training initiative
will enable FinCEN to respond to the increasing number of
requests it receives each month from State and local law
enforcement. It also furthers our goal of leveraging FinCEN's
resources to more efficiently and effectively serve our
customers.
Money Laundering
The third initiative addresses the importance of technology
in our efforts to combat money laundering. As you have heard us
say before, the world of money laundering is complex and ever-
changing. Five years ago, the BSA concentrated on the reporting
of currency being deposited in banks. Today, money laundering
methods, as well as the financial sector itself, are undergoing
constant and dramatic changes. Needless to say, the
Government's resources dedicated to this fight have not
increased at the same rate. Therefore, we have to do more with
what we have and adopt innovative uses of technology.
Our initiative in this area will support the use of
advanced technology, often referred to as data-mining. The
combination of software and hardware uses a variety of
automated and analytical tools to discover patterns and
relationships in the data that would otherwise not be found.
Taking artificial technology to its next level, data-mining
will help make use of very large volumes of data bringing to
the surface meaningful groups of information. Hidden activities
and interrelationships previously unknown will be discovered.
It is using technology at its best.
FinCEN's fiscal year 1999 budget request continues the
programs which enable it to support law enforcement
investigation, regulatory efforts, and international
coordination. The three program initiatives, which we are
respectfully proposing be funded from the violent crime trust
fund are modest in terms of dollars and cents, but each
initiative serves to enhance FinCEN's mission.
The ability to produce a statistically based model to
explain and measure the magnitude of money laundering will not
only provide law enforcement with indispensable information,
but will be cost effective in the long run. The funding for
Gateway will improve tools and information for law enforcement
in the fight against money launderers.
We appreciate the committee's consideration of our request
and the time you have given us today, and we look forward to
answering any questions.
Thank you very much, Mr. Chairman.
Prepared Statement
Senator Campbell. Thank you, Mr. Baity. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of William F. Baity
Mr. Chairman and members of the Subcommittee, thank you for this
opportunity to discuss the mission and fiscal year 1999 budget request
of the Financial Crimes Enforcement Network (FinCEN).
FinCEN works to make the prevention, detection, and prosecution of
money laundering and other financial crimes more effective by adding to
the knowledge and resources that law enforcement and the regulatory
agencies can use to fight them.
The fiscal year 1999 budget request of $24 million continues
FinCEN's support to law enforcement investigations, regulatory efforts,
and international coordination. In addition, under FinCEN's
appropriation, we are proposing that the Violent Crime Reduction Trust
Fund support three program initiatives: $500,000 to produce a
statistically-based model to measure the magnitude of money laundering;
$200,000 for continued training for state and local law enforcement as
part of the Gateway program; and $300,000 to more effectively analyze
reports filed by banks and other financial institutions under our
regulatory programs.
complexity of the problem
To better understand FinCEN's strategies in combating money
laundering, it is important to provide an explanation of the complexity
of the problem. Money laundering is the fuel for drug dealers,
terrorists, arms dealers, and other criminals to operate and expand
their enterprises. In order to unravel their illegal activities, law
enforcement must be able to ``follow the money trail'' made by criminal
enterprises. And ultimately, following the money leads to the top of
the criminal organization, and thus the dismantling of these
enterprises.
The problem of money laundering is enormous and extends far beyond
hiding narcotics profits. The dimensions of the problem increase
rapidly when one considers, for example, trade fraud and tax evasion.
Bank, medical, and insurance fraud also adds billions of dollars to the
criminal's profits.
fincen's network and strategies
As its name states, FinCEN is a network--a link between the law
enforcement, regulatory, and financial communities. Our strategy,
therefore, is to maximize information sharing among our partners in
these communities and to foster cost-effective and efficient measures
to address the complex problem of money laundering.
As you have heard us describe before, FinCEN provides case support
to more than 150 federal, state and local law enforcement agencies.
Using advanced technology, specialized analysis, and a variety of data
sources, FinCEN links together various elements of the crime, helping
investigators find the missing pieces of the criminal puzzle. To
perform this analysis, FinCEN accesses a variety of data bases--one of
the largest repositories of information available to law enforcement in
the country.
Critical information collected in these databases comes from the
financial community, another part of FinCEN's network. The Bank Secrecy
Act (BSA), administered by FinCEN, requires banks and other financial
institutions to report and keep records on certain financial
transactions. This requirement serves as a means to deter money
laundering and as a way to create a financial trail for investigators
to follow criminals and their assets. BSA records include information
not only on large currency transactions, but information related to
transactions that the banks believe are suspicious; currency
transactions at casinos; international movements of currency; and
foreign bank accounts. FinCEN puts the rules in place that banks and
others must follow to prevent and detect money laundering and also is
one of the primary users of the information collected. To further close
off avenues to money launderers, FinCEN has ongoing efforts to bring
non-bank financial institutions (known as NBFI's), under the umbrella
of the BSA. NBFI's include casinos, broker/dealers, money remitters and
other financial service providers.
By necessity, FinCEN's network extends to the international
community. The proceeds of crime generated in the U.S. move quickly
across national boundaries and into the world's financial systems.
International crime is just that--international. Building international
cooperation, both in the private and public sector, is imperative for
two reasons.
First, the federal law enforcement cases involving international
crime that FinCEN supports frequently spill over into multiple national
jurisdictions and the web of global financial services. The only way we
can adequately assist our federal law enforcement counterparts in
following the trail of the multinational money launderer is through
linkages with multi-national arrangements such as the G-7 Financial
Action Task Force (FATF) and building alliances with the Financial
Intelligence Units (FIU's)--organizations like FinCEN--established
around the world.
Second, criminals seek out countries with weak money laundering
controls; if anti-money laundering laws are strong in one country,
criminals run to another with weaker ones. Organizations like FATF and
the FIU's help establish and strengthen laws against money laundering,
leaving fewer avenues for money launderers. Building a global consensus
is essential.
FinCEN's program initiatives for fiscal year 1999 will further
support its network capabilities and strategies.
initiative: measuring the magnitude of money laundering
No assessment of an agency's or government's anti-money laundering
programs can be a true gauge of its effectiveness, unless it is based
on an understanding of the breadth of the problem being addressed. The
first initiative under our proposed fiscal year 1999 budget request
will help leverage limited law enforcement resources by providing
information on where anti-money laundering efforts would best be
directed. I would also stress that this initiative is the foundation
for our strategic planning and at the heart of measuring our
performance. If we are able to construct a viable model for measuring
the magnitude of money laundering, FinCEN will be able to review all of
its objectives in a more meaningful way. We will know whether we are
making a difference.
We believe the ability to measure the magnitude of money laundering
will add value in four key areas:
Understanding the magnitude of the crime.--With adequate measures
of the extent of the problem, it becomes easier for the Congress, law
enforcement authorities, and international organizations to determine
the amount of resources which should be devoted to anti-money
laundering and where it fits in national and international enforcement
and regulatory agendas.
Understanding the effectiveness of counter-money laundering
efforts.--Without a baseline, it is difficult to measure how--and
whether--efforts to prevent and detect money laundering are working.
The absence of scales for measurement, in turn, makes evaluation of
particular programs or approaches problematic. It hampers the efficient
allocation of resources among various enforcement functions or regions.
And it hinders effective justification for (sometimes costly)
regulatory measures designed to deter money launderers.
Understanding the macro-economic effects of money laundering.--A
central justification for counter-money laundering, especially
international counter-money laundering programs, is the adverse effects
of money laundering on financial institutions and economies. The
International Monetary Fund, in studies of this problem, has indicated
a number of possible effects:
--changes in demand for money;
--exchange and interest rate volatility;
--heightened risks to the safety and soundness of financial
institutions;
--adverse effects on tax collection and, ultimately, on fiscal policy
projections; and
--contamination effects on particular transactions or sectors and
behavioral expectations of market actors.
Without reliable data or models that measure the degree of money
laundering, it is impossible to prove the fact or gauge the size of
these effects.
Understanding the components of money laundering.--Money laundering
is often misunderstood. It is not one act or kind of transaction; it
can take many different forms, and the proceeds of various crimes are
laundered in different ways. Trying to measure the magnitude of the
problem forces us to focus on these distinctions and on the different
components of the crime we call money laundering.
Although attempts have been made over the years by a number of
countries and organizations to estimate the extent of money laundering,
these studies have only exposed the lack of sufficient, available data
and highlighted the need to develop a model or models for using the
data which has been collected.
FinCEN's overriding objective over the next few years, therefore,
will be to construct a viable model for measuring the magnitude of
money laundering.
initiative: network for state and local governments
FinCEN's second initiative addresses one of its most important
networking functions--the Gateway Program. The Gateway network extends
to state and local governments in order to ensure the widest possible
anti-money laundering effort.
State and local law enforcement agencies, working with designated
state coordinators who are trained on the special FinCEN-designed
software, have direct access to over one hundred million reports filed
under the Bank Secrecy Act, the largest currency transaction reporting
system in the world. These investigators also have access to the
Suspicious Activity Reporting System which contains reports filed by
banks on transactions that appear to represent attempts to launder
funds or violate the banking laws. This information often provides
invaluable assistance for investigators because it is not readily
available from any other source.
The Gateway system saves investigative time and money because
subscribing agencies can conduct their own research and not rely on the
resources of an intermediary agency to obtain BSA reports. All states
and the District of Columbia are now on-line with the system. In fiscal
year 1997, Gateway processed 57,663 queries from 50 states. As of
February 1, 1998, there were approximately 400 active users of the
system.
During the research and analysis process, Gateway electronically
captures the information gathered on incoming inquiries and
automatically compares this information to subsequent and prior queries
from Gateway customers. Over 25,000 subjects have been identified
through Gateway.
In addition, Gateway users ask FinCEN to match about 600 new
subjects each month against its other databases to identify potential
parallel investigations. This technique enables FinCEN to assist state
and local agencies in coordinating their investigations among
themselves, and with federal agencies through the sharing and
exchanging of case data. (In other words, FinCEN has the ability to
``alert'' one agency that another has an interest in their subject.) In
fiscal year 1997, 460 ``alerts'' were given to agencies that had an
interest in the same investigative subject. In just the past four
months, 240 ``alerts'' were issued.
Since the inception of Gateway in 1993 , almost 650 representatives
of state and local law enforcement (including state attorneys general
offices) have been trained on Gateway. In fiscal year 1997, 166
investigators or analysts from 33 states were trained on the Gateway
system.
FinCEN has worked diligently to make this system accessible to as
many people as possible. The need for training, however, continues to
increase. FinCEN is currently receiving 12 to 15 new training requests
each month. The training initiative in FinCEN's fiscal year 1999 budget
request is a result of two factors: turnover in positions held by state
financial investigators and an increase in the overall number of
investigators who are requesting use of the system. Since fiscal year
1996, there has been a 46 percent increase in training requests.
This initiative will further FinCEN's goal of leveraging its
resources to more efficiently and effectively serve its customers.
initiative: greater use of technology
The world of money laundering is complex and ever-changing. Five
years ago, the BSA concentrated on the reporting of currency being
deposited into banks. Today, money laundering methods, as well as the
financial service sector, have changed dramatically. Our success at
deterring and identifying large currency deposits has forced criminals
to use alternative and more sophisticated methods to gain access to the
financial systems. As a result, we have had to employ more
sophisticated counter measures. Now financial services are provided by
hundreds of thousands of entities ranging from traditional depository
institutions to broker dealers, state and Indian casinos, check
cashers, currency exchangers, issuers and sellers of money orders and
travelers checks as well as money transmitters.
Needless to say the government's resources dedicated to this fight
have not increased at the same rate. Therefore, we have had to do more
with what we have. As indicated earlier, we have done this by
developing partnerships with the affected industries that share our
mission, as well as with other nations. And we have found another
weapon in our arsenal--innovative uses of technology. In this area,
FinCEN analysts are pioneers. They use state-of-the-art technology not
only to strengthen their own capabilities, but also to improve the
means by which they provide investigative support and analysis to law
enforcement.
Our initiative in this area will support the use of advanced
technology--data mining. This combination of software and hardware uses
a variety of automated analytical tools to discover patterns and
relationships in data that may otherwise be overlooked. Taking
Artificial Intelligence technology to its next level, data mining helps
make use of very large volumes of data--bringing to the surface
meaningful groups of information.
Let me offer a very simplistic explanation as it relates to the
retail industry. Data mining has been used for several years in the
retail industry to try and predict the buying habits of consumers. For
instance, in what is called the ``shopping cart phenomenon,''
supermarkets use data mining techniques to analyze the buying patterns
of shoppers--which in turn help them decide which grocery items should
be in close proximity to each other in the shopping isles.
I see FinCEN's application of data mining in a very similar way,
not using consumer data--but the data that we already require from
banks and other financial institutions. As described earlier, FinCEN
uses a variety of information for its analysis--including Currency
Transaction Reports; Suspicious Activity Reports; Reports of
International Transportation of Currency or Monetary Instruments;
Currency Transaction Reports filed by Casinos; and, in the future,
reports filed under the proposed Money Services Businesses regulations.
Through the implementation of data mining techniques, our analysts
would be able to bring to the surface hidden activities and
interrelationships that were previously unknown between these various
data sources.
For instance, let's assume a business--XYZ Corporation--is under
investigation by law enforcement authorities for money laundering
violations. After examining the pattern of XYZ's financial activity, we
can apply this suspicious activity pattern to the rest of the data
bases--and ``mine'' for other businesses which match the profile we
have created. Much like the supermarket trying to determine its
customer's buying habits, we also want to predict activity--of
potential money launderers. Data mining will allow us to do just that.
It's technology at its best.
conclusion
FinCEN's fiscal year 1999 Budget request continues the programs
which enable it to support law enforcement investigations, regulatory
efforts, and international coordination. The three program initiatives
which we are respectfully proposing be funded from the Violent Crime
Reduction Trust Fund are modest in terms of dollars and cents, but each
initiative serves to enhance FinCEN's mission.
The ability to produce a statistically-based model to explain and
measure the magnitude of money laundering will not only provide law
enforcement with indispensable information but will be cost effective
in the long term. The funding for Gateway, along with our technology
efforts, improves the tools and information for law enforcement in its
fight against money launderers. We appreciate the Committee's
consideration of our request and the time you have given us today to
illustrate key aspects of FinCEN's mission.
Montana Secret Banking Proposal
Senator Campbell. I would like to yield to Senator Kohl, if
he has some questions.
Senator Kohl. All right. Well, I will ask Mr. Baity a
question and keep it to that.
Mr. Baity, we keep hearing about the Montana secret banking
proposal. Last month, they developed regulations that would
establish the State as an offshore banking haven to allow
special depositories for overseas clients seeking privacy.
Would an overseas client receive any benefit from placing
their money in Montana as opposed, for example, to the Cayman
Islands or Switzerland? First question.
Mr. Baity. Well, if I could, Senator, to put it in context,
as we understand it, the Montana Foreign Currency Depository
Act, as they call it, allows only foreign citizens to invest in
a newly created depository institution.
When they first announced their intent to enact this
statute, we along with the Department of Justice, met with them
and actually testified to ensure that our concerns, especially
from the money laundering aspect, would be met. In fact, we did
get compliance from Montana. They included in their legislation
that any such depository institution would be subject to the
Bank Secrecy Act.
We are of the opinion that any depository charter that they
would give would clearly be subject to the BSA including all of
the reporting requirements.
Senator Kohl. Are there other States that have shown any
interest in establishing such an operation?
Mr. Baity. Yes, sir; in fact, Hawaii is in the process of
actually studying the possibility of creating a similar act.
I would point out, to date there has been no charter
granted to any institution in Montana, but there remains
several issues that we intend to keep monitoring. As you know,
when a foreigner or foreign institution wants to open a bank in
the United States, a supervisory regulatory agency has the
ability to ensure that those persons are not suspected of any
criminal activity.
We are concerned with Montana that there is no such
provision in place, and we are under discussions with them to
ensure that before they move forward, a vetting process will
exist, as well as an ability to train their people for
compliance. So we are carefully paying attention to that.
Senator Kohl. I thank you, and I thank you, Mr. Chairman.
Submitted Questions
Senator Campbell. I have a number of questions to submit to
each one of you, and if you could, get those back in writing as
soon as you can. We will keep the record open for about 2
weeks, if you could answer those questions for me.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
Under Secretary for Enforcement
Question. Based upon the protective travel shortfalls in the Secret
Service budget, what specific recommendations is the Treasury
Department considering to address this problem for the long term?
Answer. The Department is carefully reviewing this situation to
first determine exactly what is causing the Service's need for
increased protective travel funding, and second to identify ways to
address it. Once we determine whether the increased level of costs
relative to protective travel are expected to continue, and are not
simply the result of a temporary and extraordinary jump in protective
workload, the Department may consider proposing changes to the
Service's fiscal year 1999 Budget Request.
Question. In light of the fact that the Secret Service expects to
have a $13 million shortfall in their protective travel budget for
fiscal year 1998, how does the Treasury Department plan on providing
funds for such shortfalls--now and in the future?
Answer. The Department is considering several options for
addressing the Service's protective travel shortfall this fiscal year
and will be discussing these options with the Committee.
Question. The fiscal year 1998 Treasury appropriations included a
directive to the Office of Professional Responsibility to conduct a
study to assess the vulnerability of U.S. Customs Service personnel.
Please provide an update on this study. Has the difficulty in hiring
staff for the Office of Professional Responsibility delayed or impacted
the study?
Answer. We share the Committee's concern regarding potential
corruption issues at the U.S. Customs Service and we appreciate your
support for the Office of Professional Responsibility (OPR) which will
allow us to more closely examine and propose integrity initiatives.
Because we did not have the OPR staff on board we hired an individual
to conduct a preliminary assessment of Customs' Office of Internal
Affairs. This individual is extremely experienced in this area and
served as a Federal prosecutor and as the head of the New York City
Police Department's Office of Internal Affairs. He has submitted a
final draft report to my office, which serves as the starting point of
OPR's review.
Unfortunately, it did take longer than anticipated to hire our OPR
staff. We received a very large number of applications and the Federal
personnel rules made review of those applications cumbersome. We did an
extensive review of the applications, which included interviews of
candidates conducted by a number of senior officials including myself
and the law enforcement bureau heads. As a result of this thorough
process, we have hired four professional staff and two support staff
for OPR. One of our new hires is a highly qualified Internal Affairs
Advisor who has reviewed our consultant's draft report and is now
commencing the study requested by the Committee.
government performance and results act of 1993
Agencies were required by the Government Performance and Results
Act of 1993 to submit their performance plans with the fiscal year 1999
budget request. The performance of agencies during fiscal year 1999 in
meeting their strategic plans will play a large role in the budget
decisions made in fiscal year 2000.
Question. Does each account and program activity for the Office of
Enforcement have performance measures associated with it?
Answer. While we do not classify the measures by account and
program activity, we do have specific performance measures for each of
the office's missions.
Question. Does your plan include performance measures for which
reliable data are not likely to be available until March 2000?
Answer. No, we currently expect to have sufficient information.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. We currently believe that technological capabilities will
not restrict our capability to measure program performance.
Question. Throughout the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. No significant overlapping functions or program
duplications were identified as part of the performance plan
development for the Office of Enforcement.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 budget?
Answer. Not applicable. No significant overlapping functions or
program duplications were identified as part of the performance plan
development for the Office of Enforcement.
Question. What do you believe will be the most difficult
performance goal for the Office of Enforcement to reach in fiscal year
1999?
Answer. While we currently feel it is attainable, annual goal 1
will probably be the most challenging. It incorporates the
establishment of a new office and the myriad issues that are
encountered in such an effort: staffing, organization, operating
procedures, etc. in addition to the achievement of the office's goals
for the year.
Question. Have you redirected resources to that particular goal?
Answer. Yes. As noted above, this goal involves the creation of a
new office within Enforcement, and includes the additional staffing and
resources required to meet this goal.
______
Bureau of Alcohol, Tobacco and Firearms
violent crime coordinators
Question. The Administration is requesting $2 million for ``violent
crime coordinators''. It is my understanding that these folks will be
assigned to work directly with the U.S. Attorneys, at their request, to
build cases involving firearms violations. Will the Justice Department
assist in funding this program?
Answer. The Justice Department will not assist in funding this
program.
explosives inspections
Question. You have received funding in fiscal year 1998 for
additional explosives inspectors. When those folks are all on board,
what percentage of explosives storage locations will be inspected each
year?
Answer. Once all staff are hired, trained, and performing
inspections, ATF plans that 80 percent of explosives storage locations
will be inspected annually.
vehicles
Question. Your fiscal year 1999 Budget includes a request of
$3,700,000 for vehicle replacement. This is in addition to the planned
$4,000,000 disbursement from the Treasury Forfeiture Fund in fiscal
year 1999 for vehicles and radios. In fiscal year 1998, ATF received
$4,500,000 from the Violent Crime Reduction Trust Fund (VCRTF) for
vehicle replacement. This is a total of $12,200,000. ATF currently has
3,894 employees, and is hoping to increase that to 4,038 in fiscal year
1999. That is over $3,000 per employee, including part-time and
temporary employees, for vehicles over two years. How do you justify
this level of expenditure?
Answer. The average price of an equipped sedan is actually over
$20,000 and special purpose vehicles such as special response team vans
or mobile laboratories cost much more. Additionally, each ATF employee
is not issued a government vehicle.
ATF's fleet has an average mileage rate of over 67,000 miles per
vehicle. The average replacement cycle should be three years if the
fleet is to remain up to GSA standards. The funding request maintains a
direct base so that a regular replacement cycle can be maintained,
rather than have sporadic purchases from other funding sources.
gsa surcharge for security requirements
Question. The General Services Administration has decided that they
will no longer foot the bill for security enhancements at locations
housing Federal agencies. As a result, those increased costs are being
billed to the agencies themselves, and funding is requested in fiscal
year 1999 Budget for this increase. ATF headquarters is currently
leased space and the owner refuses to allow installation of additional
security, which is part of the reason why ATF is requesting funding for
a new building. However, if GSA is not supplying additional security at
headquarters, what is the $1,221,000 increase in GSA rent for?
Answer. The $1,221,000 is not for headquarters nor is it for GSA
rent. These funds are for security requirements at our field facilities
and are considered a GSA surcharge. GSA is requesting reimbursement for
annualized operating costs associated with security enhancements.
youth crime gun interdiction initiative
Question. The expansion of the Youth Crime Interdiction Initiative
into an additional 10 cities also envisions hiring six agents for each
of the 27 YCGII cities for a total of 162 agents. The actual tracing of
the crime guns is conducted by the National Tracing Center. Will
additional resources be necessary to handle the increased number of
guns which you hope will be traced as a result of this expansion?
Answer. The additional agents will improve ATF's ability to follow
up on investigative leads produced through increased tracing. As far as
the National Tracing Center is concerned, we believe that the present
staffing levels are sufficient for handling the additional trace
requests we anticipate as a result of the YCGII expansion. As the
service expands to meet the demands of law enforcement in the long
term, we will re-evaluate space and other issues as they become
relevant.
great
Question. ATF is requesting $10,000,000 from the VCRTF for grants
to State and local jurisdictions for Gang Resistance Education and
Training (GREAT) Program. This is the same amount that was appropriated
in fiscal year 1998. Will this be sufficient to accommodate all state
and local entities who have expressed an interest in participating in
GREAT?
Answer. No. ATF has received applications for funding which exceeds
the current appropriation by $8,000,000.
Question. If not, what funding level would be necessary in order
for all interested parties to participate?
Answer. To meet the current demand for funding, an additional
$8,000,000 would be needed.
amendment to the federal firearms regulations--nprm
Question. You will recall that the Department published a notice of
proposed rule making on August 27, 1997 concerning an amendment to the
Federal firearms regulations. This amendment would require federal
firearms licensees to not only post a sign on their premises, but to
also provide written notification with each handgun that they sell.
This notification would, for example, advise each firearms purchaser
about the dangers of a handgun and how to handle one safely. I am sure
that the Bureau received many comments on the proposed rule making,
Where do we stand on that proposed rule making?
Answer. Over 62 comments were received and evaluated in response to
ATF's notice of proposed rulemaking. The final rule and poster are now
in review within ATF and should be published in the near future.
Question. What does the Department intend to require in these
notices?
Answer. The notice will advise that it is illegal to transfer
handguns to juveniles, provide possible penalties for transferring a
handgun to a juvenile, state that handguns contribute to juvenile
violence, and indicate that safe storage of handguns is advisable. The
Bureau is currently evaluating the comments received regarding the
notice and will incorporate any appropriate changes in the final rule.
reclassification of conventional shotguns--nra concerns and
registration
Question. It has come to my attention that ATF sent letters last
summer to a number of Federal firearms licensees regarding ATF rulings
concerning the reclassification of conventional shotguns, such as the
Striker 12, the Streetsweeper, and the USAS-12, as destructive devices
under the National Firearms Act. These rulings were made by the
Secretary of the Treasury in 1994. It appears that the letters sent
last summer is the beginning of efforts by ATF to implement the rulings
through a voluntary compliance initiative.
I have been told that the National Rifle Association has written to
ATF on this matter, offering to widely publish and disseminate
information about how owners of these particular firearms can
voluntarily comply with the National Firearms Act. The NRA has not yet
received a written response. What action is ATF currently taking to
address the NRA's concerns and the information dissemination offer with
regard to the rulings?
Answer. In August 1997, ATF began to notify Federal firearms
licensees of the need to effect registration of certain destructive
devices, Striker 12, Streetsweeper, and the USAS-12, under the National
Firearms Act. On August 21, 1997, Ms. Tanya Metaksa, Executive Director
of the Institute for Legislative Action of the NRA, wrote a letter to
Director Magaw regarding this initiative. In its letter, the NRA
offered to assist the Bureau in informing the general public on this
issue by working with ATF on an article for publication in American
Rifleman. We apologize for the delay in our response and are in the
process of finalizing our reply.
Question. I understand that ATF is not requiring that a tax be paid
to register the shotguns under the National Firearms Act, and that ATF
is not trying to obtain the law enforcement certification for
registration purposes. However, it will be difficult for the public to
respond without any general awareness that they need to do so. What is
ATF doing to make the gun owning public aware of this compliance
matter?
Answer. The tax situation is only applicable to the registration of
the Striker 12, the Streetsweeper and the USAS-12. When an entity or
individual attempts to register one of these weapons, on an ATF Form 1,
Application to Make or Register a Firearm, ATF does not require the
payment of tax or the law enforcement certification. ATF's efforts
towards making the public aware of this matter are noted above.
youth crime gun interdiction initiative
Question. You have asked for an additional $16 million for the
Youth Crime Gun Interdiction Initiative and 81 FTE's to go with it.
Realistically speaking, how many of those FTE could be hired in fiscal
year 1999?
Answer. ATF will hire 162 positions which will equate to the 81 FTE
requested in the fiscal year 1999 President's budget request.
Question. Is there any intention to take the funds that would be
allocated for salaries and expenses in this additional $16 million and
use it to pursue measures that would present additional obstacles or
requirements for law abiding citizens to own firearms?
Answer. ATF will not take funds allocated for salaries and expenses
in the additional $16 million and use it to pursue measures to present
additional obstacles or requirements for law abiding citizens to own
firearms.
Question. Is the use of the funds restricted solely to efforts to
target the unlawful diversion of firearms to gangs and criminals?
Answer. Yes. All Youth Crime Gun Interdiction Initiative funding is
to be used to address the problem of illegal diversion of firearms to
juveniles, youth gang offenders, and criminals.
government performance and results act--atf's performance plan
Question. Agencies were required by the Government Performance and
Results Act of 1993 to submit their performance plans with the fiscal
year 1999 Budget request. The performance of agencies during fiscal
year 1999 in meeting their strategic plans will play a large role in
the Budget decisions made in fiscal year 2000. Does each account and
program activity at ATF have performance measures associated with it?
Answer. Each activity at ATF has performance measures associated
with it as outlined in the table below:
Program activity Performance measures
Reduce violent crime....................................... Crime related costs avoided.
Future crimes avoided.
Number of persons trained/developed (non-ATF).
Number of Traces.
Average Trace response Time (in working days).
Collect the revenue........................................ Taxes/fees collected from alcohol, tobacco, firearms, and explosives industries (dollars in
billions).
Ratio of taxes and fees collected vs. resources expended to collect.
Burden hours reduced.
Protect the public......................................... Response to unsafe conditions and product deficiencies discovered. (Explosives).
Commodity seminars held.
More detailed definitions of our performance measures may be found
on pages AFT-34 through 36 of the Department of the Treasury Budget.
Question. Does your plan include performance measures for which
reliable data are not likely to be available until March 2000?
Answer. All data is either available now, or under development and
will be readily available by March 2000
Question. Do you have the technology capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. We are in the process of designing and implementing
tracking and reporting systems, compatible with our Enterprise Systems
Architecture (ESA), which will capture the results of key projects and
programs.
Question. Throughout the development of the fiscal year 1999
performance plan, what overlapping functions or program duplication
were identified?
Answer. ATF has contributory goals with the Department of the
Treasury and the Office of National Drug Control Policy (ONDCP) in that
ONDCP's success in meeting its ten year goals, relies on implementation
of Treasury's and ATF's goals on drug interdiction and reduction of
violent crime.
ATF's Integrated Ballistics Identification System (IBIS) project is
somewhat duplicated by FBI's Drugfire program, but the National
Integrated Ballistic Network Board (composed of representatives from
ATF, the FBI, and the National Institute of Standards and Technology)
is working to interlace the two systems. No other program overlaps were
identified during the development of the fiscal year 1999 performance
plan.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 Budget?
Answer. No other program overlaps were identified during the
development of the fiscal year 1999 performance plan.
Question. What do you believe will be the most difficult
performance goal for ATF to reach in fiscal year 1999?
Answer. The performance goals associated with the Reduce Violent
Crime activity will likely be the most difficult.
Question. Have you redirected resources to that particular goal?
Answer. Yes. The Bureau has moved the Gang Resistance Education and
Training (GREAT) Program from the Protect the Public activity to the
Reduce Violent Crime activity.
Question. The fiscal year 1997 performance plan was based upon
goals of specific performance percentages, some of which were exceeded
and others which were not met. For example, the goal for firearms
applications was that 84 percent would be processed within 60 days, was
not met. However, the number of traces conducted by the National
TRACING Center far exceeded the goal of 150,000. Do you also have
similar detailed goals for fiscal year 1999?
Answer. We are in the process of developing a set of performance
measures and indicators which will reflect the outcome, or results, of
ATF's work at the project, program and activity levels. We will
continue to track output measures in our records, but future
performance measures will be more reflective of outcome oriented
results.
______
U.S. Customs Service
non-intrusive inspection technology
Question. You have mentioned in your testimony that Customs has
developed a five-year technology plan. What did Customs use as its
guideline during the development of this plan?
Answer. Customs has briefed Administration and Congressional staffs
on this plan between December 1997 and February 1998. Several factors
guided us in the development of this plan. These included:
--Our own extensive experience in developing and deploying effective
new technologies for non-intrusive inspection, covert tracking
and surveillance, communications, and vehicle processing.
--Technical advice and assistance from several agencies, but
principally from the DOD Counterdrug Technology Development
Program, the ONDCP Counterdrug Technology Assessment Center
(CTAC), and the FAA Aviation Security R&D Program.
--The workload volumes, smuggling opportunities, commodity
characteristics, and operational constraints at each port
included in the plan.
--Knowledge of the new and emerging technologies that will provide
effective, timely, and affordable support to our requirements.
Question. Does the five year plan implement a five year replacement
cycle for all of Customs' technology?
Answer. We hope that these technologies would have a useful life
closer to 10 years rather than five. The plan includes funding for the
maintenance, repairs, spare parts, and other logistics support that
will keep the new equipment useful through this time period. The plan
does not provide a five year replacement cycle or any logistics support
for our current technologies that are now in the field.
Question. There is $54 million requested in your fiscal year 1999
budget for non-intrusive inspection technology. Would you characterize
this equipment as mobile or stationary?
Answer. These funds will provide a variety of inspection technology
including $41 million of new equipment for the Southwest Border, $10
million for equipment at high-risk seaports (2 systems), and $3 million
for Automated Targeting System modules for both sea and land ports (12
systems).
A potential array of technology to be procured could be itemized as
follows:
The Mobile Truck X-ray Systems (7 systems) are just that; they can
travel over any roads to reach a port, can operate in any area wide
enough for two trucks to pass, and can be set up or taken down within
minutes.
The Gamma-ray Imagers (11 systems) for trucks and sea containers
are easily relocated; they require less than half a day to set up or
take down and are easily transported in a small truck between ports.
The Heavy Cargo Pallet X-ray System (7 systems) can be transported
to another site when necessary, but will require several days to
assemble or disassemble. This is a large system, as it must be to
handle cargo weighing up to 10,000 pounds and up to 8 feet wide and
high.
The Rail Car Examination System (4 systems) we are currently
considering is a variation of the Gamma-ray Imager for trucks; it also
would be easily relocated between rail sites, although some prior site
preparation may be necessary.
Customs, in partnership with DOD, ONDCP, OMB, and the Congress,
will continue to evaluate new technologies as they evolve to determine
if they would meet our mission requirements. If such technology is
found to better fulfill Customs requirements, current plans would be
modified to take advantage of this development.
Question. What will be the approximate annualization of maintenance
costs for the $54 million of technology requested in fiscal year 1999?
Answer. We expect the annual recurring maintenance costs for this
equipment to be approximately $5-$8 million. This includes preventive
maintenance, repairs, spare parts, initial and recurring training of
operators, compilation of service and performance records, and other
logistics support throughout the life cycle of the equipment.
Question. Are there any research and development costs included in
the $54 million technology request?
Answer. The requested funding is for the acquisition of proven
technology that was developed and evaluated under previous programs by
Customs, DOD, or ONDCP. Therefore, there are no R&D costs included in
this request. We know that we must remain alert to changing operational
requirements and technological capabilities, but expect that any
necessary R&D would occur from sources other than this request.
Question. In last year's information submitted as part of the
record, Customs listed those technologies which were the most
effective, are those same technologies included in the five year plan?
Answer. The technologies we listed last year were the large-scale
truck X-ray system, mobile truck X-ray system, transportable gamma-ray
imaging system, X-ray vans and pallet X-ray machines, and various hand
held devices such as Busters, laser range finders, and contraband
detection kits.
The five year plan includes a large number of mobile truck X-ray
and gamma-ray imaging systems; the plan also includes an eventual up-
grade of the current large scale truck X-ray systems.
The five year plan also includes three inspection technologies that
were not fielded or fully defined last year; these are the heavy cargo
pallet X-ray, the sea container X-ray, and rail examination systems.
detection technology
Question. Is there currently technology available to Customs which
could be used for the different aspects of the Customs mission,
specifically the detection and monitoring of air, land and marine
operations?
Answer. There is no single technology or multiple-use system that
we are aware of that could detect and monitor targets for all air,
land, and maritime activities. However, there are several types of
satellite-based electronic tagging and tracking systems that could
monitor suspect air, land, or marine movements once the target plane,
vehicle or boat has been detected and a tracking device covertly
installed.
There are some radar systems currently deployed that either are, or
can be, capable of detecting and monitoring most air and maritime
targets of interest to Customs. These include the airborne radars in
Customs P-3 AEW aircraft and the DOD aerostats that can detect targets
up to 150 miles away, and the radars in the Customs Citations and other
Customs, Coast Guard, or military aircraft that can detect targets up
to several miles away.
The land-based DOD Relocatable Over-the-Horizon Radar (ROTHR) can
detect and monitor air targets, and ultimately marine targets, that are
several hundred miles away.
Cost benefit analyses for the effectiveness of the P-3, aerostat,
and ROTHR were conducted in the early development and cost
justification days of these programs. They concluded that each was
effective for the multi-agency applications for which they were being
used (e.g., Customs, Coast Guard, INS, and DEA enforcement activities,
and DOD early warning missions).
information technology
Question. Why did Customs propose a User Fee to fund the ACE
program?
Answer. Customs is proposing legislation to increase to the
Merchandise Processing Fee (MPF) to generate the revenue necessary to
fund the development of the Automated Commercial Environment (ACE) and
an enterprise architecture. The funds generated from the MPF increase
would be directly available to Customs solely for this purpose. The
current automated system is over 14 years old, costly to maintain, and
does not provide the flexibility and efficiency required in today's
environment. It is widely recognized that Customs must modernize its
automated commercial operations in order to meet the needs of the trade
community and to comply with various legislative requirements, such as
the Customs Modernization and Informed Compliance Act (MOD Act) and the
Chief Financial Officers Act.
While some appropriated funding will be required in lieu of MPF
collections for costs associated with processing merchandise from
countries exempted under NAFTA, the remaining costs for modernization
cannot be absorbed from base funds. The Administration sought
alternative ways to fund this high priority initiative. The MPF
increase was chosen because it attributes the costs directly to those
who will benefit the most, and it can consistently generate the funds
required over the time needed for deployment.
Question. How will Congress and Treasury be able to maintain its
oversight responsibilities of the program if a User Fee is enacted?
Answer. Customs proposal to increase the Merchandise Processing Fee
(MPF) is strictly a mechanism to generate additional funding for the
modernization of Customs automated commercial operations. It is not
intended to circumvent any oversight responsibilities of Congress or
the Treasury. If Customs proposal is enacted, the legislation would
provide funding through a ``current'' and ``indefinite'' appropriation.
This would mean that Customs would have to request authority from the
Appropriators each year to use the offsetting receipt funds generated
by an MPF increase. In addition, Customs would still be accountable for
the controls set forth in the Clinger-Cohen Act and Congress would
continue to maintain an important oversight role on this project.
In addition, the proposal would not have any impact on Treasury
oversight responsibilities. Customs currently provides monthly updates
and milestone revisions to the Treasury Investment Review Board (TIRB),
and conducts regular working group meetings with Treasury Management
and Chief Information Officer (CIO) staff. Moreover, Customs provides
periodic briefings to OMB to ensure compliance with ``Raines Rules.''
The OMB apportionment process and Treasury's TIRB oversight role
provide additional assurance that resources will be responsibly used.
Customs does not anticipate any diminishment in the oversight
responsibilities within the Administration or the Congress if the MPF
increase is approved.
customs integrity assurance initiative
Question. Customs integrity is a continuing hot-button issue, and
there is a new initiative this year for $6 million which would allow
Customs to conduct more special operations with other Federal agencies
and increased emphasis in integrity throughout the hiring process. What
impact will this new initiative have on the vulnerability of Customs
Service personnel?
Answer. Customs plans to use the requested funding to reduce the
vulnerability to integrity problems of Customs employees. Customs will
also revise the pre-employment screening process, thereby reducing the
likelihood that unsuitable personnel are hired. Elements of the
initiative which will decrease Customs vulnerability include:
Special Operations.--Undercover operations are essential to the
successful investigation of allegations of criminal misconduct and
corruption by Customs employees. (Corruption investigations are those
involving bribery, smuggling, and narcotics.) These operations have
special approval mechanisms, in accordance with the Department of the
Treasury guidelines, and allow for use of covert activities in
accordance with the provisions of Title 19 USC. Customs requires
additional funding to conduct additional special operations. During
fiscal year 1997, the Office of Internal Affairs conducted 5 undercover
operations. These operations cost approximately $425,000, and resulted
in 20 arrests, including 5 Customs employees; in addition, 3 Customs
employees resigned in lieu of prosecution.
Polygraph Examinations.--Upon OPM approval, pre-employment
polygraph examinations will be given to all applicants for criminal
investigator positions. This action will reduce the potential of hiring
candidates at risk for integrity problems. Polygraphs are presently
used as an aid in the investigation of possible criminal activity by
employees. During fiscal year 1997, 18 polygraph examinations were used
in these investigations: 3 revealed no deception; 10 indicated
deception, which resulted in 2 admissions of guilt; 2 were
inconclusive; and 3 employees exercised their right to decline
participation.
Quality Recruitment Initiative.--Corruption vulnerabilities in the
recruitment and hiring process for law enforcement occupations will
also be addressed through a revised screening process. This process
will consist of a series of ``hurdles,'' including automated
prescreening, a test of reasoning skills, suitability assessment tests,
and structured interviews. The automated prescreening process will
allow use of a touch-tone telephone to answer questions concerning OPM
minimum qualifications and general suitability requirements, such as
previous or current drug use.
Electronic Fingerprint Technology.--The FBI processes fingerprint
checks as a required part of the background investigations performed on
all applicants for Customs positions. Background investigations reduce
the potential of hiring at risk candidates, thereby improving the
integrity of the Customs work force. The FBI has implemented an
automated system and expects all Federal agencies to do likewise.
Electronic transmission and processing is more efficient and less
costly than the use of manual fingerprint cards.
Investigative Support Equipment.--Technical surveillance equipment,
communications equipment, forensic equipment and similar items are
essential to the successful conduct of additional criminal
investigations of Customs employees.
base funding and programs
Question. In your fiscal year 1999 request you continued base
funding for the Softwood lumber, child pornography investigations, and
Project Alert, please list the amount of funding each program will
receive as part of your fiscal year 1999 budget. Please elaborate on
the Customs' money laundering coordination center, which is to be in
operation in 1998, where it is located, and its purpose.
Answer. In addition to standard trade compliance and inspection
operations, the President's fiscal year 1999 Budget requests continued
base funding for these items as indicated below:
Enforcement of the Softwood Lumber Agreement............ $2,000,000
Child Pornography Investigations........................ 75,000
Project Alert........................................... 200,000
--------------------------------------------------------
____________________________________________________
Total............................................. 2,275,000
The Money Laundering Coordination Center (MLCC) was created in 1996
for the purpose of supporting money laundering investigations within
the Office of Investigations (OI). The MLCC, which is located at the
Financial Crimes Enforcement Network (FinCEN), serves as the
centralized clearinghouse for both domestic and international money
laundering pickup operations within OI. All money laundering pickup
information collected by the MLCC is collated and stored in the MLCC
data base for the purpose of identifying relationships, methods, and
trends that exist between past, current, and future money laundering
investigations.
money laundering coordination center
Question. How will the Money Laundering coordination center work or
interact with FinCEN?
Answer. The MLCC will work with FinCEN to utilize its resources.
FinCEN's Suspicious Activity Reports (SAR's) and artificial
intelligence will be utilized to identify money laundering trends that
the Office of Investigations field offices are encountering and provide
real time intelligence to the field.
base funding level
Question. Is your base fully funded?
Answer. The Custom's Service fiscal year 1999 budget fully funds
the necessary cost adjustments for continuing the fiscal year 1998
enacted level of service and the corresponding number of staff years.
In the passenger environment, this also includes added full time
equivalent (FTE) positions to address statutory requirements for
keeping existing lanes open longer and opening newly required crossing
points.
Question. How many FTE positions are unfilled?
Answer. Based on the ``Explanation of fiscal year 1998 Increases
and Decreases'' portrayed in the budget as the enacted starting point
for building the fiscal year 1999 request, all FTE positions for fiscal
year 1999 are funded. Customs' budgeted staffing is expressed in a
staff year measurement generally referred to as full time equivalent
(FTE) positions. Each budget request, including the current proposal,
attempts to identify as accurately as possible the number of FTE that
can be ``realized'' or achieved with the level of funding being
requested. ``Realized'' FTE reflect the conversion into staff years of
the aggregate number of positions encumbered for the full year, or
shorter periods of time, and other factors such as the number of part
time positions. The actual number of positions encumbered at any given
point during the year will vary, based on attrition and accession
patterns. As a fiscal year progresses, hiring scenarios are fine-tuned
so that total realized FTE do not exceed the available budget authority
to pay for their labor and support costs, nor the number of FTE that
were estimated in the budget. The full number of FTE for a fiscal year
is not achieved or known until the fiscal year is completed.
Contingencies, such as rent costs for new border crossings in fiscal
year 1997, can result in fewer FTE being realized than were proposed.
There is no articulation of authorized versus unfilled positions in
the budget. However, each organization uses its own position
authorization process as an internal management tool that aims to
achieve the FTE usage proposed in the budget. Over a multi-year period,
the number of actual or realized FTE is a good approximation of the
average positions that were authorized over the course of the year. The
number of FTE in the Salaries and Expenses (S&E) appropriation actually
realized in fiscal year 1997 was 16,722; the number planned for fiscal
year 1998 is 16,655; and the fiscal year 1999 request is 16,766 FTE.
Question. What would it take to fill those positions?
Answer. Although there are no unfilled positions presented in the
fiscal year 1999 budget, the cost of realizing any more FTE, by means
of establishing new positions, varies greatly with the type of position
being funded. Moreover, all of the support costs (e.g., rent,
equipment, training, supplies) are a necessary component of new
position costs. By way of example, the cost of filling new positions to
achieve a higher FTE realization than proposed in the budget would have
the same initial cost range as the 111 FTE that are proposed in the
budget. For all of the FTE being proposed, the assumption is that the
hiring stream would result in an average start date of April 1, meaning
that twice as many positions would be filled as FTE realized (i.e., 221
positions are being proposed to realize 111 FTE). In fiscal year 2000,
the budget will have to reflect the cost of the average one-half year
additional compensation cost for each of these positions, although
there will also be a substantial downward adjustment for non-recurring
costs such as vehicles, investigative and communications equipment,
training, etc.
Question. Is the amount requested to maintain current levels
accurate? Please provide a breakout for this funding.
Answer. The maintaining current levels (MCL's) amounts are
accurate. All of these amounts, except for the rent and security
figures, are generated centrally by Treasury using standardized factors
and methodology, based on the economic policy assumptions contained in
the President's budget.
Customs is requesting a total of $60.6 million to meet its
increasing obligations due to pay raises, benefits, agency
contributions to the civil service retirement funds, and other expected
increases in the cost of operations.
Of the total amount, the budget request provides for a $32.2
million increase to pay for the fiscal year 1999 pay raise for three-
quarters of a year and annualize the fiscal year 1998 pay raise. This
includes $24.2 million requested for the 3.1 percent increase in the
fiscal year 1999 pay raise and $8.0 million requested for the
annualization of the fiscal year 1998 2.8 percent pay raise.
Customs is also requesting an increase of $7.8 million for benefits
to pay the regular increases in the cost of retirement and health
benefits, permanent changes of station, and worker's compensation.
Finally, Customs is requesting $10.2 million that is needed to fund
other expected non-pay increases in the cost of Customs operations.
Customs is requesting $6.5 million for additional General Services
Administration (GSA) rent charges for new border inspection facilities,
and $3.8 million for additional GSA physical security costs at Customs
facilities related to efforts to reduce the threat of violence at
Federal properties. GSA has provided an agency-by-agency breakdown of
these costs.
air/marine operation and maintenance
Question. Is there level staffing of the Air/Marine branches across
the Southern Tier of the United States?
Answer. Customs attempts to deploy staff in such a way to best
address the smuggling threat. Response flexibility may be limited by
the high cost of relocating enforcement personnel. Within that context,
the following statistics are relevant.
--Currently, the Air Interdiction Division has 718 personnel onboard.
--Depending on the level of need, air crews from all the Aviation
Branches are deployed from the Southern Tier to foreign
assignments in the transit and source zones.
--In February 1998, the Table of Organization (TO) for the Air
Interdiction Division was changed to address the high-threat
areas along the Southern Tier.
--The Air Interdiction Division is currently recruiting and hiring
new personnel to fill existing vacancies in response to the
current threat.
For the Marine Enforcement Program, the following statistics are
relevant.
--Currently, there are 70 Marine Enforcement Officer positions in the
Customs Marine Enforcement Program, which are augmented by 80
Special Agents. The Special Agents are not all assigned to
marine enforcement on a full-time basis.
--Beginning in 1995, there was a marked increase in the amount of
drugs seized along the Southern tier by the marine enforcement
personnel.
--Through Operation Gateway, staffing for the Marine Enforcement
Program in Puerto Rico increased by 23 positions.
--Customs is in the process of recruiting and hiring personnel to
fill the funded vacancies in the Marine Enforcement Program
along the Southern Tier.
Question. How does Customs determine the location of assets and
staffing along the Southern tier of the United States?
Answer. Customs determines its staffing and asset distribution
based on several factors including workload (both in terms of amount
and type of workload (e.g., passenger, cars, trucks, rail, etc.)),
smuggling threat, intelligence, and investigative workload.
These factors are used to determine the distribution of Customs
available resources to a given port, the job skills those individuals
need, and the equipment and information required. Asset distribution is
driven by the level of staffing and the nature of the specific threat
encountered at a given location.
status of acquisition of customs p-3 aew aircraft
Question. What is the current status of the retrofitting of the P-3
AEW aircraft and the anticipated delivery date to Customs?
Answer. Customs completed negotiations with the prime contractor,
Lockheed Martin Aeronautical Systems (LMAS), in September 1997, and the
contract was signed in late October. The Customs Service expects
delivery of the first P-3 AEW aircraft in August 1999 and the second in
March 2000.
modernization of customs p-3 aew aircraft
Question. Is there a need to modernize the first four P-3 AEW
aircraft so that their systems are standardized with those P-3 AEW
anticipated for delivery over the next two years?
Answer. The Customs Aviation Program has been reviewing the
modernization of its existing P-3 AEW fleet for some time. Currently,
all four P-3 AEW's are configured with the APS-138 radar. This system
was originally used in the Navy's E-2C Advanced Radar Processing System
(ARPS) aircraft. The Navy is updating all E-2C's to an APS-145 Group II
configuration. The APS-138 is no longer in production and the Navy's
intermediate level support for this system will be withdrawn by the
year 2000. Since Customs P-3 fleet represents a relatively small part
of the overall P-3 population, spare parts (to the extent available
after 2000) will likely become more costly as economies of scale are
lost to the manufacturers. This situation is likely to create delays in
the availability of the aircraft for counterdrug missions.
Customs is waiting to take delivery of two additional P-3 AEW's
over the next 2 years. Both of these aircraft will be configured with
the newer APS-145 radar. The cost to retrofit the four existing P-3
AEW's depends on the configuration, but it is estimated at
approximately $40-50 million in total.
Question. What would the cost be to standardize the equipment of
the first four P-3's in the Customs' inventory, and what would it
entail to modernize these aircraft?
Answer. The procurement cost of the new APS-145 radar is
approximately $10 million. Current Customs P-3 AEW aircraft are
configured with a compatible antenna and dome. Integration of the APS-
145 radar would depend on the computer and display that is chosen. An
E-2C suite with the new mission computer and display package would cost
approximately $15 million installed. We estimate that the APS-145
systems can be built up from the current APS-138 systems on the four
existing P-3 AEW's for $40-50 million in total.
The upgrading of Customs current P-3 AEW's to the newer AEW
configuration would require the following:
--The replacement of numerous circuit boxes in the radar suite.
--Installation of a variable speed hydraulic motor and rotary
coupler.
--Installation of a new mission computer, monitors and associated
ducting hardware.
--Installation of a second satellite communication (SATCOM) radio.
Question. Would standardization require the aircraft to be out of
service for any length of time?
Answer. It is estimated that modernizing the current P-3 AEW's from
the current APS-138 to the APS-145 configuration in the newer P-3 AEW's
will take approximately 3 to 4 months for each aircraft during which
time they will be out of service.
Question. What benefits and cost savings would Customs have as a
result of modernizing the four aircraft?
Answer. The current Customs P-3 AEW's use the APS-138 radar system.
The U.S. Navy is in the process of modifying their E-2C aircraft to the
APS-145 radar system. This program will limit the supportability for
the APS-138 system by the year 2000 because many parts to the APS-138
may not be available after that date, creating delays in the
availability of the aircraft for counterdrug missions.
It is difficult to estimate the cost savings of modernizing the P-3
AEW fleet. However, it is believed that the savings would be
significant because support for maintenance and supply to one radar
system would be much less expensive than for two different systems.
Lastly, the APS-145 radar system offers improved over land search
capabilities. Also, the system is capable of processing a significantly
larger number of targets without overloading.
resources dedicated to inspection
Question. What percentage of resources and manpower does Customs
devote to inbound inspection and outbound inspection, respectively?
Answer. The Customs Service has 7,814 employees devoted to
inspections, of which 353, or 5 percent, are dedicated to outbound.
government results and performance act
Question. Does each account and program activity of Customs have
performance measures associated with it?
Answer. Both of our major budget accounts (S&E and O&M) have
performance measures associated with them. They account for over 99
percent of our appropriations. The other small accounts involve
functions which are already captured in the S&E performance measures.
Question. Does your plan include performance measures for which
reliable data are not likely to be available by March 2000?
Answer. We do not anticipate any difficulties at this time, as long
as our recently developed narcotics and money laundering outcome
enforcement measures are acceptable to all external stakeholders (e.g.,
authorizing and appropriating committees, GAO, OMB, and the public) and
the methodology for providing the data is acceptable. Initial feedback
has been positive, but more consultation and development is needed.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. The Customs Service has the technological capability to
provide all of its measurement data on a regular basis, except for its
enforcement outcome measures, e.g., the narcotics and money laundering
outcome measures. Customs is actively working to develop methodologies
to capture data for these measures (drug smuggling organization
transportation costs and the cost for criminal organizations to launder
money) and will provide these figures when this development is
complete. The normal enforcement output data associated with narcotics,
money laundering, and other areas, e.g. seizures, arrests, indictments,
etc. will be available on a regular basis.
Question. Through the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. The Customs Service during its reorganization review
aligned its organization along core process and mission support process
lines. In addition, it created two enforcement strategies--narcotics
and money laundering. The strategies were subsequently combined with
several smaller ones under an Enforcement Systems umbrella. This
process/system approach ensures that roles and responsibilities are
defined to avoid duplication and overlap.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 request?
Answer. There are no duplicative programs in our fiscal year 1999
funding request.
______
U.S. Secret Service
2000 presidential campaign
I note that in fiscal year 1999 the Service will begin to gear up
for the 2000 elections. Requested is $7.7 million for this preparation
year, but I am told that this is the tip of the iceberg.
Question. Why is preparation for presidential candidate protection
so expensive.
Answer. Every four years the Secret Service provides protection for
major presidential and vice-presidential candidates, nominees and their
spouses. Although there is no candidate/nominee protection the year
before the campaign begins, there are significant costs associated with
preparing for the campaign.
In the year before the campaign, training on campaign procedures
must be provided to Service and other Treasury Law Enforcement Bureaus'
agents and, due to procurement lead times, equipment for use during the
campaign must be leased/purchased.
Question. Why can't equipment purchased for the 1996 campaign be
used again in 2000?
Answer. New equipment is purchased for each presidential campaign.
Storage of equipment between campaigns is not practical because it
would require storage space and become outdated. Therefore, upon the
conclusion of a campaign, residual useful equipment and supplies are
used to replace old outdated equipment at field offices and protective
divisions throughout the country.
Question. Why can't the Secret Service agents use the radios they
have now?
Answer. When possible, Secret Service agents do use their issued
radios when on candidate/nominee protection assignments. However,
Uniformed Division personnel and other support personnel are not issued
radios. When on campaign assignments, these personnel must be
temporarily issued this equipment. The Service does not have enough
radios in inventory for use by all of the personnel involved in
candidate/nominee protection. Once the campaign is over, the campaign
radios will become part of the Service's radio inventory and used to
replace old obsolete equipment.
Question. Why can't the officers from the other Treasury bureaus
use their own radios?
Answer. When possible, agents from other Treasury bureaus will use
their issued radios when on candidate/nominee assignments. However, not
all of these agents are allowed to bring their issued radio with them
on candidate/nominee assignments due to their bureau's own operational
needs. Also, some of the other bureaus' radios are not frequency
compatible, and cannot be retro fitted for communications within the
Secret Service radio infrastructure.
international cooperative administrative support services (icass)
funding
A transfer of $602,000 from the fiscal year 1998 Department of
State budget has been provided to the Secret Service to use in support
of International Cooperative Administrative Support Services (ICASS).
That function has been absorbed in the salaries and expenses budget.
Question. What is the fiscal year 1999 request for that purpose?
Answer. The base level of funding in the fiscal year 1999 budget
for use in support of International Cooperative Administrative Support
Services, including $602,000 that will remain as part of the base
funding, is $1.250 million.
the closing of pennsylvania avenue
On February 11, 1998 an editorial appeared in The Hill, one of the
two newspapers which specifically cover Capitol Hill and read by
members and staff alike. That editorial called for the reopening of
Pennsylvania Avenue, in part because presidents should live ``. . .
close to the people who give them their strength.'' Although the
decision to close that major thoroughfare was made, in part, by the
previous Director, we understand that Director Merletti concurs with
this decision and would be opposed to reopening this street.
Question. How do you respond to critics of this decision?
Answer. The re-opening of Pennsylvania Avenue has continued to be
an issue since its closure on May 20, 1995. As in the past, the Service
will cooperate with any inquiry and continue to seek alternative
approaches to mitigate any issue viewed as a detrimental effect of the
closure.
The Secret Service remains opposed to reopening Pennsylvania Avenue
to vehicular traffic. The risk of an attack directed at the White House
Complex has not lessened, but rather seems greater with the level and
nature of terrorist activity worldwide.
The closure of Pennsylvania Avenue to vehicular traffic eliminates
the opportunity for an individual or terrorist group to interject an
explosive laden vehicle into the secured perimeters of the White House.
Secret Service security decisions for keeping the avenue closed and
protecting the White House are based on empirical data concerning White
House vulnerabilities to such an attack. These decisions are reinforced
by the unique and unparalleled symbolic value to terrorists for
targeting and successfully carrying out an attack on the White House.
That reality must be recognized, particularly in view of the continuing
acts of terrorism and related activities in the United States and
abroad.
cloning of cellular telephones
Question. In light of the recent passage of House legislation
regarding the cloning of cellular telephones and other electronic
crimes, what initiatives, if any, is the Secret Service considering to
combat these emerging criminal activities?
Answer. When the recently passed Wireless Protection Act was being
drafted, the Secret Service recommended the removal of ``intent to
defraud'' from the language in 18 U.S.C. 1029 only as it pertains to
the possession and use of the hardware and software configured to alter
telecommunications instruments. This will enable the enforcement of
section 1029 to stop the manufacture and distribution of this fraud
equipment, for which there is no legitimate purpose.
The Secret Service has aggressively investigated fraudulent
activity on U.S. telecommunications systems since the passing of the
Omnibus Crime Control Act of 1984. In 1994, the addition of
telecommunication-specific language to 18 U.S.C. 1029 enhanced the
ability of the Secret Service and federal prosecutors to address the
type of criminal activity associated with telecommunication crimes.
In anticipation of final passage of legislation that would remove
the ``intent to defraud'' element from Title 18 U.S.C. 1029 as it
pertains to the possession of cloning equipment, a nationwide operation
has been formulated in cooperation with the FCC and the Department of
Justice Computer Crime Section to locate, identify and potentially
arrest individuals and companies that continue to market such items.
protective travel funding shortfall
Question. Based upon the protective travel shortfalls in your
budget, what specific recommendations are the Secret Service and the
Treasury Department considering to address this problem for the long
term?
Answer. The Department and the Secret Service are reviewing this
situation carefully to first determine exactly what is causing the
Service's need for increased protective travel funding, and second to
identify ways to address it.
armored limousine program
Question. The Committee has been supportive of the Secret Service's
armored limousine program since its inception. With the significant
investments made to date, is the fiscal year 1999 request adequate to
complete this project?
Answer. No, funding received to date and anticipated through fiscal
year 1999 for this project will not be sufficient to complete this
program.
missing and exploited children
Question. The Service did not request funding for the Missing and
Exploited Children initiative. Can you explain why there was no
request?
Answer. The Secret Service has received funding for this initiative
since fiscal year 1995. For fiscal year 1999 however, budgetary
constraints required highest priority be given to the Service's base
mission program.
Question. Would you please provide the Committee with some details
on the geographic locations where assistance has been provided by the
Secret Service to state and local jurisdictions, as well as some
details describing the success of this program to date?
Answer. The following is a geographic list of polygraph
examinations conducted during the last two fiscal years in support of
the Missing and Exploited Children initiative: Arizona (6), California
(8), Delaware (1), Illinois (3), Maine (1), Michigan (5), Missouri (5),
New Hampshire (2), Texas (7), and Vermont (1).
A sampling of some of our polygraph successes include:
Houston, Texas.--In June 1997, the Houston Police Department
requested Secret Service polygraph assistance in a child abuse
investigation. The previous April a nine-month-old child was admitted
to a local hospital with serious injuries of a suspicious origin. The
stepmother of the child was suspected of causing the injuries but
denied any involvement when interviewed by local police officials. On
August 13, 1997, the stepmother submitted to a polygraph examination at
the Service's Houston Field Office. The results of the polygraph
indicated that the woman was deceptive to the relevant questions. She
subsequently confessed to slamming the child repeatedly against the
floor in an attempt to keep the child quiet, causing all of the child's
injuries. Houston Police immediately arrested her.
Oceanside, California.--In February 1996, the Oceanside, CA Police
Department requested Secret Service polygraph assistance in the
investigation of sexual assault on four juvenile female runaways
residing at a State licensed juvenile detention center in San Diego.
The girls, ages twelve to sixteen years, alleged that they were coerced
to engage in various sexual acts by one of the Center's counselors, a
twenty-eight year old male.
The counselor denied the allegations to Oceanside Police and
counter-alleged that the girls were making false accusations because of
his strict demeanor at the Center. He was administered a Secret Service
polygraph examination, which indicated deception on the relevant
questions concerning sexual abuse. During the ensuing interrogation,
the counselor confessed to engaging in various degrees of sexual
assault, including sodomy and rape, against the complaining victims. He
was removed from the Casa de Amparo Juvenile Center pending criminal
prosecution.
Phoenix, Arizona.--In January 1996, local authorities near Phoenix
requested that the Secret Service conduct a polygraph examination as
part of an investigation into the suspected sexual assault of an eight-
year-old girl by her stepfather. The suspect denied the allegation and
agreed to submit to a polygraph examination in the Service's Phoenix
Field Office to verify his denial. The examination disclosed the
suspect to be deceptive to the relevant questions. During the ensuing
interrogation, he confessed to sexually molesting his stepdaughter as
well as another seven-year-old girl over a several year period. He was
arrested.
Sacaton, Arizona.--On November 1995, local authorities in Sacaton,
Arizona requested Secret Service polygraph assistance as part of an
investigation of an alleged sexual assault of a 14-year-old girl by her
natural father. The girl alleged that her father had touched her
private parts in a sexual manner. The father and mother are estranged,
but he had custody of three children. The man denied ever touching his
daughter in a sexual manner. He stated that he believed his daughter
fabricated the allegation as an excuse to move to her mother's home.
The polygraph examination revealed no signs of deception and the
criminal investigation was subsequently terminated.
A sampling of the Service's Forensic Services Division's efforts in
audio/video tape enhancements and voiceprint analysis includes:
In February 1996, it received a request from the Port Orange Police
Department in Jacksonville, Florida to conduct audio enhancement of a
taped confession of a suspect admitting to molesting his 10-year-old
granddaughter.
In July 1996, it received a request from the Chicago Police
Department to conduct a voice comparison of several suspected child
abductors and an unknown caller who claimed to be a Las Vegas Police
Officer in possession of the missing victim.
In December 1996, it received a request from the Omaha, Nebraska
Police Department to conduct audio and video enhancement of a tape of a
female soliciting a male to sexually assault her children in order to
educate them about sexuality.
In June 1997, it received a request from the National Center for
Missing and Exploited Children to conduct a video enhancement to
determine if a male captured in a video molesting a young girl was
wearing a mask or if special lighting was used to obscure his face.
treasury communications system
I understand that the Secret Service's communications system will
be shut down this Spring due to the current contractor's inability to
provide continued service.
Question. Is there adequate funding in the fiscal year 1998 budget
to start the transition to the Treasury Communications System (TCS)?
Answer. No. The funding in the fiscal year 1998 budget will be
adequate to cover the Service's financial obligations for participating
in the Treasury Communications System. The Service and the Department
of the Treasury are attempting to identify a means of covering the
shortfall using fiscal year 1998 funds. The Service's transition to TCS
began in fiscal year 1997 and will be completed in fiscal year 1998.
Question. Is the fiscal year 1999 budget submission adequate to
complete the transition?
Answer. The funding for TCS in fiscal year 1999 is adequate to
cover the Secret Service's financial requirements for this program. As
you know, $3.7 million for this program will be derived from super
surplus balances in the Treasury Forfeiture Fund as indicated in the
fiscal year 1999 budget submission.
government performance and results act of 1993
Agencies were required by the Government Performance and Results
Act of 1993 to submit their performance plans with the fiscal year 1999
budget request. The performance of agencies during fiscal year 1999 in
meeting their strategic plans will play a large role in the budget
decisions made in fiscal year 2000.
Question. Does each account and program activity at the Secret
Service have performance measures associated with it?
Answer. The Secret Service has taken the position that each core
program should have a set of performance measures. The core programs
include physical protection, uniformed security, protective
intelligence, and criminal investigations. Taken together, program
measures for these core programs cover more than 90 percent of the
Secret Service's positions and operating budget.
Question. Does your plan include performance measures for which
reliable data are not likely to be available until March 2000?
Answer. The current performance plan and performance report for the
Secret Service includes only well established performance measures that
have proven to be consistent, valid, and reliable. The Service has
resisted efforts to include untested measures. However, we are
continuously examining ways to refine our performance plan, performance
goals, and performance measures. In particular, we are in the process
of developing additional, more outcome oriented measures to estimate
the impact of Secret Service law enforcement efforts for inclusion in
the fiscal year 1998 performance report. Currently, a project is
underway which examines offenders arrested by the Secret Service for
financial crime violations. Baseline statistics are being collected to
determine the extent of their financial crime prior to their arrest.
Given this data, a follow up activity is planned to develop and
validate a statistical model to estimate the average annual losses for
different types of financial crimes, and the losses prevented due to
Secret Service intervention.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. The Secret Service is in a good position for measuring and
reporting performance measures throughout the organization. The
Service's performance measurement system has evolved over a long period
of time using a multi-dimensional data base model. This is important
because the information from the performance management system can be
structured as needed to satisfy information needs at different levels
of the organization. Operational, functional, and strategic decisions
are supported by altering the dimensions of the data base in ways that
tailor the information to specific decisions.
Further, the primary consideration for determining the value of
performance measures was whether they had utility for internal
organizational decision making. The impact of this approach is that the
measures used to satisfy the Government Performance and Results Act
reporting requirement are also used for internal management purposes
such as individual performance evaluations, assessment of office
productivity, allocation of resources, determination of career
development needs, and evaluation of program effectiveness.
At present, a new online component to the performance management
system is being developed and implemented to bring the contents of the
multi-dimensional data base directly to the decisionmakers workstation,
rather than on paper. This component allows the decisionmaker to easily
select the specific information needed, both in table and graphic form,
and apply basic analytical tools.
Question. Throughout the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. A review of the Secret Service's core processes found that
there were no overlapping functions or program duplications. The Secret
Service is organized along functional lines, with specific
responsibilities delineated by program.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 budget?
Answer. There are no overlapping core programs within the Secret
Service. Therefore, funding duplicative programs is not an issue.
Question. What do you believe will be the most difficult
performance goal for the Secret Service to reach in fiscal year 1999.
Answer. Due to an internal realignment of resources the Service's
most difficult challenge will be to achieve performance goals for
criminal investigations. With increased emphasis being placed on
current and new protection responsibilities, the financial crime
performance goals for fiscal year 1998 and fiscal year 1999 probably
will be the most difficult to achieve.
Question. Have you redirected resources to that particular goal?
Answer. Increased demands to provide support to protective details
have resulted in resources being redirected from the investigative
mission, and this could result in a difficulty in reaching
investigative performance goals. This redirection of resources, while
necessary, may limit the Service's effectiveness and its ability to
address the burgeoning areas of computer-generated counterfeiting and
other financial crimes.
______
Federal Law Enforcement Training Center
rural drug training
Question. I fully supported funding for the rural drug training
program last year, and I am glad to note that this program will
continue under your budget proposal. Rural police officers face so much
more drug activity now and they need all the training they can get to
be able to handle it. For the record, can you explain a bit more about
this program?
Answer. In an era where State and local law enforcement is
suffering from diminishing resources and additional responsibilities,
the FLETC is focusing its limited resources on reaching the largest
number of customers in the most cost-effective manner. Two years ago,
following an extensive research study, the FLETC determined that 91
percent of the State and local law enforcement agencies in this country
have fewer than 50 officers. To meet the needs of these small town and
rural agencies which comprise the vast majority of the customers, the
FLETC created the Small Town and Rural (STAR) training series. The STAR
series is currently comprised of the following programs: Airborne
Counterdrug Operations Training, Advanced Airborne Counterdrug
Operations Training, Community Policing Train-the Trainer, Drug
Enforcement Train-the-Trainer, First Response Training, Gangs in Indian
Country, Hate and Bias Crimes Train-the-Trainer, and Rural Crime and
Drug Enforcement Task Force Train-the-Trainer.
Each of the STAR programs is directed toward either managers or
trainer/facilitators who can return to their jurisdictions with all the
materials necessary to replicate the training and techniques in their
agencies and surrounding jurisdictions. This approach creates a
multiplier effect which will expand the effectiveness of criminal
investigations throughout the United States. This multiplier effect is
accomplished with a funding investment that is a fraction of the cost
that would be necessary if each individual benefited by this training
initiative were to be trained directly. In fact, the second level
training will permit hundreds of Federal, State, and local law
enforcement agencies to benefit at little or no cost.
The FLETC has a two-year schedule to deliver the STAR series
programs to law enforcement officers. The target audience is small town
and rural law enforcement officers (including tribal police) who
typically lack training in these areas. Participants in STAR series
Train-the-Trainer programs receive serially numbered instructor
graduation certificates. Those who commit to delivering training to
small town and rural agencies are then eligible to become FLETC-
certified STAR instructors.
This process creates a multiplier effect which provides great
benefit for a relatively small fiscal commitment. For instance, if
training were provided during the first year for 30 students in 5
delivers of each of the 4 STAR series Train-the-Trainer programs, 600
training facilitators potentially would be prepared to share that
training in their geographical areas. If each of those facilitators
subsequently provided training for a class of 30, then 18,000 officers
throughout the United States would benefit from the funded training.
construction
Question. You have requested $13 million to construct two new
facilities in Glynco--a classroom building and a 233-bed dormitory. If
funded, when would these building be completed?
Answer. The classroom building should be completed in July 2000 and
the dormitory in March 2000.
charleston training center
Question. As you know, the Border Patrol is currently training most
of their new employees at a temporary facility in Charleston, South
Carolina--although some do still get their training at Glynco, I
understand. What is the current status of plans to close down the
Charleston site? Is there a specific closure date?
Answer. The current plan is to close Charleston as soon as the
FLETC can accommodate the total Border Patrol training workload, which
includes both basic and advanced training. While no specific closure
date has been agreed upon, the FLETC plans to conduct all of the Border
Patrol basic training requirements at Glynco by mid-fiscal year 2000.
This target is admittedly very ambitious and presumes that fiscal
resources are forthcoming and that no delays are experienced with
construction schedules.
Question. What happens if the Charleston facility doesn't close.
Will there still be a need for new construction projects requested in
your fiscal year 1999 budget?
Answer. The facilities being constructed are a part of the
facilities Master Plan, which is designed to assure quality law
enforcement training in a consolidated environment. Given the current
training needs and the future anticipated growth, the facilities being
constructed at Glynco will be fully utilized to meet future demands.
international law enforcement academy
Question. Funding has been requested both in the FLETC budget and
in the Departmental Offices budget for International Law Enforcement
Academy (ILEA) operations. Exactly what would these five new FLETC
staff be doing? Will they be stationed in Georgia or at ILEA South?
Answer. The new staff will be coordinating logistics and
administrative support for ILEA South from the United States point of
central management. They will also provide the same kind of support
``in country'' when programs are in session. Secondarily, the same
staff will provide support for the FLETC's role in ILEA Budapest. It is
also anticipated that this support will extend to ILEA Bangkok and any
other ILEA's that come on line. The staff will be stationed in Georgia,
and travel to ILEA South during sessions.
bureau of indian affairs training
Question. I am told that the Bureau of Indian Affairs expects a
significant increase in their training needs between now and the year
2002. They are currently training exclusively at Artesia, New Mexico.
What steps are you taking to make sure that there are sufficient
facilities in Artesia to accommodate this increase?
Answer. The Bureau of Indian Affairs (BIA) has submitted training
projections which significantly increase the amount of training at
Artesia during fiscal years 1999 through 2002. In fiscal year 1999, the
increase will be about 4,000 student-weeks; and in each of fiscal years
2000, 2001, and 2002, the increase is about 6,000 student-weeks. In
addition, the advanced training projections will increase about 1,000
student-weeks each year.
To accommodate the increased training projections from the BIA and
other agencies, the FLETC is continuing to construct under Master Plan
projects which are designed to expand Artesia's capability to address
the needs of its customers. Currently, a 76-room dormitory is under
construction, with completion scheduled for early 1999. In addition, a
Driver Training Range project has been designed and scheduled to begin
construction during mid-1998, with completion scheduled for mid-1999.
Other funded projects now in design, with tentative completion dates in
late 1999 or early 2000, are: Physical Training Building expansion,
Classroom/Practical Exercise Laboratory Building, Office Building, and
a Security Building.
In addition to the above, the FLETC has identified other facilities
required to conduct the increased training. These additional facilities
requirements are: 233-room dormitory, two firearms ranges, an
ammunition bunker, and a firearms training office building.
It is anticipated that the BIA basic training projections can be
accommodated with existing, current and planned construction projects.
The BIA advanced training projections should also be accommodated, but
will be considered along with the advanced training projections of
FLETC's other agency customers.
Question. The justification for your budget request includes
information on the savings resulting from the consolidation of Federal
law enforcement training--you state that this cost savings/avoidance is
estimated to be $160 million annually. However, the Administration is
requesting the deletion of continuing language contained in the Title
VI General Provisions, Section 616 in the fiscal year 1998 bill, which
prohibits Executive Branch agencies from buying, constructing, or
leasing facilities for Federal law enforcement training without the
advance approval of Congress. This just doesn't make sense to me. Can
you explain the rationale behind this request?
Answer. This provision is not needed as the Executive Branch has
the authority to control decision-making by agencies affecting the
construction of training facilities.
government performance and results act
Agencies were required by the Government Performance and Results
Act of 1993 to submit their performance plans with the fiscal year 1999
budget request. The performance of agencies during fiscal year 1999 in
meeting their strategic plans will play a large role in the budget
decisions made in fiscal year 2000.
Question. Does each account and program activity at the FLETC have
performance measures associated with it?
Answer. Yes. Both the Salaries and Expenses and the Acquisition,
Construction, Improvements, and Related Expenses accounts contain
performance measures which link to the applicable goals of the FLETC
Strategic Plan--fiscal years 1197-2002.
Question. Does your plan include performance measures for which
reliable data are not likely to be available until March 2000?
Answer. We currently have data for each of our performance
measures, however, some of our measures are being reevaluated and will
likely be revised.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. Yes. The majority of the data is captured through automated
systems.
Question. Throughout the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. None were identified, however, we are continuing to analyze
the performance plan.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 budget?
Answer. Not applicable.
Question. What do you believe will be the most difficult
performance goal for the FLETC to reach in fiscal year 1999? Have you
redirected resources to that particular goal?
Answer. Providing 100 percent of actual basic training requested
will be the most difficult goal to achieve. Over the last few years,
the FLETC has seen an unprecedented increase in its workload. There
were 23,329 student graduates representing 109,116 student-weeks of
training in fiscal year 1997. Based on the projections of our
participating agencies, this workload will grow to more than 140,000
student-weeks of training in by fiscal year 1998 and fiscal year 1999
and it is expected to remain at approximately the same level through
fiscal year 2002.
Question. In reviewing the fiscal year 1997 plan and actual
performance, the FLETC exceeded expectations in some areas, such as
customer satisfaction with service, and did not meet the plan in
others. Some of the goals, such as the number of student-weeks of
training, are not totally within the FLETC's control. They fiscal year
1999 plan has discontinued some of the fiscal year 1997 goals and in
some cases stated that a new measure is being developed. What lessons
have you learned and what changes are you planning?
Answer. It is extremely difficult to measure the FLETC's actual
impact, i.e., the impact the FLETC training has on officers of each of
the over 70 participating organizations. In a long standing effort to
provide the highest quality of service, the FLETC has for several years
maintained various program evaluation and feedback mechanisms to ensure
customer requirements are met. Many of these mechanisms have been based
on responses to agency training needs vs. the budgetary cycle. It has
been challenging to continue to manage responsiveness to agencies needs
while developing processes which essentially provided for the
collection of the same types of data either more or less frequently in
order to comply with GPRA. The FLETC is currently examining its entire
performance measurement process to ensure a clear linkage to the
strategic goals and objectives and to ensure the most appropriate and
reliable performance data is collected.
______
Financial Crimes Enforcement Network (FinCEN)
state and local law enforcement
Question. During fiscal year 1998 Congress provided funding for the
``Secure Outreach'' program which was to provide secure Internet
capabilities to Treasury's law enforcement bureaus, what's the status
of this program?
Answer. FinCEN has long been an advocate of developing a secure
network to enhance the ability of Treasury law enforcement personnel to
communicate sensitive case-related intelligence and to access financial
data base systems key to their investigations. FinCEN has been
allocated $1,000,000 of Crime Bill funds to develop this Secure
Outreach Network.
The program will provide on-line communication and information
sharing among all the Treasury bureaus. Based on secure Internet
access, the security of the system will feature state-of-the-art
capabilities in computer, communication, and encryption technology and
will be accredited by federal and private experts in the field.
Phase I: Requirements Analysis, system design and specifications,
acquisition of network components (circuit, hardware, software),
development and testing.
FinCEN has obligated $500,000 of the funds for this phase of the
project and has hired the SAIC Corporation to assist us. The effort
began in February 1998 with the process of establishing a Secure
Outreach working group. The Working Group, comprised of representatives
from FinCEN and all the Treasury law enforcement agencies, will address
the initial Network requirements with the contractor and follow-up on
all stages of development.
Phase II: System Deployment and Technical Support: This phase
entails linking approximately 300 Treasury law enforcement officials to
the Secure Outreach Network, updating the web content regularly, and
providing system and security administration support. FinCEN has
obligated $400,000 for this effort. FinCEN plans to allocate an
additional $100,000 to perform a study on how to make enhanced BSA data
available to Treasury law enforcement agencies via the Secure Outreach
Network.
Question. Could this program be expanded to include state and local
entities without compromising the Treasury's law enforcement bureaus?
Answer. It is too early to determine if and how the system could
benefit state and local entities which in some cases require
specialized information. However, based on our experience with the
Secure Outreach Network and the secure web site for foreign financial
intelligence units (FIU's), FinCEN and the National Association of
Attorneys General are currently discussing the possibility of
developing a separate secure web site to support state and local law
enforcement efforts. As the two systems are further defined, FinCEN
will be exploring ways in which the two could be linked together.
Question. During fiscal year 1998, FinCEN provided responses to
questions for the record indicating that FinCEN was anticipating the
initiation of a ``week-long course covering in-depth applications in
financial investigations'' offered to Gateway's State Coordinators,
what is the status of this program and what are the total resources
devoted to this effort?
Answer. Because FinCEN has never received funding in its base for
the Gateway program, it has been necessary to set priorities in order
to accommodate as many of its customers as possible. Thus, FinCEN is
delaying, in part, the development of a special intermediate training
program designed for experienced Gateway users, and instead is focusing
on ensuring all of its customers have the basic training required to
use the system. As a result, no resources have been devoted to this
effort. The need for this basic training continues to increase for two
reasons: turnover in positions held by state financial investigators
and an increase in the number of investigators who are requesting use
of the system.
In fiscal year 1997, 166 investigators or analysts from 33 states
were trained on the Gateway system. However, state officers and
analysts tend to be rotated from one job assignment to another every
two to three years, and when new people move into these positions,
FinCEN is called on to again provide training.
Second, states have been increasing the number of people within
their organizations who need to have access to Gateway. When the
program first began four years ago, FinCEN trained two persons per
state. Now that the system has proven its usefulness, some states have
25-30 users.
Question. The fiscal year 1997 and fiscal year 1998 Senate bills
included language which expressed the Committee's concern that there
were not sufficient resources devoted to assisting state and local law
enforcement to make use of FinCEN's resources. How has FinCEN responded
to the Committee's desire to see more resources devoted to state and
local law enforcement?
Answer. FinCEN has been very successful at leveraging its own
limited resources by encouraging and facilitating greater state and
local participation in attacking criminal proceeds. FinCEN staff have
also made a number of visits to state and local agencies explaining the
range of financial transaction data available and how it can be used to
support the financial aspects of criminal investigations.
In addition, FinCEN staff has provided basic Gateway training
classes and has worked with the states in keeping them up to date with
FinCEN capabilities. Since the inception of Gateway in 1993, almost 650
representatives of state and local law enforcement (including state
attorney general offices) have been trained on Gateway. In fiscal year
1997, 166 investigators or analysts from 33 states were trained on the
Gateway system. As a result, Gateway inquiries in fiscal year 1997 were
up 20 percent from fiscal year 1996. FinCEN has also been instrumental
in assisting several states in creating financial investigation units.
current issues
Question. During the last fiscal year, many new Financial
Intelligence Units (FIU's) were created. How are those newly created
FIU's assisting FinCEN in its work?
Answer. In the past five to ten years, governments have begun to
realize that addressing the complex issue of money laundering requires
people with unique and multiple skills--including financial analysts,
criminal investigators, regulators and computer scientists.
Increasingly, they have chosen to bring together these critical anti-
money laundering skills within analytical agencies that have become
known, over time, as financial intelligence units (FIU's)--counterparts
to FinCEN. Using information provided by banks and other sources, FIU's
use innovative analytical methods and tools to process this information
and increase its value before providing it to law enforcement and other
appropriate authorities.
In June 1995, FinCEN, in cooperation with its Belgian counterpart,
brought together a group of FIU's at the Palais d'Egmont-Arenberg in
Brussels. These FIU's agreed to meet regularly to find ways to
cooperate, especially in the areas of information exchange and the
sharing of expertise, and has now become known as the Egmont Group.
One of the Egmont Group's key achievements was to develop a
definition of what exactly constitutes an FIU and then, in June 1997,
to promulgate this definition in the Egmont Group's Statement of
Purpose. Having an FIU definition facilitates cooperation among units
at all levels by providing a common, baseline assumption about the
functions of the unit--that they are analytical intermediaries working
to support national anti-money laundering programs--and is potentially
the first step in creating a worldwide network of such units.
At the time the Statement of Purpose was adopted in 1997, 28
agencies participating in the Egmont Group met the FIU definition; just
two years before, only 14 units would have met the definition.
Currently, there are some twelve ``candidate'' FIU's that are being
studied by the Group to see whether they meet the Egmont definition. At
least half of these units became operational since January 1997. There
remain another two dozen jurisdictions throughout the world that are in
various stages of developing or establishing an FIU. With the
establishment of these units, there came a need to develop
relationships and find additional ways for the FIU's to interact.
FinCEN has taken the lead in this effort.
Since its creation, the Egmont Group has also developed a model
memorandum of understanding for the exchange of information and has
laid the groundwork for an FIU training program. Another extremely
significant accomplishment of the Egmont Group has been the creation of
a secure Internet web site. The Egmont Secure Web--developed primarily
by FinCEN--is intended to facilitate international cooperation and
foster increased international communications and mutual assistance in
combating financial crime among the FIU's of the Egmont Group.
It is hoped that the Egmont Secure Web specifically and the growing
informal network of FIU's known as the Egmont Group generally will play
an ever more critical role in the support of anti-money laundering
investigations. Just as FinCEN is able to assist federal, state, and
local law enforcement from various regions of the United States by
bringing disparate pieces of information and individual (but related)
investigations together, so FinCEN can reach out through the Egmont
Group to other FIU's to obtain information that might prove critical to
a U.S. federal, state, or local investigation.
In fact, FinCEN has been able to support a number of federal
investigations by gathering information from its FIU counterparts. This
is information that might only be obtained with difficulty or not at
all through other channels. As a participant in this worldwide
``network,'' FinCEN can likewise assist certain foreign jurisdictions
in providing them the critical anti-money laundering information they
need to investigate a case.
Question. There have been articles recently in the papers regarding
the advent of gambling over the Internet to locations where gambling is
permitted. How does this new trend of cybergambling affect FinCEN's
work?
Answer. Internet gaming, like Internet banking operations, provides
a unique and new challenge for law enforcement. Many of our traditional
investigative and regulatory authorities will be tested if this
industry begins to gain greater acceptance in the marketplace.
It is clear that FinCEN lacks the ability to require the adoption
of adequate safeguards on this new industry by reliance on domestic
laws and programs alone. Most of these businesses are located off-
shore, beyond our legal and regulatory reach.
FinCEN has been engaged in a dialogue with this new industry,
domestic and foreign casino regulators and law enforcement to encourage
the development of programs to deter and detect money laundering
transactions occurring over these new systems.
For example, last July, the Caribbean Financial Action Task Force,
known as CFATF, and FinCEN co-sponsored a two-day conference involving
senior government officials from the Caribbean and South America,
addressing the critical components of anti-money laundering programs
affecting casinos, including internet casinos. This conference provided
concrete, pragmatic measures that both the private and public sector
can take in order to discourage illicit uses of these operations.
A more specific meeting of the CFATF will be held this May at which
the threat of Internet gaming will be discussed and at which the CFATF
is expected to make recommendations for prospective consideration and
adoption by its members.
It should be noted that Internet gaming raises a host of law
enforcement and regulatory issues that are independent of our general
anti-money laundering concerns. These include consumer protection
issues, the right of states to prohibit or regulate the manner in which
their citizens can conduct gambling activities, and the ability of
state governments to investigate and license gaming operations in their
state.
While these areas overlap to some extent with our anti-money
laundering programs, our chief interest is in ensuring that internet
gaming operations--like those conducted at traditional casinos--are
subject to effective anti-money laundering controls such as accurate
and retrievable audits trails, rules requiring the identification of
customers, suspicious activity reporting, and the adoption of industry
programs to ensure compliance with applicable anti-money laundering
laws and regulations.
base funding
Question. Is your base fully funded?
Answer. The base is not fully funded to cover current operating
levels.
Question. How many FTE positions remain unfilled?
Answer. We are projecting 16 unfilled FTE in fiscal year 1998.
Question. What would it take to fill those positions?
Answer. It would require an additional $1,120,000.
Question. Is the amount requested to maintain current levels
accurate? Please provide a breakout of those funds.
Answer. The budget includes: Mandatory cost increases, $835,000;
and adjustment for contractor support to maintain the base, $330,000.
government results and performance act
Question. Does each account and program activity of FinCEN have
performance measures associated with it?
Answer. Yes, each program activity has measures.
Question. Does your plan include performance measures for which
reliable data are not likely to be available by March 2000?
Answer. Yes, we anticipate reliable data for all measures.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. Yes, we have the capability of measuring and reporting
program performance.
Question. Through the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. We did not detect any overlapping functions or program
duplications.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 request?
Answer. There were no duplicative programs.
______
Questions Submitted by Senator Shelby
Under Secretary for Law Enforcement
status of various studies
Question. Late last year, the President ordered the suspension of
certain semiautomatic firearms and announced that a study would be
conducted by the Treasury Department to determine whether the
importation of these weapons were consistent with the sporting purposes
test established under 18 U.S.C. Sec. 9259(d)(3). What is the current
status of this study? Will it be completed within the 120-day review
period undertaken by the Treasury Department?
Answer. We are very close to completing the review. We expect to
have the review completed shortly.
Question. I have significant concerns with the implications of this
study and, therefore have keen interest in knowing whether the Treasury
Department has already made any preliminary findings with regard to
this review. Has the Treasury Department made preliminary findings to
date?
Answer. The review is not yet complete. Given that fact, and the
need to ensure that all possible options are considered, it would be
inappropriate for me to comment. We look forward to sharing the
review's findings when it is completed.
Question. It is my understanding that a draft report on the use of
taggants in general explosives has been provided to the Main Treasury
by the Bureau of Alcohol, Tobacco and Firearms (ATF). What is the
status of this report? When is a final version expected to be
completed?
Answer. A draft of this report was submitted by Treasury to the
Committee on March 4, 1998. ATF will issue another progress report in
1998, and a final report, as mandated by law, within 30 days after
conclusion of the study.
Question. Does this draft report on the use of taggants in general
explosives include any fertilizer findings made pursuant to Treasury's
consultation with non-profit fertilizer research centers relating to
the regulation and use of fertilizer as a pre-explosive material?
Answer. Based upon the ATF Explosives Study Group's work to date,
and the report submitted by the International Fertilizer Development
Center, the Progress Report states that current information suggests
there is no current way to render ammonium nitrate inert and still have
it retain its properties as a fertilizer. However, there is ongoing
research in this area. Additional work also will continue on the ``Be
Aware for America'' program conducted by the Fertilizer Institute in
conjunction with ATF.
Question. A separate study to be conducted by a panel of five
experts appointed by the National Academy of Sciences was authorized on
black and smokeless powder. What is the status of this study?
Answer. The National Academy of Sciences has a study on black and
smokeless powders underway.
Question. Have any results of the study been provided to you?
Answer. During the week of March 2, 1998, National Academy of
Sciences held public meetings on black and smokeless powders. There are
no results as of this date.
Question. When do you expect the study to be completed?
Answer. The National Academy of Sciences expects that the study on
black and smokeless powders will be completed in September 1998.
Question. Would you please provide a copy of that report when it is
completed?
Answer. The National Academy of Sciences is writing and producing
the report. However, when they release the study, ATF would be pleased
to provide the Committee a copy.
Question. Is it true that the ATF plans a follow on fertilizer
study that may be conducted with the International Fertilizer
Development Center (IFDC) in Muscle Shoals, Alabama?
Answer. Yes. ATF is in the process of finalizing a second contract
with IFDC.
Question. If so, would ATF make any recommendation for including
plastic taggants in pre-explosive materials until such a follow-on
fertilizer study or any other pending studies were completed?
Answer. ATF does not currently expect to propose such
recommendations for including plastic taggants or any other taggants in
ammonium nitrate fertilizer until all follow-on pertinent studies are
completed.
______
Bureau of Alcohol, Tobacco and Firearms
atf reorganization
Question. With regard to the new reorganization in progress at ATF
that would place 1811's as the ultimate supervisors of field compliance
staffs, will these criminal enforcement agents be trained to be
sensitive to the needs of the gun industry, the gun collecting
community and others who must regularly interact with ATF for
compliance service needs?
Answer. ATF management is committed to ensuring that the special
agents in charge have a full understanding of these relationships and
associated issues. This would be a continuing area of focus, both
during our process of preparing for the reorganization and after
implementation.
In order to give the special agents in charge (and certain District
office staff members) an initial exposure to dealing with industry
members from a regulatory perspective, the District Directors are
coordinating briefing/training sessions. We have already conducted one
prototype briefing/training session for the special agents in charge
and their staffs in the northeastern part of the country. Four other
sessions are planned in the next two months to cover the special agents
in charge and staffs in the remaining parts of the country. Included in
these sessions are discussions of the regulatory role in dealing with
firearms industry members.
In May, we are holding a senior management conference in
Cincinnati. Included in the agenda for that conference are sessions on
program issues from a regulatory perspective.
As an on-the-job training initiative, the special agents in charge
would be expected to familiarize themselves with the industries through
visits to various industry members. The Special Agents in Charge would
also be responsible for maintaining liaison with industry
representatives and trade associations.
This reorganization is currently pending departmental and OMB
approval.
Question. When will the reorganization become effective, and to
what extent has it already been implemented?
Answer. The proposed implementation date for the field
reorganization is October 1, 1998. As with any major organizational
action, there will be long term implementation steps, such as
satisfying the space requirements of all offices. We are awaiting final
approval from the Department and OMB before commencing implementation.
Question. Please provide a copy of the ATF's reorganization efforts
showing a field office by field office breakdown and organizational
directory.
Answer. Please see Attachments.
[The information follows:]
------------------------------------------------------------------------
Special
Field divisions State(s) Field offices agents/
inspectors
------------------------------------------------------------------------
Atlanta Georgia Division.......... 10
Atlanta I (F/A 10
trafficking). 8
Atlanta II (Arson) 6
Atlanta III 9
(Achilles). 9
Atlanta IV (Gangs) 9
Macon............. 10
Savannah.......... 10
Southeast DO......
Atlanta AO........
------------
Total....... 81
============
Baltimore Delaware Division.......... 6
Maryland Baltimore I 7
(Arson). 5
Baltimore II 6
(HIDTA). 6
Baltimore III 10
(Achilles). 6
Baltimore IV 10
(HIDTA).
Hyattsville.......
Wilmington........
Baltimore AO......
------------
Total....... 56
============
Boston Connecticut Division.......... 11
Maine Boston I (Arson).. 8
Massachusetts Boston II 9
North New York (Achilles). 9
New Hampshire Boston IV......... 6
Rhode Island Burlington........ 9
Vermont New Haven/Hartford 7
Portland/Concord.. 3
Providence........ 5
Worcester/ 10
Springfield. 6
Buffalo........... 5
Albany............ 10
Syracuse.......... 13
Hartford AO....... 1
Boston AO......... 2
Bath POD.......... 7
Albany POD........ 2
Buffalo AO........
Syracuse POD......
------------
Total....... 123
============
Charlotte North Carolina Division.......... 8
South Carolina Charlotte I....... 8
Charlotte II...... 11
Charleston 9
(Achilles). 7
Columbia.......... 10
Fayetteville/ 8
Wilmington. 9
Greensboro........ 8
Raleigh........... 9
Greenville........ 4
Charlotte AO...... 1
Greensboro POD.... 3
Fayetteville POD..
Columbia POD......
------------
Total....... 95
============
Chicago Illinois Division.......... 13
Chicago I (OCDETF) 12
Chicago II (F/A 9
trafficking). 11
Chicago III....... 11
Chicago IV (Arson) 11
Oakbrook I........ 10
Oakbrook II....... 9
Oakbrook III 7
(Explosives). 8
Springfield....... 12
Fairview Heights.. 5
Midwest DO........ 10
Fairview Heights 2
POD.
Oakbrook POD......
Peoria POD........
------------
Total....... 130
============
Columbus Ohio Division.......... ...........
Indiana Cleveland I....... 10
Cleveland II...... 10
Cincinnati........ 9
Columbus.......... 8
Toledo............ 6
Youngstown........ 6
Fort Wayne........ 5
Indianapolis...... 10
Merrillville...... 11
Cincinnati AO..... 11
Cleveland AO...... 8
Columbus POD...... 2
Indianapolis POD.. 3
South Bend POD.... 2
------------
Total....... 101
============
Dallas North Texas Division.......... 10
Oklahoma Dallas II (Arson). 6
Dallas III (F/A 11
trafficking). 9
Dallas IV 8
(Achilles). 7
Fort Worth........ 10
Lubbock........... 9
Oklahoma City..... 7
Tulsa............. 8
Tyler............. 21
El Paso........... 1
Southwest DO...... 2
El Paso POD....... 3
Lubbock POD.......
Oklahoma City POD.
------------
Total....... 112
============
Detroit Michigan Division.......... 11
Detroit I......... 14
Detroit II (Arson) 11
Detroit IV........ 12
Detroit V 12
(Achilles). 11
Flint............. 14
Grand Rapids...... 11
Detroit AO........ 1
Flint POD......... 1
Grand Rapids POD.. 2
Kalamazoo POD.....
------------
Total....... 99
============
Houston South Texas Division.......... 8
Houston I......... 9
Houston II 9
(Achilles). 4
Houston III 4
(Arson). 8
Houston IV 12
(OCDETF). 6
Houston V......... 6
Austin............ 7
Beaumont.......... 11
Corpus Christi.... 11
McAllen........... 1
San Antonio....... 5
Houston AO........
Beaumont POD......
San Antonio AO....
------------
Total....... 101
============
Kansas City Iowa Division.......... 11
Kansas Kansas City II.... 9
Missouri Kansas City III 7
Nebraska (Arson). 9
Omaha............. 8
Des Moines........ 10
Wichita/Kansas 8
City I. 7
Springfield/Cape 8
Girardeau. 9
St. Louis I....... 10
St. Louis II...... 2
Kansas City AO.... 3
St. Louis AO......
Des Moines POD....
Omaha POD.........
------------
Total....... 101
============
Los Angeles South California Division.......... 9
Los Angeles I 12
(Metro). 13
Los Angeles II 8
(Achilles). 10
Los Angeles III 8
(Arson). 12
San Diego I....... 9
San Diego II...... 11
Santa Ana......... 13
Van Nuys.......... 2
Riverside......... 7
Los Angeles AO.... 2
San Diego POD.....
Santa Ana AO......
Van Nuys POD......
------------
Total....... 116
============
Louisville Kentucky Division.......... 13
West Virginia Louisville........ 9
Bowling Green..... 5
Charleston/ 9
Wheeling, WV. 7
Lexington/Ashland. 2
Bardstown POD..... 5
Frankfort AO...... 9
Louisville AO..... 1
Owensboro POD..... 3
Charleston POD.... 1
Falling Waters POD
------------
Total....... 64
============
Miami South Florida Division.......... 10
Puerto Rico Miami I........... 8
Miami II.......... 10
Miami IV 9
(Achilles). 9
Miami V........... 8
Fort Lauderdale... 8
West Palm Beach... 9
Puerto Rico....... 9
Miami AO.......... 8
Puerto Rico
Operations (RE).
------------
Total....... 88
============
Nashville Alabama Division.......... 12
Tennessee Birmingham/ 13
Huntsville. 7
Mobile............ 6
Montgomery........ 11
Nashville......... 9
Chattanooga....... 10
Knoxville......... 11
Memphis........... 6
Birmingham AO..... 2
Mobile POD........ 6
Nashville AO...... 1
Winchester POD....
------------
Total....... 94
============
New Orleans Arkansas Division.......... 7
Louisiana New Orleans II.... 10
Mississippi New Orleans III... 11
Baton Rouge....... 7
Little Rock....... 9
Shreveport........ 7
Gulfport.......... 5
Jackson/Oxford.... 7
Little Rock POD... 5
New Orleans AO.... 5
Shreveport POD.... 1
Jackson POD....... 1
------------
Total....... 75
============
New York New York (Metro) Division.......... 8
North New Jersey New York I........ 10
New York II....... 11
New York III 14
(Arson). 13
New York IV (F/A 10
trafficking). 13
New York V (HIDTA) 7
New Jersey II..... 10
New Jersey (Arson) 5
Fairfield AO...... 21
Melville POD...... 2
North Atlantic DO. 1
Melville POD......
White Plains POD..
------------
Total....... 125
============
Philadelphia Pennsylvania Division.......... 10
South New Jersey Philadelphia I (F/ 8
A trafficking). 8
Philadelphia II 8
(Arson). 7
Philadelphia III 6
(Achilles). 7
Pittsburgh I (F/A 5
trafficking). 7
Pittsburgh II 3
(Arson). 3
Camden/Atlantic 12
City. 8
Trenton........... 4
Harrisburg........
Reading...........
Kingston POD......
Lansdale AO.......
Pittsburgh AO.....
Trenton POD.......
------------
Total....... 96
============
Phoenix Arizona Division.......... 9
Colorado Phoenix I......... 9
New Mexico Phoenix II 9
Wyoming (Achilles). 8
Utah Tucson I.......... 6
Tucson II......... 11
Albuquerque....... 9
Denver I.......... 8
Denver II......... 7
Colorado Springs.. 5
Cheyenne.......... 7
Salt Lake City.... 4
Phoenix AO........ 2
Tucson POD........ 7
Denver AO......... 2
Albuquerque POD... 3
Salt Lake City POD
------------
Total....... 106
============
St. Paul Minnesota Division.......... 8
Montana St. Paul I........ 12
North Dakota Fargo/Sioux Falls. 8
South Dakota Billings/Helena... 7
Wisconsin Milwaukee......... 9
St. Paul AO....... 12
Helena POD........ ...........
Fargo/Sioux Falls. ...........
Milwaukee AO...... 9
------------
Total....... 65
============
San Francisco North California Division.......... 10
Nevada San Francisco I (F/ 8
A). 9
San Francisco II 9
(Arson). 9
Fresno/Bakersfield 12
Oakland (Achilles) 7
Sacramento........ 4
San Jose.......... 10
Reno.............. 5
Las Vegas......... 1
Fresno POD........ 2
Modesto POD....... 2
Napa POD.......... 13
Oakland POD....... 19
Sacramento AO..... 8
Western DO........ 5
San Jose AO....... 1
Santa Rosa POD....
Reno POD..........
------------
Total....... 134
============
Seattle Alaska Division.......... 8
Guam Seattle........... 13
Hawaii Anchorage......... 5
Idaho Boise............. 5
Oregon Guam.............. 2
Washington Honolulu.......... 6
Portland I (Arson) 10
Portland II (F/A- 6
Achilles). 8
Spokane........... 4
Yakima............ 1
Anchorage POD..... 1
Boise POD......... 12
Portland AO....... 9
Seattle AO........
------------
Total....... 90
============
Tampa North Florida Division.......... 10
Jacksonville...... 8
Orlando........... 10
Pensacola......... 6
Tallahassee....... 8
Tampa............. 11
Jacksonville POD.. 3
Tampa AO.......... 8
Winter Haven...... 2
Fort Myers........ 1
------------
Total....... 67
============
Washington District of Division.......... 9
Columbia Falls Church I 8
Virginia (Arson). 9
Falls Church II... 8
Washington I 7
(HIDTA). 7
Washington II 5
(Cease Fire). 8
Washington III 10
(HIDTA). 7
Bristol........... 3
Norfolk........... 1
Richmond.......... 7
Roanoke........... 1
Falls Church POD.. ...........
Norfolk POD.......
Richmond AO.......
Roanoke POD.......
Washington POD....
------------
Total....... 90
------------------------------------------------------------------------
[GRAPHIC] [TIFF OMITTED] T13FE26.001
[GRAPHIC] [TIFF OMITTED] T13FE26.002
Question. What steps will be taken to communicate this to the
public and to give the public guidance as to who they can interact with
at ATF?
Answer. Considering the industry and their trade associations as
the major part of the public who interact with ATF, our top
headquarters and field managers have already attended several industry
meetings to respond to questions about the restructuring proposal. We
have reached out to not only the national trade associations, but also
trade associations in the States, which are comprised of local industry
members. We will continue this effort.
This restructuring also would require changes in several
publications that list our office addresses. Modifications to those
publications are in our long-term plans. Local field offices would be
responsible for making any necessary adjustments to local information
directories.
Question. Are you considering doing a special guide?
Answer. There are several possibilities under consideration to
communicate our organizational changes to the public. These include
publication of the changes in the Federal Register, and standardized
brief articles for media and trade association publications.
______
U.S. Customs Service
retrofitting program for customs p-3 aew aircraft
Question. In the report that accompanied the fiscal year 1998
appropriations for the Customs Service, this Committee requested that a
report be submitted by January 31, 1998 on the status of the P-3
retrofitting program. What is the status of this report?
Answer. The Customs Aviation Program report was completed on
February 6, 1998. The report was sent to the Committee on February 25,
1998. A copy is attached.
study on the assets needed to conduct interdiction operations in the
transit zone
Question. I understand that the U.S. Interdiction Coordinator's
(USIC) Office is in the final stages of preparing a study on the assets
needed to conduct interdiction operations in the transit zone and its
recommendations being formulated for executive review. Do you know when
the report will be issued and are you aware of the recommendations of
the Customs Service? Have the draft versions of this study been used to
formulate the fiscal year 1999 budget request in terms of the assets
needed for drug interdiction?
Answer. Customs believes the USIC's report is scheduled for release
in the next several weeks. The Aviation Program provided a great deal
of input in the development of the report.
Customs will consider the study recommendations in its future
budget requests.
modernization of customs p-3 aew aircraft
Question. I understand that there is a need to modernize the first
four P-3 AEW aircraft to standardize the systems with the aircraft that
will be delivered over the next two years. Is the Customs Service
reviewing this and what are the costs associated with such an effort?
Answer. The Customs Aviation Program has been reviewing the
modernization of its existing P-3 AEW fleet for some time. Currently,
all four P-3 AEW's are configured with the APS-138 radar. This system
was originally used in the Navy's E-2C Advanced Radar Processing System
(ARPS) aircraft. The Navy is updating all E-2C's to an APS-145 Group II
configuration. The APS-138 is no longer in production and the Navy's
intermediate level support for this system will be withdrawn by the
year 2000. Since Customs P-3 fleet represents a relatively small part
of the overall P-3 population, spare parts (to the extent available
after 2000) will likely become more costly as economies of scale are
lost to the manufacturers. This situation is likely to create delays in
the availability of the aircraft for counterdrug missions.
Customs is waiting to take delivery of two additional P-3 AEW's
over the next 2 years. Both of these aircraft will be configured with
the newer APS-145 radar. The cost to retrofit the four existing P-3
AEW's depends on the configuration, but it is estimated at
approximately $40-50 million in total.
detection technology
Question. The Administration requested funding for additional
border patrol agents and for technology that would assist Customs
inspectors. Is there technology that could be used that would provide
capabilities that could be used for interdiction activities that would
assist a multitude of efforts, such as detection and monitoring air,
land and maritime activities?
Answer. There is no single technology or multiple-use system that
we are aware of that could detect and monitor targets for all air,
land, and maritime activities. However, there are several types of
satellite-based electronic tagging and tracking systems that could
monitor suspect air, land, or marine movements once the target plane,
vehicle or boat has been detected and a tracking device covertly
installed.
There are some radar systems currently deployed that either are, or
can be, capable of detecting and monitoring most air and maritime
targets of interest to Customs. These include the airborne radars in
Customs P-3 AEW aircraft and the DOD aerostats that can detect targets
up to 150 miles away, and the radars in the Customs Citations and other
Customs, Coast Guard, or military aircraft that can detect targets up
to several miles away.
The land-based DOD Relocatable Over-the-Horizon Radar (ROTHR) can
detect and monitor air targets, and ultimately marine targets, that are
several hundred miles away.
Cost benefit analyses for the effectiveness of the P-3, aerostat,
and ROTHR were conducted in the early development and cost
justification days of these programs. They concluded that each was
effective for the multi-agency applications for which they were being
used (e.g., Customs, Coast Guard, INS, and DEA enforcement activities,
and DOD early warning missions).
______
Questions Submitted by Senator Faircloth
Under Secretary for Enforcement
Question. Mr. Secretary, Section 809 of the Antiterrorism and
Effective Death Penalty Act, Public Law 104-32 mandated that the
Department of the Treasury conduct a study, which would assess the
threat to law enforcement officers from the misuse of firearms and
ammunition. What is the status of that report, and what is its expected
completion date?
Answer. The report has been drafted and submitted to an appropriate
review process by ATF. We anticipate the report will be completed in
the next few weeks.
Question. ATF was directed by both Houses of Congress in 1998 to
cooperate with State and local law enforcement to ensure the prompt
return of recovered firearms to their legal owners. Has ATF complied
with this request? If so, could you provide the Congress with
supporting documentation?
Answer. Yes. ATF has complied with this request by complying with
existing laws. ATF works with State and local law enforcement by
identifying the purchaser of record for a firearm that has been used in
a crime. However, ATF cannot make the determination to contact the
known firearm owner since that contact could jeopardize an ongoing
criminal investigation and possibly endanger lives. Since a firearm is
sometimes the only key to many crimes, the integrity of a criminal
investigation may be violated if ATF were to adopt any other policy
than furnishing only the firearms trace requestor with the purchaser of
record for a firearm.
Stolen firearms that come into ATF's possession during the course
of an investigation are returned to the lawful owners at the conclusion
of the investigation, in compliance with existing laws and as long as
no insurance claim has been paid.
prompt return of recovered firearms
Question. ATF was directed by both Houses of Congress in 1998 to
cooperate with State and local law enforcement to ensure the prompt
return of recovered firearms to their legal owners. Has ATF complied
with this request. If so, could you provide the Congress with
supporting documentation?
Answer. Yes. ATF has complied with this request by complying with
existing laws. ATF works with State and local law enforcement by
identifying the purchaser of record for a firearm that has been used in
a crime. However, ATF cannot make the determination to contact the
known firearm owner since that contact could jeopardize an ongoing
criminal investigation and possibly endanger lives. Since a firearm is
sometimes the only key to many crimes, the integrity of a criminal
investigation may be violated if ATF were to adopt any other policy
than furnishing only the firearms trace requestor with the purchaser of
record for a firearm.
Stolen firearms that come into ATF's possession during the course
of an investigation are returned to the lawful owners at the conclusion
of the investigation, in compliance with existing laws and as long as
no insurance claim has been paid.
______
Bureau of Alcohol, Tobacco and Firearms
average violations per inspection for firearms
Question. Director Magaw, in ATF's Budget justifications, ATF
stated in its summary performance report for fiscal year 1997, under
average violations per inspection for firearms, that .61 violations
were identified per inspection, as oppose to 1.6 as anticipated. Are
these results due to better than expected compliance?
Answer. The performance results for average violations per
inspection of firearms licensees were as we had anticipated. In fiscal
year 1997, we completed 6,258 firearms compliance inspections and cited
3,824 violations. This represents an average occurrence of .61
violations per inspection. The average number of violations per
inspection had remained relatively constant over the past three years.
The 1.6 violations per inspection in the material that was
referenced, was the result of an error in the percentages calculation
that was not detected before the performance plans were forwarded. The
data was taken from fiscal year 1995 results, which were the latest
available at the time. That year, the Bureau completed 13,141
inspections and found 8,126 violations for an average of 0.61837
valuations per inspection, not the higher erroneous percentage.
Question. Why was better than expected compliance noted as an
explanation for explosives performance, but not to firearms?
Answer. The compliance level for Federal firearms licensees has
remained relatively constant during the past 3 fiscal years.
community based strategic trace analysis and data bases
Question. Director Magaw, what is meant by ATF's proposal to
provide more community based strategic trace analysis to support
collaborative ATF/local law enforcement activity?
Answer. In order to uncover illegal firearms traffickers and enable
cities to reduce violent crimes by decreasing the amount of illegally
sold firearms to their communities, ATF is attempting to achieve
comprehensive crime gun tracing among all law enforcement agencies
nationwide.
There are two reasons for seeking to achieve comprehensive tracing.
First, it maximizes the number of leads that can be developed for
illegal trafficking. Second, it provides cities with information about
the guns used in crimes, thereby allowing law enforcement for the first
time to analyze patterns of crime gun characteristics. Examples of
information include how many crime guns are being recovered from
juveniles and how many crime guns are originally sold within state
where they are recovered. For the Youth Crime Gun Interdiction
Initiative cities, ATF is analyzing the crime gun traces and providing
reports about the types and sources of crime guns by age group.
Providing trace information and community crime gun patterns to State
and local law enforcement allows for targeted and efficient uses of
limited resources. These reports for local officials are known as
``strategic trace analysis,'' to distinguish them from Project LEAD.
Project LEAD provides investigative trace analysis aimed at individual
cases rather than strategic enforcement.
Question. What information will ATF share from the Federal Trace
System (FTS) data base with the local law enforcement community?
Answer. ATF is mandated to support local and State law enforcement
in their fight against violent crime. To accomplish this mission, ATF
has formed a close working relationship with State and local law
enforcement. In this regard, ATF has made its FTS data base available
to State and local law enforcement. This also includes Project LEAD,
the Bureau's innovative computer software program for analyzing crime
gun trace data.
The Youth Crime Gun Interdiction Initiative cities are working
closely with ATF to develop more rapid, efficient methods of submitting
trace requests and receiving trace results. The lessons learned from
these efforts will eventually be applied to law enforcement agencies
nationwide.
Question. Are there any data bases being developed by ATF or which
ATF is helping to develop for use by local law enforcement?
Answer. ATF is not in the process of developing any new data bases
for use by ATF or by State and local law enforcement. ATF is in the
process of further enhancing our Project LEAD software which performs
analysis of crime gun trace data in the existing firearms tracing
system data base. Project LEAD is used by ATF and is shared with State
and local law enforcement who are working with ATF to identify illegal
sources of crime guns. ATF has also developed a set of standardized
trace analysis reports that support local law enforcement collaboration
with ATF, by providing a summary picture of the crime guns recovered
and traced in a particular jurisdiction.
The existing firearms tracing system/crime gun information data
base maintained by the National Tracing Center has been audited by the
U.S. General Accounting Office (GAO) to ensure that ATF is maintaining
the records in an efficient manner and in accordance with the law, as
well as ensure that systems being used to track the records are not to
computerized firearms registrations which would be against Federal law.
The GAO audit conclusion stated that ATF is effectively managing the
information and acting within the guidelines proscribed by Federal law.
______
U.S. Customs Service
enforcement of the softwood lumber agreement with canada
Question. Last year, Congress directed an additional $2 million to
Customs for enforcement of the 1996 U.S.-Canada Softwood Lumber
Agreement, to make the reconciliation of import and export data
necessary for effective enforcement of the Agreement more prompt and
accurate. First, I would like to know what has happened to this $2
million? How was it utilized? Second, I would like to know what is
needed to ensure that enforcement of the U.S. Canada Softwood Lumber
Agreement and future reconciliation under the Agreement is prompt and
fully effective?
Answer. Customs allocated the $2 million for personnel at Northern
Border ports, the Office of Field Operations (headquarters), the Office
of Strategic Trade, and the Office of Regulations and Rulings. The
remainder of this funding was used to support increases in travel and
contractual support costs related to the enforcement efforts described
below.
Customs is fully committed to enforcing the Agreement. To do so
Customs has established local criteria (cargo targeting of lumber
shipments on suspected companies or classification) and conducted
intensive examinations of lumber mill works followed by detailed
questions of importers, as appropriate, concerning the classification,
and the validity of province of first manufacture in an attempt to
detect circumvention of the Agreement. Customs has referred some
questionable transactions for review by Canada in accordance with the
terms of the Agreement.
Customs has devoted considerable resources in the area of
reconciliation and conducts quarterly reconciliation of U.S. imports
with Canadian exports with the Department of Foreign Affairs
International Trade (DFAIT). Two meetings were held in Ottawa and one
in Washington, D.C. during which Canadian and U.S. officials committed
to complete the reconciliation cycle 6 to 12 months after a given
quarter has taken place. An additional meeting is scheduled for the end
of March in Chicago. Customs has developed an improved data extraction
technique and will continue to streamline and automate the many steps
required to perform an accurate and timely reconciliation. However,
timely reconciliation is not only dependent on U.S. Customs, but also
relies on the Canadian's response to their own data reviews.
Question. I understand that a potential loophole in the U.S. Canada
Softwood Lumber Agreement has been created by a U.S. Customs decision
that Canadian lumber which has a hole drilled into it by Canadian
companies is no longer considered ``lumber'' subject to the Lumber
Agreement. Canadian firms are openly advertising drill presses as a
means to use this loophole and avoid the agreement. First, what is
being done about this? Second, how do you justify your agency's request
for increased authority to enter into trade agreements with an apparent
inability to enforce agreements already in place?
Answer. Customs continues to dedicate significant resources to its
field ports to inspect and question suspect shipments of drilled lumber
to determine its actual use, and requests documentation to include
commercial billing invoices, proof of payment and purchase orders.
A ruling was issued by the National Commodity Specialist Division
in New York in February, 1997, which held that for Customs
classification purposes, stud lumber which was pre-drilled for
electrical wiring fell under Harmonized Tariff Schedule classification
subheading 4418. Since this classification subheading is outside the
scope of the Softwood Lumber agreement with Canada, concern was
expressed that the agreement was being circumvented. In October, 1997,
a Federal Register Notice was published soliciting comments regarding
commercial uses of such studs to assist Customs in determining the
correct classification. Over 5800 comments were received in response to
the notice. Customs is working expeditiously to issue a decision in the
near future.
Customs has not requested increased authority to enter into trade
agreements; that is the role of the United States Trade Representative.
What Customs has requested, is to be included in trade agreement
negotiations because enforcement of international trade agreements is a
responsibility of the Customs Service. Customs is currently responsible
for the enforcement of some 15 international trade agreements and is of
the view that active involvement when future trade agreements are being
reached will ensure that provisions negotiated are legally,
commercially and operationally enforceable.
retrofitting program for customs p-3 aew aircraft
Question. In the report that accompanied the fiscal year 1998
appropriations for the Customs Service, this Committee requested that a
report be submitted by January 31, 1998 ``on the status of the P-3
retrofitting program, including an assessment of the current
operational requirements and the potential impact on interdiction
effectiveness were the fleet to be expanded by one or two additional P-
3 AEW aircraft.'' What is Customs response to this request?
Answer. The Aviation Program completed its report on February 6,
1998. The report was submitted to the Committee on February 25, 1998. A
copy is attached.
modernization of customs p-3 aew aircraft
Question. I understand that there is a need to modernize the first
four P-3 AEW aircraft to standardize the systems with the aircraft that
will be delivered over the next two years. Once the aircraft are
standardized in the fleet, operating and maintaining the aircraft will
be much more cost effective. Is Customs reviewing this, and what are
the costs associated with such an effort?
Answer. The Customs Aviation Program has been reviewing the
modernization of its existing P-3 AEW fleet for some time. Currently,
all four P-3 AEW's are configured with the APS-138 radar. This system
was originally used in the Navy's E-2C Advanced Radar Processing System
(ARPS) aircraft. The Navy is updating all E-2C's to an APS-145 Group II
configuration. The APS-138 is no longer in production and the Navy's
intermediate level support for this system will be withdrawn by the
year 2000. Since Customs P-3 fleet represents a relatively small part
of the overall P-3 population, spare parts (to the extent available
after 2000) will likely become more costly as economies of scale are
lost to the manufacturers. This situation is likely to create delays in
the availability of the aircraft for counterdrug missions.
Customs is waiting to take delivery of two additional P-3 AEW's
over the next 2 years. Both of these aircraft will be configured with
the newer APS-145 radar. The cost to retrofit the four existing P-3
AEW's depends on the configuration, but it is estimated at
approximately $40-50 million in total.
______
Questions Submitted by Senator Kohl
Under Secretary for Enforcement
Question. This past January a Customs agent, Manny Zurita, died
while providing protective assistance to the President. There is some
question whether his 2 school age children can continue to attend the
DOD school since they are no longer dependents of a Federal employee.
What is the status of this issue?
Answer. This is an issue that is of great concern to me. We have
asked the Department of Defense to evaluate current authorities to
permit the Zurita children to continue their schooling until their
education is complete. While we have not received a formal response, we
have been told that authority does not exist to waive the dependency
requirement. We have learned that for the current school year, the
Zurita children will be permitted to finish out the term. However, the
matter of their long-term education is more difficult due to the
current law. The children are currently ages 9 and 11. The DOD schools
are the only affordable English-language schools in Puerto Rico for the
dependents of Federal personnel. Senator Grassley has introduced
legislation which would permit the Zurita children to attend the DOD
schools for the remainder of their education. His bill is very
comprehensive and addresses all of the restrictions currently in place
which place a burden on Customs families. I am hopeful the legislation
will pass prior to the end of this school year.
Question. At the last House Law Enforcement Hearing, the Under
Secretary said, ``We are never going to arrest our way out of the drug
problem.'' He went on to say that an important component in reducing
drug demand is education. Do the funding levels for Treasury law
enforcement agencies include adequate resources for this type of
education?
Answer. While the missions of the Treasury law enforcement bureaus
do not focus as directly on demand reduction as certain other agencies,
we do make important contributions. One of our principal efforts is
ATF's Gang Resistance Education and Training (GREAT) Program, which
educates youths about the dangers associated with membership in gangs,
including drug use. The fiscal year 1999 budget includes $10 million to
support this program. In addition, whether the problem is
counterfeiting, collection of import and other taxes, bank-related
financial crimes, or firearms and explosives violations, our bureaus
seek to educate and inform the industries involved to reduce the number
and kind of violations. By doing this, we can focus criminal
investigations on major violations. When we see a new and threatening
problem, we try to respond with preventive measures. For instance,
Customs noticed an increase in complaints about Rohypnol abuse in
Florida and Texas. This led to Customs' enforcement of FDA's law
barring importation of unapproved drugs. We believe this has stopped a
problem, affecting mainly a few states, from spreading further. Funding
for these types of activities is sufficient, but with additional
funding we could establish more GREAT programs across the country.
Question. The fiscal year 1999 budget request includes $800
thousand and eight employees for new enforcement policies and programs
including Enhancing Southwest Border and Caribbean Policy Development
and Oversight. The Washington Post recently ran a series on the rapid
expansion of drug trafficking throughout the Caribbean. That article
also addressed a decrease in U.S. aid to Caribbean nations.
Does this economic aid have an impact on drug trade? Is it a better
expenditure of funds than trying to stem the increasing tide of drug
trafficking? Is this something the office will be reviewing as part of
the Caribbean Policy development?
Answer. The Caribbean region and the Southwest border remain major
transit points for illegal narcotics entering the U.S. As to both
areas, therefore, we must ensure full implementation of Treasury
Enforcement bureaus' counter-narcotics activities; the active support
of other nations; and the oversight and policy roles played by the
Office of Enforcement. As to the first element, we have taken strong
measures in recent years, particularly through Customs' Operations Hard
Line and Gateway.
As to the work of other nations, we believe that technical and
economic aid provided to the Caribbean and other areas leads to better
counter-drug activity. Direct counter-narcotics training, assistance,
and funding allows other nations to strengthen their own interdiction
and investigations in response to drug traffickers and money
launderers. Treasury bureaus and offices provide vital assistance in
the Caribbean and other points in all such areas. In addition,
assistance provided by the U.S. government and individual agencies
allows for institution building in other nations that makes them less
vulnerable on a long term basis to narcotics trafficking.
Finally, as part of its Caribbean and Southwest border policy
development, the Office of Enforcement places a high priority on
ensuring full implementation of bureau counter-narcotics efforts and
participation in the formulation of policies and issues relating to
cooperation provided by other nations. In fact, we view such oversight
and policy development roles as essential to the short- and long-term
success of our counter-drug efforts.
Question. This funding level also provides funding and personnel
required to meet the workload demands related to International
training. The Federal Law Enforcement Training Center is also
requesting funds for this initiative. Please explain what the status is
of the international training program and what these and the FLETC
resources will provide?
Answer. As crime becomes increasingly international in nature, law
enforcement's efforts to combat crime must also extend beyond the
borders of the United States. U.S. law enforcement needs the assistance
of foreign law enforcement agencies in fighting crime. Therefore, it is
in our best interest to assure that foreign law enforcement agencies
receive appropriate training. In recognition of this, the first
International Law Enforcement Academy (ILEA) was established in
Budapest approximately two years ago under the direction of the FBI. It
has proven to be very successful.
To help combat drug trafficking and other crime problems in the
region, in August 1997, it was agreed that Treasury would develop an
ILEA for Latin America, known as ILEA South. FLETC is taking the lead
for Treasury in providing management oversight, administrative support,
and guiding program development for ILEA South. Treasury and FLETC
moved quickly to name a Director, select a staff, and develop a core
curriculum. The first ILEA South training program was held in Panama
City, Panama, during November and December 1997. Thirty-two students
from eight Central American countries attended the program. The program
was extremely well received and was considered by all those involved to
be a great success.
The signing of a permanent agreement with Panama regarding ILEA
South has been delayed by the need to first conclude the negotiations
for the Multilateral Counter-narcotics Center (MCC), which is also to
be located in Panama. We are hopeful that the MCC negotiations will be
concluded in the near future so that an ILEA agreement can then be
finalized. In the interim, a second ILEA South course is now in
progress in Panama.
As the professional law enforcement training agency within the
Federal government, FLETC is the proper agency to oversee the
development of ILEA South. The success of the first training course,
which included instructors from both the Treasury and the Justice law
enforcement agencies, is a tribute to FLETC's ability to bring together
instructors from diverse agencies and develop a cooperative team
relationship. This team approach reinforces one of the messages we are
trying to convey to the Latin American countries--the importance of law
enforcement agencies working together cooperatively.
To permit FLETC to continue its outstanding ILEA training efforts,
the fiscal year 1999 budget requests an additional 5 FTE and $1.5
million. These FTE are necessary because currently FLETC's staffing is
stretched very thin. FLETC has only been able to develop ILEA South
because the other Treasury bureaus have detailed employees there to
provide assistance. Keeping employees on long-term details for this
purpose is not cost efficient. The FBI devotes significant resources to
the support of ILEA Budapest. For the ILEA developed by Treasury to be
equally successful, we must have adequate resources to support it.
Treasury has also requested 2 FTE's to oversee international
training efforts. These positions do not duplicate the positions at
FLETC, but rather are intended to compliment them. By agreement between
the Departments of State, Justice, and the Treasury, each ILEA is to be
run by a Director and a Deputy Director. These positions will alternate
between the Departments of Justice and the Treasury. For example, the
current Director of ILEA South is from Treasury, and the Deputy
Director is from Justice. To permit Treasury to staff these Director or
Deputy Director positions, additional positions are needed. When
Treasury is selecting a Director or Deputy Director, it will pick the
best candidate from among the candidates nominated by the various
Treasury bureaus and assign him/her to the Treasury position. Since the
Director or Deputy Director will not always be selected from the same
Treasury bureau, it is necessary to place the FTE's for these positions
within the Treasury Department.
Question. The Office of Foreign Assets Control is requesting
resources to expand anti-narcotic and counter-terrorism activities. A
portion of the funding will be used to develop and track activities
related to approximately 300 companies that provide fronts for drug
trafficking activities. Explain this activity and the long term costs
of the initiative?
Answer. In addition to sanctions against the principal figures
identified in Executive Order No. 12978, the Order blocks property and
interests in property of foreign persons determined to (a) play a
significant role in international narcotics trafficking centered in
Colombia, or (b) materially assist in or provide financial or
technological support for, or goods or services in support of those
designated. Furthermore, it blocks all property and interest in
property subject to U.S. jurisdiction of additional persons, such as
front companies and individuals, determined to be owned or controlled
by, or to act for or on behalf of those designated as ``Specially
Designated Narcotics Traffickers'' or ``SDNT's''.
As the result of OFAC's collection, investigation, and analysis of
financial, business, and other information from a wide variety of
sources, 424 businesses and individuals have now been identified as
SDNT's. This has had the significant impact of denying the designated
businesses and individuals access to U.S. financial and commercial
markets. More specifically, OFAC has determined that one-third of the
SDNT businesses have gone into liquidation. Because of OFAC
designations, three Colombian banks have closed about 300 accounts of
SDNT individuals. One of the largest SDNT commercial entities, with an
annual income exceeding $136 million, has been reduced to operating on
a cash basis.
The funding requested for OFAC anti-narcotics efforts in fiscal
year 1999 is needed to continue the research and identification of
additional SDNT entities, prepare evidentiary documentation for
designation of new SDNT's, closely track activities of current SDNT's
to transform themselves into new front companies and designate the
transformed entities, acquire information resources, establish
electronic data systems, and provide foreign country administrative
support for OFAC personnel assigned to Bogota, Colombia. The additional
staff requested would conduct SDNT program operations in Washington,
D.C. and Bogota, and also include financial and commercial compliance
personnel to ensure sanctions enforcement and to administer blocking of
assets. We expect costs for these personnel and activities to continue
through the duration of the program.
Question. The Office of Enforcement keeps open the lines of
communications with other law enforcement agencies, such as the
agencies housed in the Department of Justice. What efforts are made to
facilitate increased communication?
Answer. The Office of Enforcement plays an important role in
coordinating and facilitating communications between Justice and
Treasury. It provides one focal point for providing information,
analysis and policy determinations. Cooperation between the Departments
of Justice and the Treasury has improved dramatically over the last few
years. While there is always room for additional improvement, I believe
that cooperation is currently at an all-time high. This is a result of
the frequent communication and close coordination between the two
Departments.
The Office of Enforcement works with the Department of Justice on a
daily basis. I speak to and attend meetings with the Attorney General,
Deputy Attorney General, and heads of the Justice law enforcement
bureaus regularly. Members of my staff speak to their counterparts at
Justice on a daily basis.
Additionally, the Office of Enforcement coordinates closely with
Justice on all significant law enforcement matters. A variety of
working groups meet regularly on important issues, such as the
Southwest border, white collar crime, money laundering, and terrorism.
Question. Who determines which law enforcement agency will take the
lead in an investigation? In other words, how is it determined that the
law enforcement agency with the greatest expertise coordinates the
enforcement effort?
Answer. The Federal law enforcement agencies each have unique areas
of expertise and jurisdiction. When an investigation involves a matter
that is clearly within the jurisdiction of one agency, that agency will
take the lead and work with other agencies as needed.
In those circumstances where there is overlapping jurisdiction,
memorandums of understanding have been developed which detail the
responsibilities of the respective agencies. Despite these efforts to
ensure clear lines of authority, situations do develop where two
agencies may claim jurisdiction over an investigation. In those
instances, the Special Agents in Charge of the field office of the
respective agencies attempt to resolve the question. If this is not
possible, further discussions between the senior managers of the
agencies will occur in Washington. The Departments of Justice and the
Treasury become involved in these discussions, as necessary.
Question. Do the Treasury law enforcement agencies have adequate
resources to conduct parallel operations with the Department of
Justice, such as Customs and INS Border Patrol activities?
Answer. Treasury law enforcement bureaus have unique areas of
expertise which complement those of other law enforcement agencies. For
example, INS and Customs work together on cases and task forces
involving illegal narcotics and other contraband smuggling. Since INS
and Border Patrol staffing continues to increase, we anticipate that we
will be called upon to participate in even more joint investigations.
The current budget request for Treasury law enforcement for fiscal year
1999 includes funds for increasing Customs capabilities both through
human resources and technology so that Customs personnel can more
efficiently and intelligently carry-out their responsibilities.
Additional Customs funding and resources would enhance Treasury's
ability to respond to growing workloads at our nation's ports of entry.
______
Bureau of Alcohol, Tobacco and Firearms
youth crime gun interdiction initiative
Question. ATF is requesting an additional $16 million for the Youth
Crime Gun Interdiction Initiative. This brings the fiscal year 1999
request to over $28 million. This extra funding will expand the program
to an additional 10 cities and will hire additional staff, but how will
the increased funding reduce youth violence?
Answer. The additional $16 million for the Youth Crime Gun
Interdiction Initiative will assist in breaking the chain of illegal
supply of crime guns to youths and minors. This can be accomplished by
additional staffing (81 FTE's) to follow up on investigative
information; comprehensive crime gun tracing by State and local law
enforcement; rapid high volume crime gun tracing and crime gun market
analysis by the National Tracing Center; and training of ATF, State,
and local law enforcement personnel.
Question. The program, which started as a two-year research
project, has been operating for over a year. Have there been any
successes the committee should be aware of?
Answer. Since the inception of the Youth Crime Gun Interdiction
Initiative, more than 36,000 firearms have been traced in the 17 pilot
cities. During fiscal year 1997, a total of 86 criminal investigations
involving individuals illegally trafficking in firearms to youths/
juveniles (and adults), as well as armed violent crimes being committed
by youths/juveniles, have been initiated in 16 of the 17 YCGII sites.
Many of these are multi defendant investigations, and many involve the
illegal trafficking of firearms to street gangs comprised of youths and
juveniles. In these cases, 90 defendants have been recommended for
prosecution, 61 have been arrested, and 1 has been sentenced. In
addition, the standardized, community based trace analysis reports
produced by ATF provide Federal, State, and local law enforcement with
a new tool for developing local crime reduction strategies.
great
Question. The Gang Resistance Education and Training Program, or
GREAT program, ties education to law enforcement and provides training
in over 50 locations. Please provide an evaluation of its success.
Answer. The GREAT program currently provides training in over 1,400
communities throughout the United States. The table below summarizes
the progress through fiscal year 1997:
----------------------------------------------------------------------------------------------------------------
Cities
Funded sending Police Students
Fiscal year Appropriation agencies officers for officers trained
(States) \1\ training \2\ trained
----------------------------------------------------------------------------------------------------------------
1992...................................... $800,000 4(1) 74 536 ...........
1993...................................... 2,400,000 12(3) 149 289 ...........
1994...................................... 7,500,000 21(8) 310 536 ...........
1995...................................... 16,000,000 43(18) 244 498 \3\ 500,000
1996...................................... 10,700,000 40(18) 364 601 221,000
1997...................................... 11,000,000 74(22) 471 665 324,291
----------------------------------------------------------------------------------------------------------------
\1\ Represents law enforcement agencies that have received congressional funding each year--not cumulative.
\2\ Not cumulative.
\3\ Through fiscal year 1995, law enforcement agencies did not fully report the number of students who
graduated. A conservative calculated estimate puts the number at 500,000 from fiscal year 1992 to fiscal year
1995. The current reporting system relies on law enforcement agencies requesting graduation certificates for
their students.
At the beginning of the 1994-95 school year, a national evaluation
of the GREAT Program was launched by the University of Nebraska at
Omaha. The primary objective of the evaluation was to assess the
effectiveness of GREAT in terms of attitudinal and behavioral
consequences. The second objective of the evaluation was to assess the
instruction of GREAT officers. In fiscal year 1997, preliminary results
of the evaluation indicated the positive impact that GREAT has on
children. A preliminary analysis of the cross sectional evaluation of
students completing the GREAT Program found that students reported
lower levels of delinquency, impulse behavior, risk-taking behavior and
approval of fighting as well as HIGHER levels of self-esteem, parental
monitoring, parental attachment, commitment to positive peers, anti-
gang attitudes, perceived educational opportunities and positive school
environment. The preliminary results of the evaluation of the
instruction of the GREAT officers found that the strongest aspect of
GREAT training is the talented and dedicated group of individuals that
comprise the National Training Team. A copy of the cross sectional
evaluation report is attached.
[Clerk's note.--The evaluation report does not appear in the
hearing record but is printed in the November 1997 issue of the
National Institute of Justice Research in Brief printed by the U.S.
Department of Justice.]
The five-year longitudinal study, the third part of the evaluation,
continues into its second year. The University of Nebraska evaluators
will provide a status report after they have evaluated the data
collected after the first year.
Question. Why are no additional funds being requested to expand
this program?
Answer. Due to budgeting constraints, no increased funding is
requested for the GREAT program. However, other programs like the Youth
Crime Gun Interdiction Initiative and the Violent Crime Coordinators
complement and enhance the efforts of the GREAT program indirectly.
Question. If additional funds were provided, could ATF expand the
program to provide summer programs?
Answer. Yes. National studies show that over 80 percent of youth
violent crime is committed when the juveniles are on summer break or
after school before their parents return from work.
Current Cooperative Agreements require communities to present the
program in three phases: 1) Teach the core programs, 2) provide a
Summer Component, and 3) provide a Parent Program.
Most communities who receive GREAT funds have well developed summer
programs which reinforce the lessons presented to the youths during the
classroom exercises.
Additional funds would permit ATF to offer more communities money.
Question. How would the summer camp program be set up?
Answer. The communities could be required to demonstrate the
commitment by the police department, school district, parks &
recreation department; local businesses; local colleges or
universities; and/or other community based programs to collaborate in
providing healthy environments for youths to develop and grow.
violent crime coordinator
Question. ATF is requesting $2 million and 15 FTE for Violent Crime
Coordinator to ensure a greater success rate in cases presented for
prosecution under the Justice department's ``Project Triggerlock.''
Please explain ATF's connection with ``Project Triggerlock.''
Answer. The Department of Justice's Project Triggerlock primarily
focuses on prosecuting firearms violations that will fall within the
jurisdiction of ATF. ATF developed the Achilles Program, which focuses
upon the aggressive identification of criminals who are vulnerable to
the sentencing enhancements found under 18 U.S.C. section 924 ( c)and
(e). The primary objective of the Achilles Program is to incapacitate
armed drug traffickers, violent street gang members, and armed career
criminals who terrorize our neighborhoods and account for a
disproportionate percentage of criminal activity. Another objective of
the Achilles Program is to increase State and local awareness of the
two Federally enhanced penalty statutes in order to better coordinate
law enforcement resources and efforts and to augment existing State or
local firearms laws or a lack thereof. These Federal cases are
prosecuted by U.S. attorneys through the Department of Justice's
Project Triggerlock.
Question. Please explain what the violent crime coordinators will
do.
Answer. The violent crime coordinators (VCC), who are senior
agents, must successfully accomplish the following tasks to fulfill the
requirements of the job: establish threshold prosecution levels with
the U.S. attorney's office to ensure only those cases which the U.S.
attorney's office will prosecute federally are pursued; evaluate all
firearms-related cases referred for prosecution by local , State, or
other Federal agencies and determines which judicial system is best
suited for that case based on the threshold levels of prosecution
previously determined; establishes effective liaison and working
relationships with the various State, local, and other Federal agencies
in the VCC's jurisdiction; maintain the integrity of the Gun Control
Act and the National Firearms Act by ensuring that each State or local
officer, referring a case in Federal court has met all the elements of
proof; gather and exchanges intelligence derived from observed trends
and from defendant interviews; ensure firearms from all referred cases
are traced, thus enhancing the ability of Project LEAD to generate
information on illegal firearms trafficking; in cities with CEASEFIRE
Projects capabilities, ensures firearms from all referred cases are
test fired and that the shell casings and projectiles are subjected to
Integrated Ballistic identification Systems (IBIS) testing, thus
enhancing the IBIS data base and increasing the likelihood of ballistic
matches; and participates in, or coordinates, numerous interviews,
reports, and trials which require a great deal of investigative and
courtroom experience. Additionally, the VCC performs the full range of
criminal investigative duties, e.g., extensive planning and
coordination of complex investigations involving major conspiracies,
multiple jurisdictions, multiple defendants, etc. The VCC will interact
directly with State and local law enforcement officers and other
Federal agencies to establish a method to pre-identify armed violent
offenders and determine the most effective avenue for prosecution.
national revenue center
Question. Consolidating the National Revenue Center in Cincinnati
will cost approximately $2.6 million. That funding will complete the
consolidations and relocate the employees. What savings are projected
as a result of consolidating these services?
Answer. Current estimates show that once it is complete, savings in
cost of space, communications (voice and data), and personnel will
eventually be $2.7 million per year. The savings arise from going from
six locations to one location and from reducing the overall number of
personnel needed by eliminating duplication of effort at the multiple
sites.
joint explosives detection canine detection pilot program with faa
Question. The fiscal year 1997 House report requested ATF set up a
joint explosives detection canine pilot program with FAA at National or
Dulles Airports. ATF has recently signed a memorandum of understanding
with FAA and the Metropolitan Washington Airport Authority to conduct
this program. Why has it taken so long to get this program underway?
Answer. The pilot program is underway. Explosives detection canines
and handlers were selected during fiscal year 1997. Two ATF-trained and
certified explosives detection canines were assigned to participate in
the pilot program in October 1997. A memorandum of understanding was
signed with FAA in November 1997. FAA and ATF canine teams have been
training at Dulles airport. Recently, contracts were finalized with two
independent outside firms to conduct actual canine testing and to
evaluate the personnel impact of the two different programs.
Question. How will the pilot program be conducted?
Answer. A contracting firm was hired by the FAA to study the
overall impact each program has on its personnel participating in the
pilot. Another contracting firm was hired by FAA to develop and conduct
the actual testing of the explosives detection canines in the airport
environment.
Question. Other than ATF and FAA, will any other agencies
participate?
Answer. The participation of the Metropolitan Washington Airport
Authority (MWAA) has been a vital part of the pilot program. MWAA is
supplying canine handlers and the facilities in which to train and test
the canine teams. The pilot will be utilizing both the Ronald Reagan
Washington National Airport and Dulles International Airport.
Question. How long will the pilot last?
Answer. The pilot program is scheduled to last 1-2 years. The
actual canine testing portion is divided into 3 phases and is scheduled
to last 15-18 months. All details prior to the actual canine testing
are being finalized by ATF and FAA.
Question. How will the results be reported?
Answer. The results of the pilot program will be reported in a
joint report signed by ATF and FAA.
canine explosives detection program
Question. The fiscal year 1998 appropriation provided $3.9 million
and 17 employees for the Canine Explosives Detection Canine Program.
The fiscal year 1999 Budget indicates the funding is reduced. What is
in the ATF base for Canine?
Answer. ATF will have $3,968,000 and 23 FTE in the fiscal year 1999
base for the canine explosives detection program. This does not include
$1,000,000 expected from the Treasury Asset Forfeiture Fund in fiscal
year 1999.
Question. Why has the funding level reduced?
Answer. ATF expects $1,000,000 in funding for the canine program in
fiscal year 1999 from the Treasury Asset Forfeiture Fund (TAFF). This
program also competes for funding--as do many programs--with other
Administration priorities. Therefore, the canine program was reduced
from $7,942,000 to $4,968,000.
Question. How will this impact the program?
Answer. The reduction will obviously mean that ATF will be able to
train fewer canines for State and local law enforcement than it
otherwise would have been able to train.
Question. How many ATF explosives detection dogs are operating in
the United States?
Answer. ATF currently has 8 ATF-trained and certified canines
working throughout the United States with ATF Special Agent/canine
handlers. ATF has also trained and certified a canine working in
conjunction with the pilot program. This canine is being handled by a
local MWAA police officer.
international enforcement branch and arms diversion
Question. Is arms diversion allied with counter terrorism?
Answer. In certain cases, arms diversion and terrorism may be
allied. ATF has known that decreasing the availability of illicitly
trafficked firearms to the international illegal market will deter
their use by terrorist groups, narcotics traffickers, and the criminal
elements operating in foreign countries.
Question. Where does the International Enforcement Branch (IEB)
have field offices?
Answer. The International Program and Policy Section, which was
formerly known as the International Enforcement Branch, currently has
field offices located in Bogota, Columbia; Mexico City, Mexico; and
Ottawa, Canada.
Question. What can the IEB do to reduce the flow of weapons across
the borders?
Answer. The International Programs and Policy Sections, in
conjunction with the National tracing Center, is attempting to have all
U.S.-source firearms that are recovered abroad traced through the
National Tracing Center. With foreign law enforcement providing the
description of crime guns recovered in their locale, ATF is able to
identify non-licensed individuals, as well as any Federal firearms
licensees, who are illegally supplying arms to foreign markets.
Information developed is forwarded to ATF field divisions where
international trafficking investigations are conducted.
The International Programs and Policy Section, in conjunction with
ATF's training and Professional Development Directorate, conducts
illegal firearms trafficking assessments and training for foreign
countries. The assessments and training serve to identify and address
problem areas related to firearms in the respective countries.
Question. If there is international government involvement in the
firearms diversion, what steps can be taken to limit the activities?
Answer. One way that the United States can prevent firearms
diversion is by encouraging other nations to mark firearms at the time
of manufacture and import, as well as by establishing or maintaining a
system of import, export, and in-transit licenses or authorizations to
govern the legal commerce in firearms. These two principles are part of
the OAS Convention to Combat Illicit Manufacturing of and Trafficking
in Firearms, Ammunition, Explosives and Related Materials signed last
year at OAS Headquarters in Washington, which will soon be sent to the
U.S. Senate for ratification. The U.S., together with its Group of
Eight partners, will also attempt to seek the adoption of a similar
instrument in the context of a planned UN Convention on Transitional
Organized Crime. The U.S. believes that agreements such as the OAS
Convention will go farther in securing international cooperation to
prevent legally traded firearms from being diverted into criminal hands
and, were diversion to occur, secure other nations' cooperation to
investigate, prosecute, and incarcerate those guilty of this crime.
Question. What is the involvement of revolutionary groups in arms
trafficking.
Answer. Revolutionary groups are a way that those involved in arms
trafficking obtain weapons of war. Their ability to acquire arms
legitimately is, for obvious reasons, very limited. So they look toward
trafficking to obtain this much needed commodity for their revolution.
Arms trafficking for these groups depends on many factors: the size
of the group, its location, its finances, its goals, etc. One group may
be involved in the trafficking of arms such as tanks from the former
Soviet Union and another may be purchasing firearms one or two at a
time and then mailing them home to a compatriot to use in the cause.
In the past, ATF has had many investigations involving groups that
were trafficking firearms and explosives in support of their cause. The
types of arms ranged from one or two firearms to hundreds of firearms.
The explosives ranged from black powder to hundreds of pounds dynamite.
data bases related to gun tracing information
Question. Are there legislative restrictions that complicate or
reduce ATF's abilities to collect or to create data bases related to
gun tracing information?
Answer. ATF has had to be very careful and sensitive to the
guidelines established under current appropriations' restraints and
yet, supplies all State, and Federal law enforcement agencies with the
crime gun tracing in support of their investigations. However, ATF's
National Tracing Center continues to strive for more efficient
analytical capabilities without establishing a national firearms
registry.
______
Internal Revenue Service
criminal investigations (ci)
Question. CI has been involved in some tax gap cases that involved
National Basketball Association referees and travel budgets. What was
this all about and how did the IRS identify there was a potential
problem?
Answer. The IRS cannot discuss on-going investigations. However,
within the past year, four NBA referees have pled guilty to filing
false tax returns charges.
Question. There are a number of militia groups interested in
developing a separate government. They are taking opportunities to
distribute their own financial notes to avoid paying debts to financial
institutions. These groups, like other tax protesters, try to develop
fraudulent procedures for claiming tax exemptions. Please explain what
the IRS can do to ensure that these individuals are paying their fair
share of taxes.
Answer. Tax protesters are not a recent phenomena. During the past
two decades CI has helped convict thousands of illegal tax protesters
for tax and money laundering violations.
Currently, CI is devoting approximately 4 percent of its total
resources to tax protester investigations. At any given time CI has
approximately 200 tax protesters under active investigation. During
fiscal year 1997, CI initiated 176 investigations of tax protesters,
117 indictments were returned and 89 convictions were obtained, with
many cases awaiting trial. Of those tax protesters sentenced to prison
(82.3 percent), the average prison sentence was 31 months.
Some of our most significant successes in the past few years were
against the leadership of the ``Freeman'' movement. The Freeman and
Republic of Texas movements are notorious for using the type of bogus
financial instruments about which you are inquiring. Leroy Schweitzer,
head of the Freeman, was sentenced to two years in prison for failing
to file Federal income tax returns. Schweitzer and his followers still
await trial on a multitude of charges arising from their efforts to
create worthless monetary instruments and other criminal activity which
culminated in the standoff in Justus, Montana.
Elizabeth M. Broderick, a hairstylist from California, attended a
seminar organized by Freeman Leroy Schweitzer where she learned how to
create worthless monetary instruments and market them to others.
Broderick became prominent in the Freeman movement by hosting numerous
seminars in California. These seminars ultimately resulted in the
creation of over $800 million in phony warrants. Many citizens were
defrauded through the use of these warrants. Unsuspecting individuals
who believed they could discharge their debts using these instruments
were financially ruined. Broderick realized over $1.2 million from
these schemes. She was charged with 28 felony violations, including
money laundering. At trial, the self-styled ``Queen of Liens'' was
convicted on 25 counts and sentenced to more than 16 years in prison.
In Iowa, seven members of the ``We the People'' organization were
convicted of 41 counts of mail fraud and conspiracy to commit money
laundering. These individuals engaged in a plan to promote a scheme
which offered millions in ``damages'' from a Colorado court case
against the Federal Government if a $300 filing fee was paid to the
defendants. Scott E. Hillenbrand, the group's leader, was convicted and
sentenced to 188 months in prison. Other members of his group received
sentences ranging from 37 to 87 months.
These are just a few examples of the cases in which CI has been
involved. Tax protest investigations are a high investigative priority
because illegal tax protest activity adversely affects not only
voluntary compliance with the tax laws but the lives of many citizens
as well.
Question. The Tax Gap, or the difference between the amount of tax
owed and the amount paid, is estimated to be approximately $130
billion. To have the greatest deterrent on non-tax compliance the CI
identifies and investigates cases that will generate the most
publicity. How does IRS determine which cases to take on?
Answer. IRS Tax Gap criminal investigations consist of tax
investigations involving legal industries.
CI is focusing enforcement activities on tax gap investigations
that reduce the tax gap and increase voluntary compliance. During
fiscal year 1997, 1,252 individuals were sentenced on tax gap charges
and 74 percent of those sentenced were sent to prison.
For IRS Criminal Investigation, the tax gap encompasses our ``Fraud
Program.'' The Fraud program covers a broad range of illegal activity,
primarily involving legitimate industries. All statutes under Criminal
Investigation's jurisdiction may be used in these investigations. This
includes not only Title 26 of the Internal Revenue Code but also
violations of the Bank Secrecy Act and the Money Laundering Control
Act. During the last several years, the national priorities relating to
the Fraud Program have been investigations concerning Bankruptcy Fraud,
Healthcare Fraud, Unscrupulous Return Preparers and Illegal Tax
Protesters. Additionally, we invested substantial resources in the
investigation of Excise Tax Fraud, Financial Institution Fraud, Gaming
Fraud, Public Corruption, Telemarketing Fraud, Questionable Refund
Fraud and General Tax Fraud.
In addition, CI has identified significant areas of noncompliance
which have been brought about by changing economic, political and
social conditions. These ``emerging issues'' consist of Foreign and
Domestic Trusts, Pension Fraud and Entitlement and Subsidy Fraud (Non
Healthcare).
The CI field offices consider the above priorities and emerging
issues in expending investigative resources and balance the
investigative attention given to each area. Further, the overall
deterrent impact which can be made in an industry, geographic area and
occupation caused by an investigation and subsequent prosecution are
also considered. Also, the sentencing guidelines are considered in the
selection process because in these times of scarce resources, the
single most important factor is the deterrent effect that can be
achieved by a prosecution. Absent unusual circumstances, the
investigation will not be opened unless the actions of the target are
serious enough to warrant incarceration upon conviction.
The concept of voluntary compliance is dependent upon changing the
behavior of those who would evade taxes through fraud and deceit. This
can only be achieved through seeking out, prosecuting and informing the
public about those who are benefiting the most from fraud schemes;
those who are innovators in perpetrating fraud; and those who by their
behavior lure others to evade taxes.
Question. Does the agency look at cases that will provide the
greatest ``bang for the buck'' in terms of bringing in revenue?
Answer. CI does not pursue an investigation solely because that
individual case may result in the collection of substantial additional
tax dollars. Instead, CI recommends prosecution of those who violate
the tax laws to demonstrate the IRS commitment to ensuring that all
taxpayers pay their fair share of taxes: It is a matter of public trust
for those who are honest, and it is a matter of a warning for those who
attempt to evade their taxes or commit a currency crime. To accomplish
this, we institute investigations and recommend prosecution across a
broad geographic, economic and occupational spectrum. The resultant
publicity, therefore, serves the dual purpose of ensuring public
confidence and deterring fraud. However, absent unusual circumstances,
a case will not be opened unless the actions of the target are serious
enough, (for example involve enough omitted income) to warrant
incarceration under the sentencing guidelines upon conviction.
Question. Please explain how the Questionable Refund Program
operates. Do the analysts review random returns or are the returns
flagged by another procedure?
Answer. The Questionable Refund Program (QRP) is a nationwide
multifunctional program established by IRS in January 1977. The purpose
of this program is to detect and identify fraudulent returns, stop the
payment of the false refunds and refer QRP Schemes to District Office
Criminal Investigation (CI). Returns with questionable civil issues are
referred to other Service Center functions.
The program's major detection operations occur in the ten Service
Centers. Questionable Refund Detection Teams (QRDT's) conduct
preliminary pre-refund reviews of millions of questionable returns
identified by manual and computerized screening techniques. False
return schemes meeting specific criteria are referred to field offices
for possible criminal investigation. The false returns not meeting
criminal referral criteria are retained by the applicable QRDT. Duties
performed by QRDT personnel include, but are not limited to, scanning
returns, verification of income claimed on suspicious returns, placing
Master File CI controls on false returns, monitoring all QRP/CI
controlled Master File accounts, developing the full scope of
identified QRP schemes, referring QRP Schemes to District Office CI,
utilizing the Treasury Enforcement Communications System (TECS) for
transmitting scheme information to other QRDT's, providing QRP support
for district office CI personnel, handling QRP court ordered
restitution cases, and responding to taxpayer refund inquiries
pertaining to QRP controlled MF accounts, etc.
The QRDT's do not review returns on a random basis. The main source
of returns selected for the QRP involves elaborate computer programs
that apply weighted criteria against every refund return (individual
returns, e.g., 1040, 1040A, 1040EZ, 1040PC, TeleFile, on line returns,
etc.) that is processed. The criteria are developed and refined yearly
based upon the profile of fraudulent returns previously discovered and
compared against a known sample representative of all returns that are
filed. These computer programs are capable of modification or data
insertion when schemes are identified, to allow for expansion of the
total extent of the filings. Other computer runs monitor the addresses
of returns and identify significant trends of filings.
Throughout the year, as schemes are developed, the QRDT's utilize
the resources of numerous other service center functions to assist in
identifying the totality of the schemes. The QRDT's receive assistance
from Returns Processing, Information System Management, Electronic
Filing, Internal Audit personnel, Adjustments, Notice Review, etc. In
addition, referrals are received from return preparers, informants,
banks, and the Secret Service.
The program relies to a great extent on the labor intensive
scrutiny of paper documents for indications of fraud. The advent of
Electronic Filing (ELF) and direct deposit refunds have provided ever
increasing challenges. The amount of refund fraud increased
dramatically in conjunction with the implementation of ELF and
increased Earned Income Tax Credit. Accordingly, the need for more
sophisticated fraud detection methods became critical.
The Electronic Fraud Detection System (EFDS) is the major fraud
detection tool for ELF returns. EFDS was developed by Research
Division, the Los Alamos National Laboratory, Criminal Investigation
Branch and the Electronic Filing Branch at the Cincinnati Service
Center (CSC). EFDS gained support and priority due to both internal and
external concern over the tax system's vulnerabilities to fraud.
During the 1994 Filing Season, EFDS was prototyped at the CSC
Criminal Investigation Branch. In the 1995 Filing Season, limited
functionalities (Prescan & Query) were rolled out to the other ELF
Center QRDT's. For the 1996 Filing Season, additional workload
management features were included and the system was further rolled out
to the NON-ELF Center QRDT's.
We continually pursue EFDS improvements as well as various other
avenues in order to thwart the attempts of fraudsters and to protect
the revenue.
Question. Does the Program utilize the Revenue Protection Strategy?
Answer. Yes. The Revenue Protection Strategy was built on a four-
pronged approach to the problem of fraudulent or questionable claims:
--Research.--Conduct statistically valid and other data analysis of
abuse areas to identify the nature of the problem and develop
appropriate responses.
--Prevention.--Design up-front validations of return information to
prevent fraudulent or questionable claims from entering the
filing system.
--Detection.--Develop improved detection systems to identify
multiple-return fraud schemes and patterns of abuse among
groups of taxpayers.
--Enforcement.--Where appropriate, pursue criminal investigation and
prosecution of fraudulent refund claims. In addition, select
appropriate returns for pre-refund examination of claims to
ensure only valid claims are paid.
Since inception and implementation, the main focus of the QRP has
been to protect the revenue. Due to its very nature, QRP has been, and
continues to be, on the cutting edge of detecting all types of tax
abuse. QRP has been responsible for the identification of substantial
tax related issues existent in other programs within the Service,
resulting in hundreds of millions of dollars in savings, e.g., Illegal
Tax Protesters, Abusive Tax Shelters, Earned Income Tax Credit abuse.
The Service believes that the Revenue Protection Strategy can
reduce the Service's vulnerability to fraud and abuse and prevent the
issuance of substantial dollars in false or inflated claims. Thus, the
service needs to continue to focus our efforts to identify questionable
claims for refundable credits such as the Earned Income Tax Credit.
Question. Criminal Investigation prioritizes its efforts in
currency reporting and money laundering to ensure its resources are
used for those cases that require the financial expertise provided by
your staff. Please explain how you prioritize your cases.
Answer. Due to its limited resources and specialized expertise, CI
has prioritized its efforts in currency reporting and money laundering
enforcement, concentrating on those investigations whose size, scope,
and complexity require the financial investigative expertise of its
special agents. Selection and prioritization of targets for
investigation are made in accordance with minimum standards set by the
Assistant Commissioner (CI), and in furtherance of the mission of CI.
National Office review and management oversight ensure compliance with
these concepts.
Question. What percentage of cases does Criminal Investigation turn
down?
Answer. The percentage of cases turned down by CI cannot be
determined because cases which are not pursued are not tracked.
______
U.S. Customs Service
drug smuggling in the midwest
Question. Customs is requesting an additional $50 million in fiscal
year 1999 to acquire non-intrusive inspection technology for land and
sea ports. And, we are aware of the continuing problem of drugs coming
across our border, particularly the Southwest Border and Miami. But,
there are drugs coming into the international airports across the
country. What is being done in the Midwest to combat increased drug
activities? For example: What efforts or resources are Customs
employing at the Chicago International airport to stem the increase of
heroin that is flowing into Milwaukee?
Answer. Most major airports have Customs Passenger Analysis Units
(PAU's) assigned, which employ the latest in information and
information technology, to select high-risk passengers for examination,
in advance of their arrival. The PAU uses Advance Passenger Information
(API), which is an electronic passenger manifest sent to Customs by air
carriers in advance of the flight's arrival, to conduct extensive name
checking against several data bases of known and suspect violator
information. In addition, PAU's use non-suspect information to identify
passengers who, although they have no previous records, may be
traveling for the purposes of violating the law. Through performance
measurement, Customs has determined that PAU's are about 55 times more
effective than simple random inspections.
Customs also employs highly trained roving inspectors, whose sole
purpose is to identify narcotics smugglers. This elite force has proven
to be an effective tool to combat drug trafficking, and is used as a
model for many foreign customs agencies.
Customs Chicago O'Hare airport PAU and rover inspectional units are
a highly trained and motivated interdiction force employing the latest
in information and information technology, along with training in
observational behavioral analysis, in an effort to identify the few
narcotics smugglers from among the 3.2 million air passengers arriving
each year. In addition, nine canine enforcement officer teams are
employed at Chicago O'Hare, and are used to locate narcotics in cargo,
baggage, and among passengers.
Chicago O'Hare also employs a new concept in Customs tactical
targeting, known as the ICAT, or Information Collection and Analysis
Team. The ICAT employs Customs inspectional, intelligence, and
investigative resources, in a single cohesive unit. The ICAT provides
inspectors with tactical targets from arriving passengers.
Chicago is also home to the Combined Agency Border Interdiction
Network or CABINET. This unit, formed in the 1980's, includes resources
from among Customs, six other Federal agencies, and foreign customs
agencies. Its sole purpose is to use available information on aliens to
target for drug smugglers, with a specialty of West African heroin
smugglers. As a result of its close proximity, a special relationship
exists with inspectors at Chicago O'Hare airport.
automatic license plate readers
Question. Funding was provided in fiscal year 1998 for automatic
license plate readers. Is this initiative now being funded in the base?
How many license plate readers were acquired with the fiscal year 1998
funding? Where are these readers being used?
Answer. Funding was provided in fiscal year 1998 for license plate
readers as part of the first phase of the Land Border Automation
initiative, which also contained funding for the replacement of
Interagency Border Inspection System primary terminals and Automated
Permit Port/Remote Video Inspection technology. Congress' fiscal year
1998 enactment of $9.5 million for this initiative is recurred in the
Crime Bill base for fiscal year 1999.
The Customs Service, in cooperation with the Immigration and
Naturalization Service, has placed license plate readers in Southern
California and Blaine, Washington. The priority for installation of
license plate reader equipment for the Federal Inspectional Service
agencies is the southern border. Customs expects that by the end of
fiscal year 1998, installation will be underway at Nogales, AZ; El
Paso, Laredo, and Brownsville, TX. Customs will continue the nationwide
deployment of automatic license plate readers, Automated Permit Port/
Remote Video Inspection technology, and the replacement of Interagency
Border Inspection System primary terminals with the funds requested in
fiscal year 1999.
detection technology
Question. The Customs Service has a strong presence on the U.S.
Mexican border. The Administration has requested additional funding for
border patrol agents and for technology that would assist Customs
inspectors. Is there technology available that would serve multiple
efforts such as detection, monitoring air, land, and maritime
activities? If such technology exists has a cost benefit analysis of
its effectiveness been conducted?
Answer. There is no single technology or multiple-use system that
we are aware of that could detect and monitor targets for all air,
land, and maritime activities. However, there are several types of
satellite-based electronic tagging and tracking systems that could
monitor suspect air, land, or marine movements once the target plane,
vehicle or boat has been detected and a tracking device covertly
installed.
There are some radar systems currently deployed that either are, or
can be, capable of detecting and monitoring most air and maritime
targets of interest to Customs. These include the airborne radars in
Customs P-3 AEW aircraft and the DOD aerostats that can detect targets
up to 150 miles away, and the radars in the Customs Citations and other
Customs, Coast Guard, or military aircraft that can detect targets up
to several miles away.
The land-based DOD Relocatable Over-the-Horizon Radar (ROTHR) can
detect and monitor air targets, and ultimately marine targets, that are
several hundred miles away.
Cost benefit analyses for the effectiveness of the P-3, aerostat,
and ROTHR were conducted in the early development and cost
justification days of these programs. They concluded that each was
effective for the multi-agency applications for which they were being
used; i.e., Customs, Coast Guard, INS, and DEA enforcement activities,
and DOD early warning missions.
______
U.S. Secret Service
security of secret service protectees
Last year in response to a question for the record concerning ``* *
* the level of security the Service would feel comfortable with * *
*'', the Secret Service responded ``* * * the Service is comfortable
with the level of security that we are currently providing to our
protectees''. The Service went on to say that ``* * * the level of
threats to the president have remained constant over the past four
years.'' However, the fiscal year 1999 budget requests an additional 25
employees and $5 million for assignment to the Presidential, Vice
Presidential, and Former President protection details.
Question. Why are additional personnel requested?
Answer. The Service is comfortable with the level of security that
is currently being provided to protectees. However, in order to provide
this level of security, Service personnel assigned to protective
details are currently working inappropriate levels of overtime,
approximately 19 percent more than agents assigned to the Service's
five largest field offices. Also, due to operational needs, the
protective details do not have the staffing necessary to ensure that
regular training is achieved. The additional staffing will ease this
situation and enhance the operational effectiveness of the protective
details.
Question. What has changed since the Service responded to these
questions last spring?
Answer. Nothing has changed. The Service is comfortable with the
level of security that is currently being provided to protectees. The
issue is the level of overtime that is being worked by detail
personnel, and our inability to schedule regular training for these
employees.
Question. Will this request fund anything other than personnel?
Answer. This request will fund personnel and their concomitant
equipment and training only.
protective travel funding shortfall
The fiscal year 1999 budget requests less funding for travel and
related costs than the Service received in fiscal year 1997. The fiscal
year 1997 travel allocation may not have been sufficient to cover the
actual cost accrued.
Question. Is the fiscal year 1999 request sufficient to meet the
projected travel needs in that year?
Answer. The Service is currently in the process of re-evaluating
funding requested for travel expenses.
The Service is reviewing some of its assumptions regarding the
annual level of protective travel costs. The actual costs of travel,
including hotel and per diem costs, have increased beyond what had been
anticipated. Also, both the level of protectee travel and the nature of
that travel, especially for the President and foreign heads of state
and government visiting this country, have changed. The President's
level of foreign travel is beyond what was anticipated, and the number
of foreign dignitary visits to this country has increased
significantly. Finally, the Service has also made changes to the way
protection is provided to its protectees when travelling, especially
the President. Greater use is being made of technologically
sophisticated equipment. New threats continue to be identified that
necessitate the development and deployment of new counter-measures.
Deploying these new counter-measures requires increasing the number of
specially trained personnel that must travel with the President. All of
these factors are being weighed as we re-evaluate both fiscal year 1998
and fiscal year 1999 travel needs.
Question. Are there some projections on the level of travel a
second term President conducts toward the end of the term?
Answer. The Service does not make a zero-based projection of its
annual travel expenses each year. Development of the annual travel
budget is not founded on differing yearly assumptions regarding the
upcoming travel schedules of the President and other protectees. The
information regarding protectee travel plans is simply not available
for use in making annual projections when preparing the fiscal year
budget. Rather, the travel budget simply reflects the assumption that,
except for major extraordinary events, e.g., an economic summit held in
this country, a visit by the Pope, or a presidential campaign, travel
activity and travel costs, adjusted for anticipated inflation, will
remain constant. There are no assumptions made, nor costs projections
rendered, relative to the second term, or for that matter, any period
of time for the incumbent President.
Question. What systems are in place to ensure that travel costs can
be accommodated by the allocation requested?
Answer. There is nothing the Service can do to absolutely ensure
that its travel allocation is adequate. Approximately eighty percent of
its travel budget is spent on fulfilling its mandated protective
responsibility, and is therefore effectively controlled not by the
Secret Service, but by those individuals that we protect. However,
having said this, the Service can ensure that it carefully monitors its
travel budget, and knows where spending stands vis-a-vis this budget at
any given time. Having current travel costs information, along with
knowing the future travel plans of protectees as soon as possible, will
allow the Service to make budget adjustments and, depending on the
magnitude of any unexpected increase in travel costs, propose to the
Congress a reprogramming of funds from elsewhere in the budget to cover
any shortfall.
The Service has made some changes in its operating procedures to
ensure that it has the best and most timely information possible
regarding its travel expenditures. It has re-emphasized the importance
of obtaining trip and itinerary information from the protectee details
as soon as possible. New cost accounting procedures to provide domestic
and foreign travel costs in a more timely and detailed manner have been
established. Finally, the Service has a working group that continues to
analyze travel data and costs-tracking issues.
missing and exploited children
In recent years the subcommittee has provided funding so that the
Secret Service could expand some of their unique forensic resources as
they apply to Child Exploitation Cases. Since many State and local law
enforcement agencies are experiencing limited budgetary resources,
initiatives such as this one could prove invaluable in investigations
into child victimization cases.
Question. Please provide the committee your brief assessment of the
Service's involvement into child victimization cases.
Answer. During the last two fiscal years, the Service's forensic
support for the Center for Missing and Exploited Children (CMEC) has
included polygraph examinations, handwriting examinations, voiceprint
comparisons, audio and video enhancements, age progressions/
regressions, and fingerprint research and identification. Of the 39
polygraph examinations involving missing and exploited children,
twenty-five (25) subjects were found to be deceptive. Of these, twenty-
two confessed to the allegations of sexual/child abuse. A suspect in
one of these examinations, which was conducted in Houston, TX, admitted
that she critically injured her one year-old son by intentionally
running over the child's head with the wheels of her automobile.
Another suspect in Schereville, Illinois admitted helping his
girlfriend drown her eight-year-old stepdaughter in the family's
bathtub.
Three of the more noteworthy handwriting examinations conducted by
the Service involved child assaults and homicides. In one, a
handwriting examination was conducted for the Chicago Police Department
with handwritten notations left on the abdominal area of an
unidentified, unconscious young girl who had been beaten and raped. The
markings were made with a marking pen and were compared against the
handwriting specimens of a number of suspects. This comparison resulted
in implicating an individual. The suspect was confronted with this and
other evidence and admitted to the assault. The case was highly
publicized in the Chicago area and was dubbed the Girl X case. The
second investigation involved a handwriting examination conducted for
the U.S. Attorneys Office, in Washington, D.C. in the matter of the
homicide of a 12 year-old boy. The Service examined letters that were
purportedly gang letters written by gang members referencing the
slaying of this youth. An incarcerated suspect was identified as having
written some of the letters to other gang members. The third involved
handwriting and ink analysis examinations, as well as audio
enhancement, for the Boulder, CO Police Department investigating the
JonBenet Ramsey homicide.
We have also obtained all of the known handwriting specimens from
the pedophile files managed by the CMEC and entered them into the
Forensic Information System for Handwriting (FISH), the Service's
unique automated handwriting recognition computer application.
Interestingly, the first identification that FISH made for the CMEC was
the author of an anonymous threat directed at the Center itself.
Our network of connectivity with most of the state and local
Automated Fingerprint Identification Systems (AFIS) has allowed us to
process requests received from local police seeking missing children,
kidnappers, and serial rapists. We also received a request from the
U.S. Customs Service to develop latent fingerprints on pornographic
materials recovered in the search of the residence of a Florida State
Patrol Officer. This officer had been identified as a suspect in a case
involving improper advances directed at a seventeen year-old male
victim. The officer's prints were subsequently developed on the
submitted materials. Our pending acquisition of a state-of-the-art
vacuum metal deposition device will permit us to provide an outstanding
means of developing latent fingerprints on non-porous surfaces, many of
which are common in homicide investigations. Use of a first generation
device, which is now inoperable, allowed us to develop fingerprints of
murder suspects on plastic garbage bags recovered in two homicide
investigations.
The U.S. Secret Service has deliberately focused its research
efforts to improve the process of developing children's latent
fingerprints. These efforts began when scientists from the Oak Ridge
National Laboratory (ORNL) asked chemists from the Service's Forensic
Services Division to act as scientific/forensic advisors for their
project involving the analysis of children's fingerprint residues. ORNL
had been requested to assist a local police department with a child
abduction case. When investigators were unable to find any of the
abducted child's prints in the suspect's car (despite witnesses placing
the child in the suspect's car), ORNL performed instrumental analysis
methods to see if there were chemical differences between adult and
child prints. Preliminary results from their limited initial study
indicated that there were differences.
The U.S. Secret Service, after obtaining funding through the
Technical Support Working Group (TSWG), contracted with the Pacific
Northwest National Laboratory (PNNL) in Richland, Washington to follow
up and expand beyond the data obtained at ORNL. PNNL's work, which just
recently began, will focus not only on a rigorous analysis of latent
print residues, but will also address how these residues change with
time (up to 6-9 months), an aspect not investigated by ORNL. Samples
will be obtained from both male and female subjects of varying ages and
analyzed using some of the most advanced and sensitive analytical
instrumentation available. Particular emphasis will be focused on the
results obtained from the analyses performed on children and adolescent
print residues. It is hoped that once a comprehensive understanding of
both the organic and inorganic components of children's prints (and how
these compounds are modified with time) is obtained, that further
research efforts could be focused on creating new processes for
visualizing the more stable compounds identified in this study. Using
the currently existing processes, it is difficult to recover children's
prints from crime scenes after a day or so. Therefore, it is hoped that
the results from this research will assist law enforcement agencies
worldwide in investigating and prosecuting cases involving missing and
exploited children.
The Service also utilized its Triggerfish technology, which tracks
cellular phone communications, to locate a known child abductor and two
kidnapped children in Miami, Florida.
The Service now has three graphic artists who can support the CMEC
with requests for age progression and regression, as well as two
audiovisual forensic scientists who can enhance audio and video tapes
and conduct voiceprint analysis. In January 1998, the Forensic Services
Division also produced a public service announcement videotape
featuring the Director of the National Center for Missing and Exploited
Children.
Since initiating the Children's Identification System (KIDS), which
provides parents with a printed document that contains the thumbprints
and a photograph of their child, the Service has processed more than
seven thousand children at different sights across the country. The
Service utilizes Livescan fingerprint equipment and digital cameras to
produce the documents. Frequently, KIDS support is provided at events
hosted for local and state law enforcement personnel where the Service
publicizes the availability of the forensic support described above to
the investigators actually tasked with suppressing these heinous
crimes.
Question. Please explain why funding was not requested in fiscal
year 1999.
Answer. The Secret Service has received funding for this initiative
since fiscal year 1995. For fiscal year 1999 however, budgetary
constraints required that limited funds be targeted to the Service's
core mission responsibilities.
financial crimes
At last year's hearing there was a discussion on 4-1-9 or
``Advanced Fee Fraud'' cases. At that time over 350 businesses and
individuals in Wisconsin had been sent solicitation letters.
Question. Please provide an explanation of the types of fraud you
have detected.
Answer. Advance fee frauds emanating from Nigeria are targeting
citizens throughout the world, and have resulted in financial losses in
the hundreds of millions of dollars. The U.S. Secret Service initiated
a pilot program dubbed ``Operation 4-1-9'' designed to assess the
financial losses to U.S. citizens, and to combat advance fee fraud
through bi-lateral and multi-lateral operations with our foreign law
enforcement counterparts.
Financial losses reported to the Secret Service by American
citizens have exceeded $100 million dollars. Experience has shown that
many victims are often reluctant to report their losses due to fear or
embarrassment, and it is likely that the actual financial losses far
exceed the reported figures.
Investigations have also shown that the proceeds of these advance
fee frauds are being diverted into other types of criminal activities,
including the trafficking of narcotics.
The Secret Service has developed a data base consisting of over
80,000 advance fee fraud letters. Using this data base the Service has
identified the locations of suspected fraudsters in Lagos, Nigeria.
Agents of the Secret Service, acting in an advisory capacity, have
accompanied Nigerian law enforcement authorities in the execution of a
number of search warrants, resulting in the arrests of advance fee
fraudsters in Lagos.
Secret Service agents have accompanied a number of U.S. victims of
advance fee fraud to London where, in conjunction with the London
Metropolitan Police, they have participated in a number of ``lure
operations'' resulting in the capture of Nigerian criminals.
Investigative information, in the form of telephone/facsimile
numbers and bank accounts known to be associated with the receipt of
the illicit proceeds of advance fee frauds, has been passed through our
overseas offices to law enforcement authorities in Canada, France,
Germany, Hong Kong, Malaysia, Monaco, the United Kingdom, and other
countries.
Advance Fee Fraud (AFF) letters and faxes are confidence schemes
and appear as various proposals from ``officials'' of Nigerian
Government ministries or existing companies, or involving Nigerian
Government contracts. The letters and faxes contain official-looking
stationery with appropriate government seals, stamps, and signatures.
Names and addresses of potential victims are obtained through various
trade journals, business directories, magazine and newspaper
advertisements, chambers of commerce, and the Internet. These criminals
do not target a single company, but rather send out mailings en masse.
All AFF proposals share a common thread. The proposals are
unsolicited, emphasize the urgency and confidentiality of the deal, and
require the victim to pay various government and legal fees and taxes
before receiving what turns out to be nonexistent money.
Part of the criminal's ruse is to have the victim travel to Nigeria
(either directly or via a bordering country) to meet with a Nigerian
Government ``official(s)'' to complete the transaction. Once in
Nigeria, these criminals will attempt to solicit more money from the
victim, either by continuing the elaborate ruse, or, if that fails,
physical intimidation.
Advance Fee Fraud confidence schemes usually fall into the
following categories: Transfer of Funds from Over-Invoiced Contracts;
Contract Fraud (C.O.D. of Goods and Services); Conversion of Hard
Currency (Black Money); Sale of Crude Oil at Below Market Prices;
Purchase of Real Estate; and Disbursement of Money from Wills
(Benefactor of a Will).
Transfer of Money From Over-Invoiced Contracts
About 90 percent of AFF are over-invoiced contract scams. The scam
involves an offer to transfer large sums of money into an overseas bank
account owned by a foreign company. The money comes from over-invoiced
contracts from a Nigerian company or one of the Nigerian Government
ministries (that is, Central Bank of Nigeria, Nigerian National
Petroleum Corporation). The author of the letter claims to be a
government or bank official who is willing to pay the victim a generous
commission of up to 30 percent for assisting in the transfer of the
funds. Initially, the victim is asked to provide company letterhead and
bank information to initiate the transfer of funds. The victim soon
finds out that he or she is required to pay various ``transaction
fees'' before the money can be released. The victim can be strung along
for months or years paying various fees and taxes before realizing that
the money does not exist.
Conversion of Hard Currency (Black Money)
The letter or fax entices the victim with a ``chance of a
lifetime'' offer. Once the victim agrees to allow the criminals to
obtain a visa for him or her and meet them in Nigeria, (or a neutral
country) the following scenario occurs:
The victim will be shown a suitcase allegedly full of U.S. currency
in $100 bill denominations that was temporarily defaced with a black
waxy material (Vaseline and iodine) to mask their origin. The criminals
tell the victim that there is $40 million dollars in the suitcase.
However, in order to remove the material and restore the notes, the
victim must purchase a special solution (commercial cleaning fluid).
The cost of this ``special'' solution ranges from $50,000 to $200,000.
The victim will receive 40 percent of the $40 million as his or her
``commission.''
The criminals will wash one of the bills with the special solution
restoring the U.S. currency to its original form. In an effort to
alleviate any doubts the victim may have, the victim will be asked to
pick out another $100 bill at random to be cleaned. Before the criminal
cleans the bill, the victim is momentarily distracted by one of the
criminal's accomplices. During that split second, the criminal using
slight of hand, will pull out a real $100 bill from his sleeve and
clean it in front of the victim. The ``treated'' notes are given to the
victim to take to a bank for verification.
In some instances, as a sign of good faith, the victim will be able
to keep the suitcase for a short time, until the victim gets the money
to buy the solution. To prevent the victim from opening the suitcase,
the victim is told that exposure to the air will cause the black
substance to ruin the money. Ammonia is placed inside the suitcase in
the event the victim opens the suitcase giving the impression that the
money is disintegrating.
The criminals walk away with the victim's money, and the victim
ends up with a suitcase full of blank paper.
Sale of Crude Oil at Below Market Prices
The victim is offered special crude oil allocations at lower than
the market rate. As in other AFF business proposals, the victim is
required to pay special registration and licensing fees to acquire
crude oil at below market price, only to find that the ``sellers'' have
disappeared once the fees have been paid.
Purchase of Real Estate
This fraud involves an offer to purchase real estate using the
services of a real estate broker or a ``well established'' business
executive. Once a home is located, the broker or person acting on
behalf of the home buyer is required to pay certain fees to complete
the transaction in return for receiving a normal commission.
Disbursement of Money from Wills
In this variant of the money transfer fraud, charities, religious
groups, universities, and nonprofit organizations receive a letter or
fax from a mysterious benefactor interested in the group's cause and
wishing to make a sizable contribution. Before the contribution can be
released, the recipient must first pay an inheritance tax or various
government fees and taxes. The victim also may be requested to travel
to Nigeria and/or a bordering country to collect the ``gift.''
Question. How is the Secret Service dealing with these scam
artists?
Answer. The Secret Service has undertaken a three pronged approach:
(1) education, (2) interdiction, and (3) investigation, to combat this
growing problem. The Secret Service is the lead agency in twelve task
forces throughout the United States whose focus is the investigation of
financial crimes committed by Nigerian criminals. Membership in the
task forces includes representatives from the Department of State-
Diplomatic Security Service, the Drug Enforcement Administration, the
Federal Bureau of Investigation, the Immigration and Naturalization
Service, the U.S. Customs Service, the U.S. Postal Inspection Service,
and numerous local and state law enforcement agencies.
The President's International Crime Control Strategy, and other
initiatives such as Presidential Decision Directive (PDD) 42 recognize
the global threat posed by organized criminal groups. The Secret
Service has established liaison with both the Department of Justice,
Office of International Affairs, and the Department of State regarding
prosecutorial guidelines, extradition, and coordination of
international advance fee fraud activity. Secret Service agents
occasionally perform temporary duty assignments in Lagos to assist the
Nigerian Special Frauds Unit in the investigation of these crimes. The
Secret Service is involved in bi-lateral and multi-lateral initiatives
with law enforcement agencies throughout the world, to include the
Metropolitan Police in London, the Bundeskriminalamt in Germany, and
the Royal Canadian Mounted Police in Toronto, Canada. The Secret
Service is the lead agency in the G-8's U.S. Delegation to the Law
Enforcement Project Sub-Group for the Project Based Initiative on West
African Fraud.
American citizens are losing their life savings, and more, to these
fraudulent schemes. At least two Americans have lost their lives after
traveling to Lagos in pursuit of an advance fee scheme. The Secret
Service is working with the Department of State, Department of
Commerce, Department of Justice, Better Business Bureaus, and others as
part of a comprehensive public awareness campaign which has
successfully prevented large numbers of American citizens from falling
victim to these crimes. The Secret Service has given countless national
print, radio and television interviews on the subject.
The Secret Service has added a section on advance fee fraud to its
home page on the Internet. Public response to this web page, via
telephone, mail, and e-mail has revealed more than $100,000,000 in
losses incurred by victims of this type of fraud. Several other
visitors to this site have reported being solicited for funds for
apparent advance fee schemes. Gaining information via this web site has
prevented some of these individuals from becoming victims of this
crime, while others have been able to avoid additional losses.
Investigative leads obtained from victims throughout the world have
identified Nigerian criminals, and in some instances, non-Nigerian
accomplices, resulting in the arrest of these criminals, and the
seizure of millions of dollars in illicit proceeds.
detection of counterfeit u.s. currency
Question. What is the status of the Secret Service overseas
program?
Answer. Since 1994, the Service has requested an additional 33
overseas positions.
Question. How many positions does the Secret Service currently have
overseas?
Answer. The Secret Service currently has a total of 36 agent
positions and 14 support positions, assigned to its 13 overseas
offices.
Question. How does this relate to the number of positions
requested?
Answer. Of those requested positions, 25 positions have been
approved. Positions which have not received Chief of Mission approval
include three positions in Moscow; three positions in Mexico City; and
one position each in Bogota and Manila.
Question. Have you worked with the State Department to create
offices where needed?
Answer. Although the Service currently is not pursuing the Manila
position, it continues to work closely with the State Department and
appropriate Chiefs of Mission in obtaining approval for the other
requested positions.
According to the summary performance report the Service anticipated
better results in the number of counterfeit notes seized and closing of
credit card and financial institution fraud cases. Now it appears the
Service has reduced its targets for fiscal year 1998/1999.
Question. Why are the performance targets reduced?
Answer. The change to financial crime performance goals for fiscal
year 1998 and fiscal year 1999 was due primarily to an internal
realignment of priorities and resources. Specifically, a greater
emphasis is being placed on current and new protection
responsibilities. The effect of this change will likely be that the
overall quantity of cases closed and arrests will drop slightly.
Although the number of credit card/access device fraud cases closed
was somewhat lower than anticipated, most of the other investigative
program performance goals were either met or exceeded during fiscal
year 1997. Both measures of case quantity and quality improved during
fiscal year 1997. The total number of financial crime cases closed, the
percentage of high priority cases, and the percentage of cases
resulting in prosecution at the Federal level all increased. In
addition, a record number of arrests for financial crime violations and
corresponding indictments were reported during fiscal year 1997.
Question. What problems did you experience in 1997 that resulted in
not meeting the projected goals?
Answer. A change in the means by which counterfeit currency is
produced goes a long way toward explaining why performance goals were
seemingly not met. The level of counterfeit notes passed to the public
tends to change from year to year. However, the amount of counterfeit
currency seized is more volatile and often fluctuates. These
fluctuations depend on the number and aggressiveness of counterfeiting
plant operations, the type of counterfeiting processes used to produce
the counterfeit notes, and whether the operation is located
domestically (or in a cooperative foreign country), or in a country
with an uncooperative government.
Recently, there has been a shift in the technology used to produce
counterfeit currency. The current pattern moves away from using the
older offset printing techniques to using the new high quality laser
and ink jet printers. This shift means that counterfeiters no longer
need to produce large stocks of counterfeits during a single production
run for distribution at a later time. With the new laser and ink jet
technology it is as efficient to produce only that which is being
passed or sold at that time as it is to produce a large volume. As a
result, there are smaller inventories of counterfeit notes on hand to
be seized when these operations are suppressed.
Question. Were fewer counterfeit notes passed?
Answer. As noted above, the amount of counterfeit U.S. currency
passed varies slightly from year to year. In fiscal year 1997, a total
of $34.7 million in counterfeit U.S. currency was passed worldwide.
This figure represents a 3 percent drop from the previous fiscal year.
Question. How do you know the number of notes that were passed?
Answer. Counterfeit notes passed come to the attention of the
Secret Service in two ways. First, a citizen, merchant or local bank
may discover what they believe is a counterfeit note and report it
directly to the local Secret Service office. An expert in counterfeit
detection will determine if the note is genuine or counterfeit. If
counterfeit, it will remain in the possession of the Secret Service, be
inventoried for possible use as evidence, and reported for statistical
purposes. Counterfeit notes of better quality may remain in circulation
until they reach a Federal Reserve Bank. Notes detected at the Federal
Reserve are turned over to the local Secret Service office. These notes
are also inventoried and reported for statistical purposes. In theory,
and empirically demonstrated, virtually all counterfeit notes placed in
circulation will ultimately be detected and reported to the Secret
Service.
federal law enforcement wireless users group
Continued funding is requested for the Federal Law Enforcement
Wireless Users Group (FLEWUG). FLEWUG was established to provide radio
inter-operability.
Question. Is there currently a Treasury-wide effort that requires
all the law enforcement agencies to acquire radio and communications
systems that are inter-operable. Could alternative efforts be developed
that would provide for inter-operability outside of FLEWUG?
Answer. It has always been the goal of the FLEWUG not to reinvent
or duplicate efforts by other federal, state, or local agencies in
achieving interoperability. Rather, the FLEWUG views its role as a
facilitator and repository of the various techniques that public safety
agencies are currently utilizing to link radio systems with different
technologies and different radio frequencies to achieve
interoperability. More importantly, the FLEWUG brings a national level
focus to the problems faced by the public safety community as a whole,
and this visibility encourages the development of more efficient
solutions to this problem. The FLEWUG seeks both hardware and software
solutions in developing interconnectivity between the numerous land
mobile radio systems currently in use, and those being planned. This
means focusing on land mobile radio systems that are both vendor
specific and vendor neutral, using both analog and digital technology.
Additionally, the FLEWUG is positioned to take a more global view of
the situation and has undertaken a number of feasibility studies that
underscore the magnitude of the problem. To a great extent the FLEWUG
envisions the Public Safety Wireless Network (PSWN) as being the
network of networks in linking independently developed federal, state,
and local networks together. The FLEWUG plans to follow its feasibility
studies with a number of proofs of concept tests that will demonstrate
cost effective technology solutions.
Question. Are efforts being made to work with state and locals to
achieve inter-operability over time?
Answer. This Federal effort has a very aggressive program working
with its state and local counterparts. A complete, bottom-to-top
analysis of federal, state, and local public safety use of land mobile
radio systems in the San Diego Imperial Counties of Southern California
and a multi-state, multi-county study with the metropolitan Washington
DC area Council of Governments is currently being conducted. These
analyses will provide the first complete picture of regional
communications systems and will form the foundation for proof of
concept testing for achieving seamless inter and intra governmental
wireless communications systems. In these two studies alone, the FLEWUG
has contacted over 400 public safety officials. Three symposiums that
focus on the key issues facing the public safety community in
developing shared radio systems have been sponsored by the FLEWUG. The
symposiums were conducted in Charlotte, North Carolina; Harrisburg,
Pennsylvania; and Sacramento, California. Attendance at symposiums
continues to increase as word of these symposiums has spread through
the public safety community. Over 200 people attended the most recent
symposium in Sacrament, California.
Question. How does radio spectrum impact on these efforts?
Answer. The FLEWUG continues to support the findings of the Public
Safety Wireless Advisory Committee (PSWAC) report that identified the
public safety need for a total of 97.5 MHz of spectrum over the next 15
years. Additionally, the PSWAC report recommended the allocation of 2.5
MHz of spectrum for interoperability from new or existing allocations.
The FLEWUG is working with the Federal Communications Commission (FCC)
and the National Telecommunications and Information Administration
(NTIA) to identify spectrum for interoperability purposes in all radio
bands used by the public safety community. At the same time the FLEWUG
is also looking at possible regulatory impediments to sharing radio
spectrum between federal, state, and local agencies, and ways to
improve public safety radio spectrum management between the FCC and
NTIA.
______
Federal Law Enforcement Training Center
state and local training
Question. What Law Enforcement training do you provide state and
local enforcement officials, and how do you determine who will receive
this training?
Answer. The FLETC offers more than 50 training programs in advanced
topical areas for personnel from State and local law enforcement
agencies. These programs develop specialized law enforcement skills
through training not readily available from other sources. Since 1983,
the FLETC has delivered training to over 40,000 State and local law
enforcement officers throughout the United States.
FLETC Directive 30-01.P ``Policy Governing the Sponsorship and
Selection of State and Local Students for Center Advanced, In service,
Refresher, and Specialized, (CAIRS) and State and Local Training
Programs'' has been in place since June 1984. Generally, this directive
indicates that training slots will be distributed on the basis of date
and time receipt on a first-come, first-served basis. When the number
of applications for a particular program exceeds the number of training
slots available, the applications are divided according to geographic
region and allocations are made by region on a first-come, first-served
basis. For instructor training programs, additional criteria are
applied: those agencies requiring FLETC certification will receive
first priority based on date and time of application receipt, and
agencies with broader training impact (students to be trained) will
receive second priority based on time and date of application receipt.
In all cases, however, students must meet the eligibility requirements
of the specific program to which they are applying. These requirements
vary by program.
In an era where State and local law enforcement is suffering from
diminishing resources and additional responsibilities, the FLETC is
focusing its limited resources on reaching the largest number of
customers in the most cost-effective manner. Two years ago, following
an extensive research study, the FLETC determined that 91 percent of
the State and local law enforcement agencies in this country have fewer
than 50 officers. To meet the needs of these small town and rural
agencies which comprise the vast majority of our customers, the FLETC
created the Small Town and Rural (STAR) training series. The Star
series is currently comprised of the following programs: Airborne
Counterdrug Operations Training, Advanced Airborne Counterdrug
Operations Training, Community Policing Train-the-Trainer, Drug
Enforcement Train-the-Trainer, First Response Training, Gangs in Indian
Country, Hate and Bias Crimes Train-the-Trainer, and Rural; Crime and
Drug Enforcement Task Force Train-the-Trainer.
Each of the STAR programs is directed toward either managers or
trainer/facilitators who can return to their jurisdictions with all the
materials necessary to replicate the training and techniques in their
agencies and surrounding jurisdictions. This approach creates a
multiplier effect which will expand the effectiveness of criminal
investigations throughout the United States. This multiplier effect is
accomplished with a funding investment that is a fraction of the cost
that would be necessary if each individual benefited by this training
initiative were to be trained directly. In fact, the second level
training will permit hundreds of Federal, State, and local law
enforcement agencies to benefit at little or no cost.
The FLETC has a two-year schedule to deliver the STAR series
programs to law enforcement officers. The target audience is small town
and rural law enforcement officers (including tribal police) who
typically lack training in these areas. Participants in STAR series
train-the-trainer programs receive serially numbered instructor
graduation certificates. Those who commit to delivering training to
small town and rural agencies are then eligible to become FLETC-
certified STAR instructors.
This process creates a multiplier effect which provides great
benefit for a relatively small fiscal commitment. For instance, if
training were provided during the first year for 30 students in
deliveries of each of the 4 STAR series train-the-trainer programs, 600
training facilitators potentially would be prepared to share that
training in their geographical areas. If each of those facilitators
subsequently provided training for a class of 30, then 18,000 officers
throughout the United States would benefit from the funded training.
Question. The local law enforcement agencies are responsible for
covering the costs associated with traveling to and from the FLETC to
acquire the training. Is the FLETC aware of any grants or other Federal
programs that local law enforcement agencies could utilize to increase
their access to these programs?
Answer. Not only are State and local law enforcement officers
responsible for covering the costs associated with traveling to and
from the FLETC, they also must fund their per-diem and lodging during
training. Additionally, those programs without funding from other
sources to cover tuition costs, must also pay for their tuition costs.
The FLETC actively pursues funding from a variety of sources to help
offset the cost of training for State and local officers. However,
other than those listed below, the FLETC is not aware of any other
Federal programs that provide funds to attend this training.
Through Crime Bill initiatives, $1 million has been designated to
offset tuition cost for Rural Drug training, which has become part of
the STAR training series. In addition, the FLETC partnered with the
Department of Justice, Office of Community Oriented Policing Services,
to deliver the STAR community Policing Train-the-Trainer Program. Over
25 training programs will be delivered during the next two years at
export training sites across the country. The training is tuition-free.
Participants must fund their own travel, meals, and lodging. The
Environmental Protection Agency (EPA) funds all the cost of the
training, including tuition, travel to and from the FLETC, and per-diem
and lodging during training for State and local enforcement and
regulatory personnel.
To reduce travel costs for officers, the FLETC delivers training at
multiple sites through export and telecast training to regional small
town and rural areas.
In addition to the training conducted on-site and one the FLETC's
residential facilities in Georgia, New Mexico, and the temporary
facility in South Carolina, the FLETC also utilizes State and local
training facilities that could be used to accommodate increases in
training. Using these available sites can make it more convenient and
cost efficient for customers to acquire required training.
Question. Could using these facilities give the FLETC greater
ability to accommodate increases in training? Don't these facilities
provide greater opportunities for State and local law enforcement
agencies to participate? Is the FLETC pursuing greater flexibility in
developing these remote locations?
Answer. Arrangements have been made with a number of academies, law
enforcement agencies, and colleges with criminal justice programs to
enable them to serve as sites for repeated training deliveries for
State and local law enforcement. The delivery of this training
primarily as export makes it more accessible and cost-effective for
State and local law enforcement, since it reduces their travel costs.
Recent research conducted by the FLETC documents that these small
town and rural agencies do not have the financial resources to send
officers great distances to training, nor are they able to spare
officers for long periods of time. However, because they form the vast
majority of police agencies in this country, these agencies'
contributions to combating drugs and hate and bias crimes is essential
to the Federal government's ability to deal with these crises. From the
information presented above, it can be concluded that there is a
definite need for low cost or no cost training to be provided to small
town and rural area law enforcement--training that meets their
documented needs and training that is delivered to the crossroads of
America, right to the doorsteps of these officers. The FLETC has
responded to his need by developing pertinent training and designing an
appropriate delivery system.
______
Financial Crimes Enforcement Network (FinCEN)
The Gateway System provides state and local law enforcement
agencies direct, on-line access to Currency Transaction Reports and
Suspicious Activity Reports filed under the Bank Secrecy Act.
Question. What can Wisconsin expect to get out of having access to
these data bases? Can the State and local organizations have access to
these data bases without receiving the training?
Answer. Through the Gateway system, state and local law enforcement
agencies, including those in Wisconsin, have direct, on-line access to
reports filed under the Bank Secrecy Act, the largest currency
transaction reporting system in the world. BSA reports contain
information such as large cash transactions, casino transactions,
international movements of currency, and foreign bank accounts.
Investigators utilizing the Gateway system also have access to the
Suspicious Activity Reporting System which contains reports filed by
banks on transactions that appear to represent attempts to launder
funds or violate the banking laws. This information often provides
invaluable assistance for investigators because it is not readily
available from any other source. It has proven very useful to state and
local agencies in financial crime investigations as well as other kinds
of cases.
Using FinCEN-designed software, the Gateway system saves
investigative time and money because subscribing agencies can conduct
their own research and not rely on the resources of an intermediary
agency to obtain BSA records. All states and the District of Columbia
are now on-line with the system. Analysts at the Wisconsin Department
of Justice have been trained on the Gateway program, and use the system
in support of case work. In fiscal year 1997, Wisconsin performed 229
Gateway queries.
During the research and analysis process, Gateway electronically
captures the information gathered on incoming inquiries and
automatically compares this information to subsequent and prior queries
from Gateway customers. FinCEN is then able to electronically match
these new subjects against its other data bases to identify potential
parallel investigations. This technique enables FinCEN to assist state
and local agencies in coordinating their investigations among
themselves, and with federal agencies, through the sharing and
exchanging of case data. (In other words, FinCEN has the ability to
``alert'' one agency that another has an interest in their subject.)
As part of its outreach effort and as resources permit, FinCEN has
been enhancing its support to the states through on-site training for
Gateway users. Such briefings include a discussion of how other states
are successfully using the BSA data; how the data can be used to
support various financial aspects of cases; and unique ways to attack
criminal proceeds. Wisconsin also could benefit from this expanded BSA
training, including use of the alert system as described above. FinCEN
provided such demonstrations to the Wisconsin Gateway users in 1995;
additional training is planned in fiscal year 1998.
Relative to training, state and local enforcement authorities are
not permitted access to the data without the benefit of training.
Training is imperative to successful use of the system and
understanding its capabilities. Equally important to understanding the
complexities of the system is the need to ensure that each user
understands the security procedures in place to protect against the
misuse of the system, as well as the legal agreements and disclosure
rules that must be made clear to each participant prior to using the
system.
Question. Could this training be placed on line for automatic
access? Or is there anyway that the training for this equipment could
be standardized, such as through FLETC?
Answer. FinCEN has been exploring various options in the
development of training alternatives including ``training modules.''
However, none have yet been finalized. The training alternatives under
discussion include sites such as the Federal Law Enforcement Training
Center and the FBI training facility in Quantico, VA.
However, it is important to note that components of FinCEN's
training program involve security procedures, key stroke instruction,
the recognition of the value of the information, its application to
investigations, legal agreements and the disclosure procedures. One-on-
one training, as opposed to on-line training, allows each training
component to be tailored to the individual participants.
We are all aware of FinCEN's international responsibilities and the
need to make the world of international finance aware of FinCEN's
existence.
Question. What activities and resources, other then those dedicated
to the Gateway Training Initiative, are being requested to assist State
and Local financial crime enforcement activities?
Answer. The $300,000 request for additional funding for the
improvement of the analysis capabilities of Suspicious Activity Reports
(SAR's) through data mining would be extremely beneficial to state and
local enforcement. SAR's provide enforcement authorities at all levels
with valuable intelligence information which could be used to assist
on-going investigations and aid in the development of new
investigations. The results of this improved ability to analyze these
highly effective reports would be passed along to our state and local
partners.
Federal officials estimate the money launderers in New York City
funnel more than $1.5 billion to Colombia and $500 million to the
Dominican Republic.
Question. Stopping those transactions at home would be an area to
focus on, wouldn't it? What could be done to stop the transactions
before the money got to Colombia or the Dominican Republic?
Answer. As the committee knows, Treasury has employed a Geographic
Targeting Order (``GTO'') to target the flow of laundered funds through
money transmitters in the New York metropolitan area to Colombia and
the Dominican Republic. A GTO is a device that enables the Treasury to
impose additional reporting and recordkeeping requirements where
necessary to carry out the purposes, and prevent evasions, of the BSA.
Money launderers use legal channels for illegal purposes; that is
true when they use the banking system, and it's true when they use the
money remittance system operated by non-banks. Our strategies have been
to make it more difficult for illegal transactions to take place within
these channels. To keep illegal users of the system away, Treasury has
employed a combination of special regulatory rules; vigorous
surveillance and auditing in the wake of those rules; and swift
prosecutions when criminal activity is revealed as part of these
strategies.
In August 1996, a GTO (the ``Colombian GTO'') was put in place in
the New York metropolitan area with respect to cash-purchased
remittances to Colombia. As a result of the Colombian GTO and the
criminal enforcement of its terms, the flow of laundered funds through
the targeted transmitters in the New York metropolitan area dropped
dramatically; in fact, several of those transmitters have stopped
remitting funds to Colombia altogether.
In addition, during the operation, currency seizures increased
dramatically. For example: during the first six months of the GTO, $50
million was seized from various sources along the eastern seaboard.
This figure is approximately four times higher than it has been in
prior years. The dramatic increase in currency seizures attributable to
the GTO, as well as information from various undercover operations,
indicates that the GTO has forced money launderers to resort to bulk
currency smuggling to move their money.
The Colombian GTO was renewed several times before finally expiring
in October 1997.
In September 1997, additional GTO's (the ``Dominican GTO's'') were
put in place both in the New York metropolitan area and Puerto Rico,
with respect to cash-purchased remittances to the Dominican Republic.
As of this date, the Dominican GTO's are still in effect. One of the
largest transmitters in this market--Remesas America Oriental
(``RAO'')--has pled guilty to felony money laundering and structuring
charges, and has had its license revoked by the New York State Banking
Department.
A longer-term regulatory approach to protecting the industry from
money launderers is now being finalized. Under three BSA rules proposed
last May, all money services businesses would be required to register
with the Treasury; money remitters and sellers of traveler's checks and
money orders would be required to report suspicious activity; and money
transmitters nationwide would be subject to reporting and recordkeeping
requirements similar to those imposed by the Colombian and Dominican
GTO's.
Question. What is the status of FinCEN's Non-bank Financial
Institutions Regulations? Is any funding being requested in fiscal year
1999 to insure these regulations can be implemented?
Answer. Based on the Colombian GTO and other initiatives, it became
clear that a nationwide approach, which went beyond currency reporting,
was needed for money services businesses (MSB's). FinCEN's study of the
industry, undertaken by Coopers and Lybrand, helped to further profile
and define this group of diverse businesses.
Proposed rules were announced in May 1997 to respond to
vulnerabilities in the MSB industry as well as to implement the
requirement of the Money Laundering Suppression Act of 1994 that the
Treasury register this group of businesses.
The first proposed rule would require that MSB's--which include
money transmitters or remitters, money order issuers and sellers,
travelers check issuers and sellers, retail currency exchangers and
check cashers--register with the Department of the Treasury. A second
proposal would extend suspicious activity requirements to money
transmitters and issuers, sellers and redeemers of traveler's checks or
money orders. The third proposal would require money transmitters to
report currency transactions of $750 or more that involve the
transmission of funds to any person outside the United States.
FinCEN held five public meetings last summer to elicit comments on
the proposed rules. The written comment period ended on September 30.
FinCEN has reviewed the comments and is finalizing the proposed rules
based on industry concerns, where appropriate.
Treasury has indicated it will allocate $2.5 million from Treasury
Super Surplus balances in the Treasury Forfeiture Fund to FinCEN for
MSB implementation fiscal year 1999. This amount would be used for
guidance, interpretive advice, oversight, coordination and data
analysis.
Question. Has the IRS requested the funding necessary for the
information systems and data processing required to get this initiative
started? What was the substance of the comments you received during the
public comment period?
Answer. The IRS has indicated that they are requesting $14 million,
which includes funding for information systems and data processing;
examination resources; and notice and outreach to diverse retail and
financial communities.
The MSB Rules have attracted significant attention and controversy,
and generated enormous effort, both by FinCEN and representatives of
the affected industries. Eighty-two comments on the Rules are under
review; approximately 30 of the comments are detailed ones, some
running to more than 50 pages of text. We are still in the process of
analyzing the comments and will provide the Committee under separate
cover a summary of the comments we have received from the industry.
Question. What type of security activity would be identified as
suspicious activity. Is a review of that activity already subject to
Security and Exchange Commission review?
Answer. Securities broker dealers are already subject to currency
transaction reporting requirements--and all other reporting and
recordkeeping requirements--under the BSA.
In addition, FinCEN has developed in close cooperation with the SEC
and the industry, a proposed regulation that will require securities
broker dealers to report suspicious activity to FinCEN. The suspicious
activity required to be reported will include money laundering, for
which there is no existing system of reporting.
A draft rule should be published this spring.
Question. What steps can FinCEN take that the SEC would not be
authorized to take?
Answer. While FinCEN is not in a position to delineate the SEC's
full range of authority, FinCEN has been explicitly provided very
specific and important statutory authority to prevent, detect and deter
money laundering. Moreover, FinCEN has an infrastructure in place to
provide for the processing and dissemination, with appropriate
safeguards, of reports of suspicious transactions.
Question. Please explain what Card Clubs are and how they are used
to provide for money laundering activities? What regulations has FinCEN
issued that impact card clubs?
Answer. In order to close a gap identified by federal and state law
enforcement, FinCEN has brought card clubs, which are responsible for
nearly $9 billion of yearly wagering activity, under anti-money
laundering requirements.
The regulation, which was issued in its final form on January 13 of
this year, goes into effect on August 1, 1998 and affects those card
clubs with more than $1 million in gross annual gaming revenue.
Most frequently found in California, card clubs typically offer
facilities for gaming by customers who bet against one another, rather
than against the establishment.
Card clubs are at least as vulnerable to use by money launderers as
other gaming establishments, both because of their size and because
those institutions often lack the controls found at casinos.
Under the final rule, card clubs--including those operated on
tribal lands--would be treated in the same manner as casinos (i.e.,
subject not only to currency transaction reporting rules but to the
full set of provisions to which casinos in the United States are
subject--a comprehensive recordkeeping system and a compliance program
containing anti-money laundering safeguards.)
______
Questions Submitted by Senator Mikulski
Bureau of Alcohol, Tobacco and Firearms
baltimore office staffing
Question. Two years ago, I was given an assurance by the Deputy
Director that the Baltimore Office of the ATF would not suffer any loss
of manpower as a result of ATF's reorganization and consolidation. I
have recently discovered that contrary to the commitment I was given by
the Deputy Director, there has been a loss of manpower in the Baltimore
Office. Why has this commitment not been fulfilled?
Answer. Staffing reductions in the Baltimore field office are due
to attrition. There have been several key retirements throughout the
agency. For the first time in many years, ATF is in a hiring mode in
order to backfill vacancies and keep pace with anticipated retirements.
In the past 3-4 years, ATF has seen a 14 percent reduction in its
overall special agent population.
In fiscal year 1997, ATF launched an extensive recruitment program
that generated more than 6,000 applications. The first selections began
in fiscal year 1997, and will continue into fiscal year 1998.
Question. When will the manpower in the Baltimore Office be
restored to its previous levels?
Answer. We expect to be in a hiring mode for the next several years
to fill these and other critical positions within ATF.
petitions for rulemaking
Question. After ATF receives a petition for rule making, could you
outline the procedure ATF follows in obtaining comments, formal or
otherwise, and how the petition would be considered by ATF until this
process is completed? How long does this process usually take?
Answer. After ATF receives a petition, an ATF Specialist is
assigned to analyze, research and evaluate it for completeness and for
compatibility with the law. Once this process is complete, we prepare a
Notice of Proposed Rulemaking for publication in the Federal Register
in order to afford the public and those concerned with the industry an
opportunity to comment. Prior to publication, rulemaking documents are
thoroughly reviewed and vetted by various ATF and Treasury offices.
Petitions are treated as internal matters up until the point of
publication. Depending on the complexity of the issue or issues
involved, the entire process could take up to a year or even more
before publication of a rulemaking document.
Question. How many petitions does ATF receive each year?
Answer. Each year, ATF receives approximately 20 formal petitions
to change the regulations. Requests for interpretations of, rulings on,
and variances from the regulations are much more numerous. In addition,
most regulatory changes that occur do not arise from petitions.
Regulatory reform efforts, law and policy changes, and improvements
developed and proposed by ATF are the reasons for many of the changes
implemented.
Question. What types of petitions are received?
Answer. Petitions to ATF request amendments or revisions to
alcohol, tobacco, firearms or explosives regulations. A large majority
deal with alcohol matters, as these regulations are more detailed and
complex, involving both tax and regulatory issues.
Question. What percentage are approved/denied?
Answer. The approval rate is approximately 75 percent.
______
Questions Submitted by Senators Gorton and Murray
U.S. Customs Service
intellectual property rights
Question. The Customs Service first issued proposed regulations
liberalizing the release of information on seized and detained goods to
intellectual property rights owners in 1993. Now, five years later,
final regulations have still not been issued, and Customs still
operates under outdated, ineffective regulations. The existing
regulations cripple the ability of IP rights holders to pursue private
remedies. Do you agree this is an acute problem? What is keeping
Customs from promptly issuing final, comprehensive regulations
liberalizing the release of such information?
Answer. New Customs regulations to provide intellectual property
rights (IPR) owners sample merchandise and disclose information
regarding the identity of persons involved with importing infringing
goods, will be published on March 11, 1998, and will become effective
30 days later. The change will assist Customs in making infringement
determinations and enable IPR owners to more expeditiously proceed to
enforce their property rights by means of appropriate judicial
remedies.
Question. We understand that disclosure policy differs port-to-
port. Don't we need a uniform, nationwide policy?
Answer. Customs has reconciled any field inconsistencies in
disclosure which have come to Headquarters' attention. We do need a
uniform nationwide policy on disclosing information and samples in
intellectual property rights cases, and the new regulations should
ensure assistance in this effort. The IPR disclosure regulations will
be effective the second week of April. In order to ensure uniform
application of the new disclosure regulations, Customs internal IPR
committee will discuss monitoring at its March 1998 meeting. The IPR
committee consists of representatives from all concerned Customs
offices.
Question. Piracy of intellectual property rights of Americans is
estimated to cost our economy and trade balance billions of dollars
annually. In our view, private industry and the federal government must
work together to attack this problem. Promulgating final regulations
providing for greater release of information is a critical first step.
What else can Customs do to aid IP rights holders?
Answer. During the last five years, Customs has seized over $230
million worth of merchandise involving IPR violations. Besides
implementation of the new disclosure regulations, Customs constantly
conducts ``in house'' IPR training programs, provides speakers to
industry groups such as the International Anticounterfeiting Coalition
(IACC) and the International Trademark Association (INTA), and
cooperates with IPR holders through border enforcement
``interventions'' such as those recently done for Underwriters
Laboratories and the golf club industry.
Subcommittee Recess
Senator Campbell. I thank this subcommittee. As I
mentioned, the record will stay open for about 2 weeks. I thank
you for appearing.
With that, this subcommittee is recessed.
[Whereupon, at 3:24 p.m., Thursday, February 26, the
subcommittee was recessed, to reconvene at 1:32 p.m., Thursday,
March 5.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, MARCH 5, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:32 p.m., in room SD-124, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Shelby, Faircloth, Stevens, and
Kohl.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
STATEMENT OF CHARLES O. ROSSOTTI, COMMISSIONER
ACCOMPANIED BY:
ARTHUR GROSS, CHIEF INFORMATION OFFICER
JOHN DALRYMPLE, DEPUTY CHIEF OPERATIONS OFFICER
Opening Remarks
Senator Campbell. The Treasury and General Government
Subcommittee hearing will be in order. Senator Kohl has said he
may or may not be able to attend today. He has a conflict, and
we will probably have a few drifting in and out.
I want to welcome you today, Mr. Rossotti, and I understand
that Mr. Arthur Gross is going to be with you?
Mr. Rossotti. Yes.
Senator Campbell. I welcome everyone to this second hearing
of the Treasury and General Government Appropriations
Subcommittee.
This afternoon we will be discussing the fiscal year 1999
budget request of the Internal Revenue Service. I do not need
to tell you, as you know, just being new to the job, that the
IRS is probably not, in the eyes of many constituents, the most
favored agency in the U.S. Government, and your mail runs as
mine does so you are aware of that.
But clearly, as a result of some of the testimony in recent
months, particularly on the House side, I think we have been
given an opportunity to really do some major reforms that will
be looked at with a little better judgment by the constituents
and taxpayers of this country. That bill did pass the House and
is currently under consideration in the Senate Finance
Committee, as you know.
As a matter of fact, Senate Majority Leader Lott has
indicated that it will be his intention to bring that bill
before the full Senate by the end of the month.
This is a critical period for the IRS and I certainly
compliment you on taking on a very, very tough job in facing a
myriad of problems that you have to deal with. But it is a good
step forward to resolving some of the conflicts.
Conversion of all of the agency's computers is certainly
going to be recognized and the year 2000 must be some of the
highest priorities that you face. Certainly it is not going to
be cheap, and we have to do it relatively soon.
The IRS collected $1.5 trillion in taxes in fiscal year
1997 and expects to collect that much plus probably another
$750 million in fiscal year 1998. Tax collections is a
necessary function, sometimes called a necessary evil, too, but
it is something we are all faced with. It is also, I think, a
recognized fact that over 80 percent of American taxpayers are
voluntary taxpayers, not trying to get away with something.
They are doing their duty, and civic duty as good citizens. The
IRS certainly needs to work with them and not against them.
Taxpayers of this country are demanding that the IRS
provide reliable customer assistance instead of functioning as
an adversary. The Federal agencies I think, and IRS included,
can learn a great deal from the private sector, in which many
people who, if they need assistance and they talk to the first
person, that first person if he does not have the answer will
try to find it from another person. Unlike some of the
experiences they have had with the IRS where the first person
they deal with seems to be a judge and jury in their problems.
The IRS is requesting a total of almost $7.9 billion for
operating expenses and an additional $323 million for
information technology investments in fiscal year 1999. A total
of over one-half of a billion dollars more than fiscal year
1998.
This committee must determine whether the IRS needs that
level of funding and, if not, what programs can be reduced or
cut or streamlined so that we do not have that outlay.
With that, Senator Kohl, I am glad you are here. I just
made an excuse for you, saying that you might be a little late.
I would yield to you.
Statement of Senator Kohl
Senator Kohl. Thank you very much, Senator Campbell.
Much has happened over the past year, since the last time
we held this hearing. The Internal Revenue Service has
appointed a new Commissioner with a strong background in
management and information technology. Congress is considering
passing sweeping new legislation to restructure the IRS. Plans
are being developed to realign the IRS along customer service
lines. And hopefully a request for a proposal to hire a prime
contractor for the tax modernization effort will be released
shortly.
I know we will be discussing all of these changes during
this hearing, but before we get into those issues I want to
briefly say a few words about the need to change the culture at
the IRS.
Last fall, as we recall, most of us were very upset by the
abuse of taxpayers that the Senate Finance Committee hearings
laid before the country. Many of these problems were not caused
by rogue agents acting without knowledge of their supervisors.
Instead, many of these abuses resulted from IRS employee
performance measures that demanded more collections without
regard to fairness or common decency.
In other cases, it appears the IRS employees were
intoxicated with a ``I am from the IRS and I can make your life
difficult'' attitude.
We here in Congress have a responsibility to drive these
problems out of the IRS, and I know the Commissioner shares
this goal. He has already moved to fix these problems with the
development of new performance standards and with a new focus
on customer service throughout the IRS.
But the question is when will these taxpayers actually see
changes and how much is it going to cost them to be treated
fairly.
Entire Federal agencies are run with the kind of money that
the IRS is requesting for customer service improvements, over
$950 million. For this type of investment this committee and
the country should expect to see an immediate turnaround in
customer service. Immediate changes and not a series of reports
of discussions. Instead, what we need are results.
Finally, calling for increased customer service and
requiring an elimination of IRS taxpayer abuse does not require
elimination of the agency. That would be like killing the
patient in order to cure him. As much as no one wants to admit
it, we need a national revenue collection agency. None of us
likes to pay taxes but we all want to maintain a strong
national defense, educate our children, get help saving for
retirement, keep our streets safe, secure our borders, protect
our environment, and much, much more.
Now these services cost money and so there is no such thing
as a free lunch. Instead of wasting time on a who hates the IRS
more debate, I urge all of us in Congress, the IRS, and the
country to work together to make our tax collection system
work.
Again, I am happy that we have this opportunity to talk
with the new Commissioner and discuss various options for
improving the Internal Revenue Service.
Thank you much, Mr. Chairman.
Senator Campbell. With that, Mr. Rossotti, if you would
like to go ahead, all of your testimony will be included in the
record so you can ad lib or abbreviate, whatever you would like
to do.
Statement of Charles O. Rossotti
Mr. Rossotti. I would like to just summarize some of the
testimony and the rest will be in the record.
Thank you very much, Mr. Chairman and Senator Kohl.
What I really want to discuss today is how we can use the
fiscal year 1999 budget to begin the transformation to the kind
of agency that both of you, in your opening statements, said we
should be. As I would state it, our goal is to make the agency
provide a far better level of service to the taxpayers and be a
service agency.
And I, by the way, believe we can do that while continuing
to reduce the size of the agency in relation to the American
economy.
I think another way to put this is that we need to shift
the focus of the agency from just its own internal operations
to become an agency that views its whole job as helping
taxpayers comply with the tax laws that are on the books.
To accomplish that, both our service and our compliance
goals are going to have to change a lot of things at the IRS.
We are going to have to modernize our business practices, our
organization, and our technology. This is going to require a
period of investment over the next several years in both the
organization and the technology.
What I see in the fiscal year 1999 budget is the foundation
for this. I think it is absolutely essential that we begin this
now, as Senator Kohl said, and some of this will play out
longer. But it is also important that we deliver some key
service improvements to the taxpayers in fiscal year 1999. I
will discuss some of those, as to how we expect to do that
specifically in the near term.
But I would like to just take a moment, if I could, to
summarize some of the long-term goals and changes that I think
we need to really get the level of service up to what it should
be for taxpayers. There are really five key elements to this
concept.
Business Practices
The first one is that we have to rethink all of our
business practices, from customer education, the way filing is
done, the way collection is done, the way compliance is done.
And each of those has great promise to improve by taking
advantage of things that are known in the private sector, and
even in the IRS. But the common theme is to turn it around and
focus on understanding and solving problems from the taxpayer
point of view.
One of the keystones of doing that is that we have to
understand that not all taxpayers have the same kind of
problems. A college student who can file with a small return
and a phone call is different from say a senior citizen that
may have Social Security income, and very different from a
small business that has a more complex relationship. So one of
the things we need to do is to tailor our services to the needs
of each particular group of taxpayers.
Organization Structure
The second major area of change is the organization
structure. The current organization structure of the IRS which
has evolved over the last 45 years is really outdated. It is no
longer capable of allowing the managers in the structure to
really take the actions they need to to help taxpayers in the
appropriate way. Nor, I believe, is it really capable of
providing the right foundation to modernize the technology.
In the testimony, in chart 4, I have outlined what I
believe is the logical way for the IRS to be organized in the
future, which is very similar to the way many private sector
companies are organized into lines of business, each one of
them aligned with serving a particular group of taxpayers.
The four units would each be responsible for serving one
group of taxpayers. Individual taxpayers that are wage and
investment income primarily, small businesses in another
category, large businesses, and then finally your whole tax-
exempt sector. With this concept each of these units would be
completely responsible for serving from end to end each of
these groups of taxpayers.
I think what is important is that the management teams in
each of these groups would then be able to become much more
knowledgeable about the particular problem, say of a small
business, and be able to take action on those and to be held
accountable, which is one of the criticisms of the IRS today,
you cannot hold anybody accountable. Partly that is because of
the way the place is organized.
Measures of Performance
Another point that is very important, which I think that
both Senator Campbell and Senator Kohl alluded to in your
opening statements is the idea of having measures of
performance that are really appropriate to what we are trying
to accomplish. The key here is to have measures from the
customer or the taxpayer's point of view as well as from the
business results, and also measuring our productivity and our
employee's point of view.
The key here is to make sure that we are measuring what we
want to, which is to provide the right kind of service to
taxpayers while ensuring the compliance is fair, but not cause
inappropriate behavior toward taxpayers, or to provide
incentives that would undermine our service approach. We are
working on those measures right now.
New Technology
The final element, of course, is new technology because we
absolutely need to replace the obsolete base of technology in
the agency. The recently issued technology blueprint that my
colleague here, Mr. Gross, was the primary author of and the
new organization that is being built under the CIO, will
provide the basis for managing this evolution of technology.
But in addition, it is extremely important that we make the
organizational and business changes that I outlined because
building computer systems to fit old business practices and a
complex organization will not work.
So those are the long-term concepts. I think they hold
great prospect for improvement over a period of time.
But during this time, we also must make some step-by-step
improvements and, in addition, we must handle the mandatory
changes that you outlined are required for the century date
change, the so-called year 2000 problem.
Year 2000 Date Change Problem
To just outline how we expect to do this in fiscal year
1999, we have organized it into five major initiatives during
fiscal year 1999. The first one is completing the century date
change. This is one of the most critical elements in our budget
and our most pressing priority.
Completing the Century Date Change
But the beginning of the 1999 filing season, less than 1
year from now, most of our system changes that are required for
the century date change must be completed. And then during the
remainder of 1999, after the filing season, the principal task
will be final testing and complete certification, which is
still a very large estimate.
The entire cost in 1999 in the budget is $234 million and,
of course, that is absolutely essential in order to avoid what
would be disastrous consequences if we do not correct this
problem.
Customer Improvements
The second major priority in the 1999 budget is to make
near-term improvements for the customer, much as Senator Kohl
said we must do. We are going to try to do this through a very
focused problem of near-term changes which include improving
the clarity of the notices we send out to taxpayers as well as
the forms and publications, better telephone service so you
will be able to get through easier, better walk-in service for
those taxpayers who like to deal face to face, expanded
electronic filing, improved training of our customer service
representatives so they will have the right information to give
to the taxpayers, some strengthened support for small
businesses, increased staffing for the taxpayer advocate's
office, which is one of the most important in resolving issues,
and a new initiative creating what we call our citizen advocacy
panels which will be an outreach effort with common citizens to
help them connect better with the IRS.
It shows in chart 5 in my testimony, the total incremental
cost of all these initiatives in fiscal year 1999 is $105
million.
Technology Improvements
The third major program, and what is going to be necessary
to ensure that customer service remains on the up trend, will
be some nearer term technology improvements. These are really
necessary for the size of agency we have just to maintain an
acceptable level of service.
The major ones in fiscal year 1999 are the completion of a
call routing system to route our phone calls, deployment of
computers to field collectors who currently have no computers
at all, and replacement of some computers used by field agents
who depend on them for examinations.
And finally, the last item is an increase in what is called
product assurance, which is an essential way of testing
software before it is put back into the tax system so that
changes do not result in errors that could result in problems
for taxpayers. There is a chart in the testimony, chart 6,
which summarizes these.
Technology Investments
The fourth item, which is shown in chart 7, is that during
1997, and this current year, we are making careful preparation
for the longer term technology investments we must make, which
will involve replacing the really obsolete base of technology
we have in the agency today.
The beginning of this was the publication of the
modernization blueprint, the establishment of a systems life
cycle which is a methodology to manage our technology, and the
publication of a draft RFP which we hope to complete soon.
In fiscal year 1999 we will continue this process by
strengthening the internal IRS system's management capabilities
and go ahead with the award of the prime contract. The initial
task on the prime contract will be focused on completing the
methodology life cycle that we need in order to manage this
technology and on implementing the first two subreleases, which
are just particular projects within the technology
modernization blueprint. These are aimed at providing better
telephone service and other communication capabilities which
are essential capabilities that underlie everything else we do.
Chart 8 shows these longer-term investments.
Modernization of the Organization
Finally, the fifth one is an item currently listed as $25
million to support the modernization of the organization. This
is the transition to the new customer focused organization
structure. We are currently engaged in a study with the aid of
a management consulting firm to better define exactly how we
will implement this new organization and we will come back to
the committee with more detail on exactly how this $25 million
would be used to help us transition to this new organization
when we complete this study this summer.
Budget Outlook
Finally, just to summarize the budget picture, let me go
over for just a moment the historical perspective as I
inherited it. This is pretty well summarized in a couple of
charts, charts 9 and 10 in my written testimony. I think what
these simply show is that the IRS budget over the last 3 years,
when you take out the extra costs of the century date change
piece, has actually gone down about 7 percent.
Of course, the workload of the IRS does grow every year
because the economy grows and collections grow. We have
increased the number of returns about 8 percent and the dollars
collected about 24 percent over this period.
I also have to note that the recent tax act, the Taxpayer
Relief Act of 1997, added about 800 changes to the Tax Code and
these are all reflected not only in the computer programs, but
they ripple through the IRS, requiring new forms, new
publications, and of course, new training of the employees so
that they can talk to the taxpayers intelligently about the new
tax law.
So these have been some difficult conflicting trends with
which we are presented as we begin to modernize the agency. I
do want to stress to the committee, though, that I personally
am not one who believes that budget dollars are the solution to
everything at the IRS. That is not what I believe.
We obviously need the dollars to do the specific things,
but simply throwing money at them will not solve them. We have
to do all the changes in an orderly way, that I outlined--
better business practices, organization structure, roles and
responsibilities that stress accountability for management, new
measurement system, as well as new technology.
If we can use the money effectively as an investment to do
those things, then I think we can accomplish our goals.
So I just want to conclude by saying that I believe that
there is a new day at the IRS. I took the job because I think
we can transform the agency into a place that actually helps
taxpayers and is on their side, with the exception of the very
small number of people that do not willingly comply. Then we
need our enforcement powers. But most of the taxpayers are
there to comply. We should be there to help them do it.
I also believe that we can do this while shrinking the IRS
as a fraction of the economy. I think it could become a smaller
percentage of the economy as time goes on by taking advantage
of some of these improvements. We cannot do that overnight, and
it will take some investments in order to modernize our
approach. But with the support of Congress, I believe it can be
done.
Thank you very much, Mr. Chairman.
Prepared Statement
Senator Campbell. Thank you, Mr. Rossotti. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of Charles O. Rossotti
Mr. Chairman and Distinguished Members of the Subcommittee: In my
testimony today, I would like to set forth how the IRS budget for
fiscal year 1999 can be used to begin the transformation of the IRS
into an agency that provides a far greater level of service to
taxpayers than it does today while continuing to reduce its size in
relation to the U.S. economy.
Today, the IRS does its basic job of collecting with integrity 95
percent of the funds of the Federal government, while processing
returns from 125 million individual taxpayers and 7 million businesses.
Over the last two years, much study and attention has been given to the
IRS, by the Treasury Department and the Restructuring Commission, by
the National Performance Review, by the GAO and Congressional
committees. From this work a broad consensus has formed that the IRS
must shift its focus from its own internal operations to become an
agency that helps taxpayers comply with the tax laws by understanding
and solving problems from the taxpayer's point of view. The budget
before you sets the stage for this long-term shift in focus and
direction at the IRS.
From the taxpayer's point of view, the IRS provides service in two
ways.
First, the IRS serves each taxpayer, one at a time. These
interactions range from the routine, such as providing forms or
information about refunds, to more complex interactions such as when
additional money may be due because of an audit. As shown in Chart 1,
of the IRS's 100,000 FTE's, approximately 64,000 work directly in
contact with taxpayers in these kinds of interactions. In fiscal year
1998, the IRS will answer over 120 million phone calls, provide walk-in
service to nearly 9 million taxpayers, and will examine nearly 1.3
million individual returns. These activities have an enormous impact on
the lives of most Americans.
Despite recent improvements, the IRS today does not meet the
public's legitimate expectations of service from the IRS. Our goal must
be to provide prompt, accurate and professional treatment of taxpayers
each time they deal with the IRS based on what we know to be their
specific needs. The measures in this budget are important steps towards
meeting this goal.
Second, the IRS provides service to all taxpayers by ensuring that
compliance is fair. Our tax system depends on each person who is
voluntarily complying having confidence that his or her competitor or
neighbor is also complying. While the overall compliance level is
estimated to be 87 percent, there is significant unevenness of
compliance and our estimates of compliance are incomplete and out of
date. A decrease of even one half of 1 percent in compliance would more
than equal the entire budget of the IRS. Our goal should be to increase
the fairness as well as the overall level of compliance.
I believe that the IRS can accomplish these goals for increased
service with the work force that we have, which is dedicated and
competent but handicapped by outdated practices, structures and
technology. In other words, I believe that the IRS can handle the ever
increasing workload generated by a rapidly growing economy while
greatly improving service to taxpayers without significantly increasing
the size of the work force.
If we can accomplish this ambitious productivity goal, our
objective will be to continue to shrink the size of the IRS in relation
to the economy while increasing productivity faster than private sector
financial institutions.
In order to accomplish these service and productivity goals, we
must modernize the IRS business practices, organization and technology.
This will require sustained investments for a period of years in
technology and organizational modernization. The fiscal year 1999
budget we are requesting is absolutely essential to begin this long-
term transformation. At the same time, it is designed to allow us to
deliver some key service improvements to taxpayers in some important
areas during fiscal year 1999.
Before I discuss the specific elements of our fiscal year 1999
budget request, let me first outline the long term direction we must
pursue to modernize the IRS. Then I will describe the strategy for
accomplishing this long term change while delivering improvements to
taxpayers step by step.
modernizing the irs
To accomplish the goals we seek for the IRS, we must make
fundamental changes which will take time but are essential for the IRS
to meet the public's legitimate expectations for service from its tax
agency. Let me lay out my concept of how we can modernize the IRS. The
modernization concept includes a renewed mission with emphasis on
service and fairness to taxpayers and practical goals and guiding
principles which define the path forward. It is designed to enable us
to answer the basic question: how can the IRS shift its focus and
become the customer oriented agency it must become?
I should also note that this concept was developed after the
details of the budget before you were completed. Thus, much of what I
will discuss here does not have a specific corollary in our fiscal year
1999 submission. Nonetheless, the budget priorities that I will discuss
later are perfectly consistent with the concept and five key elements
discussed below, and represent an essential first step toward a modern
Internal Revenue Service.
five key elements
We will reach our goals of service to each and to all taxpayers
through changes in five key areas, each complementing the others. These
five areas, along with the goals and guiding principles are summarized
on Chart 2.
Revamped IRS business practices that will focus on understanding,
solving and preventing taxpayer problems
Each of the IRS's business practices, from customer education to
filing assistance to collection, holds great promise for improvement by
our gaining a greater understanding of the particular problems that
taxpayers have and focusing continuously on solving them. In most
cases, there are very close parallels in the private sector that we can
draw on.
For example, our business practices should make filing easier for
all taxpayers by providing easily accessible high quality assistance to
those taxpayers who need help in filing and by having more returns
filed electronically. Just as companies develop very particular
marketing programs to reach customers with differing needs, we can help
taxpayers more effectively by tailoring our publications, education,
communications and assistance programs to taxpayers with particular
needs. College students who often can file with a simple 1040EZ form
and a 10 minute phone call have very different needs from senior
citizens with social security and investment income who may be best
served through a network of volunteers who specialize in the needs of
seniors.
This principle of tailoring our services to the needs of particular
groups of taxpayers is a cornerstone of how we can dramatically improve
our service to taxpayers as well as our internal productivity.
As another example, some of our most difficult interactions with
taxpayers occur when additional money may be due and collection
activity is required. Today, 90 percent of the active collection
activity by the IRS telephone and field collectors is on accounts that
are more than 6-months old, and most are much older than that. This is
the reverse of practices in the private sector. The proven keys to
effective collection are to identify as promptly as possible customers
who may present risk of non-payment and to work out a payment program
that addresses the particular payment problem of that customer. This
helps the customer as well as the collecting agency and minimizes the
need for enforcement actions.
Organizational structure built around taxpayer needs
The IRS organizational structure no longer enables its managers to
be knowledgeable about and take action on major problems affecting
taxpayers nor is it capable of modernizing the business practices and
technology needed to achieve our goals. The principal IRS organization
today, as shown in Chart 3, is built around 33 districts and 10 service
centers. Each of these 43 units is charged with the mission of serving
every kind of taxpayer, large and small, with simple or complex
problems, in a defined geographical area. If a taxpayer moves, the
responsibility moves to another geographical area. Further, every
taxpayer is served by both a service center and a district and
sometimes more than one. Service centers and districts each perform
customer service, collection and examination activities for the same
taxpayer.
For example, in the collection area, there are three separate kinds
of organizations, spread over 43 organizational units, that use three
separate computer systems to support collection. Each of these three
types of units collects from every kind of taxpayer, from small
businesses to wealthy individuals.
There are 8 intermediate levels of staff and line management
between a front line employee and the Deputy Commissioner, who is the
only manager besides the Commissioner who has full responsibility for
service to any particular taxpayer. Although important improvements
have been made in this structure over the last few years, notably the
reduction in the number of districts, the fundamental problem remains:
the structure is far too complex and accountability is weak.
Fortunately, there are solutions to this organizational problem
which are widely used in the private sector and may enable us to better
serve the American taxpayer. The approach I am discussing today is to
organize around the needs of our customers, the taxpayers. Just as many
large financial institutions have different divisions that serve retail
customers, small to medium business customers, and large multinational
business customers, the taxpayer base falls rather naturally into
similar groups. This fact simply reflects the structure of the U.S.
economy.
Therefore, as shown in Chart 4, one logical way to organize the IRS
is into four units, each charged with end-to-end responsibility for
serving a particular group of taxpayers with similar needs. These units
could replace the four regional offices and a substantial part of the
national office, allowing the national office to better fulfill its
responsibilities of oversight and broad policy rather than operations.
As I noted at the outset, this is a concept--a concept that will
require outside validation. I am initiating a review of this concept
because I believe we need to refocus and realign the efforts of the IRS
toward our customers--the American taxpayers. Of course, during and
after the review, we may need to revise this proposal, depending on the
results.
By organizing in this way, the management teams for each unit could
learn a great deal about the needs and particular problems that affect
each group of taxpayers. The tax code is extremely complex but most of
it does not apply to each group of taxpayers.
There are 100 million filers, comprising about 140 million
taxpayers, who have only wage and investment income. For this very
large group, almost 80 percent of all taxpayers, the primary needs are
improved assistance in filing or in getting information about an
account or a refund. Collection problems are relatively limited since
most of their taxes are paid through withholding by employers.
Compliance problems are concentrated in the area of dependent
exemptions, credits, filing status, and deductions, many of which can
be addressed in part by better education of taxpayers with the
assistance of volunteer groups and preparers. Improved phone service
and more walk-in ``retail'' sites where taxpayers can get quick, in-
person assistance are also important.
Another very important group of taxpayers is small businesses,
including sole proprietors and small business corporations. There are
about 25 million filers in this category. Compared to other individual
taxpayers, this group has much more frequent and complex filing
requirements and pays much more directly to the IRS, including tax
deposits, quarterly employment returns and many other types of income
tax returns and schedules. Providing good service to this group of
taxpayers is more difficult than wage and investment filers, and
compliance and collection problems are also much greater. Small start-
up businesses in particular need special help. By dedicating a fully
responsible unit to providing all IRS services for the self employed
and small business, this unit will be able to work closely with
industry associations, small business groups and preparers to solve
problems for the benefit of all.
Larger businesses, although few in number, pay a substantial share
of their tax in the form of withholding, employment and excise taxes,
and corporate income taxes. Complex tax law, regulatory and accounting
questions, including many issues arising from international activities,
dominate the work of the IRS in serving this group. A management team
and unit dedicated to serving these taxpayers will be able to
understand and solve these problems more effectively than at present.
Finally, the tax exempt sector, including employee plans, exempt
organizations and state and local governments, represents a large
economic sector with unique needs. Although generally paying no income
tax, this sector pays over $190 billion in employment taxes and
withholding for employees and manages $5 trillion in tax exempt assets.
This huge sector will benefit from a dedicated unit that understands
its special problems.
Management roles with clear responsibility
Since each unit will be fully responsible for serving a set of
taxpayers with like needs, the management teams responsible for each of
these units will be able to become knowledgeable about the needs and
problems of their customers, and be held fully accountable for
achieving specific goals in serving them. Furthermore, having learned
about problems, managers can cut dramatically the time required to
communicate with the work force and implement solutions. Because the
organization would be ``flatter,'' there would be fewer layers of
management. Front-line employees and first-line managers would have a
much closer identification and communication channel to people with
general management responsibility.
For each unit, a cohesive management team will be established which
will be able to organize internally in ways that are appropriate to the
particular needs of the taxpayers they are serving. I believe that
highly qualified managers, from internal or external sources, will be
far more attracted to these kinds of management jobs than those in
today's complex structure.
Balanced Measures of Performance
It is essential to have measures of organizational performance that
balance customer satisfaction, business results, employee satisfaction
and productivity. It is particularly important that performance
measures do not directly or indirectly cause inappropriate behavior
toward taxpayers, and that they provide incentives for service-oriented
behavior.
The establishment of management teams with clear responsibility for
serving large groups of taxpayers with reasonably common
characteristics and needs will help make it possible for the first time
to develop realistic and meaningful measures of organizational
performance in the areas of customer satisfaction and overall
compliance on a continuing basis. This will help eliminate the problem
that has plagued the IRS for decades, namely the use of ``enforcement''
results as a key measure of success.
New Technology
One of the limiting factors in our ability to modernize our
business practices at the IRS today is our computer systems, which are
extremely deficient in their ability to support our missions and goals.
But computer systems essentially represent a detailed codification of
the business practices and organization structure that exist. Building
new computer systems to support the old business practices and complex
organization structure will not work.
The recently issued technology modernization blueprint and the new
CIO organization provide an outstanding and professional basis for
managing the evolution of our technology. The revamped business
practices and rationalized organizational structure I discussed earlier
will provide a sound basis for completing and implementing the modern
systems envisioned in the blueprint.
The management teams in each unit will be able to act as
knowledgeable and responsible business owners to work with the
centralized professional information systems organization and outside
contractors. For the first time, this will establish all the critical
elements needed to manage a large-scale technology/modernization
program successfully.
strategy for modernization and service improvement in fiscal year 1999
While there is great potential to improve the IRS service and
productivity, it will require a period of years to achieve the major
changes outlined above. During this period, we must make improvements
step by step. In addition, mandatory requirements for change must be
met, notably the large project required to update computer systems for
the Century Date Change. To accomplish all this change in an orderly
fashion, during fiscal year 1999 our budget effort is focused on five
major initiatives.
1. Completing the Century Date Change program.--Preparing for the
Century Date Change is one of the most critical elements of our 1999
budget. By the beginning of the 1999 filing season, nearly all of the
systems changes required for the Century Date Change must be completed.
During the remainder of fiscal year 1999, the principal tasks will be
the completion of testing and certification, still a large effort that
will cost $234 million in fiscal year 1999. In addition to the year
2000 project expenditures, this includes the cost of completing the
mainframe consolidation and integrated submission and remittance
processing systems replacement. I cannot stress enough the importance
of this effort. The funds I am requesting here are vital to ensure that
we will be able to meet our commitment to providing essential service
to each and every taxpayer and to avoid the potentially disastrous
effects of an uncorrected Century Date Change problem.
2. Making near-term improvement to service for taxpayers.--The
second critical component of the budget is a set of specific activities
designed to improve service to taxpayers in the coming year. As we
proceed with our long-term efforts to modernize the agency, we must
also take some actions that can be implemented now. During fiscal year
1999, we will pursue a highly focused initiative to improve service to
taxpayers through improved clarity of notices, forms and publications,
better telephone service, more walk-in service, expanded electronic
filing, improved training of customer service representatives,
strengthened support for small businesses, increased staffing for the
taxpayer advocate's office and the creation of Citizen Advocacy panels.
Chart 5 shows estimated incremental costs of $103 million related
to these essential near term service improvements for fiscal year 1999.
3. Investing in essential near term technology.--Because of the
greatly increased financial demands of the Century Date Change during
the past two years (fiscal year 1997 and fiscal year 1998), nearly all
investment in basic hardware and software to support current operations
was eliminated. In an agency in which two-thirds of the employees deal
directly with taxpayers based on information in the agency's computer
systems, this lack of investment results directly in lowered service to
taxpayers as well as lowered morale of employees who are doing their
best to serve taxpayers. In order to ensure that customer service
remains a top priority as we move toward the year 2000, this budget
includes investments that are necessary to enable us to just maintain
an acceptable level of service.
The major near term investments for fiscal year 1999 are completion
of a call router system, funding for which is included in improved
service to taxpayers, deployment of computers to field collectors who
currently have no computers, and replacement of computers used by field
agents who depend on them for examinations. In addition, increases in
product assurance are essential for adequate testing of changes to tax
systems before they are put in production to keep records on millions
of taxpayers.
Chart 6 shows fiscal year 1999 near term investments in technology.
4. Investing in long term technology modernization.--As shown in
Chart 7, the IRS existing base of technology is extremely old and
deficient in its ability to support the mission of the agency. We must
replace it. In fiscal year 1997 and 1998 careful preparation for this
major and difficult task began through the publication of the
modernization blueprint, the beginnings of an establishment of an
internal systems life cycle management process, and publication of a
draft RFP. We expect to issue a final RFP before April 1, 1998.
In fiscal year 1999, the process of long term modernization will
continue with the strengthening of the IRS internal systems management
capabilities and processes and the award of the Prime contract. The
initial tasks on the Prime contract will be focused on completing the
systems management life cycle and on developing the first two
subreleases of the technology modernization blueprint, which provide
telephone and other communications capabilities that are basic
functions essential to support all IRS operations. Let me stress that
they are independent of a specific organizational structure and are
fully compatible with the modernization concept I outlined earlier. In
fact, the two subreleases will also provide a practical way of testing
and refining the management processes of the IRS and the Prime before
proceeding to more challenging projects that are more closely tied to
more detailed modernization business requirements.
Additional subreleases of the blueprint will be very carefully
planned and coordinated with modernization of the business processes
and organization before they are allowed to proceed.
Chart 8 shows the fiscal year 1999 budget for longer term
technology modernization, in two parts: IRS capabilities for managing
and supporting modernization, including funding of the integrated
support contract, as well as funding for the Information Technology
Investment account for the Prime contractor.
5. Organizational Modernization.--The fiscal year 1999 budget
includes $25 million to support the long term modernization of the
organization described earlier. These funds will be used to provide for
a number of activities relating to the modernization concept discussed
earlier and, though not yet fully specified, will include recruiting,
relocation and retraining of people as well as preparation of detailed
plans for reorganization. Greater details on the use of these funds and
organizational plans will be available when the initial study is
complete in early summer of 1998.
historical perspective
Before summarizing the fiscal year 1999 budget, let me review what
has actually happened over the last few years.
As shown in Charts 9 and 10, over the last three years the IRS
budget, net of costs for the Century Date Change, has actually declined
by 7 percent, while dollars collected have gone up by 24 percent,
returns processed have increased by 8 percent and the Taxpayer Relief
Act of 1997 has added about 800 changes to the tax code. These
increases in volume of activity and in changes in the code ripple
through the IRS, requiring new forms and publications, training of
employees and updating of technology.
The net effect of these conflicting trends presents us with new
challenges as we move to modernize the agency. However, I strongly
believe that budget dollars alone will not solve the problems facing
the IRS--these challenges will only be solved through revamping
business practices, realigning the organizational structure, redefining
roles and responsibilities for management, creating a balanced
measurement system, and investing in technology that supports a
modernized IRS.
The work force has been reduced through attrition and buyouts
resulting in a less than optimal deployment. Fast growing economic
areas of the country--those with the highest demands for IRS employees'
skills have seen the largest reductions in the work force. In places
where the demand for IRS employees was weakest, the opposite has been
true.
Workers across the board lack adequate professional training to
keep up with the tax laws and regulations, impairing their ability to
serve taxpayers. Past reductions in the training budget have not been
fully restored. This factor shows up markedly in employee surveys and
is a critical factor we need to address as we strive to ensure proper
treatment of taxpayers.
Because nearly all available technology investment funding in
fiscal year 1997 and fiscal year 1998 was diverted to the Century Date
Change, there was minimal replacement of basic hardware and software to
support front line workers, leading to an erosion of an already
seriously deficient technology base.
recap of fiscal year 1999
In fiscal year 1999, we have prepared a budget that supports the
beginning of the transformation of the IRS which we have outlined
above. It allows us to continue current operations while working on the
five initiatives that form the strategy for near term improvement and
long term modernization. It also sets the stage for the kinds of
productivity improvements we will need to provide good customer service
within the budget constraints under which we must necessarily operate.
Our total budget request for fiscal year 1999 is $8.196 billion and
99,829 FTE. This covers funding of the Processing Assistance and
Management, Tax Law Enforcement, Information Systems and Information
Technology Investment Appropriations. In addition, we are requesting
$143 million and 2,184 FTE in funding outside the caps for the EITC.
The total budget request includes a net increase of $529 million and
1,232 FTE over the fiscal year 1998 level, as shown in Chart 11.
Of this increase, $176 million represents part of the cost that
would be needed simply to maintain the current level of operations,
taking into account inflation and mandatory pay increases. This $176
million level is less than the full cost of maintaining current levels.
We have absorbed as much of the difference as possible without
diminishing service to the taxpayer.
The remaining increases from fiscal year 1998 levels are for the
priorities discussed above (less a $2 million reduction in our
Information Technology Investment Account):
--Improved near term customer service ($103 million);
--Near term and long term technology investments (net of $227
million); and
--Organizational modernization ($25 million).
conclusion
In conclusion, I believe that there is a new day at the IRS. I
believe we can transform the IRS into an agency that helps taxpayers
meet the obligations imposed by the tax laws while ensuring that
compliance is fair. We can do this while increasing productivity and
shrinking the size of the IRS in relation to the economy. This will
take time and investments to modernize technology, business practices
and organization. But, with the support of the Congress, it can be
done.
CHART 1.--IRS EMPLOYMENT BREAKDOWN
----------------------------------------------------------------------------------------------------------------
FTE--
------------------------------------------------------
Percent
Full time Seasonal Total of full Percent
OTFTP time of total
----------------------------------------------------------------------------------------------------------------
Direct Taxpayer Contact
Customer service......................................... 15,722 4,735 20,457 18.3 20.3
Taxpayer advocate........................................ 383 5 388 0.4 0.4
Walk-in service.......................................... 830 331 1,161 1.0 1.2
Customer education....................................... 217 44 261 .3 .3
Underreporter............................................ 1,357 355 1,712 1.6 1.7
Exam..................................................... 20,906 376 21,282 24.3 21.1
Collection............................................... 10,537 117 10,654 12.2 10.6
Criminal................................................. 3,881 159 4,040 4.5 4.0
Appeals.................................................. 2,042 19 2,061 2.4 2.1
EP/EO.................................................... 1,755 41 1,796 2.0 1.8
------------------------------------------------------
Total customer contact............................. 57,630 6,182 63,812 67.0 63.5
Submission processing.................................... 7,386 7,175 14,561 8.6 14.4
Information systems...................................... 7,165 175 7,340 8.3 7.3
Forms distribution....................................... 246 362 608 .3 .6
Inspection............................................... 1,162 6 1,168 1.3 1.2
International............................................ 432 41 473 .5 .5
Counsel.................................................. 2,511 72 2,583 2.9 2.6
Management and support................................... 9,541 413 9,954 11.1 9.9
------------------------------------------------------
Total.............................................. 86,073 14,426 100,499 100.0 100.0
----------------------------------------------------------------------------------------------------------------
Notes:
1. Included all people in N.O. and R.O. in Management and Support.
2. Used fiscal year 1998 financial plan, as of January 31.
3. Management Support Includes: SOI, Research, Mgt. Services, DSS, Finance, HQ, Procurement, Communications,
CTR, Bldg. Del. and IS-EITC.
4. Direct taxpayer contact numbers include non-SES managers below District level.
[GRAPHIC] [TIFF OMITTED] T13MA05.008
[GRAPHIC] [TIFF OMITTED] T13MA05.009
[GRAPHIC] [TIFF OMITTED] T13MA05.010
Chart 5.--Enhance Customer Service
Initiatives
Improve clarity of notices, forms, pubs................. $5,000,000
Provide better telephone service........................ 50,000,000
Make it easier to get answers in person................. 6,000,000
Expand electronic filing................................ 3,000,000
Strengthen support for small business................... 1,000,000
Shift how performance is measured....................... 1,000,000
Improve customer service training....................... 23,000,000
Strengthen Taxpayer Advocate's Office................... 10,000,000
Create citizen advocacy panels.......................... 5,000,000
--------------------------------------------------------
____________________________________________________
Total............................................. \1\ 103,000,000
\1\ Includes $42 million contained in the Information Systems
Appropriation.
---------------------------------------------------------------------------
Chart 6.--Near-Term Technology Investments
Fiscal year 1999 increase \1\
(IS appropriation)
Business lines investments:
Integrated collection system........................ $61,000,000
Field agent exam computers.......................... 33,000,000
Integrated personnel system......................... 14,000,000
Other systems....................................... 17,000,000
--------------------------------------------------------
____________________________________________________
Subtotal.......................................... 125,000,000
Other investments:
Enhance customer service (Includes $19 million for
call routers)..................................... 42,000,000
Operational systems (Includes $16 million for
product assurance)................................ 33,000,000
Organizational modernization........................ 6,000,000
\1\ Refer to Chart 11 for further details.
CHART 7.--IRS PRINCIPAL SYSTEMS
------------------------------------------------------------------------
Computer systems Vintage Technology platform
------------------------------------------------------------------------
Master files (Taxpayer 1965................ IBM--tape files
records).
Integrated data retrieval 1978................ UNISYS
(On-line access/customer
service).
Automated collection system 1985................ IBM
(Telephone collections).
Field agents' exam computers 1990/1991........... DOS laptops
Revenue officers' personal 1/3 paper, 2/3 1996/ UNIX laptops
computers. 1997.
Customer service rep. tax Paper............... 3-ring binders
law information.
------------------------------------------------------------------------
Telephone system: Manual call routing; no screening voice response unit;
limited voice messaging; circuitry bottlenecks due to design flaws;
minimal systems management capability; and no predictive dialing.
CHART 8.--LONGER TERM TECHNOLOGY INVESTMENTS
------------------------------------------------------------------------
Fiscal year 1999 (IS
appropriation)
-------------------------------
Budget Increase
------------------------------------------------------------------------
Modernization Program:
Program management/architecture and
engineering........................ $31,000,000 ..............
Security............................ 17,000,000 $17,000,000
Systems life cycle and performance
measures........................... 18,000,000 18,000,000
Phase I blue print implementation... 13,000,000 13,000,000
Architecture/engineering/
infrastructure..................... 21,000,000 21,000,000
-------------------------------
Subtotal.......................... 100,000,000 69,000,000
Investment account: Information
technology investment.................. 323,000,000 ..............
-------------------------------
Total longer term technology
investment....................... 423,000,000 \1\ 69,000,000
------------------------------------------------------------------------
\1\ Refer to Chart 11 for further details.
[GRAPHIC] [TIFF OMITTED] T13MA05.011
CHART 10.--IRS BUDGETS
[Dollars in millions]
------------------------------------------------------------------------
Fiscal year appropriations--
-------------------------------------------
1995 1996 1997 1998
------------------------------------------------------------------------
Processing, assistance and
management................. $1,704 $1,724 $2,882 $2,926
Tax law enforcement......... $4,390 $4,097 $3,036 $3,144
Information systems......... $1,388 $1,527 $1,287 $1,272
-------------------------------------------
Total operating
appropriations....... $7,482 $7,348 $7,205 $7,341
Less: Y2K costs \1\......... ......... ......... $175 $384
-------------------------------------------
Total operating
appropriations less
Y2K:
Nominal dollars... $7,482 $7,348 $7,030 $6,957
Constant dollars.. $7,482 $7,195 $6,716 $6,478
===========================================
Workload:
Net revenue collected... $1.270T $1.376T $1.504T $1.575T
Primary returns
processed.............. 193.3M 196.2M 202.6M 208.4M
===========================================
Information system
investment................. ......... ......... ......... $325
===========================================
Total IRS
appropriations....... $7,482 $7,348 $7,205 $7,666
===========================================
Earned income tax credit.... ......... ......... ......... $138
------------------------------------------------------------------------
\1\ Includes mainframe consolidation, DSP/ RPS and product assurance
related to Y2K.
CHART 11.--INTERNAL REVENUE SERVICE FISCAL YEAR 1999 BUDGET
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Processing,
assistance Tax law Information Information
and enforcement systems technology Total
management investments
----------------------------------------------------------------------------------------------------------------
Fiscal year 1998 base............................ $2,926 $3,144 $1,272 $325 $7,667
==============================================================
1. Maintaining current levels (MCL).............. 91 108 44 ........... 242
Less:
Nonrecurring costs........................... ........... ........... -14 ........... -14
Absorbed w/in base........................... -28 -17 -8 ........... -52
--------------------------------------------------------------
Net MCL's.................................. 63 91 \1\ 23 ........... 176
==============================================================
2. Enhance Customer Service...................... 58 3 \2\ 42 ........... 103
==============================================================
3. Information systems:
Operational systems.......................... ........... ........... \3\ 33 ........... 33
(Balance of increases/decreases not included
in Nos. 1, 2, 4 and 6)
Modernization program........................ ........... ........... 69 ........... 69
Business line investments.................... ........... ........... 125 ........... 125
--------------------------------------------------------------
Subtotal information systems............... ........... ........... 227 ........... 227
==============================================================
4. Organizational modernization.................. 16 3 6 ........... 25
==============================================================
5. Decrease in information technology investments ........... ........... ........... -2 -2
==============================================================
6. TIMIS (payroll) transfer...................... 29 ........... -29 ........... .........
==============================================================
7. Realignments.................................. 70 -70 ........... ........... .........
==============================================================
Subtotal, increases........................ 236 \1\ 26 \1\ 269 -2 529
==============================================================
Fiscal year 1999................................. 3,162 \1\ 3,170 \1\ 1,541 323 8,196
----------------------------------------------------------------------------------------------------------------
\1\ Totals do not add due to rounding.
\2\ Includes $19 million for call routers.
\3\ Includes $16 million for product assurance.
Additional Comments
Senator Campbell. Mr. Gross, did you have additional
comments?
Mr. Gross. No, Mr. Chairman.
Senator Campbell. I notice that you are going to be leaving
us on April 1. It will be your last chance to impart some
wisdom with the U.S. Senate.
Mr. Gross. I just want to thank the committee. The
committee has been extraordinarily supportive of all of our
efforts to properly fund the critically important programs that
the Commissioner has just outlined.
Senator Campbell. Before we go to any questions, we have
had some Senators come in. Senator Faircloth, did you have a
statement?
Statement of Senator Faircloth
Senator Faircloth. I do, and I will make it brief, Mr.
Chairman.
Mr. Chairman, I thank you for holding this hearing. I think
it is important and I think it gives us an opportunity to
welcome the new Commissioner, Chairman Charles Rossotti, to
speak to the committee and tell us what he plans to do.
Mr. Rossotti is the first businessman to head the IRS since
World War II. I certainly welcome him and what he plans to do.
I had a visit with Mr. Rossotti and I was quite impressed with
his plans and what he wants to do.
He has taken on maybe one of the worst jobs around. If he
were looking for a more difficult one, he could have taken the
District of Columbia or maybe the FAA but I am glad that he has
taken it.
As we all know, the very mention of the word Internal
Revenue Service simply frightens the life out of most people. I
could not help but laugh, somebody said that--I believe it was
you, Mr. Rossotti--that the Internal Revenue Service is here to
help you. That is the oldest joke in the book, that I am from
the Internal Revenue Service and I am here to help you. That is
not usually what most people relate to having the IRS call on
them.
We had some public hearings and I will not go into that, in
the time here, but just some of the most atrocious things came
out of the public hearings, just ludicrous things. One lady
that the IRS recommended very strongly she go into bankruptcy
and she is still in business and has gotten rich 10 years
later, she did not go in bankruptcy.
One young man, working for Wal-Mart at $6 an hour, got a
bill for $300,000,028.15 from the Internal Revenue Service. He
did not pay it.
But the Internal Revenue Service is in need of reform as
much as any governmental agency ever did. As we all know, they
went into an equipment buying spree over a period of 6 or 7
years, and put somewhere near 3.5 billion taxpayer dollars in
new equipment that turned out to be a total fiasco. As I
understand it, and I have not had anybody--if there is anybody
from Revenue knows better, that it is pretty much a total loss
down the drain, and got to go back to ground zero and start
again.
Now that type of thing would never happen in the private
sector. If it did, the company would be broke. But it would not
just have gone on, repeated mistakes and things done wrong.
So I am here to say that, to the new Commissioner, he has a
tremendous job. He comes to it with an excellent background and
knowing how to run things and knowing how to make them work.
And not only that, his background centers somewhat strongly on
the technological or the computer aspect of it.
Mr. Commissioner, we welcome you and we look forward to
having more hearings. I wish you well and we intend to observe
your changes and improvements. Thank you.
Senator Campbell. Senator Shelby.
Statement of Senator Shelby
Senator Shelby. Mr. Chairman, I will try to be brief, I was
a little late getting here.
First of all, I want to congratulate you, on you
undertaking this task and it is a task, and I wish you well. I
want to pledge to you, I am going to do what I can to help you
succeed.
But I do not think it is any mystery what my view is of the
IRS. I chaired this subcommittee for several years and I made
it very clear that I believe the agency is too big and bloated
and it has too much power over the lives of our citizens.
I want to commend you for what I believe, from you, that
you are a well-intentioned man and you have good intentions to
try to fix the problem. But at the end of the day, I believe
what you can do to address the problems is limited. The
complexity of the Tax Code is creating the environment that we
have at the IRS.
I am an advocate of a total overhaul of our tax system, a
flat tax. I know that is something that Congress will have to
speak to.
In the meantime, I wish you well in your endeavors. Thank
you.
Senator Campbell. Senator Stevens.
Statement of Senator Stevens
Senator Stevens. Mr. Chairman, I just dropped by to welcome
Mr. Rossotti, also. I do think that the problem in IRS is one
of attitude, not legality and not the existing laws and not the
complexity of the code, but attitude. The attitude that has
built up in recent years with the personnel of IRS is that the
average taxpayer is guilty before he has even been
investigated. I think that gets reflected to us every time we
go home.
Our people really, as Senator Shelby said, fear the IRS now
rather than look to them for assistance in honestly paying
their bills.
I think you have a big job ahead of you, and I wish you
well.
Senator Campbell. We will go ahead and trade off on the
questions and do two or three rounds, Mr. Rossotti. I will ask
the first one.
Citizens Advocacy Panels
The IRS recently announced the launching of their citizens
advocacy office, or panels, I guess they were. I do not think
you have set up offices, yet. There have been a number of them,
Milwaukee, Brooklyn, Seattle.
I wanted to ask you two questions along that line. First of
all, they apparently are volunteer panels. First all, the
Brooklyn, Milwaukee, Seattle, I noticed there was none in mid-
America or the Rocky Mountain area. That is the first question.
The second question I would like to ask you, what is their
purpose going to be?
Mr. Rossotti. First of all, you are right, Senator. We did
have the idea of starting with four but eventually, as soon as
we learn enough about them, we will spread them to the other
parts of the country. The purpose of starting with these
initial four was just to get some experience before we roll
them out to the rest of the country.
Of course, it is a new idea, which is one of the reasons we
want to be careful about figuring it out.
The purpose of it is to work with the taxpayer advocates in
the local offices and to essentially advise the taxpayer
advocate from the average citizen's point of view about how the
kind of problems that the average citizen is having complying
with the tax load can be dealt with. Of course, the taxpayer
advocate program is where the people who are having trouble
with the IRS can get some help.
This has been around for a long time but one of the
immediate things that we are doing is really trying to
strengthen this program a great deal. I think it has much more
potential to help taxpayers than has been realized so far.
We are increasing the staffing of these taxpayer advocates
but the citizen advocacy panels will be an additional way. What
we will do is have a small group of ordinary volunteer citizens
work with the taxpayer advocate. They will not be able to deal
with individual taxpayer cases, of course, but the taxpayer
advocate will report to them on the kinds of problems that
taxpayers are having in that local area and will seek their
input and their advice as to how these problems can be
resolved.
As we get it rolled out, I think it has the potential of
identifying from the average citizen's point of view what the
kind of problems are that people really want us to work on. And
then, in the annual report that the taxpayer advocate gives to
Congress, we can provide suggestions for tax law changes if
necessary.
Senator Campbell. How many people are going to be on these
panels?
Mr. Rossotti. I think that we are going to have fewer than
10, small enough and with people who would be on for a limited
period of time so they could rotate.
Frankly, we are still experimenting. I mean, this is a
brand new thing and that is why we do not want to start with
the whole country all at once. But we are going to start----
Senator Campbell. Then you will reimburse them for the time
they have to----
Mr. Rossotti. No; they would be just totally volunteers.
Senator Campbell. Just voluntary?
Mr. Rossotti. Just volunteers.
Senator Campbell. And they would basically be a committee
that recommends things to IRS?
Mr. Rossotti. Exactly. And also try to be an outreach, to
make the taxpayer advocate program more visible.
One of the things we find is there are a lot of taxpayers
who have problems that could be solved or helped by the
taxpayer advocate. But partly due to our inability to make this
program known well enough, people do not know they have this
channel. So we are hoping this will be another way of making it
known.
Senator Campbell. Thank you.
IRS Employee Browsing
Last year, I am sure you are aware that we did a hearing on
the issue of IRS employees doing what was called browsing, just
arbitrarily going through taxpayers' files without any probable
cause, without any reason to do so. At the time, the IRS
acknowledged--this was before you came on board--but they did
acknowledge at the time they had a lot of security measures
that were lacking in the current system to provide sufficient
protection for the taxpayer files.
Could you give the committee an update on what has
happened, on perhaps not only the employees who were caught
browsing, but also on the systems you are going to put in place
to try to prevent that?
Mr. Rossotti. Yes; actually, this is something about which
there was considerable action before I got to the agency, and
the law was changed last August to make it a potential
misdemeanor and require removal of employees who are caught.
But internally within the agency, there was quite an
extensive program that started about a year ago and a lot of it
has already been implemented. We call it UNAX for unauthorized
access. The motto is stop UNAX in its tracks. We have gotten
every employee in the IRS to be required to take a training
program, and to sign a certification that they have had this
training program.
We have also done some technical things to try to identify,
through our computer systems, cases of unauthorized access. And
finally, I have assigned to the inspection service, which is
our internal investigative group, the responsibility for
investigating all cases and to adjudicate these on a central
basis.
From the early returns on this, it looks as though there
has been a drop of at least one-half, if not more, in the
number of cases. But there are still cases and we are not going
to be satisfied until we get them down to zero.
Senator Campbell. I know that some were recommended for
some counseling or retraining or so on, but there were a few
that I very frankly thought should have just been flat fired,
if they could have been.
Mr. Rossotti. There were 153 that were fired in fiscal year
1997, flatout separated.
Senator Campbell. Good.
Mr. Rossotti. Of course, there are still due process rules
that employees have to----
Senator Campbell. I understand.
Problems of Small Businesses
I came from the private sector where I was a small
businessman before I was elected to Congress, and I know that
small businessmen need a great deal of assistance. The forms
they get and the things that they have to go over are very,
very complicated, and I am sure you agree with that.
Perhaps you could tell us, in your new plans, how you are
going to address some of the problems small businesses have
that private citizens do not.
Mr. Rossotti. First of all, let me just say, Senator, I
totally agree with you. In fact, Senator Faircloth and I were
talking about this in his office this morning. I think that of
all the segments of the taxpaying population, the IRS does the
poorest job in serving small business.
It is partly, not so much because it does not want to, but
it is more complex for small business and often the small
businessperson does not have the full-time accountants and
other people to help them.
I think the biggest thing in the long term that we are
going to do is to basically organize an entire unit to work
strictly with small business. We can then have all the services
that small business needs in one place, and have people brought
in, including people who have worked in small business, to help
run this agency.
That is the long-term solution, and that will enable us to
really understand, case by case, the particular problems of
different kinds of small businesses and work with them.
In the meantime, we are doing some things to try to improve
service, as we are doing in other areas. We are trying to make
some of the filing easier. For example, one of the things that
just came out relates to the 941, which is something that all
small businesses with employees have to file quarterly. We have
now tested that and people will be able to file through a
simple telephone call. We are also going to try to work to
provide better assistance to small businesses throughout the
districts when they need help.
But I think the long-term solution is that this is such a
huge and important sector of the economy that we really need to
not just have it be a side issue but to be sort of a major
focus of an entire unit, with the right kind of people focused
on solving their problems. I think that will ultimately go a
long way.
Senator Campbell. May I also recommend that when you set up
your volunteer advocacy programs, you have somebody on there
who understands small business or knows what it is to go
through that.
Mr. Rossotti. Oh, we most certainly will. We most certainly
will.
Senator Campbell. Since we have a number of people here, I
will go ahead and yield to Senator Kohl. If we could keep our
questions down to maybe about 5 minutes or so, it will give
everyone an opportunity.
Noncustodial Parents
Senator Kohl. Thank you. I would like to talk about
noncustodial parents who claim child tax benefits for just a
minute, Mr. Rossotti. There are several tax benefits in our
current Internal Revenue Code that go to taxpayers who have
dependent children. These include head of household filing
status, the earned income tax credit, the tax exemption for
dependent children, the dependent care tax credit, and the new
$500 per child tax credit.
In 1996 the Health and Human Services Inspector General
found that many noncustodial parents were incorrectly claiming
these benefits, even though by law they can only go to the
custodial parent. HHS Inspector General estimated that at least
$200 million and possibly $1.5 billion in tax losses may result
annually from noncustodial parents incorrectly claiming child-
related tax benefits.
The inspector general of HHS recommended that information
that is or will soon be available on State child support
registries could easily form the basis of an antifraud
initiative. HHS will share information on custodial parents
with IRS for information on who is claiming child-based tax
benefits resides. An initiative that I sponsored to allow this
sort of data exchange was passed as part of last year's tax
bill.
I understand that there are some problems with the States
collecting the data HHS needs to make this antifraud program
work. But I also understand that HHS and IRS are confident that
those State child support systems will be up and running soon.
So my question is what steps are you taking to move this
effort forward? Have you been in consultation with HHS? And in
your opinion, when will we begin to see results from this
program?
Mr. Rossotti. I would like to ask my colleague, Mr.
Dalrymple, to answer that question for me, if that is OK.
Mr. Dalrymple. Senator, we have been working closely with
HHS around this issue, and we actually helped them design the
way some of the information would be gathered to make sure that
it is more helpful. And notwithstanding that fact, we do
understand that they have had some problems gathering the data
from the States, as you mentioned.
I do not know that we actually have an exact timeline in
place yet, but I would be more than happy to provide
information for the record later, to determine exactly when
that is going to be. But, as you said, we expect this to be
extremely beneficial to the Service in combating this potential
area of fraud or abuse and expect to work quite closely with
HHS. In fact, part of the initiative that we had on the EITC
funding that we got last year, was to go directly to HHS, or I
should say is funneled through us to go to HHS to help build
that data base.
Senator Kohl. My office is very interested in trying to see
to it that we get this program not only underway but up and
running so that we can save this money. I would appreciate it
if you will take it as a matter of priority.
Mr. Dalrymple. It is an absolute priority with us.
Senator Kohl. I thank you.
Tax counseling for the elderly
The fiscal year 1999 budget requests $3.7 million for the
Tax Counseling for the Elderly Program. Since this program was
first authorized in 1978 it has grown to include 53 sponsors
assisting more than 1.6 million elderly taxpayers.
I would like to ask you, Mr. Rossotti, to describe what
kind of assistance is actually provided to the elderly, who
provides the assistance, how they are compensated, whether or
not we are reaching all elderly who require the assistance, and
how much money is needed to ensure that every elderly person
who requires assistance would receive it? Would you describe
the program and how it is going?
Mr. Rossotti. Let me once again ask Mr. Dalrymple to give
the details, but I just want to say one general point because I
think this is an important one. I think that one of the
opportunities we have to provide better service to many
segments of the population, including especially the elderly
but others including various small businesses, is by taking
advantage of partnerships and relationships with various kinds
of associations and volunteer groups.
I have met with several of these, including AARP, and they
are very anxious to work with us, if we can only get out and
provide some support to them.
I personally want to tell you that I think this is in
keeping with what people in the private sector do. You do not
try to do it all yourself. You go out and try to work with
others to help you. This is a very, very promising area.
As far as the specific tax counseling, I will ask Mr.
Dalrymple to give a few more details.
Mr. Dalrymple. As you mentioned, we have spent up to $3.7
million last year and we are going to spend up to that amount
this year. We also supplemented this with computer equipment
and some other equipment, in addition, from our offices. We
helped 1.5 million taxpayers in fiscal year 1997 and expect to
do somewhat more than that this year.
There were 53 sponsors for the program. The largest, of
course, was AARP as Mr. Rossotti just mentioned.
This really is a very important program for us and one with
which we have had a very long history. In fact, my mother uses
TCE and has for a number of years. She lives in Iowa and, in
fact, I was home a few years ago and asked her if she would
like me to do her tax return, and actually she somewhat
politely told me that she only trusts the folks at the TCE
counseling center, with whom she could make appointments to do
that for her.
So I recognize how important this is to folks, because they
become quite dependent on it. We are going to strive to make
this much more available.
We have gone out this year for the first time on our
Internet site and asked for more sponsors, and we are getting
quite a response from that. This will be for the 1998 tax year,
1999 filing season.
Century Date Change
Senator Kohl. Good. One last question, century day change.
Mr. Commissioner, as you indicated in your statement, century
day change or year 2000 is one of the most critical elements of
the fiscal year 1999 budget. We understand that the IRS is also
requesting funds in fiscal year 1998.
How is the IRS going to cover the costs of these
requirements? What happens if the year 2000 is not funded,
particularly if your requests for the telecommunications
systems is not funded?
Mr. Rossotti. Well, I think that whatever happens, we
simply have to make these changes. I think that we do need the
funding to make these changes. If we do not get the funding, we
will have to find something to solve this problem, because we
cannot allow these systems not to be updated.
I do think that we are getting a much closer control over
what we need to do than was the case even 6 months or 1 year
ago. This is simply the fact that we have been working very
hard to identify all of the individual components that we have
to update. This is something that every large business in
America is going through.
In the case of the IRS, it is a gigantic task because we
have, for example, about 90,000 individual application
programs. We have hundreds of thousands of pieces of hardware
and software products that we have to identify.
We are now getting to the point where all of the high-
priority ones have been identified. We are getting to the still
essential but slightly less priority ones, and I think we are
very close to having them all identified.
I have spent considerable time on this program. It was one
of the first things that I looked at when I got into office. My
own assessment of this program is that while there still is
considerable risk as there would be for anything this huge, I
do believe that we have identified those risks and we have got
some actions in place to manage those. And, assuming we can get
funding and that we can continue on, I do not think we are
going to have a catastrophic failure here.
There could be problems, given the magnitude of it, but I
think we can manage those at this point, assuming we can get
the funding.
Senator Kohl. Thank you. Thank you, Mr. Chairman.
Senator Campbell. Senator Faircloth.
Senator Faircloth. Thank you, Mr. Chairman.
New Information Technology Systems
Commissioner Rossotti, I do not mean to pursue the--and I
know you had absolutely no hand in this absolutely--equipment
mess up from word one. I mean, you were out working up the
money to pay for it.
But maybe what is the IRS budget annually?
Mr. Rossotti. The total IRS budget?
Senator Faircloth. Yes, sir.
Mr. Rossotti. This year we are asking for about $7.9
million plus the investment, the $300 million investment, for
the information technology.
Senator Faircloth. For the what?
Mr. Rossotti. For the new systems, the new information
technology.
Senator Faircloth. I am trying to comprehend how the new
system is roughly $300 million. How could we waste at least 11
times that much on a system that did not work, was not working?
It is just mind-boggling how it--and if somebody is there with
you that could explain how you could do that?
Mr. Rossotti. Let me try to do the best I can. First of
all, unfortunately, we are just beginning the replacement
effort of the new system. Mr. Gross has been working for about
2 years to outline a plan for it, and we are just ready to
begin. The money that we are asking, the $300 million,
unfortunately is not going to be just for 1 year. I mean, we
are going to be working at this probably for another 10 years,
I would say, or at least 7 to 10 years. I do not know that it
would be that amount of money per year, but this is a very,
very big program.
The IRS has one of the most enormous information technology
systems anywhere in the world, so we are not talking about
something small here.
As to your question of how did it fail? Of course, I was
not there but I have studied it a little bit, not in detail. I
will tell you, I think that in the private sector large
technology programs do fail, also. The difference is that the
failures are identified earlier, as you noted, and you do not
go so far down the road.
Senator Faircloth. That really was my question.
Mr. Rossotti. And so I do not know entirely why it was not
identified earlier. But I think if we look at what are the
things that need to be done, that we are putting in place here
to make sure that it does not fail again, there is a whole
series of them.
One of them is simply having professional management of the
information technology function. Unfortunately, Mr. Gross is
leaving us but he has brought some new people in and he has
built the beginnings of a real professional organization. He
has also agreed to continue to consult with us after he leaves,
fortunately, and I am committed to recruiting a person from the
private sector who is a professional person to be the overall
manager.
Second, we are going to use the best contractors, outside
contractors. In this day and age you do not try and do these
things yourself, not only to buy the hardware but to actually
put it all together and to integrate it. So we are going to do
that.
The third thing that is very important is that technology
does not stand by itself in business. It has to work with the
people who are using it to design it. That has been a problem,
as well. Part of my concept here in the future would be to have
a much closer or clearer sense of ownership of these new
systems by the people actually in the agency and using it.
And finally, I have spent 28 years in this business, I am
just committing myself here to try to oversee this thing, to
try to make it successful. But it is going to take time and
there are risks associated with it.
That is the best answer I can give, not having been here
during the period when it was done.
Senator Faircloth. At least we do not plan to repeat the
mistakes of the last one?
Mr. Rossotti. Not if I can help it.
Section 6103
Senator Faircloth. You might not be familiar with this,
certainly in 4 months you probably have not. But there is one
section of the Tax Code, section 6103, that was put in and
intended to protect the taxpayers' privacy, was the purpose of
it. But now it is being used by the IRS and IRS attorneys to
shield the inner workings of the IRS from the scrutiny of
Congress in many ways and many times.
Do you, or is someone accompanying you, what ideas do they
have for opening up the IRS for better congressional oversight?
Mr. Rossotti. Senator, let me just say, that is one section
of the code I have learned, even though I am not a tax lawyer.
I learned 6103 even before I was confirmed.
I believe that there is a lot more disclosure and a lot
more information that we can give to Congress, as well as the
public, without violating 6103. In my confirmation hearing
before the Senate Finance Committee and Senator Roth back in
October, that was one of the things that I said that I thought
was going to be my policy, to help improve the agency.
I do not believe that you can solve problems until you have
acknowledged honestly that they exist. And so from the very
first day that I was in office, I sent out a memo and an e-mail
and a voice mail to every employee saying that open
communication and honest acknowledgement of problems was going
to be something that we were going to have to face up to and
do.
I do not know that we will succeed in that instantly, but
in every way that I can I am pursuing that policy.
I do not really think that 6103 is that much of an obstacle
to it. All it says is that you cannot release a specific
taxpayer's information. But if you look, for example, at the
internal audit reports and the GAO reports that are done, which
are many, very little of them have reference to individual
taxpayer information. We are now sending all of our internal
audit reports over to the committee here, and as far as I am
concerned we will continue to follow that practice and try to
respond every way we can.
I am committed to acknowledging problems and solving them,
not trying to cover them up.
Senator Faircloth. Thank you. One other quick question, if
I may, Mr. Chairman.
Internal Ethics Problems
Could you provide the committee with any statistics or with
statistics on internal ethics problems within IRS employees? I
would like a breakdown on how many employees have been
disciplined over the past 3 years.
Not names, of course, but how many have been disciplined
over the last 3 years, and for what offenses and what type of
punishment was merited.
Mr. Rossotti. We can do that. I do not have it with me, but
I would be glad to get back to you on that.
Senator Faircloth. I am sure you do not, but if somebody
could get that.
Mr. Rossotti. We will get you that, Senator.
Senator Faircloth. Thank you so much.
[The information follows:]
For 1996, 1997, and thus far in 1998, employees have been
disciplined for the following offenses that relate to ethical
issues: general conduct matters; Taxpayer Bill of Rights II
violations; and employee tax matters. Punishment ranged from
admonishment, reprimand, suspension, up to removal.
Employees
Category disciplined
General conduct matters....................................... 1,895
Taxpayer Bill of Rights II.................................... 64
Employee tax matters.......................................... 501
--------------------------------------------------------------
____________________________________________________
Total................................................... 2,460
Disproportionate Audits of Southerners
Senator Campbell. Senator Shelby.
Senator Shelby. Thank you, Mr. Chairman.
I would like to get into a story that surfaced recently
about the IRS disproportionate audits of southerners, being a
southerner. I think Senator Coverdell asked the General
Accounting Office for a study there. I am sure you are familiar
with it.
When the General Accounting Office study conducted for
Senator Coverdell found that 47 percent of taxpayers audited at
random reside in 1 of the 11 Southern States. These States,
including my State of Alabama, account for just 29 percent of
the population.
How do you explain that? Is this just seeking out people?
Is that getting into the auditing of the investment tax credit?
Or what is it? And is not 47 percent a pretty disproportionate
share of so-called audits?
Mr. Rossotti. Let me just say, Senator, first of all I am
still learning myself where these audits are.
Senator Shelby. Sure, I know you are.
Mr. Rossotti. And how they are done. I am continuing to
work to try to find out, because I certainly do not believe
that it is our job to target anybody unless there is a real
good reason to do it.
I do have the study and I have had a little bit of time to
look at it. It does appear that, in this particular study, the
real reason was that 84 percent of these particular audits were
really designed to study the EITC program, which is a program
which has had, as I understand it, some significant problems
with money being claimed that was not owed. And there was
actually encouragement by Congress to study this.
Senator Shelby. I will be the first one to tell you, we do
not want anybody to cheat the system, game the system, on
anything. But on the other hand, when 47 percent of the audits
come out, that is sort of troublesome.
So you have got to have a good reason for it, and I know
you were not there.
Mr. Rossotti. I think that in this particular case the
principal reason was not any deliberate targeting but simply
the fact that it was mostly a study of EITC problems. Eighty-
four percent of it was the EITC, and it happened that there are
more EITC recipients in some of the Southern States than there
are in other places. I think that was the reason why, in this
particular case, that came out that way.
But more generally, I just want to try to assure you, I
have not studied all this yet, but we are going to do the best
we can to try to make sure that the whole process is absolutely
fair and that nobody is unfairly targeted. The sole purpose of
doing audits is to encourage compliance.
Budget Request
Senator Shelby. It is my understanding in the budget
request that the IRS is asking for $143 million and 2,184 FTE,
full-time equivalent, positions for the EITC appropriation. Can
you explain that in detail? That is a lot of money, $143
million.
Mr. Rossotti. Let me just say that this was the money that
I think was specifically added by the Congress last year, to
request the IRS to do this. So this was requested by the
Congress, as I understand it, but Mr. Dalrymple can tell you
exactly what we are going to do with this money.
Mr. Dalrymple. This last year we were given $138 million
and, you are right, in the 1999 budget----
Senator Shelby. Mr. Dalrymple, could you pull the
microphone up?
Mr. Dalrymple. Too far away? Maybe it is not on. OK.
At any rate, we were given $138 million in this last budget
year and I think the 1999 budget reflects $143 million, as you
mentioned.
That was a direct result of a lot of concerns. They were
basically twofold. One, that we make sure we reach all of the
people who need to be reached. And two, that we get as much of
the overclaim rate out of the system as possible.
What we have done in 1998, and we will continue in 1999, is
basically on one hand, to ensure that everyone who should be
eligible is claiming, we have sent informational letters to the
top 100 employers, most likely to employ taxpayers who would be
eligible. We sent notices to over 6 million EITC recipients,
informing them of the advanced earned income credit, because we
know that people are much more compliant who use the advanced
earned income credit. We sent approximately 2.5 million notices
to taxpayers who did not claim the credit but appear eligible
for the credit.
And we also worked with the Social Security Administration
to send out a document in their reporter which reaches over 6
million employers, to give them information about this.
We are also providing toll-free telephone assistance for
EITC questions 24 hours a day, 7 days a week on a special line.
On the other side of the ledger, because we want to make
sure that we have also reduced as much of the overclaim rate as
possible here, we also expect to protect over $1.2 billion this
year through our math error operations, which Congress gave us
authority to use in this area, and through additional
examinations this year.
Earned Income Tax Credit
Senator Shelby. Mr. Dalrymple, do you know how the earned
income tax credit works? Do you know the mechanics of it?
Mr. Dalrymple. I generally know, yes.
Senator Shelby. How is that? It is not a credit against
what you earn, it is a check if you do not earn a certain
amount of money, is it not?
Mr. Dalrymple. It is a refundable credit, you are right.
Senator Shelby. For example, if I earn x dollars and I was
supposed to pay taxes, would I get my taxes back? In other
words, if I qualified for that, or would I get my taxes back
plus a subsidy, a welfare check?
Mr. Dalrymple. You could get more than the taxes.
Senator Shelby. I would get more back than I ever paid in;
is that right?
Mr. Dalrymple. You could, at certain incomes.
Senator Shelby. So that is a misnomer, is it not, when you
say it is an earned income tax credit? You are really giving a
subsidy out, are you not? You are giving a check out for me
that I did not earn; is that correct?
Mr. Dalrymple. Senator, you are now asking questions of
someone who administers the law, versus someone who----
Senator Shelby. I am just asking you mechanically. Let us
say I earned $25,000 and I was cut so much taxes, would I get
that money back if I qualified, plus other money that I never
earned? Do you see what my question is?
Mr. Dalrymple. It really depends on your circumstances.
Senator Shelby. I understand that, but that is not what I
am asking you. I am asking you that you do not just get your
tax money back, you get a welfare check back; is that right?
Mr. Dalrymple. Well, you can get a credit over and above
your tax.
Senator Shelby. Now do you get a credit or do you get a
check?
Mr. Dalrymple. You get a check.
Senator Shelby. That is right. A lot of difference, is
there not?
Mr. Dalrymple. You get a check back.
Senator Shelby. So why do they call it a credit?
Mr. Dalrymple. I really cannot answer that.
Senator Shelby. Congress did that, did they not?
That is a big thing. I think a lot of people do not realize
in America what that is. It is a big handout. I know you did
not create the program, and neither did I.
Tax Code complexity, the Tax Code is very complex; is it
not?
Mr. Rossotti. Yes, sir.
Senator Shelby. In addition to being a nightmare for most
taxpayers, including this one here, the Tax Code's complexity
obviously poses very substantial problems for your agency with
regard to administration. Would that be a given?
Mr. Rossotti. Certainly.
Changes in the Tax Code
Senator Shelby. You have noted, in your prepared testimony,
that there were about 800 changes made to the Tax Code that
``ripple through the IRS, requiring new forms and publications,
training of employees, and updating of technology.''
Obviously, this ultimately ends up costing more money for
compliance and administrative costs; am I right, sir?
Mr. Rossotti. Yes, sir.
Senator Shelby. Can you give me a better idea of what is
triggered when Congress makes significant changes to the Tax
Code? Or have I already said it?
Mr. Rossotti. I think you just said it.
Senator Shelby. I think it was alluded to, the employee
disciplinary procedures that might not be there, I am not sure.
In April of last year the subcommittee held hearings regarding
the issue of IRS employees browsing or snooping at taxpayers'
files, which most Americans thought were confidential, you
know, that they were dealing with the IRS and they had a right
of privacy there, and so forth. And I believe they do. At that
time, it was expressed that serious concerns about holding
employees accountable through severe disciplinary actions.
Mistreatment of Taxpayers
A common theme throughout your prepared testimony today is
the goal of making the IRS perform more like a private
financial institution. Last fall Senate Finance Committee
brought to light severe mistreatment of taxpayers by employees
of the Internal Revenue Service, people that you are their
superior.
The private sector has a very simple solution to those kind
of problems and you know about it, you have been there. It
fires people. You cannot put up with that kind of stuff.
Do you know how many people have lost their jobs as a
result of the misconduct outlined in the Finance hearings last
fall? And in addition, how has the agency changed its policies
to expedite the termination of rogue employees, employees at
the IRS that snoop and disseminate information that is
confidential for the average American taxpayer?
Mr. Rossotti. That is a very, very good question, Senator.
Let me address the issue that has been an issue longer,
which is the unauthorized access. I think I summarized this in
answer to a previous question, but with the help of Congress we
did get a new law, a change in the law in August, which made it
much easier to discipline employees, made it clear that losing
your job or even criminal prosecution would be a consequence of
unauthorized access.
And we also, as I said, have put in some significant
programs to make it clear that this is going to happen. We call
it unauthorized access [UNAX], and every employee has now gone
through a required training program, has signed a
certification, and we have added a special central way of
processing these cases.
Senator Shelby. Let me ask you this, as a new boss over
there, I certainly wish you well, and I believe you have a
great attitude and I hope you will retain it as you delve into
the problems there.
Mr. Rossotti. Thank you.
Senator Shelby. If you find out, and you are the head man,
that people are snooping into taxpayer's files and
disseminating this information--I am talking about the average
American taxpayer--are you going to fire those people, are you
going to pension them off, or what are you going to do?
Reassign them? I think that is important.
Mr. Rossotti. We have got the authority----
Senator Shelby. No, sir; what are you going to do? You are
going to set the tone.
Senator Campbell. If the Senator would yield, he did
testify earlier that they had fired, what was it, 140?
Mr. Rossotti. 153 in fiscal year 1997.
Senator Campbell. 153 you have fired.
Senator Shelby. That is good.
Mr. Rossotti. I mean, it does not happen in all cases
because there are some cases where there are mitigating
circumstances. Even in private business, I did not just fire
everybody the first time that somebody did something wrong. So
you do want to have due process for people, and it is a little
longer I have found in the Federal Government.
Senator Shelby. Too long, is it not?
Mr. Rossotti. Well, it is longer, but I think if you pursue
it you can still make it happen.
Senator Shelby. Do you believe that the American taxpayers
who file their taxes should have the benefit of confidentiality
with the Internal Revenue Service?
Mr. Rossotti. Oh, most definitely.
Senator Shelby. And should that be one of the highest
orders at the agency?
Mr. Rossotti. Yes, sir; absolutely. And I think that, in
this area, most of this was done, I have to say, before I got
here. There is a very aggressive program to do this, and we
have better technology to detect when people are doing it, and
the number of incidents has dropped dramatically.
It is still too high. We still need to go down to zero, or
as close to zero, but I think there are some real programs in
place to make this happen.
Senator Shelby. Mr. Chairman, I have one last question, if
you will permit me.
Taxpayer Service
Taxpayer service is very important, and you probably went
into it earlier and I did not get here at the beginning.
Taxpayer service, when someone contacts the IRS should they not
be able to rely upon the advice they get from the IRS? Or if
they cannot, why give the advice at all? Because a lot of
people in America are frustrated with the advice they have
gotten from the IRS, to rely on what they get.
Would it not be better not to give advice than to give
erroneous advice that frustrates the process, frustrates the
people, and destroys the respect they have for your agency?
Mr. Rossotti. Yes; that is right. It would be better to not
give advice than give erroneous advice. And this area of
customer service has been really acknowledged to be quite
deficient.
There are significant improvements in this filing season,
at least in the quantity certainly, of being able to get
through, and the measurements of quality. I do not think we are
still at an acceptable level of quality, but we are measuring
it. We are measuring it better.
All I can say is we are not going to be satisfied until we
get--we will never get to 100 percent, I do not believe, but we
can certainly improve significantly.
Senator Shelby. Thank you. Thank you, Mr. Chairman.
Information Accuracy Rate
Senator Campbell. If I might add something to Senator
Shelby's comments and questions, it is my understanding that
the IRS initiated a toll-free number in order for taxpayers to
get information on how to comply with a particular tax law and
how to fill out certain tax forms. In 1997, according to the
IRS statistics, the accuracy rate for the taxpayer inquiries
were 96.1 percent, which is great except for the 3.9 percent
that did not. And they relied on information provided by the
IRS but then learned later that it was wrong information. When
the IRS demanded additional taxes and fines, of course it
created some real problems.
My question, in addition to Senator Shelby's question, is
how are they going to be able to rely on information? You may
never get to 100 percent, but is there an appeals process they
have to go through when they have gotten bad information?
Mr. Rossotti. I think that there is a number of solutions
here. Probably the most important solution is 96 percent is
certainly better than it was, but that is still 3.5 percent and
that is not good enough.
I think in many businesses, one of the things that you have
found is that you set a goal, you get to a certain point, and
you find OK, now we can take that 3.5 percent, and if we cut it
in half that is 1.7 percent, that will be a big improvement.
That is one of the most important things, to just give the best
advice in the first place.
I think one of the things that we have in this 1999 budget
is some additional money. It is in customer service, but it is
really for training the employees. One of the reasons, of
course, that you do not give the right advice is you do not
train the employees with the right information. In 1999 that is
going to be particularly important because we have all these
tax law changes.
I can tell you the employees are very frustrated when they
do not have the right training and then they get into a phone
call with a client, with a taxpayer. I am still calling them
clients because that was what I used to call them on my
previous job.
Senator Campbell. There is a lot of money in the training.
You also have a request to provide better telephone service for
over $50 million. I will tell you, I do not know of anything
more frustrating than calling a Federal agency now and you
cannot find a live, warm body. What you get is a recording,
press one for so and so, press two for so and so, you know the
routine.
If we are going to add $50 million to this, can we
anticipate some kind of improvements where people can talk to
human beings?
Mr. Rossotti. The point is to be able to have more people
on the phones, No. 1; and to schedule them when people call.
One of the biggest things about calling is just simply
scheduling. In other words, for the average person, there is a
pattern of calling. People call in the evenings, for example,
when they are free. They do not necessarily call at 10 o'clock
in the morning when they are working, so we are extending the
hours of service.
Senator Campbell. And Saturdays, as I understand.
Mr. Rossotti. And Saturdays, we are open Saturdays. Those
are the kind of things that we need to do.
We also need better technology to put the calls across the
Nation in the right place where the people are. So those are
some of the things that we are trying to do, and we will be
working on. I think in 1999 we can make some significant
progress.
Senator Campbell. Let me go on to a couple of other short
ones, before I yield to Senator Kohl.
Tax Law Enforcement Section
In fiscal year 1998 there were more employees in the tax
law enforcement part of the IRS than there are in processing
and assistance. Given the fact that over 80 percent of the
taxpayers are voluntarily paying and have no problems at all,
why do we need so much of the budget in the enforcement
section?
Mr. Rossotti. There are a significant number of people in
the compliance functions. That is correct, Senator. I think
that the biggest single category of people in that category are
simply the people doing examinations. A lot of those people are
doing examinations of corporations as well as individuals.
There are a lot of corporations that pay a lot of taxes in this
country.
The actual examination rate for individual taxpayers is a
little over 1 percent, and it is really in the nature of a spot
check, as I would see it, to make sure that the people who are
fairly paying are not victimized by the small percentage of
people who do not pay. And it does take quite a few people even
to do 1 percent examinations of those returns.
But let me just say that, longer term as we go forward
here, what we can do is handle more returns but we can maintain
the level of compliance without adding to the number of people.
I think, in other words, we can shrink the number of people in
the IRS in all the functions as a fraction of the economy.
We cannot do that overnight, because it takes
reorganization and it takes technology, but I do think over
time it can shrink.
Management of Purchasing Processes
Senator Campbell. Last question before I yield, we are
being asked to put an awful lot of money into purchasing new
high technology equipment. I was interested in how you purchase
things.
No. 1, since you have offices all over the country, is
there going to be some kind of management control so that field
offices are not purchasing something that simply cannot be
hooked up or utilized? What is the process by which you intend
to do some of the purchasing?
Mr. Rossotti. Yes, sir, Senator. That is one of the big
changes over what was done in the past. We are centralizing not
just the purchasing--that is just one part of it--but the
entire management process for all the information technology in
the central group here that would be headed by the chief
information officer.
That is partially done today and we are moving more in
fiscal year 1999. As part of the year 2000 we are centralizing
more. But I think within a few years we will have it almost
completely centralized in terms of its management.
The other big change is that most of the development of the
new systems, including new equipment, will be managed through
one major prime contract where the single contractor will be
the integrator and will make sure all this fits together, which
is the way it is done, for the most part, in the private
sector.
Senator Campbell. Senator Kohl.
Electronic Filing
Senator Kohl. Thank you, Senator Campbell. I will just ask
one question, Mr. Rossotti.
Would you talk about electronic filing for a bit? What the
percentage of taxpayers are who file electronically now and how
you intend to progress on this, what your timetable is, and
what the American taxpayer can look forward to by way of
electronic filing?
Mr. Rossotti. Yes; well, this year we have some pretty good
news in the early filing season. I think we are up, John what
is it, about 20----
Mr. Dalrymple. We are over 24 percent above where we were
last year across the board.
Senator Kohl. How many Americans file electronically now?
Mr. Dalrymple. So far this year, we have had approximately
17 million people file electronically this year. In all of the
last filing season we did about 19 million, just a fraction
over 19 million. So we are running substantially ahead of where
we were last year, to the tune of about 20 to 24 percent ahead
of last year.
Mr. Rossotti. It is still though, to get to your question,
there are still many more that are filing by paper. I think it
is about 80 percent or so paper, still. We will have to see how
it comes out by the end of the year.
But of course, if we continue to grow, what is happening is
that the number of returns on paper is gradually going down and
the number of electronic returns is going up very rapidly. So
if you extrapolate over the next 4 or 5 years, we will cross
these lines.
However, it is not going to happen just by our standing by
and watching it. There are some very aggressive things that we
have to do. We really do not have as good of an electronic
filing program as we need to have. There is still too much
paper involved even in some of the electronic filing. Even
though you file electronically there is still, in some cases,
some paper you have to send in which really does not make a lot
of sense. That is because of some of the problems with having
signatures that are authorized.
We are working very aggressively right now to come up with
an improved electronic filing system for next year, for fiscal
year 1999, that would eliminate some of these problems and
accelerate the trend toward electronic filing.
Senator Kohl. As we look out the next 3, 4, 5, 6, 7, 10
years, what is your estimate of what the percentage of
Americans filing electronically will do?
Mr. Rossotti. Well, I do not know what the exact percentage
is, but I think if you just extrapolate the trends that we are
on and we do some other things, it will not be too long before
it will be certainly the majority. And ultimately you will
never get to 100 percent--well, I will not say never, but it
may take quite a while before you get to 100 percent.
But certainly the predominant form of filing in the future,
and it will not be too far into the future, will be electronic.
Senator Kohl. Thank you, Mr. Chairman.
Year 2000
Senator Campbell. The year 2000, and I keep hearing that,
that year is the time when all of the computers, what, do they
go crazy or something?
Mr. Rossotti. Yes.
Senator Campbell. As I understand it, they will not be able
to recognize between a six-digit bar code and an eight, or
something. I know that the IRS has worked very hard on that, to
try to get ahead of the curve, but could you give me just a
little nontechnical overview about how you are moving forward
to prevent this doomsday effect that we keep hearing about?
Mr. Rossotti. Yes; I will. In simple terms, there are two
things that you have to do. In some of the computer programs
you have to do what is called renovate them, which is just make
some changes to them so they can accommodate the century date.
And the other thing you have to do on some of the products
that you have bought from the outside, is to get new versions
of them, new pieces of hardware and software. These are the two
basic things you have to do.
The final thing you have to do, after you do that, is test
it all to make sure it works.
Basically in terms of the first two, the renovation and
replacement, our plan is to have most of that done, almost all
of it done, at the end of this calendar year, 1998, before we
start next year's filing season. There may be some that would
hang over, but for the vast majority of it we would have it
done. And we have an enormous amount of management time going
in to making that happen.
What would happen during next year, calendar 1999, is the
final testing of all this to make sure it works. It is a very
big program. The whole thing all together, over 3 years, is
more than a $900 million program, which is really enormous in
terms of management in any business.
But fortunately, mostly due to work that Mr. Gross did
before I ever got here, it is a well-organized program. That is
not to say there are not risks associated with it, but I think
we understand where those risks are.
Senator Campbell. Well, I do not know, frankly, what it is
going to mean to the average mom and pop out on the farms
paying their taxes if something does not work, but hopefully it
will be ironed out by then.
Misprinted Bar Codes
It was recently discovered that an IRS contractor
misprinted the bar codes on about 1 million address labels. As
I understand that, unless that is fixed, the completed tax
returns will actually go back to the taxpayer rather than the
IRS. They will get their own mail back.
I would really like to know what steps you are taking to
try to correct that? Is there something going to be done before
April 15, so these people will not be in jeopardy of missing
the deadline?
Mr. Dalrymple. Yes; in fact, we have already begun mailing
letters out to the taxpayers, informing them of that, with
additional bar coded envelopes so that they can mail their
returns properly. We have identified exactly who they are. The
vendor who was responsible for that took responsibility for
mailing out these corrected ones.
Senator Campbell. When something like that happens, what
actions do you take against the vendor? Do you just not deal
with them anymore? Is there some kind of a bonding system or a
penalty or how do you deal with it?
Mr. Dalrymple. Each year, of course, when we contract with
vendors we look at their past performance. We deal with a
number of vendors in terms of mailing out forms and
publications.
Part of the penalty phase would be looking at whether we
are going to use this particular vendor again. We traditionally
have one or two problems during the filing season because of
the volumes involved. The vendors are supposed to have very
careful quality controls in place.
In this particular situation it was unacceptable to us
because from what we thought would have happened with that
vendor, they would have caught this much earlier because their
quality control would have been much sooner than having as many
of these documents go out as did.
Senator Campbell. Are the vendors responsible for the
additional cost of correcting the mistake?
Mr. Dalrymple. Yes; they are.
Senator Campbell. OK. Do you have any additional comments?
EITC Program
Mr. Dalrymple. Can I just clarify one thing for the record?
Senator Campbell. Sure.
Mr. Dalrymple. When Senator Shelby was asking earlier about
the EITC taxes, I think it is important to get on the record
that those also were intended to refund the payroll taxes in
addition to the income taxes, and I do not think I made that
perfectly clear in an earlier statement.
Senator Campbell. He might not hear the tape. You might
wish to drop him a line and correct that so he will be aware of
that.
Mr. Dalrymple. I will. I absolutely will.
Prepared Statement
Senator Campbell. Before we adjourn, with unanimous consent
to be included for the record a statement by Senator Coverdell,
who wanted to be here with us, but could not today.
[The statement follows:]
Prepared Statement of Senator Coverdell
Chairman Campbell, members of the Subcommittee, and guests, I
appreciate this opportunity to submit testimony as you consider fiscal
year 1999 funding for the Internal Revenue Service (IRS) in the
Treasury/Postal Appropriations legislation. Although I would very much
like to have delivered these remarks in person, I am prevented by an
unavoidable scheduling conflict.
As you may be aware, I released earlier this week a General
Accounting Office (GAO) report regarding the use of random audits by
the IRS. The finding that the IRS has targeted low-income taxpayers was
shocking, but not unexpected. In my travels throughout Georgia,
invariably I have been approached by individuals who found themselves
within the sights of the IRS, and they were scared to death.
More and more, I saw a pattern. The Georgians who approached me
were not wealthy nor were they CEO's of big corporations. They were
ordinary, law abiding taxpayers who earn a wage or run a small business
or operate a family farm. Some were struggling just to make ends meet.
Many were frankly confused as to what they had done WRONG to deserve
the attention of the IRS. Thanks to the GAO report on IRS random
Audits, now we know that many of them had done NOTHING to warrant such
attention.
Low income taxpayers are defenseless when confronted by the IRS,
and I suspected that is exactly why they had been targeted. It is
troubling to know that my suspicions have been confirmed. Now is the
time to do something about it. It is important to mention again that
these are audits of taxpayers whose returns indicated NO WRONG DOING.
Of all the random audits of returns filed by individual taxpayers in
this Nation from 1994 to 1996, over 90 percent were conducted on
taxpayers earning LESS than $25,000. This is unconscionable.
The incredible Finance hearings last Fall brought to the Nation's
attention the abuses the IRS has inflicted upon taxpayers. I want to
quote from one witness, Jennifer Long, who is a field agent with the
IRS. She said, ``As of late, we seem to be auditing only the poor
people. The current IRS Management does not believe anyone in this
country can possibly live on less than $20,000 per year, insisting
anyone below that level must be cheating by understating their true
income.''
Moreover, at a recent field hearing of the Senate Committee on
Small Business, the Director of the Georgia State University Tax Clinic
testified that when confronted by the IRS, low-income taxpayers end up
paying more tax than they actually owe. I believe the IRS knows this.
When its campaign of random audits against the poor was uncovered,
the IRS made the outrageous claim that it is only responding to a
congressional mandate to root out fraud in the Earned Income Tax Credit
(EITC) program. This is just one more instance of the lengths the IRS
will take to misdirect congressional and public scrutiny from its
shameful activity. In fact, Congress has passed no mandate, no edict,
instructing the IRS to target poor taxpayers with random audits.
After uncovering these very troubling facts, the question remains,
what should be done to put a stop to this practice? First, I believe we
must prohibit the practice of random audits. We must remove this brutal
tool from the hands of the IRS and put a stop to this indiscriminate
targeting. In addition to legislation I will be introducing soon to
prohibit random audits, I believe it is critical that restrictions be
placed upon the appropriations Congress allocates to the IRS.
Specifically, I refer to the $716 million in funding through 2002
authorized in the Balanced Budget Act of 1997 to support the EIC
Compliance Initiative of the IRS.
Congress provided $138 million in fiscal year 1998 to the IRS and
trusted it to use that money appropriately. Since that time, we have
learned of the IRS' outrageous use of random audits as a tool of its
EIC Compliance Initiative and of its attempt to misdirect the
responsibility for that action. Clearly, the IRS cannot be given free
reign in this matter without inviting abuse of low income taxpayers.
The Subcommittee and Congress has before it the opportunity to
protect these low income taxpayers who are otherwise defenseless when
confronted by the IRS. As you consider funding for the IRS' EIC
Compliance Initiative in fiscal year 1999, authorized at $143 million,
I urge you to prohibit these funds from supporting the practice of
random audits.
Once again, thank you for allowing me to testify today and to
express my deep concerns.
Submitted Questions
Senator Campbell. I appreciate you being here and I have
several other questions that I am going to submit. If you would
answer those in writing, I would certainly appreciate it.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
Question. Mr. Rossotti, the Senate Majority Leader has announced
that he expects to have an IRS reform bill before the Senate this
month. I am sure you have been in almost constant contact with Senator
Roth, Chairman of the Senate Finance committee, to discuss this issue.
Based upon the bill you expect to see emerge from the Finance
Committee, do you believe that your operating expenses will decrease or
increase.
Answer. The IRS reform bill is very consistent with the direction
of organizational modernization that we have proposed and in fact
directs some organizational and procedural changes. Some of the
taxpayer bill of rights provisions will require significant changes to
computer systems. The Senate Finance Committee is working with us to
develop effective dates for these provisions that are feasible in light
of Century Date Change and other tax law requirements. Assuming that
mutually acceptable dates can be worked out, we should be able to make
the changes envisaged by the restructuring bill within the limits of
the fiscal year 1999 budget as now submitted. The restructuring bill
does, however, make it even more essential that the amounts requested
for technology and customer service improvements, as well as the $25
million requested for organizational modernization, be approved.
Question. What efforts have been made to include taxpayers in these
reform discussions?
Answer. The IRS' Office of Public Liaison and Small Business
Affairs maintains a very active liaison relationship with the
practitioner and small business communities, the Tax Executives
Institute, Inc., Federation of Tax Administrators, American Association
of Retired Persons, the payroll community, and the Commissioner's
Advisory Group (CAG). This program enables IRS to maintain an
interactive and frequent communication system to share information
about the new concept of operations and request stakeholder feedback.
These organizations represent nationwide practitioners and
stakeholders. Through their members' daily interaction with taxpayers
and IRS employees, these organizations are perfectly suited to assist
us in our assessment of our customers' (the taxpayers) needs and
concerns.
The Deputy Commissioner or I have personally briefed these groups
about my proposal to modernize the IRS.
The CAG, composed of representatives from major market segments,
has undertaken an in-depth study of the proposal. Members will convene
in working sessions to discuss scenarios based on the currently
proposed organizational structure and the implications this could have
on taxpayers and practitioners. In addition, the CAG will also work
with Booz-Allen & Hamilton to provide feedback about the new concept of
operations. The CAG will present formal recommendations about their
findings during upcoming public meetings.
Booz-Allen & Hamilton will also meet with the various practitioner,
small business, and stakeholder groups to discuss their constituencies'
key issues and concerns.
Question. The fiscal year 1999 budget requests a total of $25
million from three accounts for organizational modernization. However,
the budget justification provides no details about this proposed
reorganization or modernization, other than a breakout of the requested
funding by object class. Your testimony before this Committee included
information about a reform plan you are investigating. However, I am
told that this is still in the development stage. Exactly what
organizational modernization is envisioned which will cost $25 million?
If it is your own reform plan, which divides the organization along
business lines, how were you able to determine the cost of a plan which
has not yet been finalized?
Answer. The $25 million requested for organizational modernization
will support my proposal to move the IRS to a more customer-focused
organization. These funds will be used to begin implementation of the
organizational changes described in the modernization concept,
including training, relocating, or retiring portions of our work force,
as well as using the services of professional consulting firms who
specialize in reorganizing organizations. This cost is a rough estimate
of the funds needed in the short term to begin the modernization
efforts; the consultants conducting the validation study will also
provide a more accurate estimate of the total cost of implementation.
We will provide more detail to the Committee staff.
Question. Does each account and program activity for the Internal
Revenue Service have performance measures associated with it?
Answer. In our budget submission, there are performance measures
associated with every account and program activity. IRS has three
levels of key measures to focus the energies of the organization on
attaining the mission: the mission-level indicator, the objective-level
measures, and the budget-level measures. The measures appear in the
fiscal year 1998 President's Budget, dated February 2, 1998. These
measures are all being reviewed in light of our goal of transforming
the IRS from an internally focused organization to one which views
itself from the taxpayer perspective and in light of the elimination of
use of all enforcement statistics for measuring organizational
performance. We have a task force working on this problem and plan to
get the assistance of expert outside consultants. We expect to have
interim results to use for measuring performance during fiscal year
1999. These measures will build on some of the measures included in the
budget submission.
Question. Does your plan include performance measures for which
reliable data are not likely to be available until March 2000?
Answer. The reality is that the IRS at this moment has very few
performance measures that are meaningful, reliable, and appropriate.
There are very few measures of customer satisfaction and the business
measures traditionally used have largely been eliminated. It will be a
major job to develop new ones and at best in fiscal year 1999 we will
have an interim set of measures.
In addition, the IRS today has no reliable measures of overall
compliance . The figures generally cited are extrapolations of 10-year-
old data. Furthermore, we have at present no proposal or plan to solve
this problem. It is essential that this problem be solved, but we do
not have an acceptable solution.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. Yes, the Service has a longstanding tradition of measuring
and reporting program performance in order to achieve its desired
results. Our cyclical Strategic Management Process establishes long-
range goals which drive the creation of near-term goals with their
associated measures and targets. The near-term measures and targets are
reflected in the Annual Performance Plan and used throughout the year
to track and report on program performance. The last step in the cycle
is a summary assessment of accomplishments known as Business Review,
the results of which are used to update the long-range goals. The
Service uses the Executive Management and Support System (EMSS), an
automated management information system, to facilitate the monitoring
of program performance.
However, these measures are all being reviewed in light of our goal
of transforming IRS from an internally focused organization to one that
views itself from the taxpayer perspective and in light of the
elimination of the use of all enforcement statistics for measuring
organizational performance. We have a task force working on this
problem and we expect to engage expert outside consultants to assist in
this task. We expect to have interim results to use for measuring
performance during fiscal year 1999. These measures will build on some
of the measures included in the budget.
Question. Throughout the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. Any changes to the mission or function of our current
organization at the division level (``Division'' applies to all
organizations two levels below the Commissioner, regardless of official
title) and above are subject to the approval of the senior executives
and a multi-functional review. At times, lower level changes affect
division level mission or function; when they do, these procedures
apply to them as well. This safeguards against programmatic overlaps or
duplications, while facilitating the creation of cross-functional
programs such as Electronic Tax Administration (ETA). ETA's purpose, to
``revolutionize how taxpayers transact and communicate with the IRS,''
requires that they draw from multiple IRS organizations such as Tax
Forms and Submission Processing, Information Systems Modernization, the
Office of Public Liaison, and others.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 budget?
Answer. In the framework of the current organizational structure,
there is a specific reason for each organizational unit and program.
However, in the course of reviewing the entire structure of the
organization as part of our organizational modernization study, we will
be looking carefully at how we can streamline the structure. In fact,
this is the only way that the IRS will be able to meet the increased
demands of service to taxpayers and the increased workload from a
growing economy without adding to overall staffing levels.
Question. What do you believe will be the most difficult
performance goal for the IRS to reach in fiscal year 1999?
Answer. Two of the most important customer service measures for IRS
to achieve in fiscal year 1999 are Toll Free Level of Access and Tax
Law Accuracy Rate for Taxpayers. For Toll Free Level of Access, we plan
to increase the level of access from 70 percent in fiscal year 1998 to
86 percent in fiscal year 1999. This is a substantial increase given
that we had previously planned an fiscal year 2002 goal of 80 percent
for this measure. Equally important is maintaining a high level of
accuracy for the responses provided to taxpayers and that target for
fiscal year 1999 will be 96 percent.
Question. Have you redirected resources to that particular goal?
Answer. Yes, the IRS requested budget increases of $103 million to
be directed to all of the customer service goals, especially the two
critical goals: Toll Free Level of Access, and Tax Law Accuracy Rate
for Taxpayers.
customer service
Question. There are provisions within your fiscal year 1999 budget
which focus on enhancing customer service. Overall, this increase is
only 1 percent compared to your fiscal year 1998 budget and I believe
that we would all place a greater emphasis on the need for the
improvement of customer service within the IRS. I know that you only
came to the IRS late in this budget cycle so I would only ask what you
believe is a reasonable percentage the IRS should be spending on
customer service?
Answer. While the increase as a percentage of our total budget may
be small, in terms of the budgets for each of the individual service
oriented activities of toll free telephones, walk-in service and
taxpayer education, the increases are larger. The toll free increase in
fiscal year 1999 is actually 13 percent over fiscal year 1998 and the
walk-in increase is 5 percent. Taxpayer Education was increased by 20
percent in fiscal year 1998. So, there is significant emphasis on those
program areas that we feel is appropriate at the present time and is
consistent with our ability to measure short term change.
However, there remains a great deal of improvement required before
the IRS reaches an acceptable level of service to each taxpayer who
needs it. As noted in the answer to the above question, we will need to
modernize both the organization and the technology in order to free up
the resources and to have the management structure needed to meet this
service deficit and meet increased workload without significantly
increasing overall staffing levels.
telephone access
Question. Mr. Rossotti, one initiative in your fiscal year 1999
budget request is to provide better telephone service for $50.3
million. Today, what is the percentage of calls that the IRS is
actually answering and I'm not talking about people actually getting
into the queue, but the percentage of calls that actually get answered
by a real person at the IRS?
Answer. As of 3/14/98, 75 percent of the calls attempted to the
various IRS toll-free telephone lines this filing season were answered
by an assistor. This represents an improvement over the 56 percent of
all calls that reached an assistor during the same period last year.
FILING SEASON SERVICE LEVEL COMPUTATION
[As of March 14, 1998]
----------------------------------------------------------------------------------------------------------------
Service
Filing season Calls to IRS Calls answered level
(attempts) (percent)
----------------------------------------------------------------------------------------------------------------
1998............................................................. 32,160,816 24,187,669 75
1997............................................................. 41,697,669 23,210,084 56
----------------------------------------------------------------------------------------------------------------
Question. What percentage of improvement does the IRS anticipate as
a result of this additional $50.3 million?
Answer. We anticipate significant improvement with the roll out of
the intelligent call router, expanded hours and better scheduling and
forecasting of the workload.
Question. What would it take to have the IRS answering close to 100
percent of the calls that come in?
Answer. One challenge for the IRS in providing service to 100
percent of its customers is that the telephone calls are not equally
balanced over the course of the year. In fact, the greatest number of
calls are received over a five month window of time beginning in early
February and ending in late June. Consequently, additional staff and
equipment resources need to be allocated accordingly. The establishment
of the Customer Service organization is a step in that direction. By
making use of a diverse work force that has the appropriate training
and skills to shift from one type of work (i.e., responding to
correspondence or working the Automated Collection System inventory to
front line telephone service) to another where a peak demand is
occurring has resulted in the higher level of service that has been
provided in 1998. We must continue to refine our ability to do this as
well as improving our systems to route calls without human
intervention. It is possible eventually to reach a 90-95 percent
level--which is a private sector standard, but this will take several
years.
Question. How long is the average wait-time a taxpayer is on hold
before getting someone to talk to?
Answer. Wait-time is calculated at the local site level based on
individual application (type of question). Local management uses wait-
time as a tool to determine where to place staff and when to have
traffic transferred to another site. Some of the nearly 500
applications are very heavily used and some are rarely used. The sites
provide staff to the applications based on historical data and move
staff when it appears necessary. However, in 1999, with the full roll-
out of the call router, telephone traffic becomes a corporate asset and
wait-times will be available on a national level.
Question. How will this improve with the additional $50 million?
Answer. With the roll out of the intelligent call router and the
implementation of better scheduling and forecasting techniques, wait-
time will decrease. Calls will be directed to a location where the
caller will have the best chance for the least amount of wait-time
where staff has been scheduled for phone work based on improved
forecasting techniques.
taxpayer access
Question. Mr. Rossotti, another initiative in this year's request
is to make it easier for taxpayers to get answers in person. IRS is
requesting an additional $5.6 million to extend the hours of district
offices and having them open on Saturdays. With this $5.6 million, how
many of the district offices will be open longer?
Answer. $2.5 million of the $5.6 million will be used to expand our
Saturday Service. Currently, selected walk-in offices are open for six
Saturdays starting March 7, 1998, and ending April 11, 1998. In fiscal
year 1999, Saturday service will start on January 23, 1999 and continue
through April 10, 1999 for a total of 12 Saturdays. We expect to have
over 150 offices open on any given Saturday. The remaining $3.1 million
will be used to conduct Problem Solving days. Each district office will
conduct a minimum of one Problem Solving day per month.
Question. How long before we can see this change?
Answer. Problem Solving days will start in October and expanded
Saturday Service will start in January.
Question. How do you intend to accommodate those taxpayers which do
not live near a district office?
Answer. The toll-free telephone line is one of the best ways of
receiving IRS service. Information is available on our systems about
the various services we provide and the telephone number for the
services. IRS has commissioned a task force to perform an analysis of
the service IRS does provide to taxpayers to determine what gaps in
service exist. The task force will develop recommendations on effective
methods for filling those gaps.
small business
Question. Mr. Rossotti, an additional initiative is focused on
strengthening support for small business, for $1.1 million. It is my
understanding that small businesses are the taxpayers which have the
most difficulty complying with the tax law. What else are you proposing
to improve service to small business?
Answer.
--Develop easy to read and understand forms, publications and
notices.
--Reduce the burden for reporting, filing and recordkeeping.
--Provide more easily accessible, correct service the first time.
--Apply fair treatment consistent with the law.
--Expand the roles of our Compliance employees to include education
of start-up and existing small businesses, particularly when a
deposit or a penalty for failure to file is assessed.
--Establish a small business tax assistance hotline.
--Mail the taxpayer a Your Business Tax Kit, a Tax Tips Calendar and
other pertinent information when they apply for an EIN.
--Expand marketing to small business outlets to make them aware of
IRS products and services.
--Continue partnership with SBA to have IRS products available at
their various locations, i.e., Business Information Centers,
Small Business Development Centers, Women's Entrepreneurial
Networks.
--Ensure that Districts are more uniform in the outreach efforts with
the small business community.
--Apply ``softer'' penalties for first time offenders in major
programs, i.e., EFTPS.
--Partner with other federal, state and local agencies to inform and
educate, i.e., licensing offices.
--Develop avenues for open communications with the small business
community, i.e., e-mail, specific mailing address, VMS mailbox.
--Develop multi-agency small business CD-ROM.
--Develop small business kits and publications in Spanish and other
languages.
--Focus more outreach efforts to Hispanic and other ethnic outlets.
--Continue expansion of small business information provided on the
IRS Homepage using plain language to explain regulations,
procedures and tax information.
Question. Although I know you do not track your budget this way
currently, how much would you estimate of IRS' budget is in some way
supporting the small business community beyond the $1.1 million
requested in this year's budget?
Answer. We do not separately track time spent supporting the small
business community within our financial systems. However, significant
portions of our various Servicewide customer service programs support
small business. These programs include the Problem Resolution Program
(PRP), Customer Service, and Taxpayer Education.
Question. As a person who has just come from the private sector,
what do you think it would take to address their needs?
Answer. The new IRS focus on helping people comply with tax laws
while ensuring fairness and uniformity of compliance will address all
taxpayers' needs including those of the small business community. The
IRS must become fundamentally committed to customer service. We must
shift our focus, as many large companies have already done, from
expecting our customers, the taxpayers, to understand and navigate the
IRS according to our internal operations, to thinking about everything
from the taxpayer's point of view. Revamped IRS business practices will
focus on understanding, solving, and preventing taxpayer problems. Our
work will be designed and organized around major taxpayer groups with
similar needs and compliance requirements. The majority of taxpayers
fall into one of four customer groups: individual taxpayers with wage
and investment income; small business and self-employed taxpayers;
large business taxpayers; and, employee plans, exempt organizations,
and state and local governments. By dedicating a fully responsible unit
to providing all IRS services for the self-employed and small business
communities, we will be able to work closely with industry
associations, small business groups, and preparers to solve problems
for everyone's benefit. This is the long term solution to provide
adequate service to small businesses.
irs employee training
Question. Mr. Rossotti, we have all heard about the horror stories
highlighted in the Senate Finance Committee's hearing. Within your
fiscal year 1999 budget, there is $22.5 million requested to improve
customer service training. What is the total amount that the IRS spends
each year on customer service training for its employees?
Answer. In fiscal year 1997, we spent $49 million in training. In
fiscal year 1998, the amount is planned at $43.5 million.
Question. Who does that training?
Answer. Recognizing that we need to improve the development and
delivery of training, IRS has begun to use outside contractors,
affiliated with colleges and universities, to provide skills
development to Customer Service employees. These courses include
communications, listening, decision making, analysis, and `customer
service' skills. This training is being provided to employees while
concurrent managerial classes are provided on coaching and skills
reinforcement techniques to support the training objectives. However,
generally, instructors are IRS employees and managers who have
successfully completed Basic Instructor Training and possess the skills
and technical knowledge necessary for a Customer Service
Representative.
Question. Do you intend to do a review of how the IRS currently
trains its employees with regard to how it treats the taxpayer?
Answer. A memorandum dated January 2, 1998, requests that each
regional office provide a monthly report on the training curriculum
that was delivered, period delivered in, area trained, number of
employees trained and hours expended to train. A critical part of our
training program is the emphasis that is placed on providing
professional, accurate, and fair treatment to every taxpayer.
I intend to charge our soon-to-be-selected executive for IRS
Training with the responsibility to conduct a thorough review on the
training development and delivery systems within the IRS. How IRS
treats taxpayers will be one element of this review, which will also
include the required leadership, expertise, funding, and technology
necessary to ensure an effective training program within the IRS. With
regard to specific training to improve treatment of taxpayers, IRS is
developing and will deliver the following two courses for frontline
employees:
--Interviewing Techniques for Revenue Officers; and
--Establishing and Maintaining Quality Public Service in the IRS.
Question. Do you believe that with the additional $22.5 million
plus the total funds the IRS is spending on training IRS employees for
customer service that we can turn around the customer service the IRS
delivers?
Answer. We believe we can make a significant improvement that will
have a direct effect on the ability of our employees to assist
taxpayers accurately. However, the 1999 filing season will be a much
more difficult filing season than in recent years because of the many
complex changes to the tax law that are effective in tax year 1998 and
because of the massive technology changes required to comply with the
Century Date Change. Thus, increased training effectiveness will be
required to prepare our employees to even an adequate level.
Furthermore, the IRS lacks a fully effective and modern training
preparation and delivery strategy and organization. Therefore, as with
many dimensions of the IRS, it will take several years and major
structural change to reach the desired level of training.
taxpayer advocate office
Question. There is $10 million to strengthen the Taxpayer
Advocate's Office. How will this help the taxpayer and what will this
provide them that they do not already have?
Answer. There are four areas in which increased funding for the
Taxpayer Advocate will have a direct and beneficial effect on
taxpayers:
--A second Problem Resolution Program position is being restored to
each of the former district offices that were downsized as a
result of IRS restructuring. Each of these 30 offices has been
authorized at least two full-time PRP employees, who report to
the taxpayer advocate in their district headquarters, yet are
available to handle local taxpayers' needs in person.
--The local telephone numbers of all of the district taxpayer
advocates are being published in directories for the first
time, which will make direct access to PRP far easier for
taxpayers. Taxpayers will have a distinct listed number for
PRP, instead of being directed to call the standard toll-free
``1040'' number. Additional PRP staff will be required to
handle the increased phone traffic.
--A new nationwide toll-free number is being created specifically for
PRP. Taxpayers will be able to seek resolution of problems,
without charge, and without first having to call the existing
Customer Service ``1040'' number. The toll-free PRP calls will
be routed to centralized locations where trained assistors will
deal, on-line, with the less complex incoming issues. More
complicated tax cases will be forwarded to the taxpayer
advocates in taxpayers' local offices for resolution.
--Additional staff will be added to the district taxpayer advocates'
offices, in order to handle the anticipated increase in
Applications for Taxpayer Assistance Orders (ATAO's). These
requests (Forms 911) for hardship relief can only be acted upon
by taxpayer advocates, and it is assumed that applications in
fiscal year 1999 will increase after the IRS begins including
the form in all Collection-related notices issued by service
centers. The result for the taxpayer is that there will be a
greater opportunity to apply for and, if warranted, receive
relief from impending compliance actions.
Question. In your fiscal year 1999 request there is mention to
increase the Taxpayer Advocate's powers. Can you outline for the
Committee how you anticipate increasing this office's powers?
Answer. One specific change is that the Taxpayer Advocate has been
given authority to issue Taxpayer Advocate Directives, which have the
effect of mandating administrative or procedural changes, on a
Servicewide basis, within other IRS functional areas. In this way, the
Taxpayer Advocate may enforce systemic changes that he/she believes are
necessary and in the best interest of taxpayers. The Taxpayer
Advocate's role in IRS will also be expanded through ensuring the full
exercise of his or her statutory powers, the selection of a Taxpayer
Advocate from outside the IRS, a reiteration of the independence of all
the local taxpayer advocates and the endorsement by the Commissioner
and the Secretary of the Treasury to support in very visible ways their
desire to buttress this independence and expansion of the use of
powers. In addition, internal commitments to give the Taxpayer Advocate
more staff to carry out the mission, establishing a new ``800'' number
to provide direct access to the program, and undertaking a
professionally developed major publicity campaign to advertise the
program will all aid in the accomplishment of the above.
modernization
Question. Mr. Rossotti, your fiscal year 1999 budget contains a
request for $323 million which is to be utilized for ``capital asset
acquisition''. Last year this subcommittee had the same request for an
advance appropriation by IRS, but part way through the year, IRS then
changed its mind and decided that it ``may need to spend the funds''.
Although you were not part of last year's cycle, I did want your
intentions for this seed money for the record.
Answer. The funding requested for the Information Technology
Investment Account for fiscal year 1999 provides the ``seed money'' to
support Modernization and begin implementation of much needed
improvements in the area of Customer Service. In fiscal year 1997 and
fiscal year 1998 careful preparation for this difficult task began with
the publication of the Modernization Blueprint, the initial stages of
establishing an internal systems life cycle management process, and the
publication of a Request for Proposals for the Prime Systems
Integration Services Contractor. In fiscal year 1999, long term
modernization will continue with the strengthening of IRS internal
systems management capabilities and the award of the PRIME contract.
The initial task of the PRIME contract will be to complete the systems
management life cycle and to develop the first two subreleases of the
Modernization Blueprint, which provide telephone and other
communications capabilities that are basic functions to support all IRS
operations. All technology projects involve a significant degree of
risk and changes as they proceed, but good management can manage change
to produce ever improving results. Finally, I want to assure you that
no money will be spent on any subreleases beyond these first two
without my personal review and judgment that adequate business cases
and control of risk factors exist.
taxpayer burden
Question. In IRS' strategic plan submitted last year, there is
mention that the IRS plans to ``contain the growth of taxpayer burden
cost for the IRS to collect $100 at $10.48 compared to $9.38 for fiscal
year 1996''. If I am reading this right, what this says to me is that
the IRS is increasing the cost for the taxpayer burden with the $10.48
target. Can you comment?
Answer. It is possible to calculate and define taxpayer burden as
we have in the past, limiting the definition to include paperwork
burden, consistent with Paperwork Reduction Act requirements. This
accounts for time taken by taxpayers in the following four activities:
1) record keeping beyond what they would normally be required to do; 2)
learning about a tax law or form; 3) preparing the form; and 4)
copying, assembling, and sending the form to the IRS. One wage rate is
used for both businesses and individuals when hours are converted into
taxpayer cost in terms of dollars. For the strategic plan to which you
refer, we employed an alternate accounting method. This recomputation
includes not only paperwork burden, but also post-filing contacts
taxpayers have with IRS including audits, responding to notices, and
complying with collection activities. We also utilized different wage
rates for individuals and businesses. Since the strategic plan was
written, IRS has decided to calculate burden consistent with prior
years, until more formal estimates can be made. Regardless of which
accounting method is used, taxpayer burden cost to collect $100 is
increasing. The anticipated increase is explained in the next question.
IRS recognizes that the current method of calculating taxpayer
burden has significant weaknesses. The model covers only the burden of
IRS tax forms and regulations ignoring post-filing burden, is unable to
capture changes in burden due to alternative filing methods (e.g., on-
line filing, tax preparation software, and electronic filing), is based
on outdated estimates, and does not differentiate wage rates for
different types of taxpayers.
Question. Mr. Rossotti, we need to be decreasing the taxpayer's
burden, not increasing it, and we need to focus on making it easier not
harder for the taxpayer to voluntarily comply. What will the IRS do to
decrease the amount of time and effort it takes for the taxpayer to
voluntarily comply?
Answer. This year the IRS has taken several steps to make it easier
for taxpayers to file their tax returns and help them voluntarily
comply with the tax laws. For example, telephone assistance is now
available 16 hours a day, 6 days a week for taxpayers to get answers to
their account and tax law questions. We expanded walk-in service to six
Saturdays beginning March 7, 1998 through mid April, and taxpayers
wishing to call our tax form toll-free line for tax forms and
publications can do so 16 hours a day 6 days a week. Internet services
on our IRS Homepage also offer access to tax forms, answers to
frequently asked questions, and taxpayers can E-mail us and receive
general answers to tax law questions. We have also made it easier for
taxpayers to file their returns. Results so far this filing season
indicate that electronic filing increased 24 percent over the same
period last year, and TeleFile is up 26 percent.
Future initiatives: This spring, small businesses nationwide will
be able to file Form 941, Employer's Quarterly Federal Tax Return, over
the telephone, and we expect over 1.2 million returns to be filed using
this option. Next year, we will continue to make it easier for
taxpayers to file their tax returns by expanding telephone assistance
to 24 hours a day, 7 days a week. We also plan to introduce new payment
options, allowing taxpayers who file their returns electronically to
pay their taxes with a direct withdrawal from their bank accounts.
The President's budget for fiscal year 1998 showed basically static
funding for IRS through fiscal year 2002. Faced with that scenario, IRS
said that staffing levels would decline and most programs would suffer,
with enforcement programs receiving the greatest reductions.
Question. In your fiscal year 1999 submission, the IRS performance
target for taxpayer burden is $8.55, up from $8.52 in fiscal year 1997,
in essence each year the cost to the taxpayer is increasing. Can you
explain?
Answer. Taxpayer Burden Cost to Collect $100 is composed of two
elements: Burden Cost and Revenue. The anticipated increase in Burden
Cost to Collect $100 from $8.52 in fiscal year 1997 to $8.55 in fiscal
year 1999 is driven by Burden Cost which we anticipate will increase
slightly faster than Revenue. Burden Cost is composed of burden hours
multiplied by wage rate. Burden hours are expected to rise
approximately 1-2 percent per year as the filing population increases
and as wage rates are expected to increase 3 percent each year.
Overall, between fiscal year 1997 and fiscal year 1999, we anticipate
Burden Cost will increase 10 percent while Revenue estimates provided
by Treasury's Office of Tax Analysis will increase only 9 percent.
Higher burden hours also result from more accurate filing figures as
well as complexities associated with the Small Business Job Protection
Act, the Taxpayer Relief Act, and additional lines on several tax
forms. IRS continues to promote burden reduction efforts including
electronic filing which help contain the rise in Burden Cost to Collect
$100.
submission processing
The IRS fiscal year 1999 budget request includes $888.4 million and
15,113 FTE for Submission Processing, a budget activity within the
Processing, Assistance, and Management appropriation. The following
questions relate to that budget activity.
processing tax payments
Question. Given the extra cost to the Government, and the lack of
conclusive evidence on burden, why does IRS continue to have taxpayers
send their tax returns to the lockbox banks?
Answer. IRS considers it too burdensome to require taxpayers to
mail their Form 1040 return separate from their payment and voucher.
IRS is conducting focus studies to measure individual taxpayers'
reactions to the different payment mailing concepts. FMS and IRS are
planning a study to compare lockbox and service center processing. Once
the data is compiled, a decision will be made on whether or not to
continue directing Form 1040 returns/payments to the lockbox banks.
Question. What, if anything, does IRS plan to do to develop more
conclusive evidence on burden?
Answer. IRS is conducting focus studies to measure individual
taxpayers' reactions to the different payment mailing concepts. FMS and
IRS are planning a study to compare lockbox and service center
processing. Once the data is compiled, a decision will be made on
whether or not to continue directing Form 1040 returns/payments to the
lockbox bank.
Question. How much did the government pay banks in fiscal year 1997
to handle individual income tax returns?
Answer. FMS reports that from October 1996 to June 1997, they paid
the lockbox banks approximately $8.3 million for individual income tax
return handling. FMS has not completed the calculation of lockbox costs
for the entire year. In fiscal year 1996, FMS paid lockbox banks $10.8
million.
Question. How much does it expect to pay banks for that service in
fiscal 1998?
Answer. Presently the cost is unknown. FMS is currently negotiating
1998 lockbox costs and since costs are tied to the Consumer Price
Index, they cannot increase more than 2.2 percent.
Question. Why are these costs paid by FMS rather than IRS?
Answer. FMS is the U.S. government's financial manager. It manages
Federal payments and collections, promote sound financial management
practices by Federal agencies, oversee the Government's central
accounting and reporting systems, provide information for investment
decisions and manage the Government's relationship with commercial and
Federal Reserve Banks. As a part of its role, FMS designates Financial
Agents of the government, and monitors the daily deposit flows to the
U.S. Treasury. The use of lockbox technology for collection of taxes is
one mechanism managed by FMS for Federal agencies. FMS pays all IRS
lockbox processing costs except those connected with the processing of
installment agreement user fees. IRS reimburses FMS for these costs.
Question. Since the proposed FMS study could have a significant
impact on IRS operations what does IRS know about the study's status?
Answer. FMS has advertised in the Commerce Business Daily to offer
public vendors an opportunity to bid on the float study. FMS hopes to
award the contract soon. The study will be conducted during the April
peak to compare the service center and lockbox processing. This study
should indicate any and all savings that are realized through the use
of lockboxes.
Question. Assuming the study is done and shows that it is not cost
effective to process Form 1040 payments at lockboxes, will IRS return
this workload to its service centers?
Answer. If the study shows that is not cost effective to continue
processing Form 1040 payments at lockbox, IRS will use this and other
information in determining if the workload should be returned to the
service centers.
Question. Is the new remittance processing system being sized to
handle the additional workload if IRS should decide it is more cost
effective to process the remittances in-house? If not, why not?
Answer. We are conducting a pilot of the new remittance processing
system. The results of this pilot will be used to validate the hardware
needs at each site. We will also determine what additional equipment,
if any, will be needed to process the lockbox 1040 returns/payments if
the work is returned to the centers.
processing tax returns
Question. What does it cost IRS to process an individual income tax
return filed on paper? Please break out the cost by type of return
(i.e., 1040, 1040A, 1040EZ, 1040PC) and explain what type of costs are
included and what are not. What does it cost IRS to process an
individual income tax return electronically (not including those filed
by telephone)? Please break out the cost by type of return (i.e., 1040,
1040A, 1040EZ) and explain what type of costs are included and what are
not. What does it cost IRS to process an individual income tax return
filed via telephone (i.e. TeleFile? Please explain what type of costs
are included and what are not.
Answer. The IRS recently calculated the fiscal year 1996 fully-
burdened cost of submission processing in the Service Centers. This
study is almost completed and will be published shortly. ``Submission
processing'' is defined as that portion of tax return processing from
receipt of a tax return at the service center to the point where the
return data is ready for posting to the IRS computer master file.
``Fully-burdened'' means that we have attributed an appropriate portion
of overhead and support costs to submission processing, using activity
based costing concepts. The cost information currently available is the
full amount obligated in fiscal year 1996 that is attributed to each
type of return, including the full cost of capital investments made in
1996. Note: While we plan to revise the treatment of capitalized assets
to amortize them over their useful life, the results of this revised
approach are not yet available.
total fiscal year 1996 cost of submission processing
Based on the results of this study, we determined that the fiscal
year 1996, fully-burdened cost of submission processing in the Service
Centers was $827 million. This represents 11 percent of the IRS budget.
The main cost components of this $827 million are labor, rent, computer
and headquarters support, and overhead. Note: As a result of these
costs being fully-burdened, these costs are larger by definition than
those associated with returns processing in budget submissions. Of the
$827 million, $72 million was the cost of processing electronic returns
(e.g., 1040, 1040A, 1040EZ, 1040EZ TeleFile, 941, 5500, 5500-R, 5500-
C). The remaining $755 million is the cost of processing all other
returns, whether submitted on paper, tape or by other means.
The costs below include the following: labor and non-labor (e.g.,
rent, supplies, etc.) costs within the Service Centers which directly
or indirectly support the processing of returns from receipt to good
tape plus the unpostables operation; appropriate Information Systems
costs; direct headquarters support and oversight; and support services
host site and headquarters overhead costs (e.g. budgeting, accounting,
personnel management, training, etc.). Capital investments obligated in
fiscal year 1996 are included in full. Capital investments obligated
prior to fiscal year 1996 are not included. Costs incurred upstream of
the data capture processing (e.g., design, printing and distribution of
tax forms and instructions) and downstream of data capture processing
(e.g., archiving and retrieval of tax returns, compliance activities)
are not included.
COST OF PROCESSING 941 AND 1040 RETURNS FILED ELECTRONICALLY
------------------------------------------------------------------------
Fiscal year
Fiscal year 1996 fully
Return type 1996 volume of burdened
returns filed cost per
return \1\
------------------------------------------------------------------------
1040 ELF................................... 6,074,986 $4.69
1040A ELF.................................. 4,560,478 4.69
1040EZ ELF................................. 1,499,356 4.63
1040EZ TeleFile............................ 2,840,973 \2\ 5.11
1040EZ TeleFile............................ 2,840,973 \3\ 3.58
941 ELF.................................... 272,000 2.61
------------------------------------------------------------------------
\1\ Including full fiscal year 1996 obligations for capitalized assets.
\2\ Includes fiscal year 1996 one-time TeleFile investment costs.
\3\ Excludes fiscal year 1996 one-time TeleFile investment costs
cost to process an individual income tax return filed via telephone
(i.e. telefile)
Based on the results of this study, we determined that the fiscal
year 1996, fully-burdened cost of submission processing of an
individual return filed via TeleFile was $5.11 per return when fiscal
year 1996 one-time TeleFile investment costs are included. This cost
would be $3.58 per return if fiscal year 1996 one-time TeleFile
investment costs were excluded. In addition to the previous description
of costs included in this answer, the TeleFile costs include the one-
time TeleFile investment cost of equipment to expand our capacity to
receive TeleFile calls (included in the $5.11) and the costs of an
average of two toll-free calls per TeleFile return filed.
COST OF PROCESSING INDIVIDUAL RETURNS FILED ON PAPER
------------------------------------------------------------------------
Fiscal year
Fiscal year 1996 1996 fully
Return type volume of burdened
returns filed cost per
return \1\
------------------------------------------------------------------------
1040 Other-than-full-paid (i.e. refund or
balance due)............................ 44,561,449 $4.07
1040 Full-paid (i.e. with remittance).... 15,500,170 5.35
1040A Other-than-full-paid............... 16,561,316 3.35
1040A Full-paid.......................... 2,284,331 5.12
1040EZ Other-than-full-paid.............. 7,851,986 2.40
1040EZ Full-paid......................... 1,025,330 4.44
1040PC Other-than-full-paid.............. 5,778,103 3.05
1040PC Full-paid......................... 1,258,056 5.13
------------------------------------------------------------------------
\1\ Including full fiscal year 1996 obligations for capitalized assets.
potential savings from electronic filing
To understand the cost tradeoffs between electronic and paper
returns filings requires an understanding of the fixed and variable
components of these costs at various points of the electronic/paper
filing mix. The IRS has begun a new study to determine this. Until that
study is complete we will not have a definitive answer. However, at
this point we can get some idea of this by looking at certain known
costs for fiscal year 1996 for the Form 1040 family of returns and
making preliminary judgments.
In fiscal year 1996 the cost per return for electronically filed
Form 1040 family of returns was $4.76, while the cost for paper filings
was $4.49 (not including upstream/downstream costs). The small
differentiation in cost between paper versus electronic processing is
encouraging, as electronic filing expenses are amortized across 15
million Form 1040 family of returns versus the 95 million for paper
Form 1040 family of returns. Also, it is clear that much of the paper
filing costs in fiscal year 1996 are related to labor, which results in
high variable costs, while most of the electronic filing costs were
fixed costs. Also, there may be other non-financial reasons (such as
reduced taxpayer burden) that would compel an aggressive pursuit of
electronic returns.
If these data hold up in our study, this means that as electronic
returns increase we will have substantial opportunity for savings in
our variable (labor) costs. However, this data is preliminary. We do
not yet know whether any additional fixed cost investments will be
necessary to support increased electronic filing. It seems clear
though, that the cost differences in variable costs favor increased
electronic filing, and will result in labor savings.
electronic filing strategy
Electronic filing is the primary component of IRS' Electronic Tax
Administration (ETA) program whose overall mission is to revolutionize
how taxpayers transact and communicate with the IRS. One of the key
strategies for ETA is to make electronic filing, payment and
communication so simple, inexpensive and trusted that taxpayers will
prefer these to calling and mailing. Although the IRS has been
continually expanding the electronic filing program over the past
several years, some forms and schedules are still not accepted which
prevents certain taxpayers from participating. In addition, paper, in
terms of the signature jurat, W-2's and other forms, is still part of
the electronic filing system. The IRS recognizes that steps must be
taken to simplify the system and to make it more convenient and easier
to use. Initiatives are already underway to move toward a truly
paperless system beginning with a pilot of electronic signature
alternatives in 1999. In addition, next year for the first time,
taxpayers filing balance due returns will be able to pay using an
Automated Clearing House debit payment as part of the electronic
return.
The IRS is currently in the process of developing a comprehensive
Strategic Plan for Electronic Tax Administration which will clearly
articulate ETA's mission, strategies and business goals, as well as the
tactical initiatives to achieve those goals. Additionally, the
Strategic Plan will describe the substantial market segments that exist
for ETA, as well as the significant challenges that must be addressed
if electronic filing, payment and communication are to become the
preferred and most convenient means of taxpayers' interaction with the
IRS.
Question. What is the status of the electronic commerce strategy?
Answer. A draft version of the Strategic Plan for Electronic Tax
Administration is expected to be made available for public comment
later this spring
Question. When can the Committee expect to see a final product?
Answer. The Committee will be receiving a draft version of the plan
later this spring when it is released for public comment. The plan will
be issued in final after the comments have been received, reviewed and/
or incorporated into the plan.
Question. What key factors have contributed to the delays in
completing the strategy?
Answer. Ownership and accountability are two key factors which
affected completing the strategy. In the past, the Administration,
Congress and other external stakeholders have been frustrated by the
lack of a focal point for Electronic Tax Administration activities
within the IRS. Last year, the IRS took an important step toward
clarifying the responsibilities for Electronic Tax Administration by
establishing a new organization headed by an Assistant Commissioner
devoted exclusively to the management of existing and planned programs.
Bob Barr, the new Assistant Commissioner for Electronic Tax
Administration, who joined the IRS last fall has made the development
the strategic plan one of his top priorities.
general
It is our understanding that the National Performance Review (NPR)
made over 200 recommendations on how IRS can improve its customer
service. Likewise, the National Commission on Restructuring IRS made
recommendations aimed at improving customer service. The Commissioner
has stated that improving customer service is one of his highest
priorities. Also, earlier this year, the Commissioner outlined a plan
for improving customer service by reorganizing IRS into four major
operating units, each serving a group of taxpayers with like needs.
Question. Which of the many NPR and Commission recommendations have
been implemented or are targeted for implementation?
Answer. The Commissioner established the Taxpayer Treatment and
Service Improvements Program to bring discipline and rigor to the
setting and tracking of priorities of those changes which have the most
direct and lasting impact on the treatment of and service to taxpayers.
A steering committee comprised of senior Treasury and IRS executives
has been providing active oversight of the program. More than 245 NPR
and Commission recommendations have been catalogued by the Taxpayer
Treatment and Service Improvements Program staff. Analysis and
implementation of the recommendations are in an early stage, since the
final NPR report was issued very recently.
Six recommendations with significant immediate impact have been
implemented:
--Ban the use of measures such as enforcement statistics to rank
districts and to set dollar goals for districts and service
centers.
--Open district offices on Saturdays during the busiest weekends of
the filing season.
--Expand the number of taxpayers who are eligible to use TeleFile,
the telephone filing system. Nearly three million additional
TeleFile packages were sent to taxpayers for the 1998 filing
season.
--Increase the number of forms that can be filed electronically, and
educate customers about the benefits of electronic filing. In
1998 two additional forms are being accepted electronically as
well as returns with an Individual Taxpayer Identification
Number and an Adoption Taxpayer Identification Number. All
other forms and schedules not currently accepted electronically
are being analyzed. In conjunction with an advertising agency,
IRS launched a public education campaign on electronic filing
benefits. Through February, conventional electronic filing had
increased by 20 percent over last year.
--Expand telephone service to 6 days a week, 16 hours a day since
January 2, 1998.
--Establish a new full time position of a ``notices gatekeeper'' who
has the authority and accountability to manage the entire
notice process.
Three other recommendations are presently being carried out. They
are the monthly Problem Solving Days which started on November 15,
1997; the tracking and reporting of the status of cases identified as a
result of Problem Solving Day activities; and expansion of the TeleFile
program to let many small businesses use their telephones to file Form
941 and report their employment taxes starting in April 1998.
Another 71 recommendations are in the process of being implemented.
These are primarily ones which are planned to be completed within the
next 18 months. The recommendations cover the following areas: the
contents of notices; clarity and issuance criteria; further expanding
telephone service; improving the availability of forms and
publications; expanding services available through the Internet,
electronic mail and CD-ROM; expanding availability of services in
languages other than English, further expanding electronic filing and
other electronic services; improving service to small businesses;
reviewing the fairness and effectiveness of all penalties; improving
handling of undelivered mail and updating taxpayer addresses; improving
the system for handling non master file cases; improving the resolution
of taxpayer problems; developing a balanced scorecard of measures to
evaluate the IRS and its employees; and improving employee training in
customer service.
Although specific action plans have not yet been developed for the
remaining recommendations, the vast majority of them are targeted for
implementation within the next 19 to 24 months.
Question. Which, if any, NPR or Commission recommendations does IRS
not plan to implement, and why?
Answer. There are no NPR or Commission recommendations which IRS
does not currently plan to implement. However, the timeframes of
implementation are still being considered.
Question. Which, if any, of the recommendations would no longer be
valid in light of the Commissioner's reorganization plans?
Answer. Both the recommendations and the current reorganization
plans are focused on improving service to the taxpaying public.
However, the reorganization plan is currently at a high-level
conceptual stage, while the recommendations are focused at a more
specific program and functional level. Although the overall concepts
behind the recommendations would remain valid, is it apparent that
recommendations in several areas could be subject to modification as a
result of the new concept for modernizing the IRS. Examples of such
areas are the design of telephone systems for serving specific taxpayer
segments, the nature and location of walk-in services, the design and
content of training packages for employees directly serving taxpayers,
and the nature of employee programs at various locations.
taxpayer service
Questions. How many FTE's from across the agency does IRS plan to
devote to true taxpayer assistance (e.g., answering the phones,
responding to correspondence, providing walk-in service, conducting
education programs, providing forms and publications, working problem
resolution cases) in fiscal year 1999? How does that plan compare to
the actual number of FTE's devoted to those activities in fiscal year
1997 and number expected in 1998? Please break those numbers down by
the type of assistance (e.g., the number of FTE's devoted to answering
the phones).
Answer:
IRS FTE'S DEVOTED TO SPECIFIC PROGRAM ACTIVITIES
------------------------------------------------------------------------
Fiscal year--
Program activity \1\ --------------------------------
1997 1998 1999
------------------------------------------------------------------------
Telephone:
Toll free operations \2\........... 6,582 6,955 7,868
Automated collection systems....... 3,095 3,240 3,240
--------------------------------
Subtotal, telephone.............. 9,677 10,195 11,108
================================
Correspondence:
Adjustments/taxpayer relations..... 5,019 4,576 4,576
Service center collection branch... 2,849 2,699 2,703
Service examination branch......... 3,044 3,222 3,227
Document matching.................. 1,897 1,682 1,682
--------------------------------
Subtotal correspondence.......... 12,809 12,179 12,188
================================
Other:
Walk-in--Face-to-face.............. 1,080 1,191 1,248
Taxpayer education................. 247 297 297
Problem resolution program......... 418 437 628
Forms and publications............. 90 90 103
Customer service reserve........... ......... 216 .........
--------------------------------
Subtotal, other.................. 1,835 2,231 2,276
================================
Total............................ 24,321 24,605 25,572
------------------------------------------------------------------------
\1\ Includes activities in all IRS Appropriations.
\2\ The 226 FTE for the fiscal year 1999 Customer Service training
initiative has been included in the Toll Free Operations pending
finalization of training plans within the correspondence functions to
determine an optimal allocation.
customer service
The IRS' fiscal year 1999 budget request includes a program
increase of $103.0 million and 1,024 FTE to enhance customer service.
As described in IRS' budget estimates, that money will be used, among
other things, to improve taxpayer service, strengthen the Taxpayer
Advocate's Office, and pay for additional Problem Solving Days.
Question. In response to a question from this Committee last year,
IRS provided a breakdown of the FTE's being requested for the Telephone
and Correspondence budget activity. The breakdown showed the number of
FTE's included in that budget activity for (1) the Problem Resolution
Program, (2) Toll Free Operations, (3) Adjustments/Taxpayer Relations,
(4) Service Center Collection Branch, (5) Automated Collection System,
and (6) Service Center Examination. Please provide the same breakdown
for fiscal year 1999.
Answer:
IRS FTE'S FOR TELEPHONE AND CORRESPONDENCE ACTIVITIES
------------------------------------------------------------------------
Fiscal year--
Program --------------------------------
1997 1998 1999
------------------------------------------------------------------------
Problem resolution..................... 418 437 628
Toll-free phones....................... 6,582 6,955 7,868
Adjustments/TP relations............... 5,019 4,576 4,576
Collection branch--Correspondence...... 2,849 2,699 2,703
Automated collection system--Phones.... 3,095 3,240 3,240
Service center examination............. 3,044 3,222 3,227
------------------------------------------------------------------------
Note.--Fiscal year 1998 figures for the Telephone and Correspondence
activity were taken from the Financial Plan. Fiscal year 1999 figures
are taken from the fiscal year 1999 President's Budget.
Question. How many FTE's from across the agency does IRS plan to
devote to true taxpayer assistance, e.g., answering the phones,
responding to correspondence, providing walk-in service, conducting
education programs, providing forms and publications, working problem
resolution cases, in fiscal year 1999? How does that plan compare to
the actual number of FTE's devoted to those activities in fiscal year
1997 and the number expected in 1998? Please break those numbers down
by the type of assistance, e.g., the number of FTE's devoted to
answering the phones. In response to a question from this Committee
last year, IRS provided a breakdown of the FTE's being requested for
the Telephone and Correspondence budget activity. The breakdown showed
the number of FTE's included in that budget activity for (1) the
Problem Resolution Program, (2) Toll Free Operations, (3) Adjustments/
Taxpayer Relations, (4) Service Center Collection Branch, (5) Automated
Collection System, and (6) Service Center Examination. Please provide
the same breakdown for fiscal year 1999.
Answer:
------------------------------------------------------------------------
Fiscal year--
Program --------------------------------
1997 1998 1999
------------------------------------------------------------------------
Toll free--Phones...................... 6,582 6,955 7,868
Adjustments/taxpayer relations--
Correspondence........................ 5,019 4,576 4,576
Automated collection system--Phones.... 2,869 3,231 3,231
Collection branch--Correspondence...... 2,850 2,699 2,703
Examination branch--Correspondence..... 3,044 3,222 3,227
--------------------------------
Total, customer service activity. 20,364 20,683 21,605
================================
Document matching underreporter--
Correspondence........................ 1,669 1,682 1,682
Document matching SFR--Correspondence.. 228 ......... .........
--------------------------------
Total, document matching
activities...................... 1,897 1,682 1,682
================================
Walk-in................................ 1,112 1,191 1,248
Taxpayer education..................... 198 297 297
Problem resolution..................... 418 437 628
================================
Customer service activity.............. ......... 20,683 21,605
Not included above:
Customer service reserves.......... ......... 216 .........
Information systems for customer
service........................... ......... 9 9
--------------------------------
Total, customer service.......... ......... 20,908 21,614
------------------------------------------------------------------------
The Customer Service training initiative included in the National
Performance Review of 226 FTE has been included within the Toll Free
component of Customer Service pending finalization of training plans
within the correspondence functions to determine an optimal allocation.
Question. How does IRS decide on how much to spend on the different
customer service programs? Please provide information showing how much
IRS spent or plans to spend and the number of full-time equivalent
staff years allocated to the different programs for fiscal years 1997,
1998, and 1999. Please include in these figures any costs/staff years
associated with detailees from other functions, such as Exam staff who
are detailed to help answer telephone calls. Also, provide information
on the number of taxpayers served or expected to be served by the
different programs during those years.
Answer. Actual and estimated expenditures by program follow:
FTE
------------------------------------------------------------------------
Fiscal year--
Program --------------------------------
1997 1998 1999
------------------------------------------------------------------------
Toll free.............................. 6,541 6,944 7,694
Taxpayer education..................... 247 297 297
Walk-in................................ 1,112 1,191 1,248
--------------------------------
Total............................ 7,900 8,432 9,239
------------------------------------------------------------------------
Note.--The Taxpayer Education and Walk-in figures include Information
Systems resources.
----------------------------------------------------------------------------------------------------------------
Fiscal year--
Program -----------------------------------------------
1997 1998 1999
----------------------------------------------------------------------------------------------------------------
Toll free....................................................... $259,519,000 NA NA
Taxpayer education.............................................. 13,036,000 $15,902,000 $17,540,000
Walk-in......................................................... 112,509,000 51,671,000 54,014,000
-----------------------------------------------
Total..................................................... 385,064,000 67,573,000 71,554,000
----------------------------------------------------------------------------------------------------------------
See note above.
Due to the consolidation of Customer Service management activities
into one activity in fiscal year 1998, dollar breakouts for Toll Free
are not available for fiscal years 1998 and 1999 since our planning
models are geared to FTE's.
SERVICE DATA BY PROGRAM
----------------------------------------------------------------------------------------------------------------
Fiscal year--
Program -----------------------------------------------
1997 1998 1999
----------------------------------------------------------------------------------------------------------------
Toll free calls answered........................................ 116,972,333 127,600,000 132,406,000
Walk-ins served................................................. 6,400,000 9,900,000 9,900,000
Taxpayers served through volunteers, taxpayer education, and
outreach activities............................................ 3,799,151 3,395,382 3,463,290
----------------------------------------------------------------------------------------------------------------
Question. What is your accessibility goal for fiscal year 1998 and
how are you doing in relation to that goal?
Answer. IRS set an accessibility goal for fiscal year 1998 at no
less than a 70 percent level of access. As of March 14, 1998, using the
level of access measure agreed upon between IRS and GAO (calls answered
+ abandoned calls divided by total attempts), the fiscal year
cumulative level of access for all Customer Service toll-free telephone
lines is 89 percent. The filing season cumulative, as of the same date,
is 91 percent.
Question. Please provide information on your actual and expected
accessibility rates, staffing and hours of operation for fiscal years
1997, 1998 and 1999. With the expanded hours of operation in 1998, how
many more taxpayers have you been able to serve?
Answer. The accessibility goal for fiscal year 1998 is 70 percent,
and 86 percent for fiscal year 1999. As of February 28, 1998, the
fiscal year cumulative level of access is 88 percent. In fiscal year
1997, a different formula was used to compute level of access. Thus,
the goal and actual access rates are not comparable to fiscal year 1998
and fiscal year 1999. Staffing for 1997 and 1998 is 6,664 FTE's and
7,229 FTE's respectively. The IRS plans to provide customer service
seven days a week, 24 hours a day (7 x 24) in fiscal year 1999. We are
currently in the process of determining the staffing required to meet
this goal and for the expansion of our hours of operation to 7 days a
week and 24 hours a day (7 x 24). Hours of Operation for fiscal year
1997 were 7:30 a.m. to 5:30 p.m. on the general information (1040)
number and from 7:30 a.m. through 9:00 p.m. on the notice and refund
numbers. Since January 1998, the hours of service were permanently
expanded to six days a week, 16 hours a day, Monday through Saturday
(7:00 a.m. through 11:00 p.m.). As of February 28, 1998 the IRS
answered 26.5 million calls compared to 26.3 million as of a comparable
period in fiscal year 1997. Although the number of calls answered in
fiscal year 1998 is relatively the same as that answered in fiscal year
1997, the impact of the additional staffing is evident in the reduction
in busy signals and the increase in the level of access. By having the
staffing available to answer the call the first time the customer
calls, we have decreased overflows (busy signals) by over 70 percent.
Question. Does IRS plan to continue detailing employees from other
functions during peak periods to telephone assistance as was done in
fiscal year 1997? If not, where will the necessary staffing come from?
How does the detailing of employees affect the performance of their
home units?
Answer. Yes, historically, Examination and Collection provided
employees to help with answering phone calls and working in walk-in
during periods of high volume. This fiscal year we are also detailing
employees from Automated Collection sites and from other areas of the
service centers to supplement existing staff. Examination staff is also
being utilized to answer specific topics where the taxpayer is asked to
leave a message for call back. This process, commonly referred to as
``Call Back Messaging'' provides personal call back assistance while
drawing upon the IRS' highly skilled technical staff, who are often not
co-located with telephone operations/systems. At this point, it is too
early to assess the impact on the other operations providing support to
answer telephones.
Question. What has been your experience with the interactive
applications during fiscal years 1997 and 1998?
Answer. By the end of calendar year 1997, the following 10
interactive telephone applications were operational nationwide. Overall
30 million calls were received by the Telephone Routing Interactive
System (TRIS) in fiscal year 1997. Of those 30 million, 24 million were
routed to Customer Service Representatives, 3 million abandoned, and 3
million completed in (TRIS). The number of calls completely automated
by each application in fiscal year 1997 is shown in the answer to the
next question. Fiscal year 1998 information is not yet available. TRIS
completed over 3 million calls in fiscal year 1997. Since fiscal year
1998 will be the first year that TRIS will be available at all sites
with a larger variety of applications, we estimate that TRIS will
complete twice as many calls (or 6 million) in fiscal year 1998. For
the future, we are currently piloting two additional TRIS
applications--Refund Release and Refund Trace. Refund Release allows
the caller to provide information needed to release a refund being held
due to discrepancies such as name changes, name misspellings, or
transposed or incorrect social security numbers. Refund Trace allows
the caller to file a claim for a lost, stolen, or destroyed refund
check, or sends Form 3911 for the caller's use in making a claim if the
caller is not eligible to process the claim over the phone. An
application to assist callers with questions regarding the earned
income credit is currently being planned.
Question. What are your expectations for fiscal year 1999 and
beyond?
Answer. From now through 2000, TRIS is in an enhancement and
maintenance phase. Future TRIS applications are prioritized in the
modernization blueprint with rollout scheduled to begin in 2002. Until
then, we will be analyzing management information data to determine and
implement improvements to the existing applications.
Question. Please describe each application and provide information
on the number of taxpayers who accessed, abandoned and completed the
different applications.
Answer:
Refund Inquiry--after the caller enters the Taxpayer Identification
Number, (TIN), he/she can obtain the status of his/her refund, filing
and expected refund amount (2.7 million calls completely automated in
fiscal year 1997).
Location--allows the caller to get the mailing address for filing
return or making payment (66,083 calls completely automated in fiscal
year 1997).
Voice Balance Due--allows eligible callers to set up a payment plan
or receive a 30- or 60-day extension of time to pay (200,570 calls
completely automated in fiscal year 1997).
VPPIN--provides security and authentication solution for
applications providing tax account information. Each caller establishes
a unique PIN before accessing interactive applications that provide
account information. This replaces the disclosure interview performed
by Customer Service Representative.
Payoff--provides caller with account payoff balance as of the call
date or as of a date up to 120 days in the future (25,280 calls
completely automated in fiscal year 1997).
Transcript--allows caller to request account transcript, return
transcript, or Form 4506 to order photocopy of return. Generates a
cover letter and requested item to a caller's address of record (61,652
calls completely automated in fiscal year 1997).
Credit View--provides a caller with the status of a selected
payment or list of up to last six payments made. (Call data not yet
available. Application did not become operational until February 1998.)
Debit View--provides a caller with detail or summary on account for
a chosen tax year. (Call data not yet available. Application became
operational February 1998.)
Survey--offers statistical sample of callers the option to
participate in customer satisfaction survey. Asks maximum of three
questions regarding automated service received (12,000 surveys
completed).
Call Referral--asks for the phone numbers of certain callers to
account applications who have a need to speak with Exam, Collection, or
Special Procedures. Generates a daily report of phone numbers for
follow-up by the various areas. (Call data not yet available.
Application became operational February 1998.)
Question. Have you solicited taxpayers' views on the interactive
applications, particularly those taxpayers who abandoned their calls?
If no, why not? If yes, what have you learned, and what actions have
you taken as a result?
Answer. Our automated survey application (see description in
response above) surveys a sample of callers who completed the
applications. Response data compiled from fiscal year 1997 indicates
that 12,448 callers were offered the survey and 8000 of those agreed to
participate. The majority of callers who participated found the
applications easy to use, were satisfied with the service offered, and
found it convenient.
Customer satisfaction surveys on toll-free and Automated Collection
System will be administered by a contractor during 1998 and will
include a question regarding customer's level of satisfaction with
automated service. Results will be tabulated quarterly. In addition, a
more comprehensive automated survey is expected to be in place by next
filing season that would have the capability of asking callers more
detailed, directed questions (for example, why they defaulted out of
automated service). We are also continuing to analyze our TRIS
management information system data, which provides details about where
in TRIS applications callers are defaulting so we can make improvements
such as clarifying messages, increasing response times allowed, and
adjusting business eligibility rules where possible to increase the
number of callers who can use the system successfully.
Question. How many interactive applications do you plan to
implement and what is the schedule for development and implementation?
Answer. By the end of calendar year 1997, the following 10
interactive telephone applications were operational nationwide. We are
currently piloting two additional TRIS applications--Refund Release and
Refund Trace. An application to assist callers with questions regarding
the earned income credit is now in planning stage. Future TRIS
applications are prioritized in the modernization blueprint with
rollout scheduled to begin in 2002. Until then we will be analyzing
management information data to determine and implement improvements to
the existing applications.
Question. By fiscal year, how much have you spent on interactive
applications and what are your future spending plans?
Answer:
Fiscal year 1997 actual expenditures:
Labor............................................... $4,049,000
ADP (hardware/software purchases and maintenance)... 617,000
Contractor services................................. 3,038,000
Telecommunications (purchase and maintenance)....... 918,000
Other (travel, overtime, awards, supplies).......... 394,000
--------------------------------------------------------
____________________________________________________
Total............................................. 9,016,000
========================================================
____________________________________________________
Fiscal year 1998 spending plan projections:
Operational activities.............................. 6,422,000
Deployment activities............................... 40,000
EITC application activities......................... 820,000
--------------------------------------------------------
____________________________________________________
Total............................................. \1\ 7,282,000
========================================================
____________________________________________________
Fiscal year 1999 spending plan projection............... 7,700,000
+38 FTE
========================================================
____________________________________________________
Fiscal year 2000 spending plan projection............... 6,619,000
+38 FTE
\1\ Does not include Y2K $$ for Y2K activities (app. $2M).
Question. What are the return on investment and other expected
benefits from use of interactive applications?
Answer. TRIS will help move work from correspondence to telephones.
Resolution over the phone will take minutes rather than days as
required via correspondence. TRIS reduces burden by increasing IRS
business hours, thereby allowing for increased taxpayer access. It also
allows taxpayers the flexibility to resolve certain issues themselves,
which may reduce stress levels for taxpayers who are anxious about
talking to IRS employees. TRIS provides easy access to procedural and
account information such as refund inquiries. Taxpayers need not wait
in queue for available Customer Serve Representatives (CSR's). Once in
the system, assistance begins immediately. The technology enables CSR's
to improve productivity and resolve more issues using fewer resources.
The projected benefits from TRIS over the 10 year period (1996-
2005) total $814.9M. This is comprised of FTE benefits of $781.5M and
telephone savings of $33.4M.
Question. Why did IRS change its call-back goal for 1998 from 2
business days to 3?
Answer. In order to optimize customer access, an initiative was put
in place in fiscal year 1997 and fiscal year 1998 whereby taxpayers can
leave a message containing their questions on designated technical tax
topics. These questions are then answered by technical Compliance
professionals who are not necessarily co-located with the telephone
operations/systems. In fiscal year 1998, the recording that taxpayers
hear when leaving a message was changed to indicate that calls will be
returned within three business days (fiscal year 1997 recording was two
business days). The recording was changed at the beginning of this
filing season in anticipation of an increase in message workload and
because allowing an extra day to try to contact the taxpayer would
increase the probability that we would be able to reach the taxpayer by
phone (callers who cannot be contacted by phone are sent a letter.) In
order to provide the same level of assistance in fiscal year 1998 as
was provided in fiscal year 1997 to these taxpayers and because
anticipated workload increases have not materialized, we have continued
to maintain our internal goal to answer within two business days.
Question. In 1997, what percent of the calls received on the voice
messaging system were returned within 2 business days?
Answer. During fiscal year 1997, data on the success rate of Call
Back Messaging callbacks was not captured nationally. For fiscal year
1998, a more formalized process for quality review of the Call Back
Messaging program has been established.
Question. So far this year, how many taxpayers left a message and
how often did you meet your goal of returning the taxpayers' call
within 3 business days?
Answer. As of the week ending March 7, 1998, taxpayers left 707,473
requests for information through customer messaging. Based on
information to date, captured through the Quality Review process, 100
percent of the taxpayers who left usable messages were contacted within
two business days. (A usable message is one that contains sufficient
information for a call back such as the name or telephone number).
Question. For those that were not returned within 3 days, why were
not they?
Answer. Based on information to date, captured through the Quality
Review process, 100 percent of the taxpayers who left usable messages
were contacted within two business days. (A usable message is one that
contains sufficient information for a call back such as the name or
telephone number).
Question. How does IRS ensure that a taxpayer's call is actually
returned?
Answer. Quality reviews administered at the local level ensures
that the calls are returned timely.
Question. Can IRS tell us the extent to which persons who are told
to leave a message decide not to?
Answer. Of the 845,019 opportunities for customer messaging,
707,473 customers left messages and 137,546 elected not to leave a
message. This represents 16.3 percent of the total.
Question. How, if at all, has IRS changed its position on the
importance of/need for walk-in service?
Answer. IRS recognizes and supports the view that walk-in services
are an important product line for serving taxpayers. Although most of
the services performed in walk-in offices can be obtained elsewhere,
some taxpayers trust and rely on the personal interaction of the walk-
in situation.
Question. How many full service walk-in sites (defined to exclude
sites that merely distribute forms) were open during the 1998 filing
season, and how does that compare to the 1996 and 1997 filing seasons?
Answer. Currently, the are 403 open walk-in sites. In 1996, there
were 448 open offices, and in 1997, there were 418.
Question. To what extent, if at all, does IRS plan to increase the
number in 1999?
Answer. IRS is currently reviewing the service provided by the
existing walk-in sites and has commissioned a task force to make
recommendations regarding what should be done to improve existing
service, including a review of the number of walk-in offices.
Question. What information and services are available to taxpayers
via IRS' web site?
Answer. Below are examples of IRS Digital Daily Services (all items
are updated and current; bolded items are new this year)
Over 600 statistical reports and/or databases
--Tax topics, short explanations of approximately 150 tax subjects
--News releases
--An electronic tax calendar with individual, business, and excise
tax dates
--The Internal Revenue Bulletin, issued weekly; contains Revenue
Rulings and Procedures, Treasury Decisions, Notices and other
items of general interest
--Almost 200 frequently asked tax questions and answers
--Tax regulations and plain English summaries
--The capability to comment officially on proposed regulations
--Sign-up for the Digital Dispatch, an E-mail newsletter of the
latest tax news
--Market Segment Specialization Audit Techniques Guides, training
tools which describe how we handle certain industry-specific
tax issues; currently 17 guides are available on industries as
diverse as pizza restaurants, clergy, musicians, and Alaskan
commercial fishing
--Coordinated Issues Papers, over 80 documents which describe IRS'
current thinking on industry-specific tax issues
--Customer service standards
--Thousands of tax forms, publications, and instructions; tax year
1992 to current;
--Portions of the Internal Revenue Manual
--Local news from field offices
--On-line want ads for IRS jobs
--A Tax Professionals' Corner with news and information geared
specifically for this customer base
--A series of 26 interactive ``Tax Trails'' which allow taxpayers to
click yes or no to a few questions and get the tax answers they
need to complex tax issues
--IRS Year 2000 program information, of particular interest to our
electronic trading partners
--Advance Notices; prior to issuance in the Internal Revenue
Bulletin, these public notices provide late breaking tax news;
the notices are widely used by tax research services
--Disaster relief kits to assist customers who may need to apply for
loans and obtain copies of prior year returns; links to FEMA
--Information on electronic tax payment and filing options
--Free downloadable tax software
--Capability to answer tax law (no account) questions via E-mail
--Links to related information and government sites such as state tax
forms
--Information on other electronic information services such as fax
and CD-ROM
--Extensive contact information such as where to file and key IRS
phone numbers
--A variety of exempt organization information such as how to apply,
forms, educational materials, frequently asked questions and
answers, a tax kit, a database of exempt organizations and
types of exemptions
--Small business tax information such as Work Opportunity Credit
details, an electronic Your Business Tax Kit for businesses
just starting out, a Tax Tips Calender geared just for small
business, and information on employee versus independent
contractor issues
--Third party processor information (lock boxes)
--Special notices on important tax news such as the Taxpayer Relief
Act
--Taxpayer Bill of Rights; related training materials and reports to
Congress on taxpayer rights
--Taxpayer Advocate Program information, including a directory for
Problem Resolution and the 911 form for emergency relief
--International Tax Forum, a newsletter for tax professionals
--Tax Supplement, a compendium of articles normally used by news
media to help spread the word on tax changes
--Collection Financial Standards
--Promotional kits for electronic return preparers
--Information on educational materials, conferences and exhibits.
Question. What additional services do you have planned for the web
site?
Answer. Our Internet site is updated daily. Thousands of pages of
tax information were added just last month. Local news is also
available from our field offices such as calendars of small business
tax workshops.
Tax professionals play a vital role in helping serve American
taxpayers as well. To help them help others, we developed a tax
professionals' corner on our web site which provides information on
workshops, tax research materials, certifications, and how to become an
electronic return preparer. We could not have been as successful
without the help of industry to define its needs and help in the
planning and development. Members of the IRS Commissioner's Advisory
Group helped develop the Tax Pro Corner. We will expand this area based
on recommendations and input from tax practitioners and the
Commissioner's Advisory Group.
We are currently testing a few Fill-in-the-Blank Tax Forms,
available via the Net. We plan to make at least 250 of the most popular
forms available for taxpayers to fill in on-line this year. Users can
download forms from the IRS home page or the IRS Federal Tax Forms CD-
ROM, fill in the blanks on their own computers, and print them out.
Feedback thus far has been extremely positive and the majority of those
customers who do comment request more fillable forms.
Expand Tiered Distribution of Electronic Information (1998-2002).--
Two key programs will be developed. The Corporate Partnership Program
provides CD-ROM's of IRS tax products to large businesses. The
companies place the CDS on their internal networks and provide free
access to their employees. Other federal and state government entities
may also join this program. This program will be expanded through 2002.
The second key area is the Library program which currently provides IRS
CD-ROM's to public libraries. In 1999 we will add web-based and E-mail
services for librarians to assist them in distributing tax information.
For example, the status of arrival dates for tax forms and CD shipments
for filing season and back ordered materials would be important to this
audience. This program will be expanded in 2000 to libraries which are
not ``public'' (such as those in private colleges). For taxpayers, this
will result in increased accessibility.
Develop On-Line Learning Lab (1998-1999), Expand (2000-2002).--We
are improving our taxpayer education program, particularly for first
time taxpayers, students aged 13-18 who learn about taxes in school. We
are developing an on-line learning lab which will cover, among many
topics, the reasons we pay taxes and how they can meet their tax
obligations. Particularly important is availability of electronic
filing options and teaching electronic filing by electronic filing. The
web-based education program will also have a companion CD product.
Interactive games and activities will make taxes--almost fun! First
time taxpayers will learn electronic filing methods rather than paper
filing and learn to interact electronically with IRS. The initial web
site will be available in May 1998, with the first school year
availability for 1999. Additional services for other customer groups
will be added during the years 2000-2002 (for example, on-line
practitioner workshops, small business workshops, tutorials for updates
in specialized tax fields such as estate and gift tax).
Note: the draft opening screen is available now. A poster size
image can be made available with two days notice. The lab will be an
on-line ``Zine,'' part of the Digital Daily. The Zine is called Taxi,
short for Tax Interactive.
Expand CD-ROM, Fax, and Internet Service Capacity and Products, Add
Media (1998-2002).--More IRS products will be added to all media,
particularly products which promote electronic filing and payments. For
example, in 1999 we plan to add locator services on the Internet for
electronic return preparers. Taxpayers will be able to put in a zip
code or city and get a list of certified ERO's near them. We plan to
add DVD services in 2000. Additional services currently being examined
include undelivered refunds, employment information, job announcements
and position descriptions via fax-on-demand. Better tax research bases
will be available because we will use ``intelligent'' text information
which is accessible through a normal Internet browser interface and
will provide significantly increased search capabilities.
Expand Cross-Government Initiatives for One-Stop Service.--This
year, IRS began the first project to develop a cross-government CD-ROM
for start-up businesses. The CD will be useful for anyone who is
starting a new business and will provide information from a variety of
government agencies. The CD will be available in 1999. Additional
cross-government services will be deployed through 2002. We expect this
to be our first fully blended Web/CD project. In certain topic areas
the CD would automatically go to a selected web site for updates,
combine the updated information with the CD information, and present
the most current combined information in a single interface.
Question. Are their security concerns or other reasons that limit
services you provide on the web site?
Answer. Our choices for Internet services have primarily been
driven by customer needs and usage rather than security concerns. Yes,
we do have security concerns, but so do our customers in private
industry. Very few citizens currently do their banking on the Internet.
Certainly, we expect that to change shortly as industry and government
security standards for Internet evolve. We are prepared to add new,
secure services as our customers move to using secure Internet
services.
Question. What data, other than the number of ``hits'', does the
IRS have to indicate how its web site is being used?
Answer. Although predictive indicators such as hit counts,
downloads, fax transmissions are useful to gauge taxpayer response, we
will continue to use and expand on additional measures which provide
better information on customer service improvements (increased
availability, improved quality, faster service, improved accommodations
for persons with disabilities, and more convenient hours) and business
results (reduced waste, reduced distribution costs, improved production
rates, improved time to market, lower cost per customer served) .
Currently, for example, we code a sampling of forms so we know where
they came from. Separate codes are used for Internet, fax, and CD
services. Last year, 6 percent of forms sampled in submission
processing sites came from Internet. Another example is the cost per
form distributed. Via Internet the cost is about one penny compared to
telephone orders at about $3. The time it takes to mail forms to
international taxpayers is about two weeks or more and via fax or
Internet, taxpayers get what they need in minutes. Even within the U.S.
it takes 7-10 working days to deliver forms by mail. We constantly
examine the most popular Internet products and ensure that taxpayers
can get to this information with a minimum number of clicks from
anywhere in the site.
Question. To what extent, if at all, has use of the web site
reduced the demand on other sources of assistance, including telephone
and walk-in sites?
Answer. Last year we know that more than 19 percent of tax forms
submitted as tax returns came from the tax packages we mailed out.
Approximately 6 percent of the tax forms submitted came from Internet.
In 1996, the first year of operations for our Internet services, 2
percent of the forms sampled were from our Internet site. So, in one
year we saw a tripling from this one source. The percentage of forms
submitted that come from tax packages has decreased over the past two
years since we have provided Internet service. Two years ago more than
30 percent of the forms we sampled came from tax packages. Likewise,
the percentage of forms coming from our toll-free number for tax forms
distribution centers and from walk-in centers has decreased. Similarly,
we have seen, for the first time ever, a small decrease in the number
of callers who try to reach us by telephone. By tracking and analyzing
these trends we can plan resources to meet our customers' changing
needs.
Our goal is to make it more convenient for people to get the tax
information they need. That is why we provide a broad range of choices
for taxpayers. For some that may be Internet. For others it may be
telephone services or a visit to their local library. The number of
Americans with Internet access is increasing dramatically and we want
to meet that service need.
This is a difficult area to quantify however, telephone demand has
decreased in the past two years, even though we have answered more
calls.
As for walk-in, part of the way we gauge the results of various
channels for distributing tax information is to track the number of tax
forms submitted back to us from various sources. We code forms in order
to track the effectiveness of our distribution channels for our
customers. Forms coming from the Internet have a different code than
those in public libraries or from our distribution centers, for
example.
Question. Have you surveyed taxpayers to get their view on the
services you provide via the web site? If not, why not? If so, what
have you learned from the taxpayers, and what actions have you taken on
what you have learned?
Answer. Yes, we have surveyed taxpayers to get their views. We have
learned much not only about the needs of taxpayers but about the impact
of our Internet services are having on other IRS services. We have
found that surveys alone, however, do not provide the detailed input we
need. As just a few examples, there are numerous products that have
been added based on taxpayer feedback from a variety of sources. Based
on taxpayer E-mail received, we added Applicable Financial Rates to our
site in less than two weeks. We added more searchable publications and
fill-in-the-blank forms based on feedback from E-mail as well. Our
Public Liaison Office arranged for us to meet with representatives of
the small business community and we added a recommended reading list
for small businesses. Our trading partners wanted a tax professional's
area and we worked with representatives from that arena to design and
implement that section of our web site. We work closely with the IRS
Public Liaison Office and the Commissioner's Advisory Group to track
user needs and gather input. We have also found through survey that 98
percent of taxpayers who use Internet to ask tax law questions would
have gone to our phone system. This is incredibly useful information
which also tracks with the trend we have seen--a decrease of traffic
into our phone sites. This also says that the Internet can help us in
our efforts to provide better phone service by diverting some traffic.
Our budgeting for different customer service alternatives is based
primarily on trends in customer demand. For example, over the past two
years we have seen a dramatic rise in customer demand for electronic
services. Taxpayers are increasingly using convenient electronic media
such as Internet, fax, and CD-ROM services to get the tax information
they need. Another example of our responsiveness to changing customer
needs is our IRS TaxFax system. Taxpayers can retrieve tax forms and
information any time of day or night. We have found that some of the
most popular IRS TaxFax products, as we predicted, are products for new
or small businesses. One half million fax orders were filled this
January and February--just two months. This figure is well over double
last year's total at that time.
Question. How, if at all, does IRS' Annual Performance Plan (APP)
for fiscal year 1998 differ from its fiscal year 1997 Plan as it
relates to customer service?
Answer. In the fiscal year 1997 Annual Performance Plan, IRS began
moving toward a budget structure consistent with its major business
lines--Customer Service, Submission Processing, Compliance and the
Support Functions (including Human Resources and Information Systems).
In fiscal year 1997, the Customer Service business line included non-
face-to-face responses (telephones, automated systems or written) to
taxpayers on tax law and tax account issues and early resolution of
less complex collection and examination cases. This business line also
included the Problem Resolution Program, an independent complaint-
handling system to assure that taxpayers' problems which have not been
resolved through normal channels, are promptly and properly handled. In
fiscal year 1998, the Customer Service business line broadened to
include the Automated Collection System and the Document Matching
Program (which enables IRS to identify and follow up on income
reporting discrepancies) as well as the programs listed for fiscal year
1997.
Greater resources, both in terms of dollars and staffing, were
directed to customer service in fiscal year 1998 as compared to fiscal
year 1997 (assuming the same list of programs is compared in both
years). In fiscal year 1997, approximately $717 million and 18,978
full-time employees supported customer service [figures were obtained
from the fiscal year 1997 Annual Performance Plan, dated December 4,
1996, and the draft fiscal year 1998 Annual Performance Plan, dated
February 27, 1998]. In fiscal year 1998, these resources increased to
$827 million and 20,255 employees. This redirection of resources is
consistent with the emphasis on customer service.
In fiscal year 1998, IRS began working with a contractor in the
development of IRS-wide customer satisfaction surveys for all business
lines which interact with the public (e.g., telephone assistance, walk-
ins, compliance, etc.). The surveys will provide statistically valid
samples of customers who actually had contact with IRS. Data from the
surveys will allow a detailed analysis of taxpayers' opinions relative
to specific IRS business lines. Moreover, the data will lead to
improved business practices that meet taxpayers' expectations.
Question. Without comparable measures for the different programs,
how can IRS be assured that it is getting the greatest return on its
overall investment in customer service?
Answer. Your question assumes that a single scale or measure is
appropriate for all of our customer service programs and that Return on
Investment is the best measure for customer service. We believe that
gauging the return on our various customer service initiatives requires
a number of different measures because the services themselves are very
different and do not lend themselves to a single scale or measure. For
example, programs that deliver telephone service, walk-in service and
taxpayer education differ substantially and cannot be compared with a
single measurement tool. Rather, we prefer to remain committed to
supporting all of our customer service lines, and study them from the
perspective of customer satisfaction.
For many years, IRS has conducted customer satisfaction research to
assess how taxpayers value different programs and attributes of the tax
processing system. Historically, we have conducted surveys of small
businesses, individuals and tax practitioners. The analysis of survey
data includes identification of trends based on previous survey
results, and an identification of program strengths and areas for
improvement. Summary reports from the surveys are distributed
throughout the organization. For fiscal year 1998, IRS plans to utilize
the recently completed customer satisfaction survey to help better
assess the effectiveness of our investment in customer service. Based
on the results of these surveys, we plan to direct resources in a
manner that increases the aggregate level of customer satisfaction.
Question. What plans does IRS have to develop measures for all of
its customer service programs that will enable it to compare their
effectiveness, measure the quality of services provided, and obtain the
views of taxpayers?
Answer. New measures of customer satisfaction are a critical part
of the development of the balanced scorecard for IRS. During September
1997, the IRS began working with a contractor in the development of
Servicewide customer satisfaction surveys for all business lines which
interact with the public (e.g., telephone assistance, walk-ins,
compliance, etc.) Phase I of the surveys was implemented in March 1998,
and includes surveys for Collection, Examination, Employee Plans/Exempt
Organizations, Customer Service (Toll Free, Automated Collection
System, Service Center Examination, and Walk-ins) and Appeals. Phase
II, a detailed analysis of the survey results, will be implemented by
December 1998. The results of Phase II will enable us, with the
assistance of a contractor, to develop better measures of customer
satisfaction for all of our programs, including Compliance and Appeals.
Question. How, if at all, can management and Congress use IRS'
performance measures to evaluate resource allocation decisions? For
example, a decision to detail compliance staff to help answer the
telephone will likely reduce compliance results and increase the level
of telephone access (both of which would probably be reflected in IRS'
measures), but how can one determine the overall impact of that
decision on IRS' mission effectiveness?
Answer. IRS's existing measurement system is able to detail the
direct impact on performance of some of our resource allocation
decisions like the one mentioned in the question--detailing compliance
staff to answer phone calls during the filing season. These measures
are all being reviewed in light of our goal of transforming the IRS
from an internally focused organization to one which views itself from
the taxpayer perspective and in light of the elimination of use of all
enforcement statistics for measuring organizational performance. We
have a task force working on this problem, and we expect to engage
expert outside consultants to assist in this task. We expect to have
interim results to use for measuring performance during fiscal year
1999. These measures will build on some of the measures included in the
budget submission.
problem solving days
Question. How much did it cost IRS to hold the initial national
problem solving day on Saturday, November 15, 1997?
Answer. The estimated cost is $1.5 million, based on the average
spending for 4 months of problem solving days (PSD). A precise number
for a given month's events is not available for two principal reasons.
First, the PSD expenditures are being ``flagged'' via use of a new code
in IRS' accounting system, and employees are to use this code for time
spent planning PSD's, dealing with taxpayers during PSD's, and also
working the cases that result from PSD's. Therefore, at any given time,
the staff hours being reported may represent past, present and future
PSD's, with no means of differentiating among them. In addition, when
an employee earns compensatory time or credit hours for off-hour PSD
work, the time is not reported in the payroll system as PSD time until
the employee actually uses the comp time or credit hours, which might
be weeks or months later.
Question. What were the major components (e.g., employee salaries,
overtime, office space, utilities, etc.) of these costs?
Answer. The major spending categories, over the course of 4 months,
have been: salaries and benefits (67 percent), overtime (21 percent),
travel (4 percent) and utilities and guard services (4 percent). The
other 4 percent consisted of a variety of support items.
Question. How much did it cost IRS to hold subsequent problem
solving days in December 1997 and January and February 1998?
Answer. For the reasons stated in response to another question, the
best estimate for individual monthly PSD expenses is to take an average
of spending for all PSD's conducted to date. The average monthly cost
after four scheduled PSD's is $1.5 million.
Question. How many taxpayers visited IRS with problems during the
problem solving days in November 1997 through February 1998?
Answer. The number of taxpayers who visited problem solving days is
as follows:
Number of
Month Taxpayers
November, 1997.................................................... 8,418
December, 1997.................................................... 4,257
January, 1998..................................................... 4,125
February, 1998.................................................... 3,065
-----------------------------------------------------------------
________________________________________________
Total.......................................................19,865
Question. How many of those taxpayers had their problems resolved
as a result of IRS' problem solving day initiative?
Answer. For November, 90 percent of the taxpayers' cases have been
closed; for December, 80 percent of the cases have been closed and for
January, 70 percent of the cases have been closed. A taxpayer's problem
(case) is not considered closed until it is fully resolved. However,
closing a case does not necessarily mean that the resolution is what
the taxpayer has requested or wanted. The rationale for the resolution
is explained to the taxpayer, along with any follow-up action that
could be taken.
Question. How many were resolved in the taxpayer's favor?
Answer. In general, IRS does not keep statistics about in whose
favor the decision is made. We have groups studying the problems that
cause the most taxpayers problems. For example, audit reconsiderations
caused taxpayers the most problem solving day cases. Of the cases
studied, approximately 60 percent of the cases were resolved with full
or partial abatement of the additional tax assessed. These cases were
certainly resolved in favor of the taxpayers.
Question. What kind of follow-up is IRS doing to ensure that
problems are being resolved and that corrective actions agreed to
during the face-to-face meetings actually happen? Assuming there has
been some follow-up, what has IRS learned?
Answer. Procedures are in place to ensure that no case is
considered closed until all case issues are addressed, fully resolved
and all corrective actions are accomplished. IRS management reviews all
cases, verifying that all necessary actions have been taken to resolve
the taxpayer's problems. Only at this point is a case considered to be
closed. Quality review is then done for a statistically valid sample of
the closed cases to further verify that the proper actions have been
taken to resolve the case.
IRS has learned that there are many benefits to both taxpayers and
employees in having face-to-face contact on these problem solving days.
Having all the functional areas and management levels represented at
the problem solving days, working in a team effort, really expedites
resolution of taxpayer problems. The problem solving days embody the
ideal of ``one stop service'' for taxpayers.
Question. How much does IRS estimate this initiative will cost in
fiscal year 1998, considering costs already incurred and anticipated
costs for the rest of the year?
Answer. Based on costs incurred through February, the IRS estimates
that Problem Solving Days for all of fiscal year 1998 will cost between
$12-$15 million. Most of these costs will be employee salaries and
benefits which are not an incremental cost; they were already budgeted
before the Problem Solving Days initiative was implemented.
Question. How many taxpayers does IRS project will visit IRS as a
result of the problem solving day initiative in fiscal year 1998?
Answer. IRS has made no projections because this is a new program.
However, based on current receipts, if the taxpayers continue to visit
PSD's at an average of 5,400 per month, it is projected that
approximately 59,000 taxpayers will visit IRS during the eleven month
period from November, 1997 through September, 1998 (the end of fiscal
year 1998).
Question. How many of those taxpayers does IRS project will have
their problems resolved?
Answer. All cases are worked to resolution and subjected to
management review prior to closure. Resolving a case does not
necessarily mean that the solution is what the taxpayer may desire or
request, but the outcome and rationale are explained to the taxpayer,
along with other steps that may be taken.
Question. What actions has IRS taken to hold down the costs of the
problem solving day initiative?
Answer. On a Servicewide basis, we have decided to hold more
coordinated national events than in the months since November, 1997.
After that first national Problem Solving Day (PSD), we encouraged our
33 district directors to rotate their events among various cities and
towns within their geographic areas and also allowed them to select the
days and times for themselves. More recently, we have chosen to be more
structured, by fixing two or three days only during a month, from which
the various offices must choose their PSD's. This approach reduces
publicity expenditures somewhat, but more importantly, limits the
amount of time during each month when we must maintain access to our
tax databases. In turn, that reduces the money spent on the computer
specialists who must keep systems up and maintained during off-hours,
as well as trimming hardware/software maintenance fees and utilities
charges. We have also begun holding PSD's on weekdays, with hours
extended into the evening, rather than hosting the events only on
weekends. In March, 1998, two-thirds of the PSD's were held on weekdays
which, while still affording taxpayers the opportunity to obtain help
and deal with IRS face-to-face, reduced our overtime expenditures
considerably.
At the district level, as the offices have gained experience in
hosting several PSD's, they have found ways to more efficiently plan
for resource usage. They now know better how many taxpayers to expect
at a given site and time, and can arrange their staffing and other
support services (e.g., guards and utilities) accordingly to meet, but
not exceed, the expected demand.
Question. Has IRS identified systemic problems as a result of the
issues raised by taxpayers during the problem solving day initiative?
What are the major systemic problems identified; what actions has IRS
taken or does it plan to take to address these problems in the future?
Answer. Study groups commissioned by the Taxpayer Advocate are
focusing on four areas that cause a majority of taxpayer problems:
audit reconsiderations, offers-in-compromise, installment agreements,
and penalty issues. These study groups are gathering data and analyzing
these problem areas in depth. They are making recommendations to
correct the underlying problems, often expanding outside the realm of
the problem solving day cases to get a complete understanding of the
systemic and procedural problems.
Question. Recognizing that IRS already has a Problem Resolution
Program in place, what actions will IRS take to direct taxpayers having
problems to that program rather than to a separate problem solving day
initiative?
Answer. IRS has recognized that it needs to improve publicity
about, and access to, the Problem Resolution Program (PRP). We expect
that these actions should reduce the need for taxpayers to participate
in the Problem Solving Day program, and instead provide ongoing access
to the PRP program itself, so that taxpayers do not need to wait for a
local PSD opportunity. Nevertheless, because of the evident benefit to
certain taxpayers, IRS does intend to make the Problem Solving Day
initiative a permanent feature operated under the auspices of the local
Taxpayer Advocates.
Question. How, if at all, has workload generated by Problem Solving
Days affected the ability of the Taxpayer Advocate to handle the
regular Problem Resolution Program workload?
Answer. On a nationwide basis the workload has increased to the
levels of two years ago. While in certain offices there are special
workload burden issues, overall the workload is manageable. However,
because of this program and planned increases in workload from new
publicity efforts, additional staffing is being allocated to all
offices to assure that all workload can be managed without compromising
quality standards.
Question. What are IRS' current plans with respect to future
Problem Solving Days?
Answer. IRS plans to conduct 12 problem solving days in every
district office in 1999, and has made the Problem Solving Days a
permanent ongoing program available for taxpayers.
Question. Does IRS expect to continue having such days past fiscal
year 1999?
Answer. Yes. We see this as an ongoing program.
controls to ensure fair treatment of taxpayers
Question. What is the status of IRS efforts to develop a management
information system to ensure that taxpayer abuse is identified and
addressed and to prevent its recurrence?
Answer. To help develop management information on complaints IRS
receives from taxpayers, a three-part definition of a taxpayer
complaint was developed. The first category is complaints about
employee behavior which violate specific statutes or the Code of
Conduct. This activity is tabulated by the Chief Inspector and included
in the semi-annual report of the Inspector General. The second category
is complaints about IRS system failures or problems. These are reported
in the statutorily mandated annual report (fiscal year basis) of the
Taxpayer Advocate. The third category is complaints about employee
behavior which is inappropriate in carrying out official business,
e.g., rudeness or overzealousness. This behavior is reported in the
Customer Feedback System in an annual report (calendar year basis)
mandated by Congress.
Question. What is the status of efforts to change the current
information systems maintained by IRS, the Treasury Inspector General,
and Justice to include specific data elements for taxpayer abuse?
Answer. While we cannot comment on those systems not under the
control of IRS, within IRS we are now reviewing the Customer Feedback
System to see if it can be improved.
Question. What is the status of the needed changes to this system
that are required to ensure accurate and objective data?
Answer. The Customer Feedback System (CFS) was implemented to
collect the data needed to prepare the annual report on taxpayer
complaints required by TBOR2. Managers complete Form 10004, Customer
Feedback Record, when a taxpayer complains to them about the conduct of
one of their employees. As part of the IRS' review of correspondence
for the fourth quarter of fiscal year 1997, every Form 10004 prepared
during that period was reviewed. To date we have not identified any
weaknesses with the accuracy and objectivity of the data collected
however, we continue to be concerned with the consistency of
participation in CFS. The number of 10004's prepared varies
significantly from site to site and function to function. We have taken
and continue to take actions to increase awareness of the program and
encourage completion of the 10004's as required. These actions include:
articles in management publications (Leaders Digest and A Manager's
Tool Kit); recertification for all managers as part of the filing
season readiness review; program reviews; reviews of data by function;
top level management emphasis on the program and many local initiatives
to raise the profile of the CFS program.
Question. How can IRS meet the mandate in the Taxpayer Bill of
Rights 2, which requires the IRS to file an annual report on taxpayer
complaints, if the Customer Feedback System does not contain accurate
and objective data?
Answer. We believe the data reported is accurate and objective. Our
concern is to insure that all instances of taxpayer complaints are
reported on Form 10004 and we are continuing to emphasize the
importance to managers of their participation. Ongoing reviews and
publicity have contributed to an increase in volumes reported in recent
months.
information systems--century date change effort (year 2000)
Question. What progress has IRS made in completing unfinished
assessments and identifying funding for these areas? How will the $42
million be spent?
Answer. The assessment of how we propose to spend the $42 million
is complete. We have specific approved line items for expenditure of
the entire $170 million appropriated in fiscal year 1998 for Year 2000
conversion work. Consistent with the notification sent to Congress on
February 9, 1998 (as part of our quarterly Appropriations report), IRS
plans to spend the $170 million as follows (including realignment of
the $42 million).
----------------------------------------------------------------------------------------------------------------
Congressionally Increase/
Congressional category enacted New alignment decrease
----------------------------------------------------------------------------------------------------------------
Conversion and testing......................................... $79,000,000 $84,000,000 +$5,000,000
Telecommunications............................................. 23,000,000 51,000,000 +28,000,000
ADP equipment.................................................. 13,000,000 21,000,000 +8,000,000
Operating system S/W........................................... 17,000,000 9,000,000 -8,000,000
CDC project office/program management.......................... 9,000,000 14,000,000 +5,000,000
Certification.................................................. 7,000,000 11,000,000 +4,000,000
Contingency.................................................... 42,000,000 .............. -42,000,000
Offset within IRS budget....................................... -20,000,000 -20,000,000 ..............
------------------------------------------------
Totals................................................... 170,000,000 170,000,000 ..............
----------------------------------------------------------------------------------------------------------------
It must also be noted that significant additional needs have been
identified for fiscal year 1998, and that some areas are still under
assessment. IRS expects that its Tier 2 (minicomputer) and
telecommunications costing will be complete by the end of July 1998.
Tier 3 (microcomputer) systems, needs identified through systems
integration testing, and the non-information technology (non-IT) area
may take longer to finalize. Some of these areas will have fiscal year
1999 implications. Also note that areas of uncertainty and
identification of new needs will continue into fiscal year 1999.
Question. What is IRS' latest estimate of its additional funding
needs for fiscal year 1998? Has IRS identified potential funding
sources to cover its needs? If yes, what are they?
Answer. The latest estimate of additional funding needs in fiscal
year 1998 is about $64 million for year 2000 conversion work (a
revision to our estimate of $90 million contained in the January Report
to Congress). IRS has tentatively identified a source for $50 million
of this need, but this will require Congressional approval to re-
program certain expired unobligated balances.
The President submitted a fiscal year 1998 Supplemental request for
a number of agencies on February 20, 1998. Included in that
supplemental was a request for the Department of Treasury to have
authority to transfer up to $250 million among Department accounts for
Y2K requirements, subject to advance notice to the House and Senate.
Also included was a request for authority to make unobligated fiscal
year 1998 balances available through September 30, 1999, subject to
advance notice to the House and Senate. There was no request for
additional funds for IRS in the supplemental. With this authority, the
IRS should be able to cover any remaining unfunded Y2K needs, including
those which will be identified later. In addition, Treasury has
recently committed to fund the Treasury Communications System (TCS)
conversion, which should free up the majority of the $29 million IRS
has previously reserved for that purpose.
Question. Please explain how IRS can consider the assessment for
its mission critical systems complete. Why are contingency funds
necessary if the mission critical systems have been fully assessed?
Answer. The IRS considers its assessment of mission critical
systems complete because all have been analyzed for year 2000 impact
and committed to a conversion phase. For each mission critical system
an executive has made a commitment to convert it and has allocated
technical resources to complete the conversion. Furthermore, the agency
is conducting a weekly progress oversight process and I receive a
monthly progress report.
Some unresolved issues remain, however, especially in the areas of
telecommunications, Tiers 2 and 3 infrastructure, vendor products, and
externally exchanged files. Contingency funds are required to cover any
unforeseen Y2K impacts, or problems that are likely to be discovered in
some areas. It has been our experience that additional needs are
uncovered as we progress through the conversion process. IRS has
established several mechanisms to identify additional needs or problems
early: (1) systems integration testing; (2) the Risk Analysis process;
(3) the Contingency Management process; and (4) External Trading
Partner Risk Analysis. Nine internal audits have commenced to address
the adherence to standards and the efficacy of the implementation of
the Y2K conversion efforts.
Question. How do the areas still under assessment impact mission
critical operations?
Answer. The IRS expects minimal impact on its mission critical
operations resulting from areas still under analysis. Issues and
potential problems will be discovered through the processes put in
place for early detection of such items, and this identification will
occur either prior to or in fiscal year 1999. The Risk Assessment and
External Trading Partner outreach programs are in place, and systems
integration testing will begin in January, 1999 and is scheduled to be
completed by October, 1999. The Contingency Management process for
applications is in place, with the COTS and external trading partner
portions to be implemented soon. As new products or requirements are
identified, they will be evaluated and solutions will be integrated
into the Year 2000 Project Master Plan for tracking progress. The
budget will also be adjusted accordingly to include any additional
requirements.
In addition, we have ongoing processes in place that will help us
ensure that Telecommunications provides the essential infrastructure to
allow the Mainframe Consolidation systems to operate.
Question. What progress has IRS made in converting its systems to
date? Please provide this information in terms of the names of mission
critical systems that have had their applications, systems software,
and hardware converted and tested.
Answer. Of 126 Mission Critical applications systems, 75 have been
renovated, 60 tested, and 59 systems have been implemented into
production as of Phase 3. Please see the attached list of systems for
specific names.
These counts address our applications programs. These systems also
rely on commercial software and hardware, telecommunications systems,
electronic data from sources outside IRS, and to some extent, on
equipment generally outside the scope of information technology, for
example, building security systems and environmental controls.
The IRS has established detailed conversion plans for each area and
dedicated resources have been assigned to execute the plans. Progress
in each area is monitored on a weekly basis and corrective actions are
taken to ensure the progress is on schedule.
Question. Are there any areas for which IRS is at risk of not
meeting this goal? What is IRS' plan for addressing those areas that it
may not be able to convert on time? Given that IRS has less than 2
years to fix and test all of its systems, what contingency plans is IRS
prepared to implement in each of the following scenarios: (1) funds are
not available to convert all mission critical systems by 2000, (2)
there is not enough time to convert all mission critical systems by
2000, or (3) unexpected system failures occur for a variety of possible
reasons including unassessed areas, conversion oversights, or
incomplete testing? Does IRS have Year 2000 contingency plans for those
systems that are critical to the collection of $1.4 trillion in annual
revenues? If no, why not?
Answer. The IRS has identified four potential risk areas that could
affect the IRS' not being fully Year 2000 compliant. They are
Telecommunications, Tier 2 hardware and software, Tier 3 hardware and
software, and External Trading Partners Data Exchange.
IRS has established detailed conversion plans for each area and
dedicated resources have been assigned to execute the plans. Progress
in each area is monitored on a weekly basis and corrective actions are
taken to ensure the progress is on schedule.
I chair a monthly Executive Steering Committee meeting to address
immediately the critical issues and risks associated with the Year 2000
efforts. In addition, I frequently communicate with selected IRS and
other stakeholders on an individual basis to monitor the progress of
specific components of the Year 2000 effort. I have met with the
General Accounting Office and the IRS' Internal Audit function to
ensure an independent view of the situation. I also met with Booz-Allen
& Hamilton on their Independent Validation and Verification risk
assessment.
Given the scope of the IRS program and its critical importance to
both the nation's economy and its taxpayers, it is imperative that the
IRS' mission critical systems continue to function properly in the new
millennium. Because the risks are significant, despite the progress
made, the IRS has developed feasible contingency plans to neutralize
any adverse impacts of a less than fully successful century date
program. These contingency plans reflect the IRS functions as well as
those of our data exchange partners. The overall IRS contingency
planning strategy is to focus our efforts on planning for only those
aspects of the program that may not be completed timely and/or fully
successfully.
The IRS has scheduled for conversion of all its application systems
by January 1999, allowing the remainder of 1999 for integration
testing, system level testing, and certification, and to address any
unexpected conversion items. Contingency procedures will be developed
and implemented for products if they become dangerously behind
schedule. The IRS' Year 2000 Contingency Management Plan tracks Y2K
remediated progress and allows us to create specific contingency plans
when a need arises.
With over 41,000 components and approximately 47 percent of mission
critical systems converted and implemented as of January 1998, the IRS
conducted a post-implementation (Phase 3) Review. As a result of this
review, the IRS identified several lessons learned which were applied
to all systems. Specific technical solutions, standards implementation
and testing procedures were modified to reflect these lessons learned.
In preparation for a similar review process after Phases 4 and 5, the
IRS has instituted additional metrics. During fiscal year 1999 the IRS
will implement an end-to-end test or systems integration testing of all
systems. If a failure or problem occurs in the systems integration
testing, an existing requirement for a contingency plan will be
invoked.
Question. What is IRS' fiscal year 1999 budget request for each of
the following areas:
a. Mainframe consolidation?
b. Integrated Submission and Remittance Processing System?
c. Year 2000 conversion efforts (i.e., those activities not covered
by ``a'' and ``b''?).
Answer. IRS refers to its non-infrastructure related Year 2000
efforts as Year 2000 ``conversion'' work.
a. The IRS' fiscal year 1999 budget request for the Service Center
Mainframe Consolidation is $76 million.
b. The IRS' fiscal year 1999 budget request for the Integrated
Submission and Processing System is $18 million.
c. IRS' fiscal year 1999 budget request for Year 2000 conversion
activities is $140 million.
Question. How much of the request for mainframe consolidation is
attributed to the need to make IRS' mainframe computers Year 2000
compliant? How much is attributed to non-Year 2000 data center
consolidation efforts?
Answer. As a result of the business alternatives analysis for
mainframe consolidation, of the total investment required for Mainframe
Consolidation initiative, $265 million represented the minimal cost
required to achieve Y2K compliance through upgrading the existing
legacy environment. The analysis to break this cost down by year has
not been completed.
OVERVIEW OF COST AND DOLLAR BENEFITS (FISCAL YEARS 1997 TO 2006)
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Contract costs Total life
Delivery alternative -------------------------- cycle Cost
Investment O&M funding savings
----------------------------------------------------------------------------------------------------------------
Stay-in business............................................ $265.0 $357.2 $1,815.2 ...........
Consolidation (with Lease To Purchase)...................... 321.4 222.8 1,311.2 $503.9
----------------------------------------------------------------------------------------------------------------
The mainframe consolidation program has four parts. Two of these--
the Communications Replacement System (CRS) and the replacement of
desktop devices, with the associated telecommunication infrastructure--
are mandatory for Y2K compliance. The CRS cannot be upgraded and must
be completely replaced. The Terminal Replacement Project replaces
approximately 17,000 desktop workstations which cannot be otherwise
modified or upgraded. The proprietary telecommunications infrastructure
supporting connectivity between mainframes, as well as workstations at
approximately 700 sites, requires significant modification or
replacement. These projects are currently on schedule to be completed
by December 1998.
The other two parts of the mainframe consolidation program involve
the replacement of existing IBM and UNISYS mainframe computers, in each
of the ten service centers, with mainframe computers in the Martinsburg
and Memphis Computing Centers. The Consolidation project is driven
principally by the requirement to ensure Year 2000 compliance for all
mainframe platforms. The benefit/cost analysis provided within the
current Consolidation Business Case indicates that the chosen solution
provides the greatest return on investment versus a ``pure'' Year 2000
solution upgrading antiquated equipment in place, and offers a cost
savings of $503.9 million over a ten-year period. There are a number of
additional benefits, as described within the business case, which
provide standardization, satisfy other business requirements and
position the IRS for subsequent modernization activities. These
include:
--Reduced IRS Information Systems Operations and Maintenance Costs
--Improved IRS taxpayer data quality
--Improved Disaster Recovery and Business Resumption capabilities.
Question. Has IRS identified any additional Year 2000 funding needs
for fiscal year 1999 since the budget request was submitted to
Congress? If so, what are those needs?
Answer. IRS requested $50 million in Year 2000 contingency funds
for fiscal year 1999. At this time, we have additional needs estimates
for several area of conversion work, totaling approximately $39 million
in fiscal year 1999. The majority of these needs occur in the areas of
non-IT ($19 million), Tier 3 hardware ($11 million), and human
resources retention allowances ($6 million). IRS plans to meet these
needs out of the $50 million Contingency portion of the fiscal year
1999 President's Budget request. Also, the Service Center Mainframe
Consolidation (SCMC) Project is re-evaluating its fiscal year 1999
needs and impacts, and may require additional funding as a result of
schedule delays, and modified capacity and disaster recovery
requirements. IRS is conducting further capacity analysis due to recent
changes to its level of service (e.g., 6 by 16 hours of operations for
Customer Service) as well as the additional functionality and the
increase in locations for the Integrated Collection System. IRS is also
reviewing modified disaster recovery requirements which call for more
backup capabilities and shorter time frames for recovery operations. If
the requested Treasury reprogramming authority is approved, it should
yield sufficient flexibility to address unforeseen problems.
Question. What has IRS done to ensure that its current budget
provides sufficient resources to modify and test its systems to address
these changes at the same time it is modifying and testing its systems
for its century date change effort?
Answer. The work required to accomplish Year 2000 conversion is
competing for the same resources as the work required for the other
efforts to which IRS is committed in this time frame, and this is a
concern. In response to this, I have established the monthly Executive
Steering Committee meetings to address Year 2000 impacts and 1999
filing season issues together in an integrated fashion. All aspects of
these areas, including testing and resource requirements are addressed
and follow-up actions assigned. I have asked that all potential
additional needs be flagged and evaluated to monitor their resource and
schedule impacts and risks through the monthly meetings.
When Year 2000 resource shortfalls are identified, IRS assesses its
priorities and, when feasible, realigns funding from less critical
activities. If there are still unfunded Year 2000 needs, IRS works with
Treasury and OMB to identify funding sources or request additional
funding as appropriate. Our requests for contingency funds are one way
of ensuring that all necessary resources are available as, and when
needed.
One of the major areas we have requested funding for is contractor
support to leverage our internal resources, especially in the area of
systems testing and certification. In some areas, such as new hardware
or operating environments (systems software), contractor expertise has
been added to get the new systems rolling and allow internal staff to
come up to speed. Also, many requests for systems enhancements are not
being honored during this period and will accumulate for later
implementation. The effects of accumulated attrition are also a factor
in IRS' level of concern about its ability to do everything the IRS
needs to do in this time frame. The Commissioner recently sponsored a
six-part human resources initiative which should help in this area,
especially with the retention of IRS experienced computer personnel and
the recruitment of additional systems development and testing personnel
to backfill behind significant attrition.
mainframe consolidation
Question. Is the data center consolidation proceeding according to
its original schedule?
Answer. The Terminal Replacement and Communications Replacement
Systems components, which need to be replaced to become Y2K compliant,
are proceeding according to plan and are on track. Augmentation
activities associated with Service Center legacy systems have begun in
the initial five sites to be cut-over and are proceeding slightly
behind schedule based upon training and operational issues. The Service
Center Replacement System and the Integrated Collections System/
Automated Collections System/PRINT projects are proceeding behind
schedule based upon requirements to conduct much more thorough and
exhaustive testing of new technologies and systems beyond what was
originally envisioned when the project plan was first developed. IRS
has developed several contingency options is currently reviewing them
to assess impacts to the project critical path and business case due to
schedule delays, and modified capacity and disaster recovery
requirements. IRS is conducting further capacity analysis as a result
of recent changes to its level of service (e.g., 6 by 16 hours of
operations for Customer Service) as well as the additional
functionality and the increase in locations for the Integrated
Collection System. IRS is also reviewing modified disaster recovery
requirements which call for more backup capabilities and shorter time
frames for recovery operations. A decision regarding which option will
be selected will be made by early June 1998, at which time we will
provide an updated status assessment and the impacts on funding needs
and the business case.
Question. If not, what problems has IRS encountered and what are
IRS' plans to address them?
Answer. The challenges facing consolidation are typical of any
large and complex information systems project. It is also true that the
risks associated with the project are increased as a result of
requirements to achieve Year 2000 compliance in a rapid time frame.
Impacts experienced to date include:
(1) Programmatic issues, such as the scope and duration of testing
required to verify the capacity and performance of new systems and
architectures. Several contingency options have been developed and are
under review which provide more comprehensive verification and
validation of new products within the IRS processing environment. To
mitigate these risks, additional testing will be required to support
capacity and performance, Disaster Recovery, Security, and Business
Resumption planning and analysis.
(2) Operational issues associated with the development of new
standard operating procedures (SOP's) and inter-organizational service
level agreements (SLA's). Inter-disciplinary teams composed of Service
Center, Computing Center, and Business personnel have been created to
address modifications required to over 400 SOP's based upon new
technologies and the improved telecommunications infrastructure. A
Business Project Manager, reporting to the Executive Officer for
Service Center Operations as a matrix partner within the Project
Management Office, has been charged with developing and coordinating
all required SLA's. These will define the new working relationships
between the computing and service centers, as well as the support to be
provided between information systems organizations within the service
centers and their local business area partners.
(3) Personnel issues associated with staffing, training, and
relocating personnel within very aggressive timeframes. Extended
negotiations with the National Treasury Employees Union contributed to
a later than expected implementation of the consolidation staffing
plan. This has placed pressure upon the project critical path in
regards to staffing ramp-up within the consolidated computing centers,
as well as the associated relocation and retraining timeframes
necessary to ensure successful filing season operations. The IRS is
committed to taking whatever steps necessary to retain key expertise
within the IRS and has provided a number of retraining and relocation
incentives to employees electing to pursue careers within the
consolidated computing centers. For those employees who remain within
the Service Centers, several options are under evaluation for providing
remote access support, temporary or long-term details to other
computing or service centers, or retraining and assimilation within
other areas in the IRS organization.
(4) Technical issues associated with the delivery sequence of both
commercial and IRS developed applications. Given the myriad of
thousands of technology components, the interdependencies between
individual systems and projects are enormous. The IRS is pursuing very
aggressive management and oversight of all supporting vendors and
organizations to ensure timely and quality delivery of products and
services. Although there have been some impacts to the critical path,
these have been mitigated through alternative testing schedules and
options, as well as through interim manual procedures.
Question. What are IRS' current cost/savings estimates for
mainframe consolidation and how have they changed from the initial
estimates?
Answer. The cost savings adjusted to remove investment costs,
normal business operating costs, and revenue benefits are $503.9
million. This cost reflects projected life-cycle dollar savings
resulting from consolidation. As a result of the on-going schedule
contingency analysis, it is expected that these figures will change and
updated information will be provided as it becomes available. However,
given the initial very strong return on investment (ROI) results
outlined within the Consolidation Business Case (330 to 350 percent),
it is expected that any option will continue to support a positive ROI.
Question. What accounts for the changes, if any?
Answer. As has been previously stated, changes in the cost/savings
estimates are under review as part of the overall contingency analysis
and will be made available as this process is completed in early June
1998.
Question. What impact have schedule slippages, if any, had on
projected costs/savings?
Answer. The IRS is currently reviewing potential schedule
modifications. The impact of schedule changes on cost is being
analyzed. Several issues as previously described (e.g., capacity and
disaster recovery) are driving potential modifications. The IRS will
take appropriate measures to update its business case and inform the
Senate of any significant modifications once the contingency analysis
is complete.
Question. What specific aspects of this consolidation are required
to help IRS achieve Year 2000 compliance?
Answer. Communications Replacement System (CRS) cannot be upgraded
for Y2K compliance and must be completely replaced. The Terminal
Replacement Project replaces approximately 17,000 workstations which
cannot be otherwise modified or upgraded for Y2K compliance. The
proprietary telecommunications infrastructure supporting connectivity
between mainframes, as well as workstations at approximately 700 sites,
requires significant modification or replacement for Y2K compliance.
These components are currently on schedule and are scheduled to be
completed by December 1998. The SCRS and ICS/ACS/PRINT projects achieve
Year 2000 compliance while satisfying additional business requirements,
as opposed to a ``pure'' Year 2000 solution upgrading antiquated
equipment in place. The Consolidation business case identified
alternative solutions for achieving Year 2000 compliance and determined
that the current approach offered the best ROI.
Question. In the event that aspects of this consolidation fall
behind schedule, what parts, if any, could be delayed without
jeopardizing Year 2000 compliance?
Answer. The mainframe consolidation program has four separate
parts. Two of these, the Communications Replacement System and the
replacement of desktop devices, are mandatory for Year 2000 because the
systems they are replacing cannot be made Y2K compliant. These two
projects are currently on schedule and are scheduled to be completed by
December 1998. The other two parts of the program involve the
replacement of current IBM and UNISYS mainframe computers in each of
the 10 Service Centers, with the new mainframe computers in the
Martinsburg and Memphis Computing Centers. This aspect of the
consolidation provides substantial annual cost savings and
standardization, and positions the IRS for subsequent implementation of
the modernization blueprint. It will also eliminate the need for
upgrade of some vendor products and for testing and certification for
Y2K compliance at each of the Service Centers. However, it is not
mandatory to complete conversion of all Service Centers to the new
technology to achieve Y2K compliance. Currently, one of the Service
Centers has been converted to the new technology and is operating
successfully. If the schedule for the mainframe consolidation
components slips, the IRS has the option of remediating the legacy
platforms in the non-consolidated service centers for Y2K compliance.
Contingency plans are under development which address the requirement
to pursue remediation of the legacy SCRS and ICS/ACS/PRINT environments
in the event that some Service Centers operations cannot be migrated
prior to January 1, 2000.
Question. What portion of the total cost estimate is attributed to
the need to make systems Year 2000 compliant?
Answer. As a result of the business alternatives analysis for
mainframe consolidation, of the total investment required for Stay-in
Business, $265 million represented the minimal cost required to achieve
Y2K compliance through upgrading the existing legacy environment. The
analysis to break this cost down by year has not been completed.
The consolidation solution offered the best return on investment
for achieving Year 2000 compliance as well as satisfying other business
requirements. The business case outlines the following figures. In this
case, the Stay-in Business alternative represents the cost of upgrading
and operating legacy technologies in-place to achieve Year 2000
compliance. However, it does not include the additional investment
necessary to position the IRS for future modernization, which is
inherent within the Consolidation alternative.
OVERVIEW OF COST AND DOLLAR BENEFITS (FISCAL YEARS 1997 TO 2006)
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Contract costs Total life
Delivery alternative -------------------------- cycle Cost
Investment O&M funding savings
----------------------------------------------------------------------------------------------------------------
Stay-in business............................................ $265.0 $357.2 $1,815.2 ...........
Consolidation (with Lease To Purchase)...................... 321.4 222.8 1,311.2 $503.9
----------------------------------------------------------------------------------------------------------------
Question. What has IRS done to independently verify actual costs
against projected costs?
Answer. Several steps are initiated as part of the overall budget
and program management methodology. Vendor Invoices received against
task orders/delivery orders are forwarded to the relevant Project
Manager and COTR to validate that goods and services were received in
accordance with the established work and cost breakdown structures.
These are then reviewed within the context of the project and overall
Consolidation Resource Management and Spending plans to ensure actual
costs are were within projections and identified in accordance with the
baseline Master Plan. Costs are ultimately reconciled with the
consolidation business case and the initial contractor Program proposal
to verify actual costs against projected costs. This method ultimately
ensures that both positive and negative cost impacts are identified and
addressed as quickly as possible.
By utilizing a contracting paradigm which establishes fixed-prices
for hardware and software products, while managing services under a
time-and-materials arrangement, vendor risk is mitigated more
effectively versus a fix-priced ``for everything'' approach. This
ultimately yields significant cost savings to the Government for
services, and at the same time builds a greater level of accountability
into the management process.
Question. What impact has this had on projected savings?
Answer. Because we have not yet defined the contract's parameters,
the impacts of our costs verification are not known at this time. IRS
anticipates that, as a result of its efforts to build a greater level
of accountability into the management process and once contract
parameters have been defined, it will achieve cost savings in services
and lower hardware and software prices. However, the project is likely
to incur cost increases as a result of changes in requirements for
security, disaster recovery, and the scope and duration of testing
which will impact the schedule completion and result in a continuation
of some service center operations. As soon as the net impacts of the
cost increases and decreases are finalized, we will provide the Senate
with updated information.
Question. How much has been obligated to each of the major
consolidation contractors?
Answer. For the period July 1997 through March 19, 1998, the IRS
has obligated the following to each of the major consolidation
contractors:
------------------------------------------------------------------------
Expenditures \2\
Contractor Actual (based on
obligations \1\ invoices paid)
------------------------------------------------------------------------
UNISYS \3\........................... $130,705,373 \4\ $12,576,453
IBM \3\.............................. 40,595,088 ................
TRW Telecom.......................... 27,877,000 \5\ 2,940,000
----------------------------------
Total.......................... 199,177,461 15,516,453
------------------------------------------------------------------------
\1\ The $199 million in obligations reserves funding for the entire
fiscal year 1998 contract costs. The remaining balance (approximately
$7 million) will be used to cover maintenance for terminals and
mainframes.
\2\ The $15.5 million currently expended does not reflect our efforts to
assess contractor's cost proposals and define costs, or our efforts to
negotiate the fixed-price components of the contract. Once these
actions and our assessment of the modifications to the schedule are
completed, we will provide updated cost and business case information
to the Senate.
\3\ Includes the cost of other, less prominent, subcontractors.
\4\ Unisys/IBM as of March 19, 1998.
\5\ As of January 1998.
Question. How does this compare to planned obligations?
Answer. Planned obligations for each of the major consolidation
contractors for the period July 1997 through year-to-date March 1998
are as follows:
Contractor Planned obligations
UNISYS \1\.............................................. $121,665,896
IBM \1\................................................. 35,360,192
TRW Telecom............................................. 49,641,350
--------------------------------------------------------
____________________________________________________
Total............................................. 206,667,438
\1\ Includes the cost of other, less prominent, subcontractors.
Question. Is the contractor responsible for doing all system
testing for mainframe consolidation?
Answer. The contractor and the IRS jointly conduct evaluations and
tests supporting functional, capacity and performance, Security, and
Disaster Recovery capabilities, as well as mutual implementation of the
five-step process of testing, verification and validation associated
with the migration of individual Service Center operations.
Question. If so, is IRS undertaking any independent assessment of
the testing to help ensure the results are reliable?
Answer. The IRS provides coordination and oversight to all vendor-
related testing. IRS technical personnel conduct independent
assessments of all vendor testing, to include review of documented test
plans and procedures, observation of the test activities within secure
test environments, and the evaluation of pre- and post-test baseline
data to determine if results are consistent with testing objectives.
These results are also evaluated against current legacy and historical
IRS systems profiles to determine if new baseline results are
consistent with the minimum operational capabilities. In addition, Y2K
certification must be performed by the IRS Product Assurance
organization. Upon completion of these activities, the contractor
submits individual systems to the Government as Ready For Use (RFU), at
which point the Government accepts the systems and enters them into
operation.
In addition, the IRS is in discussion with its Federally Funded,
Research and Development Center to conduct an independent review of its
performance and capacity testing and overall test plans.
Question. With the heavy dependence on contractors to complete
consolidation in a very short time frame, how does IRS plan to monitor
contractor efforts?
Answer. At the individual project level, Government Project
Managers and COTR's monitor day-to-day performance in accordance with
work-and cost-breakdown structures associated with individual task/
delivery orders. These are further monitored at the Program level and
summarized for initial executive review as a standard weekly report.
Program management includes a Configuration Control Board with project,
business, and vendor representation, supported by an issues tracking
system and database; a Risk Management Committee which maintains
contingency plans for each project issue; and an executive committee
with first-line representation from both the vendor and IRS
communities. In addition, I have implemented an executive steering
committee which convenes monthly to review on-going status and the
project implementation strategy. This committee includes
representatives from the Treasury, and NTEU, as well as the IRS
information systems and business sponsors.
Question. Given IRS' past difficulties in developing clear business
requirements for contractors, what types of activities did IRS
undertake to help ensure that the contractor was provided a clear set
of business requirements for mainframe consolidation.
Answer. The overall scope for technical and functional requirements
for Consolidation was first identified during the development of the
Consolidation Business Case. Initial project implementation required
the vendor to develop and deliver a comprehensive Project Master Plan
which was based upon Government Furnished Information validated by the
IRS at the time of writing. The Project Management Plan is then updated
on a quarterly basis with oversight through a joint Treasury-IRS
executive steering committee. All IRS organizations provide updated
input in coordination with the Project Management Office. These updates
are then controlled within the Project Management Office through the
Configuration Control Board, which evaluates each modification as a
Basic Change Request. The results of these actions are quantified in
terms of cost, schedule, and risk impacts, and forwarded to the Program
Manager, and ultimately the Program Executives, for review and final
action.
systems modernization
Question. Does IRS plan to postpone further work on the details of
the May 1997 modernization blueprint until implementation plans for the
revised organizational structure have been developed? When are those
plans expected to be complete?
Answer. The IRS is actively engaged in Modernization and is not
postponing further work on the details of the May, 1997 Blueprint until
plans are in place for the revised organization structure.
Specifically, the IRS issued the Request for Proposals for a Prime
Systems Integration Services Contractor on March 26, 1998. The Prime
Contractor will partner with the IRS and its contractors (i.e.,
Integration Services Contractor TRW and the Federally Funded Research
and Development Center) to develop and deploy the Systems Life Cycle,
develop the requisite program management capabilities and continue work
on the first two subreleases for Modernization, Primary Telephone Call
Routing and Management and Enhanced Secondary Telephone Call Routing
and Management, respectively. The current estimated implementation date
for these subreleases is December, 1999 and November, 2000. The IRS
views the technology modernization as defined in the Blueprint as an
enabler of the organizational modernization.
The anticipated completion date for plans for the organizational
modernization structure will be made available as soon as it is known.
The IRS has begun detailed analysis with Booz-Allen and anticipates
providing timeframes and implementation strategies in the near future.
Question. Could the proposed reorganization also affect IRS'
current effort to consolidate all data processing in 2 centers? If so,
how?
Answer. It is not anticipated that the proposed IRS reorganization
would affect the mainframe consolidation activities, which are
scheduled to be completed in 1999.
Question. In light of the Commissioner's reorganization plans, the
CIO's resignation, and the RFP's delay, how have IRS' plans for
completing each component of the modernization blueprint (system life
cycle, architecture, requirements, and sequencing plan) and commencing
modernization changed?
Answer. The IRS is moving forward with acquisition of the Prime
Systems Integrated Services Contractor for Modernization and the first
two subreleases of Phase I/Release 1 as planned. Any future
Modernization activity would be performed consistent with and in
support of the organization modernization and approved by internal and
external oversight including the Commissioner, Treasury and Office of
Management and Budget. As previously stated, we believe that technology
modernization, defined in the Blueprint, enables organizational
modernization. Attached for your information is a description of
longer-term technology investments associated with the fiscal year 1999
budget.
Question. Why was release of the RFP delayed, and what is the
current status? Does IRS still plan to award the Prime contract by
October 1, 1998?
Answer. The Request for Proposals (RFP) for a Prime Systems
Integration Services Contractor was originally scheduled for release on
January 15, 1998. The issuance of the RFP was delayed to provide the
newly appointed Commissioner an opportunity to perform due diligence
related to content and scope of the document. The RFP was released on
March 26, 1998 with an award date by December 1998.
Question. With so many other major efforts on its plate-a major
reorganization, century date change, mainframe consolidation, and the
replacement of IRS' primary returns processing and remittance
processing systems--how does IRS expect to move forward with an award
for a prime contractor?
Answer. The single most important priority for the IRS is the Y2K
program which is managed by IRS technical staff and supported by
contractors other than the PRIME offeror teams. This team is solely
dedicated to Y2K activities. Likewise, all activities for mainframe
consolidation and the Integrated Submissions and Remittance Processing
System are supported and managed by IRS and contractor teams other than
the PRIME offerors.
However, the IRS recognizes that although these critical programs
need to progress, there is an immediate need for the PRIME to arrive
and bring with it the requisite technical and management capabilities
for the IRS to proceed with Modernization and implement much needed
improvements in the area of Customer Service.
The first two subreleases of Modernization will be managed by IRS
and PRIME contractor staff who are not involved in the activities
mentioned above. Additionally, the scope of these subreleases was
crafted to ensure minimal design impact on IRS legacy systems which are
the focus of the Y2K effort, mainframe consolidation and Integrated
Submissions and Remittance Processing System.
Question. Has the Commissioner agreed to the mainframe-centric
blueprint that the CIO and his team created? If not, how will his
disagreement affect future plans?
Answer. As defined in the Commissioner's Statement before the
Senate Finance Committee on January 28, 1998, the Organizational
Modernization is based on five key elements, as follows:
--revamped IRS business practices that will focus on understanding,
solving and preventing taxpayer problems;
--organizational structure built around taxpayer needs;
--management roles with clear responsibility;
--balanced measures of performance; and
--new technology.
The new CIO organization, the Modernization Blueprint and the
recently released request for proposals for a Prime Contractor provide
an outstanding and professional basis for managing the evolution of our
technology. The revamped business practices and Organizational
Modernization will provide a sound basis for completing and
implementing the modernized systems envisioned in the Modernization
Blueprint, including the mainframe centric solution and centralized
databases, and will be tied to the development of lower level
requirements for design and development through the Prime Contractor.
enforcement--examination
Question. What plans does IRS have to use dollars collected to help
measure and report audit results?
Answer. IRS did not agree that the collection rate, as used by GAO,
should be used as the sole measurement of the effectiveness or
productivity of our audit program for large corporations. There are
various actions outside of the control of the Examination function
which can occur after an audit has closed. Items such as Net Operating
Loss and Credit Carrybacks, as well as post closure abatements, can
have a significant impact on the amount ultimately collected. The
current budget does not include a collection rate as a measure of audit
results.
Many of the measures which IRS used in the past were business
results measures involving IRS' tax law enforcement activities. While
some of these business results measures tracked items such as cycle
times and case dispositions, many were essentially productivity
indicators that recorded dollar revenue per FTE for particular
enforcement activities. Neither extensive external (customer)
information nor employee satisfaction information has been used in
evaluating organizational performance. Thus many managers and employees
have focused primarily on productivity.
To address this imbalance, the IRS has established a task force,
the New Measures Task Force (NMTF). The ultimate aim of the NMTF is the
development of a new, balanced measurement system for the IRS that is
equal to the ``best in class'' in private industry. Such a system would
reflect the new organizational structure of the IRS (to be aligned with
major taxpayer groups) and would measure how well the IRS is meeting
its strategic goals by incorporating measures of customer satisfaction
and employee satisfaction with measures of business results and
compliance.
In the nearer term, however, the goal of the NMTF is to develop, in
partnership with a contractor, an interim set of balanced measures that
would move the IRS toward this ultimate goal. This task shall include
the identification of measures for customer satisfaction, employee
satisfaction, and key activity/productivity and quality measures.
Specifically, one of the sub-tasks will be to develop and determine
quality measures for each area. This is likely to require substitute
measures for the cycle time and dollar revenue per FTE measures
previously used in Examination and Collection. As part of the
substitute measures, and building on ongoing IRS work in this area, the
NMTF and the contractor will work to develop more qualitative measures
of the quality of case work for Examination and Collection (including
timeliness, accuracy, resources used, and assistance to the taxpayer to
remain in compliance).
Among other things, IRS' Employee Plans/Exempt Organizations (EP/
EO) Division monitors employee pension plans and exempt organizations
and examines returns filed by those plans and organizations. According
to IRS' fiscal year 1999 budget estimates: ``Because of the size,
complexity, and resources of exempt organizations, and the large sums
invested in employee benefit plans, the potential for abuse is great *
* *''. Despite that potential for abuse, IRS data show that the number
of EP/EO employees has steadily declined from 2,448 at the end of
fiscal year 1992 to 2,194 at the end of fiscal year 1996. Likewise,
although the number of returns filed by exempt organizations and
employee plans increased from about 1,654,000 in 1992 to about
1,750,000 in 1995, the number of such returns examined decreased from
about 42,000 in fiscal year 1993 to about 25,200 in fiscal year 1996.
IRS' budget request for fiscal year 1999 calls for the same number of
full time equivalent staff years as in fiscal year 1998 with a slight
decrease in funding.
Question. What factors govern IRS' decision that an apparent
discrepancy on a tax return should be handled through service center
correspondence rather than a face-to-face audit by the district office?
Answer. Generally, the complexity of the issue(s) involved
determines which office or type of employee is assigned an audit.
Returns with the fewest and simplest issues are performed in our
service centers. As the issues become more complicated, they are more
likely to be assigned to a district office. The IRS tries to use the
technique which is the least intrusive and least burdensome method for
the taxpayer while still adequately resolving potential discrepancies.
Question. Does IRS have plans to shift any district office audit
workload to service centers? If so, what types of workload will be
shifted, how will the service centers be prepared to handle the new
workload, and when will the shift occur?
Answer. IRS is involved in preliminary discussions about the
feasibility of shifting some work from the district offices to the
service centers. The work we would consider is primarily 1040A returns
with total positive income below $25,000 and possibly some non-1040A
returns with total positive income below $25,000. District Office
Examination has had preliminary conversations with the Service Center
Examination Division on the potential transfer of workload. We are
considering the shift of this work in conjunction with our Examination
Occupational Study project on Tax Auditors and Revenue Agent positions.
However, because this is at a conceptual stage, we have not addressed
specific issues including how the service centers will handle the
workload and the timeframes when the shift will occur.
Question. How do district audits compare to service center audits
in terms of traditional audit results (e.g., percent of audits that
resulted in no recommended change in tax liability, amount of
recommended tax change per audit, and direct hours invested per audit)?
Answer:
------------------------------------------------------------------------
Recommended
No change dollar change Hours per
(percent) per return return
------------------------------------------------------------------------
Revenue agent individual.......... 10 $19,330 22
Revenue agent corporate........... 24 58,562 58
Tax auditor....................... 14 3,447 4
Service center.................... 14 3,247 1
------------------------------------------------------------------------
Data is fiscal year 1997. Data does not include Coordinated Examination
Program results.
Question. How often do taxpayers request a reconsideration of the
results of a district office audit compared to the results of a service
center audit?
Answer. In fiscal year 1997, approximately 74,000 returns examined
in district offices were appealed to the IRS' Appeals function. For the
service centers, approximately 8,000 returns were appealed.
Question. For both district office and service center audits, how
does IRS ensure quality during the audit and measure quality after the
audit?
Answer. Ensuring Quality During The Audit.--Auditing Standards
Examination has auditing standards which define the technical quality
of completed casework. The standards address concepts of scope, audit
techniques, technical conclusions, workpaper preparation, reports, and
time management. Each standard is composed of key elements describing
specific components of an examination which are present if a quality
examination is conducted. The Auditing Standards describing case
quality parallel the Critical Elements used to evaluate employee
performance.
Managerial Oversight Group managers are responsible for the
procedural and technical quality of the work produced by examiners
under their supervision. Management practices, appropriate for the
individual examiner, are selected to provide oversight and quality
control. For example, managers may choose on-the-job visitations, in-
process case reviews, or workload reviews as a method of direct
involvement for examiners. Experienced examiners with reputations for
strong technical skills would require less ``hands-on'' supervision.
Branch Chief oversight ensures that the appropriate tools are selected
and are used with sufficient regularity.
These are not the only management practices used to control and
improve technical case quality. Managers may use the Individual
Development Program (IDP) to identify an examiner's specific needs,
determine corrective action, and monitor success. Examiners have access
to technical expertise through the Industry Specialization Program
(ISP) and Market Segment Specialization Program (MSSP) and each
district provides continuing professional education (CPE).
Measuring Quality After the Audit.--Examination Quality Measurement
System (EQMS) is used to collect data regarding examination results and
the examination process. IRS conducts post-audit reviews of randomly
selected cases to determine compliance with the Auditing Standards and
collect process measures. A Customer Satisfaction survey is also sent
to every taxpayer selected for an EQMS case evaluation. The survey
addresses concepts such as the fairness of the examination, if the
taxpayer was treated with respect, and whether the taxpayer was
satisfied by the services provided. The data from the case evaluation
and the taxpayer's response are associated to provide a more complete
and accurate picture of the examination process.
Question. How valid are the DIF formulas for returns being filed in
1998?
Answer. Existing DIF Formulas were derived from data of the last
TCMP surveys, 1987 returns for corporations and 1988 returns for
individuals. Certain revisions of DIF Formulas resulting from major
changes in the tax laws are implemented between TCMP surveys as needed
to reflect the impact of law changes on the relative ranking of
returns. These formula revisions are not considered updates of the DIF
Formulas. Only data from examinations of randomly selected returns can
serve as the basis for DIF Formula updates.
Question. As the formulas age, has IRS noticed any differences in
the returns being selected through DIF and/or in the results of audits
done on DIF-selected returns?
Answer. The results of audits done on DIF selected returns has
remained relatively stable. Since we believe that these formulas do
deteriorate over time, these stable results could be caused by more
selective screening of returns and/or a drop in voluntary compliance.
Question. What plans, if any, does IRS have to update DIF with
statistically valid research data or to replace DIF with some other
objective selection method(s)?
Answer. Until such time as the IRS has access to statistically
valid research data, such as that collected through a TCMP-type
compliance survey, we will continue to be unable to update DIF. IRS has
conducted research on alternatives for developing workload selection
systems as a replacement for DIF and will continue its research in this
area. However, none of the techniques that have been investigated
performed better than, or even as well as, DIF.
Question. Please explain how the Market Segment Workplan works. Is
its use negating the need for DIF?
Answer. Each region is presently participating in a test to convert
the traditional Examination Plan to a market segment based plan. The
test districts are North Florida, New Jersey, Illinois and Pacific-
Northwest. The method that was developed allows a district to re-sort
the traditional Activity Code workplan to determine the fallout of
returns by market segment by district and post-of-duty. Feedback from
the test indicates the primary benefit of the market segment plan is in
determining the placement and assignment of market segment examiners.
The market segment workplan does not negate the need for DIF
because it is not a return selection process. The system for the
ordering and delivery of returns is still based on DIF scored returns.
Question. What is the status of the IRS' effort to collect data on
taxpayer satisfaction with the audit process, and how will IRS use the
data?
Answer. Examination Divisions in each of our 33 district offices
have received responses from taxpayers who received survey letters.
Quarterly data from October-December 1997 has been compiled.
The responses received from the taxpayers will be coupled with the
data collected from our internal reviewers on the quality of closed
examinations. This data will be used to identify systemic improvements
to the audit process. In addition, districts will be monitored based on
a customer service index tied to fairness, respect and satisfaction
with the audit process.
Question. GAO reported in its High Risk Report on IRS that the
inventory of tax debts at the end of fiscal year 1996 was $216 billion.
(GAO/HR-97-8, Feb. 1997). What was the inventory at the end of fiscal
year 1997? Please provide a detailed breakdown of these receivables by
their collection status at the end of fiscal year 1997. And please
identify how much of this inventory represents valid financial
receivables versus compliance assessments and how much IRS expects to
eventually collect.
Answer. The Gross Accounts Receivable Dollar Inventory as of
September 30, 1997, was $236 billion. The attached charts show the
collection status of the entire inventory, and a breakdown of the
Currently Not Collectible inventory by condition.
As the GAO stated in its report on our audited financial
statements, IRS' unpaid assessments balance after auditor adjustments
was about $214 billion. These adjustments arose primarily to eliminate
the double counting from the trust fund recovery penalties assessed
against officers and directors of businesses who were involved in the
non-remittance of federal taxes withheld from their employees. The
related unpaid assessments of those businesses are reported as tax
receivables, but the IRS may also recover portions of those businesses'
unpaid assessments from any and all individual officers and directors
against whom a trust fund recovery penalty is assessed.
This unpaid assessments balance has historically been referred to
as IRS' taxes receivable or accounts receivable. However, a significant
portion of this balance is not considered a receivable and a
substantial portion is largely uncollectible.
Of the $214 billion of unpaid assessments, $76 billion represents
writeoffs. Writeoffs principally consist of amounts owed by bankrupt or
defunct businesses, including many failed institutions resolved by the
Federal Deposit Insurance Company (FDIC) and the former Resolution
Trust Corporation (RTC). In addition, $48 billion of the unpaid
assessment balance represents amounts that have not been agreed to by
either the taxpayer or a court. Due to this lack of agreement, these
compliance assessments are likely to have less potential for future
collection than those unpaid assessments that are considered federal
taxes receivable or financial receivables. The remaining $90 billion of
unpaid assessments represents financial receivables.
About $28 billion of the $90 billion financial receivables balance
is estimated to be collectible. Components of the collectible balance
include installment agreements with estates and individuals, as well as
relatively newer amounts due from individuals and businesses who have a
history of compliance. The remaining $62 billion of the financial
receivables balance is estimated to be uncollectible due primarily to
the taxpayer's economic situation, such as individual taxpayers who are
unemployed or have other financial problems. However, IRS may continue
to collect for 10 years after the assessment or longer under certain
conditions. Thus, these accounts may still have some collection
potential if the taxpayer's economic condition improves.
Question. Is that report now available? If it is, can IRS tell us
the amount of new receivables identified in the past 3 years and the
collection outcome of these receivable? If the report is not available,
when will it be?
Answer. IRS' Enforcement Revenue Information System (ERIS) tracks
dollars collected on accounts that become delinquent from the date of
assessment until the account is resolved or until the statute expires.
The IRS can provide the amount the IRS has collected on assessments
that were made during fiscal years 1997, 1996, and 1995, but cannot
provide detailed information on collections specific to existing unpaid
assessments in the inventory as we report them in our reports on the
Gross Accounts Receivable Dollar Inventory.
The report that will show the dollars collected from new receipts
versus dollars collected is not yet available. This report is being
developed to support the information we report in our financial
statements for the gross accounts receivable dollar inventory. This
report is not yet available because the IRS has had to make changes in
how we report on this unpaid inventory to comply with the standards
defined in the Statement of recommended Accounting Standards Number 7,
Accounting for Revenue and other Financial Sources and Concepts for
Reconciling Budgetary and Financial Accounting. It has also been
delayed due to Year 2000 programming. This report should be available
by 9/30/99.
Question. How soon after the April 15 filing deadline did IRS send
out its nonfiler and underreporter notices for tax year 1996?
Answer. We scheduled tax year 1996 notices for various intervals
after the April 15th filing deadline. The first batches of notices were
mailed to taxpayers during November, 1997 and February, 1998.
Additional batches have been scheduled for May and August, 1998.
Question. Does IRS expect any changes to those time frames for tax
year 1997?
Answer. We are continually evaluating the timing of these notices.
It is our goal to get the notice to taxpayers, with accurate
information, as quickly as possible. The schedule for tax year 1997
notices has not been finalized.
Question. GAO testified at the Senate Finance Committee hearings in
September 1997 that the IRS did not have the information systems
necessary to identify the extent to which its collection enforcement
tools--liens, levies, seizures--may have been used inappropriately.
What steps has the IRS taken to develop information systems needed to
determine the extent to which liens, levies and seizures are used
appropriately?
Answer. We do not believe that information systems can be developed
that can adequately determine the extent to which liens, levies, and
seizures are used appropriately. Case files contain a number of forms,
documents and case history about the tax delinquent case. Some of the
documents include hand written case history entries, correspondence,
financial analysis decisions, hardship determinations, steps taken to
locate assets, and investigation results relating to the equity in the
asset. An analysis of all of these documents are necessary to determine
if the lien, levy, or seizure was appropriate. We believe that the best
way to identify the appropriateness of an enforcement action is a
review of the case by reviewing officials. Because a review of the case
file is necessary, and an analysis must be made as to the
appropriateness of an action, we do not believe a systemic, information
systems approach would be feasible.
There are, however, a number of non-systemic initiatives in use,
and some initiatives under way, which track inappropriate enforcement
actions. Currently, there are a number of review systems, independent
of Collections, that are able to identify instances of inappropriate
Collections actions. These include the Collections Appeals Program,
Problem Resolution Program, and results from the Problem Solving Days
initiative. Collections uses this information to determine seizure and
sale trends. Historically, these systems show minor activity, usually
in the 4 percent range. Collections is also recommending increased
regional oversight of seizure cases and tracking the number of seizures
denied by approving officials. The reasons for denial will be loaded on
a newly designed seizure and sale tracking system.
The appropriateness of lien filings must also be measured by
taxpayer contact and managerial case review. The Automated Lien System
(ALS), which generates Notices of Federal Tax Liens and their releases,
allows for the insertion of a code designated for an ``Erroneous'' Lien
situation. However, an analysis of the facts and circumstances of those
cases shows that more often than not, these errors are the result of
employees inputting incorrect entity information (such as incorrect
name spelling, address, etc.), rather than an inappropriate judgment
that a lien should be filed.
Question. What additional controls, if any, over the use of these
enforcement tools have been incorporated since these hearings?
Answer. Since the Senate Finance hearings, a number of additional
controls and taxpayer safeguards against abuse have been placed on the
use of enforcement tools incorporated into collection procedures. Here
is a list of some of the changes:
--The District Director or Assistant Director must approve all
seizures of principal residences and their contents (even if it
is the residence of someone other than the taxpayer, e.g. a
taxpayer's tenant). Also, the Director or Assistant Director
must approve all seizures of perishable goods.
--Procedures have been revised to require revenue officers to give
the taxpayer an opportunity to file a corrected return before
enforced collection proceeds when a liability is based on a
substitute for return. (Under substitute for return provisions,
the IRS prepares a tax return based upon third party
information after the taxpayer has been afforded the right to
file a tax return voluntarily, but neglects or refuses to file
a tax form.)
--Publication 594, ``Understanding the Collection Process,'' which is
mailed with all Notices of Intent to Levy, is being revised to
make it more useful to taxpayers. In addition, a ``tear-off''
copy of Form 911, ``Application for Taxpayer Assistance
Order,'' is being added to the Publication.
--District and Service Center Directors review all complaint
correspondence and confirm to the Taxpayer Advocate that all
cases have been properly resolved.
--District management met with all Compliance employees to correct
any misunderstandings about the employees' responsibilities
when dealing with taxpayers.
--Revenue Officers are required to refer to the Taxpayer Advocate any
instances when the taxpayer says that collection action will
cause a hardship.
--Deputy Commissioner Michael Dolan has assigned an executive to
conduct a review of the lien and notice of levy processes and
recommend legislative and procedural changes that will balance
the rights of taxpayers and the IRS' responsibility to collect
the correct amount of tax.
Question. In fiscal year 1996, IRS issued over 3 million levies
compared to 750,000 liens and 10,000 seizures. Given the relatively
large volume of levies, please explain how this enforcement tool is
used in the collection process and what controls exist to ensure it is
used appropriately.
Answer. Generally, a notice of levy is used when someone other than
the taxpayer has the taxpayer's property and can turn it over by merely
writing a check. This usually involves bank accounts, wages,
commissions, or accounts receivable of a contractor. On the other hand,
seizure generally involves property or rights to property in the hands
of a taxpayer such as vehicles, buildings, and business property. The
Internal Revenue Code lists the types of property and income that are
exempt from notices of levy and seizures. Policy statements also limit
what IRS can levy.
Generally, employees initiate levies as a follow-up action when the
taxpayer has not responded to a Notice of Intent to Levy, or taxpayers
may be contacted and then miss deadlines for providing needed
information or have broken a promise to pay or some other commitment.
Frequently, the levy elicits responses from taxpayers who have not
responded to calls and/or letters in addition to collecting dollars.
Generally, the levy is released if the taxpayer responds before
proceeds are sent. The taxpayer contact provides financial or other
information to resolve the case, most often by granting an installment
agreement, but also through short-term payment arrangement, a currently
not collectible determination under hardship provisions, or a tax
adjustment.
The levy must be released if an installment agreement is granted
unless the agreement specifically allows for the levy, or if the levy
is causing an economic hardship, or for other reasons specified in the
Internal Revenue Manual.
Procedures involving levy releases apply both before and after levy
proceeds are received. As a result of TBOR2, the IRS now has the means
to return the proceeds of a levy to a taxpayer even after the IRS has
processed the payment.
The Taxpayer Bill of Rights also added provisions to the IRC that
allow taxpayers to sue the government for damages, based on actions or
inactions of IRS employees. If an IRS employee disregards the
provisions of the IRC and its regulations in the course of his or her
duties, the taxpayer may bring an action against the IRS to recover
damages under IRC 7433.
Safeguards are built into our billing system to ensure that
taxpayers are systemically notified of their rights. The taxpayer is
advised in our notices and publications about how to question the
liability if it is wrong, how to get help if a levy would cause a
hardship, and how to appeal collection actions. If the taxpayer
questions the liability, the IRS' Policy P-5-16 is to withhold
collection of any liability that is in doubt. Before a notice of levy
is issued, taxpayers are sent at least two notices asking them to pay
the amount owed. These are the ten day notice and demand (which
includes Publication 1, Your Rights as a Taxpayer) and the thirty day
notice of intent to levy (which includes Publication 594, The
Collection Process). Often, there are more notices sent when individual
income tax is owed. There is also an active Collection Appeals Program
(CAP) which enables taxpayers to appeal proposed or executed liens,
levies, seizures and termination of installment agreements. Other
information is available to taxpayers regarding the Collection Appeals
Program in Publication 1660, Collection Appeal Rights for Liens,
Levies, Seizures and Termination of Installment Agreements. The reverse
of Form 9423, Collection Appeal Request, also provides information to
the taxpayer on how to file an appeal. The procedures also require that
Publication 1660 for a Collection Appeal will be included with the
Notice of Seizure.
Question. What actions has IRS taken regarding the employees found
to have violated taxpayer rights and/or the spirit and intent of
Taxpayer Bill of Rights legislation?
Answer. I have requested the Chief Inspector to conduct a
comprehensive audit of general policy as well as investigate specific
allegations. The reports will also focus on executive and senior
management responsibility for issuing written guidance to the field on
the use of enforcement statistics. As reports are completed, we are
committed to fairness, objectivity, and consistency in reviewing the
findings, taking corrective actions and deciding appropriate
administrative actions. In this respect, we have devised a two-step
decision making process. The first step consists of a panel that
includes executives inside and outside the IRS who will review the
results of the investigations. Members of this panel are: Doug
Browning, Customs Assistant Commissioner for International Affairs;
Steven Colgate, Assistant Attorney General for Administration; and Dave
Mader, IRS Chief Management and Administration. This panel will propose
corrective and/or administrative actions. The second step of the
process is for situations where the proposed corrective and/or
administrative action(s) requires a reply and final decision by another
official. For actions requiring the second step, Kay Frances Dolan,
Deputy Assistant Secretary of Treasury (Human Resources) has been
designated. Deputy Assistant Secretary Dolan will make the final
decisions on any adverse actions resulting from the first panel. This
two-step process will continue as additional investigations are
completed.
Question. If IRS no longer uses ``dollars collected'' as a
performance measure, how will it evaluate the performance of its
collection employees?
Answer. Collection employees should never have been evaluated on
the measure of ``dollars collected.'' Nonsupervisory collection
employees performing collection activities continue to be evaluated
based on meeting, exceeding, or failing to meet the critical elements
and performance standards of the position they occupy as outlined in
their position descriptions. The critical elements and performance
standards for these employees should not have contained in the past and
do not currently contain numerical measures of performance or
statistics such as ``dollars collected.'' The immediate supervisors of
nonsupervisory employees are evaluated on their ability to meet their
critical elements and performance standards, not on numerical measures
of performance or statistics such as ``dollars collected.'' Although
``dollars collected'' as a performance measure has been used
organizationally, it is not to be used at any time in a way that would
identify the product or performance of any individual collection
employee.
Question. Without a ``dollars collected'' measure, will IRS
collections staff be more inclined to defer collection action or
consider delinquent accounts uncollectible? Is there a possibility that
collections on delinquent accounts will decrease while the size of the
accounts receivable inventory increases significantly?
Answer. The possibility always exists that Currently Not
Collectible (CNC) action will be used as an inventory control device
resulting in fewer dollars collected and increased accounts receivable.
The quality of the determination is the key to limiting this
possibility. National Office reviews concentrate on the quality of case
actions taken in the CNC case. The Regions are also expected to include
CNC quality in their reviews of district operations. The Collection
Quality Management System reviews a sample of hardship and operating
corporation CNC's to determine the quality of actions taken. Collection
is also studying other post action review possibilities to minimize
inappropriate CNC determinations.
Question. IRS' fiscal 1999 budget estimates include funding for
further development of the Inventory Delivery System. This system will
centralize collection case processing and use automated methods to
evaluate delinquent accounts for collectibility so that the most
productive accounts receive priority attention. What is the status of
the system, and how many IRS field locations are using it?
Answer. The Inventory Delivery System (IDS) is being developed in
three phases, with the first release scheduled for pilot early in 1999.
No field locations are currently using the system.
Question. Has IRS evaluated the results of the system? If so, what
do those results show?
Answer. Results derived from the system will be evaluated during
each of the three pilots and prior to implementation of each release.
However, we are currently analyzing a sample of approximately 800 cases
processed by an earlier test of the Financial Analysis Program (FAP)
piece of the functionality. FAP provides for up-front identification
and systemic closure of ``hardship'' cases and will be delivered early
in 1999, as part of the first pilot. We have not yet completed this
analysis, but the goal is to find any weaknesses in the FAP process and
fix them prior to the upcoming pilot.
Question. What is the current status of ICS, and where is it being
used? Once ICS is rolled out of these 13 sites, will all field offices
have it? If not, how many offices remain?
Answer. As of April 1, 1998, the Integrated Compliance System (ICS)
is fully installed and operational in all Collection offices in 21 of
the IRS' 33 districts. The remaining 12 districts plus A/C
(International) which do not have ICS, are scheduled for implementation
in calendar year 1999. Once ICS is installed in these remaining 13
``sites,'' no other offices remain.
Question. Why was ICS not rolled out to the 13 sites in 1998? If
IRS was appropriated funds for this rollout in 1998, how were these
funds used?
Answer. Although ICS requested funds to complete its rollout in
1998, none were included in the IRS' final budget for fiscal year 1998.
Instead, the IRS directed all available deployment funds to its top
priorities, the Century Date Change and the Service Center Mainframe
Consolidation initiatives. To complete the roll out, $60.7 million has
been included in the IRS' budget request for fiscal year 1999. The
current plan to complete ICS rollout assumes that the requested funds
will be available.
Question. Many of IRS' functions, in particular the management and
disposition of assets seized from delinquent taxpayers, are extremely
labor and paper intensive. How much of the paperwork associated with
asset seizures is affected by ICS? Has ICS made revenue officers more
productive in controlling managing, and disposing of seized assets?
Answer. ICS provides automation to the issuance of the forms and
letters that revenue officers are required to complete before taxpayer
assets can be seized and sold. ICS has made revenue officers more
productive in controlling, managing and disposing of seized assets by
reducing the time it takes to prepare these forms and letters.
Question. Several years ago Collection adopted new procedures using
Collection financial analysis in the development of payment schedules.
Collection financial analysis applies national and local expense
standards to help ensure that taxpayers are not inflating their
expenses and to help IRS obtain maximum payment. How have these new
procedures affected IRS' ability to obtain maximum payment?
Answer. The Collections financial analysis standards were
instituted to ensure fairness and consistency in determining a
taxpayer's ability to pay a delinquent tax liability. The standards
limit excessive expense claims, but they also provide national
allowances for basic expenditures which were often overlooked in the
previous system.
Although difficult to quantify from available reports, we believe
from interviews with revenue officers and group managers that the
Collections financial analysis procedures are increasing dollars
collected from higher-income taxpayers while increasing the likelihood
that lower-income taxpayer accounts will be reported as currently not
collectible.
Question. What has been the effect of IRS classifying delinquent
cases as currently not collectible? About half the delinquent cases in
IRS receivable inventory were so classified in 1996.
Answer. The overall percentage of currently not collectible (CNC)
showed a slight decline for fiscal year 1997. The number of tax periods
reported currently not collectible due to hardship (the category to
which the new collection financial analysis procedures apply) decreased
11.2 percent from fiscal year 1996 to fiscal year 1997, and dollars
collected on taxpayer delinquent accounts increased 2.6 percent.
However, we cannot definitively say this occurred due to the collection
financial analysis procedures.
The Collections Financial Analysis (CFA) standards have no impact
on defunct corporation or bankruptcy CNC's, as payment from continuing
income is not an option in those cases.
compliance research
Question. In the absence of TCMP, what statistically valid data
does IRS have to measure overall tax compliance as well as compliance
among particular types of taxpayers?
Answer. Since the completion of the last TCMP survey we do not have
any new statistically valid data to measure taxpayer compliance.
Question. Does IRS have any plans for improving these data or to
find such data for use in measuring tax compliance?
Answer. Following the cancellation of the proposed survey in 1995,
the IRS decided to bring in an outside expert (Price Waterhouse) to
look at the IRS' needs for compliance data and to recommend what
alternatives exist for obtaining these data. Price Waterhouse has
issued a final report that the IRS is still considering before making
any decisions.
Question. What is the current compliance level [Total Collection
Percentage]? How confident is IRS about the reliability of that
estimate?
Answer. Our most recent estimate of the Total Collection Percentage
(TCP), the total amount of income and employment taxes paid voluntarily
and timely or collected through enforcement in a given fiscal year,
expressed as a percentage of the corresponding true tax liability for
that year, is 87.3 percent for fiscal year 1997. That estimate relies
on compliance data that are 10 or more years old.
Question. Does IRS believe that it can attain 90-percent compliance
by 2001? If not, what is its revised goal?
Answer. We are no longer setting specific goals for increasing the
Total Collection Percentage. We do not yet know for sure how much of an
increase IRS can realistically induce, since we do not have an
effective way of monitoring changes in overall compliance.
Question. Whatever the goal, what help does IRS need from Congress?
Answer. We are currently considering recommendations made by Price
Waterhouse in its report on the Taxpayer Compliance Measurement
Program. In order to perform its mission, the IRS will eventually need
some way to measure compliance on an ongoing basis.
Question. What is the status of the Compliance Research and
Planning Approach, and how is IRS assessing its effectiveness?
Answer. The IRS created the Compliance Research and Planning
approach in 1993 to merge the Compliance 2000 philosophy with a
rigorous compliance research system. The Compliance 2000 envisioned
using non-enforcement efforts to correct unintentional noncompliance
and reserving enforcement efforts for intentional noncompliance.
The National Office Research and Analysis (NORA) function was
established in the Research Division and 33 District Office Research
and Analysis (DORA) functions were established in the IRS District
Offices. NORA serves as the central organization providing support to
the DORA's. The DORA's:
--develop measures of national and district compliance levels,
--profile potentially noncompliant market-segments,
--perform studies and tests to research any issues arising from these
profiles, and
--develop treatments to address these noncompliance issues.
There are currently 12 measures projects, 34 profiles, 34 studies
and tests, and 3 test treatments underway. These projects are guided
under the auspices of various Cooperative Strategy Working Groups
(CSWG). These CSWG's are composed of managers from both NORA's and
DORA's.
The three treatment studies are the Duplicate SSN, Self-Employment
Tax, and Electronic Transfer Projects. These have all progressed from
the profiling and testing phases to the treatment phase. All the
treatments are using non-enforcement efforts to address unintentional
noncompliance and raise the level of compliance. These measures
projects provide the baseline data to determine the effectiveness of
the new approach. Planning for fiscal year 1999 has started to
determine the best studies and test projects to pursue into the
treatment phase.
Question. How is IRS ensuring that the necessary data on compliance
can be collected and tracked?
Answer. The Collection Research Information System (CRIS) was
started early in the establishment of the Research and Planning
Approach to provide compliance data for DORA research and provide
measures of noncompliance. CRIS has evolved (and is evolving) through
several stages:
--CRIS Working File--CRIS was used in fiscal years 1994 and 1995 for
training DORA staff. It had 75 data elements limited to one
market segment.
--Interim CRIS was delivered to all DORA's in the winter of 1996. It
expanded to 800 data elements and samples of individual and
business filers for all market segments.
--Final CRIS is currently undergoing final validation with training
for all DORA's to begin this spring. It includes over 2,500
data elements on a sample of seven to ten million individual
filers with more than 3 years of data.
CRIS also contains measures of noncompliance developed by the
DORA's. As various treatments are implemented, the effectiveness of
these treatments can be tracked by applying these measures to the
compliance data contained in CRIS. It should be noted, however, that
the CRIS measures of reporting compliance are based on the latest
available Taxpayer Compliance Measurement Program (TCMP) results.
Question. How does IRS know/decide on which compliance issues to
research?
Answer. The DORA's first profile a potentially noncompliant market
segment using data from CRIS. The purpose of the profiling is to
identify any potential compliance issues for further research.
Profiling is guided by the Market Segment and Profiling CSWG.
After profiling, the results are evaluated by the Compliance
Studies and Tests CSWG to determine which compliance issues are
researched further in the studies and tests phase. The final results
are then reviewed for potential development of treatments.
Question. How will IRS use the research results to (1) plan
compliance workload and allocate resources across programs and (2) link
to IRS various measures, goals, and strategic objectives?
Answer. (1) The ``Compliance Research and Planning Approach'' is
intended to identify more efficient, effective, and economical ways of
treating taxpayer noncompliance. Tested treatments or programs, which
exhibit successful results, are evaluated against current programs,
which encumber existing resources. This evaluation is part of the
Operations Planning Process which leads to the development of the
Operations Plan--a multi-year, multi-functional, data-driven planning
document which allocates all Operations resources to specific programs
for a given year.
Research programs that appear to employ a more efficient, effective
or economic strategy for combating noncompliance are incorporated into
the Operations Plan and are allocated resources. These resources are
taken from less efficient and effective existing noncompliance
programs. The ultimate goal of the Operations Plan is to attain an
optimal level of resources in each program to maximize the impact on
compliance. The Office of Compliance Research, in conjunction with the
Operations functions and an outside contractor, is currently developing
a model to assist in achieving this optimal resource allocation.
(2) Before new strategies or programs are incorporated into the
Operations Plan, strategy owners (typically two IRS executives--one in
National Office and one in the Field--assigned to oversee development,
implementation, and review) are required to submit documentation. This
documentation details the project's purpose/description, resource
impacts, benefits, goals, and performance measures. These goals and
measures must link to the broader strategic objectives of Operations
and the overall mission and objectives of the IRS. Failure to provide
any portion of this required information could prevent a strategy from
receiving resources and being implemented at a nationwide level.
As the Operations Plan is developed each year, it directly supports
the development of the Service's overall strategic planning document--
IRS Strategic Plan and Budget (SPB).
employee plans/exempt organizations
Question. Given the ``great potential for abuse,'' how does IRS
justify the downward trend in EP/EO staffing and examinations?
Answer. Beginning with the fiscal year 1996 Appropriation, the EP/
EO FTE level has declined as the IRS absorbed budget reductions.
However, for several years, the level of staffing available to EP/
EO within the appropriated budget has resulted in a decrease in EP/EO's
ability to maintain the most effective oversight of a growing universe
and has increased the potential that EP/EO may be unable to fulfill its
Congressional mandate of ensuring that tax-exempt entities comply with
the requirements for exemption and that benefits for employees in
qualified retirement arrangements are preserved.
The ultimate punishment for violation of tax exempt laws is
revocation of a tax exempt organization's charter to operate. This is a
time-consuming process for IRS staff and a disruptive process for the
tax exempt organization. ``Taxpayer Bill of Rights 2'' (Public Law 104-
168) provided for other measures that IRS could take in lieu of
revoking an organization's charter. Specifically, the law provided for
a series of excise taxes and penalties if certain charitable
organizations failed to meet qualification requirements. These
``intermediate actions'' give the IRS a new tool that should deter
abuse and improve enforcement.
Question. What steps has IRS taken to ensure that the new excise
taxes and penalties are being assessed where appropriate? How many
organizations were assessed taxes and/or penalties in fiscal year 1997
and how much was collected that year? How much does IRS expect to
collect in fiscal years 1998 and 1999? What are the most prevalent
violations for which charitable organizations were penalized?
Answer. The IRS is working with the Treasury to develop regulations
to provide guidance concerning the new excise taxes. Promulgation of
the regulations in proposed form is a priority on the 1998 Business
Plan. In the interim, the IRS has taken several steps to inform IRS
personnel and tax exempt organizations about the new requirements. We
issued Notice 96-46, 1996-2 C.B. 212, to advise tax exempt
organizations of the new requirements and invite public comments for
the IRS to consider in drafting future guidance. We also advised IRS
exempt organizations personnel of the new requirements through
memoranda and our Continuing Professional Education program, and
encouraged our exempt organizations examination personnel to consult
with National Headquarters staff when they encounter potential excess
benefit transactions during examinations of exempt organizations.
However, we do not yet have the capability to identify excise taxes
paid under section 4958 from the total amount of excise taxes paid by
exempt organizations. Excise taxes under section 4958 are reported on
Form 4720, which is the form that has been used to report private
foundation excise taxes under Chapter 42 of the Code and which was
easily adaptable to section 4958 excise taxes. The computer programming
necessary to identify Forms 4720 reporting section 4958 taxes will not
be completed until 1999. We do not, however, expect to collect
substantial amounts of tax under section 4958, as we anticipate that
the provision will have a very positive effect on compliance by tax
exempt organizations with the prohibition against inurement of the
earnings of tax exempt organizations.
Question. How, if at all, has the availability of penalties and
excise taxes reduced the need to revoke charters?
Answer. The primary effect of the section 4948 provisions will be
to ease the IRS' administrative burdens in promoting compliance. We do
not anticipate that the excise tax provisions will substantially reduce
the need to revoke exempt status (we should note that issuing and
revoking charters is a function of the states) because they will most
often be applied in situations in which under prior law the IRS was
reluctant to revoke because of the potential harm to a charitable
organization's beneficiaries. Historically, the IRS has revoked the tax
exempt status of few organizations, usually around 20 per year. IRS
practice was to attempt to resolve the compliance problems through a
closing agreement so that the organization's charitable work could
continue. This often unwieldy process will be eased by the availability
of section 4958 sanctions, which are targeted at the transgressors, not
the objects of an organization's charitable mission. The section 4958
sanctions will not, however, eliminate the need to revoke tax exempt
status in egregious cases, such as the situation in the recently
decided Tax Court case, United Cancer Council v. Commissioner. Treasury
had proposed that the gross receipts threshold for determining if an
exempt organization has to file be raised from $25,000 to $40,000.
Question. What would be the rationale for changing the filing
threshold? How would this affect EP/EO's workload?
Answer. The proposal to raise the filing threshold was made by
Internal Audit after a study of the exempt organization return-filing
universe. The rationale is that since the $25,000 threshold was
established in 1982, inflation has made many small organizations
subject to the filing requirement. We are currently studying the
proposal and requested input from the public as well as other users of
Form 990. There is a question whether an increase by the IRS would
substantially reduce the burden on small organizations because many of
the 33 states that accept Form 990 in fulfillment of state filing
requirements are reluctant to raise the threshold. Also, it is not
clear that raising the threshold would significantly reduce the IRS'
return-processing workload. We are also considering whether to increase
the threshold for filing Form 990-EZ, which is currently available to
organizations with less than $100,000 in gross receipts and less than
$250,000 in assets.
GAO's report on not-for-profit hospital conversions (GAO/HEHS-98-
24, Dec. 16, 1997) raises issues of interest to IRS. GAO reviewed 14
such conversions and found that nearly $1 billion in net proceeds from
the conversions was provided to foundations, most of which had broadly
defined missions that focused primarily on health and wellness. The
foundations, in turn, awarded grants to a variety of health-related
activities as well as a tutoring program, an adult care giver training
program, and a summer remediation program. Other grants supported arts,
public safety, and community development. For two conversions, proceeds
totaling $115 million were not directed to charitable purposes. The
Internal Revenue Manual does not directly address how the distribution
of proceeds from hospital conversions to charitable activities should
be done. There is a presumption that the nonprofit hospital's charter
to provide charitable care--the basis of its tax exempt status--will be
transferred to a tax exempt foundation to continue charitable
activities.
Question. Does IRS see the need to clarify current regulations so
that the distribution of these charitable assets is done consistently
on a national basis?
Answer. Current law addresses distribution of assets upon
dissolution of a tax exempt organization, which is a responsibility
that is divided between the IRS and the states. The IRS' primary
concern in a takeover of a charitable organization by a for-profit
entity is that the charity receive fair market value in the
transaction, and that those proceeds are used for charitable purposes.
The IRS' tools to carry out this responsibility are the authority to
revoke, retroactively, the exempt organization status, or apply the
section 4958 excise taxes on excess benefit transactions, and in the
case in which the sale proceeds are transferred to a newly-created
organization, the authority to determine whether the new organization
is organized and operated exclusively for charitable purposes. The
authority to seek a specific application of the sale proceeds rests
with the State of incorporation through its ability to enforce, at
equity, the terms of the dissolution provisions of the exempt
organization's governing instrument. This joint authority is made
possible by the requirement in section 501(c)(3) that an organization
be organized and operated for charitable purposes to qualify for
exemption. Section 1.501(c)(3)-1(b)(4) specifically provides that an
organization does not satisfy the organizational test unless its assets
are dedicated to an exempt purpose, so that upon dissolution, its
assets would be distributed, either pursuant to a provision in the
organization's articles or by operation of law, to one or more exempt
purposes.
Of the 14 GAO case studies, 3 involved joint operating agreements
between not-for-profit and for-profit ventures. IRS has raised
questions about the tax implications of such arrangements.
Specifically, the operation of the joint venture might result in
charitable assets being used for private benefit, thereby creating a
basis for revoking the tax status of the charitable entity. In its
December 1997 report, GAO referred to a forthcoming IRS ruling that was
expected to clarify these concerns.
Question. What is the status of the ruling? What impact will it
likely have on joint ventures as they currently operate? How widespread
is the use of such joint operating agreements in the health care field?
Answer. On March 4, 1998, the IRS released Rev. Rul. 98-15, 1998-12
I.R.B. 6 (March 23, 1998). It describes two situations involving joint
ventures in which an organization that operates an exempt hospital
described in section 501(c)(3) of the Internal Revenue Code forms a
limited liability company (LLC) with a for-profit corporation and then
contributes its hospital and all of its other operating assets to the
LLC. The revenue ruling applies a facts and circumstances analysis and
holds that in one situation the organization continues to qualify for
exemption because the activities of the joint venture further the
organization's charitable purpose and, in the second situation, the
organization no longer qualifies because the activities of the joint
venture do not further the organization's charitable purpose and confer
impermissible private benefit on for-profit partners. We hope this
recent guidance will be helpful to the public. In addition, there is
currently pending before the Tax Court Redlands Surgical Services v.
Commissioner which involves issues in this area.
We do not have precise data on the scope of the use of joint
ventures in the health care field but instead customarily look to a
variety of public sources for information on transactions in this area.
special agent retirements
Question. How many of those eligible to retire in fiscal year 1997
did retire that year?
Answer. In Criminal Investigation, there were 167 special agent
retirements during fiscal year 1997. In addition, 30 special agents
left through normal attrition.
Question. Does IRS still believe that about 550 special agents will
have retired by the end of fiscal year 2000?
Answer. Yes, in fact, we now believe that an average of 200 special
agents will retire each year through fiscal year 2000. Added to the 167
that retired during fiscal year 1997, a total of 767 will have retired
from fiscal year 1997 through fiscal year 2000.
Question. Last year, in discussing its plans for overcoming the
potentially adverse effects of a high turnover of special agents, IRS
told this Committee that it would reduce its commitment to the ``War on
Drugs'' and concentrate on ``Tax Gap'' investigations. IRS also said
that its support of narcotics and money laundering investigations would
be limited to the resources provided by the Organized Crime Drug
Enforcement Task Force of Justice, which would be a 50 percent
reduction from then-current levels. According to IRS this reduction
would seriously curtail its ability to participate in multi-agency drug
task forces sponsored by local U.S. Attorneys and would significantly
reduce the amount of funds flowing into the Treasury Asset Forfeiture
Fund from IRS investigative forfeitures. Did IRS follow through on the
plans described above?
Answer. The IRS received the President's fiscal year 1998 Budget
Request. Therefore, IRS has not found it necessary to significantly
reduce its commitments to other Federal agencies, multi-agency task
forces, and United States Attorneys Offices to provide its expertise in
financial investigations, which is usually required for the successful
prosecution of narcotics-related violations.
Question. If not, what did it do differently, and why?
Answer. Approval of the President's budget for fiscal year 1998 has
enabled the agency to maintain program delivery relatively consistent
with last year's results, despite some reduction in full-time
equivalents (FTE) realized. During fiscal year 1997, the IRS increased
its percentage of enforcement efforts in ``Tax Gap'' investigations
related to legal industry income. The direct investigative time (DIT)
for ``Tax Gap'' investigations was 59.7 percent, a slight increase from
the prior two fiscal years; DIT in fiscal year 1995 was 56.8 percent
and DIT in fiscal year 1996 was 59.4 percent.
While DIT on ``Tax Gap'' investigations has increased slightly, the
DIT on narcotics-related investigations has remained relatively the
same, although FTE on narcotics-related investigations has decreased
commensurate with the agency's realized FTE.
Question. Have the consequences suggested by IRS come true?
Answer. Seized property pending forfeiture has declined due to non-
budgetary reasons.
Question. For example, has there been a noticeable effect yet on
the amount of funds flowing into the Forfeiture Fund?
Answer. The value of property seized for forfeiture significantly
decreased during fiscal year 1997. Seizures during fiscal year 1997
total $56.6 million, as compared to fiscal year 1996 seizures of $71.7
million. The value of property forfeited, particularly judicial
forfeiture actions, often lags behind the value of property seized for
forfeiture. The agency, therefore, anticipates that the amount
forfeited and deposited to the Treasury Forfeiture Fund will continue
to decrease, subsequently reflecting the amounts seized for forfeiture.
However, due to the judicial processes required, the actual forfeiture
of property seized in fiscal year 1997 may occur as early as two months
and as long as three or four years after seizure.
The amount forfeited during fiscal year 1997, and subsequently
transferred to the Treasury Forfeiture Fund, has increased over the
prior fiscal year. During fiscal year 1997, $72.6 million was
forfeited, as compared to fiscal year 1996 forfeitures of $42.1
million; however, one single forfeiture of $32 million skews the fiscal
year 1997 total. Seizures, totaling $32 million, related to a health
care fraud investigation, were forfeited during fiscal year 1997 and
are being returned to governmental victims of the fraud as restitution.
Absent that one forfeiture, the actual dollars forfeited would have
decreased $1.5 million.
Question. How, if at all, will the fiscal year 1999 budget request
change existing circumstances, either for better or worse?
Answer. Receipt of the full fiscal year 1999 President's budget
request will allow IRS to provide approximately the same level of
commitment to the ``War on Drugs'' as in fiscal year 1998. IRS has been
revamping its special agent basic training program, which it expected
to complete in time to train special agents being hired for fiscal year
1999.
Question. What is the status of this effort?
Answer. The Special Agent Basic Training (SABT) redesign effort is
on schedule and will be implemented with the next class of students
scheduled to arrive for orientation on May 19, 1998. Three additional
classes have already been scheduled before the end of this fiscal year
(July, August and September); additional classes, commencing
approximately six weeks apart, are anticipated during fiscal year 1999
and beyond.
Question. Does this effort represent a shift to on-the-job training
versus the developmental form of training used in the past?
Answer. No. The overriding goal of the redesigned program is to
graduate new agents with decision making/problem solving skills
equivalent to the experience level of an agent with two years field
experience, thereby substantially reducing on-the-job training efforts
by the field. As detailed below, the redesign effort represents a
substantial change in the methods used to present the developmental
training material to our students.
The SABT redesign effort has resulted in the development of a
three-phased learning process at the National Criminal Investigation
Training Academy (NCITA):
1. The first phase of training is a one-week orientation or Pre-
Basic Training Program that became essential with the implementation of
the new centralized hiring process that will also be implemented with
our May 19, 1998 class. During this week long program, all personnel
and administrative matters relating to new hires formerly accomplished
at the district level will be completed at the NCITA. In addition,
students will receive training in the Investigative Thought Process,
Professionalism, Time Management and Core Values which includes IRS
policies relating to ethics, diversity, quality and sexual harassment.
The students will also be tested on their knowledge of federal tax law
and familiarized with the computers and computer systems assigned to
them upon their arrival at NCITA.
2. The second phase of SABT training is the nine-week Criminal
Investigator Training Program (CITP) that is sponsored by the Federal
Law Enforcement Training Center (FLETC). This course, which has
remained unchanged, is comprised of criminal investigators (special
agents) from Treasury Department, Justice Department and other Federal
agencies. The course includes blocks of instruction in criminal law,
criminal court procedures, rules of evidence, defensive tactics, arrest
techniques, weapons familiarization and other courses of common
interest to Federal criminal investigators.
3. The third phase and heart of the redesigned SABT program is the
Special Agent Investigative Techniques (SAIT) course. This 12 week
course has been completely revamped and is presented in a highly
interactive, facilitative adult learning environment. The overall
course presentation has been modeled, to a large degree, after the
internationally acclaimed Royal Canadian Mounted Police (RCMP) recruit
training program.
SAIT students are placed in an office environment with facilitators
(on-the-job instructors (OJI's) for every six to eight students, as
well as a group manager advisor responsible for the overall evaluation
of each student's performance. The students are exposed to over 40
courses that are presented to them in a facilitative mode as they
complete two separate investigations. The courses are presented ``just
in time'' for the students to implement their newly acquired skills in
a problem solving approach to maximize their learning experience and
complete their assignments. During each step in the problem solving
process, students are challenged to critically examine their actions in
light of IRS mission statements, policies, customer needs, and core
values. In addition to the numerous practical exercises, classroom
exercises, and case studies, we have also produced approximately 40
videos which serve to advance the case story line and to visually
depict special agents interacting in the proper manner with witnesses,
third parties and subjects of an investigation.
The overriding goal of this interactive training environment is to
achieve results in line with documented RCMP successes graduating new
agents with an approximate equivalent experience level of two years in
the field. Consequently, the redesigned SABT program will place much
less of a burden upon the field for OJI activities, as field
experiences are duplicated within the NCITA to enhance and reinforce
the learning experiences of its trainees. These more experienced
trainees will be able to work cases with minimal direction and
guidance, rather than having their field OJI lead the new agent through
the investigative process. Under this new model, the OJI will become
more of a mentor than an instructor.
Question. What are its advantages and disadvantages, if any,
compared to past training?
Answer. The primary advantages of the use of the facilitative
problem solving approach to training are threefold:
1. The NCITA will supply to the new field agents decision making/
problem solving skills equivalent to an agent with two years field
experience. The increase of the equivalent experience level of our
trainees is critical to our mission due to the aging of our work force.
We are currently losing more agents to retirement than we can hire and
train to replace them. The experienced agents remaining in the work
force will be hard pressed to accomplish program goals, even without
the additional burden of training a new generation of agents. The prior
SABT program was an instructor focused, OJI intensive process. The
redesigned SABT process is learner focused and will greatly reduce the
demands upon the field to develop our new agents to their full working
level.
2. The facilitative, problem solving approach used in the
redesigned SABT program provides us with a vehicle to teach and
reinforce investigative thinking skills and to critically evaluate
proposed actions in light of IRS mission statements, policies, customer
needs, and core values. On almost a daily basis, trainees will be
challenged to develop an action plan during their problem solving
exercises to accomplish their investigative goals. In each and every
instance, the trainees will be required to critically evaluate their
action plan to be certain that it is consistent with all IRS mission
statements, policies, customer needs, and core values, thereby
reinforcing the investigative thought process once the agents are
placed in the field.
3. Our new program will incorporate not only technical skill
development, but will enhance critical people/behavioral skills, such
as presentation skills, leadership skills, and active listening skills,
etc., as well as instill in each agent the desire to become a life long
learner. This new program extensively uses practical exercises and role
playing. The trainees are required to successfully resolve situations
and circumstances involving people from diverse social, economic, and
cultural backgrounds. With the additional emphasis we place on these
types of skill development, the trainee will return to the field much
better equipped to perform tasks requiring these skills, whether
dealing with peer agents, managers, other IRS Divisions, other
agencies, and most importantly, the general public.
Question. Are there cost savings from reduced relocation costs,
less formal training, or training overhead?
Answer. The redesigned SABT Program does not impact relocation
costs relating to the students trained at the NCITA, nor are training
overhead costs materially affected.
The 22-week redesigned SABT Program includes a one-week
orientation/pre-basic training program, a nine-week CITP course and a
12-week SAIT course. The 21-week prior SABT program included a two week
Tax-CI course, the nine-week CITP course and a nine week SAIT course.
Personnel matters relating to new hires, as well as other
administrative details, certifications and orientation were handled in
the district offices prior to the trainee reporting to the NCITA.
Consequently, the difference in length of the old and new versions of
the SABT course is minimal.
The new program requires the participants to attend 22 consecutive
weeks of training. The previous program included a break between the
CITP and SAIT segments, requiring Government funded round trip
transportation for all participants between the Federal Law Enforcement
Training Center and each participant's post of duty. These mid-course
transportation costs are eliminated in the redesigned program,
resulting in cost savings to the IRS.
The advantages of the redesigned program in sending new agents to
the field with an equivalent experience level of two years on the job
places a significantly lighter burden upon the field for OJI
responsibilities and will result in the new agents becoming productive
in a much shorter period of time. Substantial savings are realized by
minimizing the burden placed upon experienced field personnel for OJI
duties, thereby allowing those experienced agents to concentrate on
direct investigative responsibilities. Additional savings are realized
as our new agents will become productive in a much shorter period of
time.
Question. Are training programs for other employees, such as
revenue agents and revenue officers, also being revamped?
Answer. A team from Corporate Education and the Assistant
Commissioner (Examination) has been formed to review all levels of
basic recruit training for revenue agents and tax auditors. The team
will review the course material for the appropriate use of financial
status audit techniques and for the inclusion of modules that
specifically address the professional treatment of taxpayers.
There have been some improvements in revenue officer training. A
course in ``Interest Based Interviewing Techniques'' is mandatory for
Continuing Professional Education in fiscal year 1998. This course is
the first step in our commitment to delivering Conflict Management to
Collection employees. The course presents the use of conflict
management principles as a method of conducting taxpayer interviews to
enhance taxpayer/revenue officer interactions, reduce the level of
stress, and help to promote a customer service-oriented atmosphere for
employees.
Question. If so, please provide details, including information on
specific subjects or job dimensions that IRS has identified as needing
more emphasis during either classroom or on-the-job training.
Answer. In addition to the ongoing review of basic recruit
training, a separate but related activity is our work on Occupational
Competency Models (OCM's) for revenue agent and tax auditor
occupations. We will be matching competencies identified for successful
performance with existing course material to identify additional
training needs.
A course focusing on the principles of customer service and fair
treatment of taxpayers is being developed during fiscal year 1998. This
course is the beginning of a Public Service curriculum for Collection,
which will contain courses in active listening, interpersonal skills,
etc. We expect that this course will be available for delivery in
fiscal year 1999.
dispute resolution
Dispute Resolution
Every year, IRS must attempt to resolve thousands of disputes with
taxpayers over tax liabilities. Traditionally, IRS has done this
through its Office of Appeals. Resolving disputes through the Office of
Appeals takes a long time and is costly to both IRS and the taxpayer.
Since the early 1990's, IRS has been attempting to implement various
alternative dispute resolution methods, such as early referral and
mediation, to improve the cost-effectiveness of dispute resolution
within IRS and to reduce the burden and cost imposed on taxpayers,
particularly corporations.
Question. For each alternative dispute resolution method used in
fiscal year 1997, please provide data on how often it was used, what
type of taxpayers were involved (e.g., individuals, corporations), and
the results.
Answer. The Appeals organization has a track record of independence
and impartiality.
1. Its mission is to resolve tax controversies without litigation
on a basis that is fair and impartial to both the Government and the
taxpayer.
2. Its organizational placement within IRS ensures separation from
both the enforcement and litigating functions. The National Director of
Appeals reports directly to the Deputy Commissioner and has line
authority over Appeals operations throughout the nation.
3. Its history since formation in 1927 repeatedly shows its
effectiveness in resolving disputes. Most taxpayers who disagree with
adjustments choose to come to Appeals without docketing their case in
the Tax Court. Each year, Appeals reaches agreement on 85 percent to 90
percent of the cases that come before it. For the fiscal year 1997,
Appeals received almost 77,000 cases and disposed of just under 72,000
cases. In comparison, about 1,200 tax cases a year are resolved in the
courts.
Appeals Initiatives to Resolve Disputes (See Attachment 1 at end of
Senator Campbell's questions for a description of each program.)
Early Referral.--The early referral process, including employment
tax, has been used in 54 cases, involving approximately $7.8 billion in
proposed adjustments, and thus far has resulted in approximately $3.6
billion in agreed adjustments.
Mediation.--Sixteen mediation requests have been made, of which
nine were denied because they did not meet the mediation criteria. One
mediation case involving $70 million in disputed adjustments was
successfully resolved. This resulted in $37 million in agreed
adjustments. One case involving approximately $1.9 billion in disputed
adjustments was successfully resolved after the agreement to mediate
was signed, but prior to any mediation session. This resulted in
approximately $1.3 billion in agreed adjustments. Two cases involving
approximately $46 million did not resolve. Three cases involving
approximately $114 million are in process.
Simultaneous Appeals/Competent Authority.--Eleven simultaneous
Appeals/competent authority cases have been completed and one taxpayer
withdrew from the process. There are sixteen other cases in process,
involving over $800 million in proposed adjustments.
Collection Appeals Program (CAP).--For the fiscal year 1997,
Appeals received 1,479 CAP cases and closed out 1,461 cases. Of those
cases closed, Collection's action was fully supported in 1,054 cases,
Collection was partially reversed in 207 cases and fully reversed in
200 cases. It is important to note that a CAP appeal requires that
taxpayers discuss their dispute with the IRS employee's manager to
attempt resolution before coming to Appeals. Most CAP cases are
actually resolved at the management level.
Question. Were there any significant developments/changes in the
use or availability of alternative dispute resolution methods in 1997
and the first half of fiscal year 1998? Last year, for example, IRS
told this Committee that it anticipated expanding mediation to cases or
issues involving at least $1 million in dispute. Has that step been
taken? If no, why not? If yes, what have been the results?
Answer. Bankruptcy Appeals Process.--With the issuance of
Announcement 97-111 on November 6, 1997, Appeals began testing a new
Bankruptcy Appeals dispute resolution program. We anticipate conducting
a review of this program at the end of June 1998. The purpose of this
process is to eliminate litigation in Bankruptcy Court on certain IRS
related issues by providing an administrative forum within Appeals to
settle these disputes. There are numerous benefits to this process. It
provides taxpayers with a no-cost, risk-free opportunity to resolve
disputes. Taxpayers who are not satisfied with the proposed resolution
are free to litigate the matter in Bankruptcy Court. Furthermore, in
all instances where a resolution is reached, this process also provides
benefits to all entities related to this process: the IRS, the
taxpayer's estate, and the Bankruptcy Court. The IRS will not expend
resources incident to litigation, the taxpayer's estate likewise will
not expend such resources and this will increase the estate's value to
creditors, and congestion in Bankruptcy Court calendars will be
reduced.
International Penalties.--Appeals is considering extending the
concept of the early referral procedures contained in Rev. Proc. 96-9
by providing for an expedited appeal of the following penalties: I.R.C.
Sections 6038(b), 6038A(d), 6038B(b) and 6038C(c), which are not
subject to deficiency procedures. This expedited referral procedure
will allow taxpayers an administrative appeal prior to the payment of
the penalty. We expect to publish a Revenue Procedure by June 1998.
Appeals Request For Review.--Appeals is developing a form for
taxpayers to request an administrative appeal, along with a customized
Publication 5 that explains the Appeals process, which taxpayers and
their representatives have told us would facilitate the Appeals
process. We expect to begin testing this form in a Service Center in
May 1998. This form will significantly reduce the time span to resolve
these cases in Appeals and the taxpayer burden in using the Appeals
process.
Mediation.--Mediation is currently limited to Coordinated
Examination Programs (CEP) cases assigned to Appeals Team Chiefs. The
initial one-year mediation test period concluded in October 1996 and
Announcement 97-1 extended the test of the mediation procedure set
forth in Announcement 95-86 for an additional one-year period that
concluded in January 1998. We have recently completed our review of the
mediation procedure and we are considering expanding the mediation
process to include more cases or issues. We expect to publish an
announcement on the new mediation program in April 1998.
Employment Tax.--Announcements 96-13 and 97-52, allow taxpayers
whose returns are being examined to request early referral of one or
more employment tax issue(s) from district compliance functions to
Appeals. The purpose of early referral for employment tax issues is to
resolve them more expeditiously through simultaneous action by the
District and Appeals. These Announcements are part of the IRS' strategy
designed to improve employment tax administration for all taxpayers,
including those who are small business owners. We expect to publish a
Revenue Procedure with the final procedures when the two-year test
concludes in May 1998.
Question. What specific goals and measures--both qualitative and
quantitative--does IRS use to assess whether each of the alternative
methods works? What have these measures shown to date about how well
the various methods meet their goal(s)?
Answer. TRACES: Appeals has initiated a review of Appeals functions
and processes to come up with new, key performance indicators that will
foster continuous improvement and provide improved customer
satisfaction. These key performance indicators are known as ``TRACES''
were developed for: Timely, Responsive, Accurate, Complete Service,
Education, and Sustention Rate. These key factors focus on providing
better products and services by reducing cycle/lapse time, providing
prompt hearings for taxpayers and making settlements that are fair,
impartial, technically and procedurally correct.
Customer Satisfaction Surveys: ADR Programs.--Through the recently
established evaluation programs, Appeals encourages taxpayers using
dispute resolution programs to comment on the procedures. Evaluation is
the key to determining whether Appeals is successfully meeting its
goals. Evaluation can also be used to assess the need for changes in
administering the program and in determining what our customers value.
In 1996, the Office of Management and Budget approved taxpayer customer
satisfaction surveys for the early referral, simultaneous Appeals/
Competent Authority and mediation programs.
The responses to our customer satisfaction surveys reveal that both
the early referral and simultaneous Appeals/competent authority
procedures help taxpayers resolve their cases more quickly than using
the standard procedures. Also, taxpayers responded that they saved
money by using mediation instead of having to litigate the issues.
Appeals ADR initiatives offer prompt and less expensive methods for
taxpayers to resolve their disputes after good faith negotiations have
failed in Appeals or agreement cannot be reached with Compliance. When
any of these programs enable the taxpayer and the IRS to reach
agreement, burdens and costs to both of them are reduced.
Appeals Process.--As part of its on-going evaluation of dispute
resolution programs, the Office of the National Director of Appeals
conducted a Customer Satisfaction Survey in June 1997 to collect
feedback from taxpayers about the Appeals process. Of the 6,800
taxpayers and tax practitioners who were mailed a two-page survey, 43
percent chose to participate in the survey.
The survey was designed to capture information about the taxpayers'
knowledge and understanding of the Appeals process. Key elements of the
survey were the taxpayers' ratings for their level of satisfaction in
nine facets of the Appeals process, including:
--How long it took:
--to get a case to Appeals;
--for Appeals to schedule a conference; and
--to get a case through Appeals
--Correct application of the law to the facts of the case
--Appeals fairness and impartiality in resolving the case.
The survey captured other data relating to how well the Appeals
officer explained the Appeals process and the outcome of the appeal.
Some of the findings are:
--84 percent of respondents would use Appeals again
--70 percent satisfied (completely or somewhat) with Appeals fairness
and impartiality
--70 percent satisfied (completely or somewhat) with the overall
Appeals process.
Future customer surveys.--The IRS announced in IR-98-7 that in a
new series of upcoming surveys, taxpayers who have dealt with the IRS
will be asked to complete questionnaires to rate the service they
received. A private contractor will conduct customer satisfaction
surveys of all IRS functions, beginning in March 1998. In that
announcement, the IRS stated, ``For the first time, we're looking at
specific services through our customers' eyes.'' Appeals has endeavored
to adopt this focus since 1995 with its TRACES measures noted above.
Appeals will use results from these new taxpayer surveys, along with
those from the 1997 survey, to improve the administrative Appeals
process, make sure it is more customer friendly and achieve a high
quality product by striving for continuous improvement and customer
satisfaction.
Collection Appeals Program.--Our goal on CAP cases is to provide an
expedited decision (within 5 days) that is the most appropriate
resolution for the dispute. To measure numbers we track of how many
cases we received and how cases are closed by type of appeal (i.e.
lien, levy, seizure, or termination of installment agreement) and
whether decisions are timely.
We measure quality by CAP caseload reviews. We have completed two
reviews. The first was a 100 percent review of all CAP cases closed
during the first 90 days of the program. The second was done as part of
the Nationwide Appeals Review Program, which reviews selected issues or
types of cases when they are closed. Our program reviews have shown
that generally case decisions are being made appropriately. The numeric
data indicates that CAP is being used and decisions are generally
timely, i.e. within the 5 days.
performance measurement
Question. What progress has been made in developing an overall
balanced measurement process?
Answer. The IRS is in the process of analyzing and redesigning its
entire measurement system from the development of corporate measures to
how the measures are used and interpreted by management and employees.
The redesign effort will consist of two phases. Phase I comprises a
near-term goal to develop a set of practical, interim measures which
are aligned with the IRS' current organization structure and can be
used in fiscal year 1999 to measure IRS district and service center
performance. Phase II of this effort, which will build on the results
of Phase I, will entail the development of a new measurement system
that is equal to the ``best in class'' in private industry and that is
aligned with the IRS' modernized organizational structure.
In late 1997, the IRS established a task force, the New Measures
Task Force (NMTF) to lead the effort of developing a balanced
measurement system. This task force includes IRS executives, managers,
and technical experts, as well as representatives of the National
Treasury Employees Union (NTEU), Treasury, and the Office of Management
and Budget (OMB). The NMTF has outlined an action plan for moving the
IRS from its current measurement system to one with a more balanced
approach and is working to integrate a number of ongoing projects
involving customer and employee satisfaction surveys, exam and
collection quality measurement systems, and other measures refinement
activities into its overall approach. The IRS is in the process of
selecting a contractor to work with the NMTF in developing the balanced
set of measures.
Question. Are the five measures cited by Internal Audit still being
used as measures? If so, how?
Answer. The five measures cited by Internal Audit were: (1) dollars
collected, (2) dollars collected per full time equivalent, (3) total
dollars collected as a percentage of current year receivables, (4)
average cycles per Taxpayer Delinquent Account (TDA)/Taxpayer
Delinquent Investigation (TDI) disposition, and (5) TDA/TDI average
hours per entity disposition. Of these measures, measure No. 1, dollars
collected, will continue to be tracked at the national level, because
it is a budgetary measure. Measures No. 2, 3 & 5 have been dropped from
the Annual Performance Plan and will not be used for purposes of
business review evaluations. Measure No. 4, average cycles per Taxpayer
Delinquent Account (TDA)/Taxpayer Delinquent Investigation (TDI)
disposition, is a Budget level measure, so results will be used for
reporting purposes, but the measure will not be used in business review
evaluations. Data for these measures is still available on our
Management Information Systems, but a district will only be able to
access information about its own results and the composite Servicewide
results.
Question. In light of recent testimony on over-zealous collection
activity and IRS reliance on enforcement statistics, how does IRS plan
to meet this mandate in the future? (mandate refers to requirements of
the Government Performance and Results Act--GPRA)
Answer. These measures are all being reviewed in light of our goal
of transforming the IRS from an internally focused organization to one
which views itself from the taxpayer perspective and in light of the
elimination of use of all enforcement statistics for measuring
organizational performance. We have a task force working on this
problem, and we expect to engage expert outside consultants to assist
in this task. We expect to have interim results to use for measuring
performance during fiscal year 1999. These measures will build on some
of the measures included in the budget submission.
Question. What plans, if any, does IRS have to improve the
reliability of this performance measure?
Answer. We do not have any plans currently.
Question. What are IRS' plans to ensure that its strategic plan
contains results oriented measures that can be used to assess how well
its strategic goals are being met for the Customer Service and
Compliance business lines?
Answer. The IRS recognizes that many of its existing measures are
output-oriented. The New Measures Task Force will work with private
sector experts to address that imbalance and identify results-oriented
measures for all its business lines. These measures will be included in
the IRS' strategic plan and will be used to monitor success in meeting
strategic goals.
other
Question. Given the additional resources provided in fiscal year
1998 for the Earned Income Credit initiative and the President's budget
request for fiscal year 1999, how, if at all, has IRS' long-range
outlook changed?
Answer. Out-year budget estimates included in the fiscal year 1998
budget request were based on OMB assumptions that agencies would be
required to absorb inflationary increases (including annual pay
raises). Given the labor-intensive nature of the IRS' budget and the
compelling need for technology investments (e.g., Century Date Change)
long-range resource forecasts suggested steadily declining FTE levels.
The fiscal year 1998 budget, enacted by the Congress, provided the
first ``real dollar'' increases to the IRS' budget since fiscal year
1995. While FTE levels during that three-year period had fallen by more
than 10 percent (from 112,000 to fewer than 102,000), the fiscal year
1998 budget allowed IRS to stabilize its work force at nearly 101,000
FTE. The IRS' fiscal year 1999 request includes 1,462 additional FTE--
primarily for enhanced customer service in connection with the National
Performance Review. The agency's renewed commitment to customer service
and organizational modernization is based--in part--on maintaining
these FTE levels during the next five to seven years. It should be
noted that although the Earned Income Tax Credit initiative is designed
to combat noncompliance and reduce overclaim rates, most of the FTE and
dollar investments are in customer service staffing in the service
centers (e.g., correspondence examinations and Questionable Refund
Detection Teams), education and outreach, and compliance research--not
traditional enforcement programs that have been most directly affected
by prior year budget cuts.
Question. Is it not fair to say that any anticipated decline in
enforcement programs is due not so much to inadequate funding but
rather to a conscious decision to emphasize customer service?
Answer. The loss of the fiscal year 1995 Compliance Initiative
funding and the recent emphasis on customer service have contributed to
a long-term reduction in traditional, face-to-face enforcement
programs. Prior year reductions in core Compliance programs such as
Examination, Criminal Investigation and Collection were accomplished
largely through attrition, early-out retirements and buyouts. Losses in
key employment categories (e.g., revenue agents, special agents and
revenue officers) in a tight labor market make recruitment of new hires
difficult and technical training expensive. Beyond FTE cuts,
disproportionate reductions to support costs such as training, supplies
and automation have strained managers' ability to ``do more with
less.'' The fiscal year 1999 budget request would partially restore
prior year cuts and help stabilize funding for these critical
activities.
Question. How many employees are in these so called temporary
customer service type jobs? What type of work are they doing? What is
the likelihood that IRS will continue to keep these employees in their
current positions?
Answer. There is a total of 114 Customer Service employees in
temporary positions. They range in grade from GS-4 to GS-13 and include
employees in Walk-in offices, the automated collection system, toll
free telephones, in addition to clerical and analyst positions. IRS
plans to evaluate the sites in April 1999 to determine the next step to
take regarding these positions.
Question. In March 1997, GAO reported that IRS did not have well-
defined procedures for requesting and processing innocent spouse claims
(GAO/GGD-97-34, Mar. 12, 1997). GAO recommended that IRS (1) develop
new or modify existing publications to better inform and educate
taxpayers about the availability of and criteria for innocent spouse
relief, (2) develop a tax form and procedures for requesting and either
granting or denying such relief, (3) provide additional guidance to IRS
employees to better insure consistency in processing innocent spouse
cases, (4) establish a cost-effective process for monitoring
consistency, and (5) update regulations to reflect current
requirements. What steps has IRS taken to implement each of GAO's
recommendations?
Answer. (1) New Publication 971, Innocent Spouse Relief, is under
development and we expect to make it available early in April 1998. (2)
New Form 8857, Request for Innocent Spouse Relief, is in the final
stages of review and we expect to make it available for distribution
early in April 1998. However, we expect the form to be available on the
IRS Web page by the end of March. (3) Pipeline processing instructions
have been updated to ensure proper processing of Form 8857. Cincinnati
Service Center will be the central location to process Form 8857.
Receipt and Control, Code and Edit, ERS, and Rejects will route Form
8857 to the Examination function for review. In addition to pipeline
processing, Files instructions have been completed and updated
accordingly.
Question. What has IRS done to implement each of the
recommendations in the cited GAO report?
Answer. The IRS currently has a program in place to reconcile all
Form 8610's and supporting documents, i.e., Form 8609's and Carryover
Allocation Contracts. All state agencies have been reconciled for 1995
and 1996. This process will be improved with electronic filing, which
we are currently testing.
The revised Form 8610 was made available to the public January 1,
1998. However, Form 8609 has not been revised to date since a
``Carryover Allocation'' document will also require a regulation
change. This has been discussed with Chief Counsel. An effective date
of January 1, 1999 is expected.
The IRS is generating a semiannual extract report which provides
information on taxpayers claiming the Low Income Housing Credit on
business tax returns. This information is run against the Low Income
Housing Database of Forms 8609's filed by the states which give the
amount of the credit allocated.
Form 8823 (Low Income Housing Credit Agencies' Report of
Noncompliance) was revised and made available to the public effective
January 1, 1998. It clarifies the types of noncompliance State Housing
Agencies must report to the IRS.
We continue to identify projects with audit potential using
classification specialists to evaluate Forms 8609 and 8823 against
filed returns. In conjunction with State Housing Agencies, we are
expanding a selection process which focuses on the developers of
projects.
Question. What is the status of IRS' actions on NARA's
recommendations? Has the backlog of uninventoried records been removed?
Answer. In his letter dated December 1, 1997, Michael Miller,
Director of the Records Management Program at NARA, advised David A.
Mader, Chief Management and Administration, how pleased NARA is with
the progress IRS has made in implementing their recommendations. Mr.
Miller also stated NARA agrees that IRS has successfully implemented
all but one of the 58 recommendations. The one outstanding
recommendation deals with records created by the Philadelphia Service
Center during the 1985 filing season; NARA urged IRS to make another
attempt to locate these records. As a result, representatives of the
Service Center and the records management staff conducted an in-depth
inventory, and recently uncovered approximately 2 cubic feet of
records. This information was reported in our final status report to
NARA on March 31, 1998. Closure of this last recommendation will mean
that all 58 were implemented within 2 years of the submission of our
initial action plan on March 6, 1996. NARA has stated that this is a
record that no other agency has achieved.
Our work has resulted in the submission of Records Control
Schedules for all uninventoried backlogs. Each schedule identified the
unique management and policy records of the organization. Several major
schedules are still awaiting action by NARA; however, others have been
approved and are being implemented, i.e., schedules covering records of
the former Historian; former Commissioners, as well as the current
Commissioner; Chief Counsel; Information Systems; Communications; and
Legislative Affairs.
Question. It is my understanding that the IRS is losing the
potential to collect hundreds of millions of dollars in overdue taxes
due to problems in determining which accounts are collectible and which
are not. What action is the IRS taking to develop information on
written-off accounts to determine whether cost-effective collection
measures can be developed and applied?
Answer. The Inventory Delivery System, a system under development,
will centralize collection case processing and use automated methods to
evaluate delinquent accounts for collectibility so that the most
productive accounts receive priority attention. The system has three
releases planned. The first release containing Financial Analysis
Profile and basic core functions to support case assignments and data
base updates is scheduled for pilot in February 1999. The second
release with Telephone Number Research is scheduled for August 1999
with a third release containing Address Research in 2000.
Question. What is the status of IRS efforts funded through the new
Earned Income Credit Compliance Account?
Answer. This year, the IRS has taken a number of proactive efforts
as part of the Earned Income Credit Initiative, including:
--Sent notices to over 6 million EITC recipients informing them of
the advance EIC payment option.
--Sent an informational letter to the top 100 employers most likely
to employ taxpayers who would be eligible for the credit.
--Sent notices to approximately 2.5 million taxpayers who did not
claim the credit but appear eligible for the credit.
--We are providing toll-free assistance for EITC questions 24 hours
per day 7 days a week.
--We expanded outreach efforts to service EITC eligible low income
and elderly taxpayers by providing tax information and return
preparation during the last three Saturdays beginning March 28.
--We designated March 28 as EITC Awareness Day, where walk-in sites
provided taxpayers with up-to-date information regarding the
new tax laws and the penalties associated with intentional
noncompliance, and assisted EITC eligible taxpayers with return
preparation.
--Informational products such as stuffers, posters, employee and
employer brochures were provided to local offices to use in
partnering efforts with groups and agencies.
--As of March 19, 1998 we have issued 47,730 EIC Math Error Notices
for Invalid/Missing Social Security Numbers.
[attachment 1]
Description of Appeals ADR Procedures
Early Referral
Early referral procedures, contained in Revenue Procedure 96-9,
expedite Appeals consideration of key issues that are ``unagreed'' (the
taxpayer does not agree with the proposed examination adjustment).
Appeals officers begin reviewing the unagreed issue while the
examination of other issues continues, allowing for the possible
settlement of key unagreed issues, and possibly closing the entire case
in the Examination function, reducing costs for the taxpayer and the
IRS.
Early Referral--Employment Tax
Although the early referral program was initially limited to
Coordinated Examination Program cases, in Announcement 96-13 the IRS
extended the early referral provisions to employment tax issues on a
one-year test basis. Announcement 97-52 extends the test of the
procedures for early referral of employment tax issues for an
additional one-year period beginning on May 27, 1997.
IRS examiners now consider the taxpayer's eligibility for
employment tax relief under section 530 of the Revenue Act of 1978
before initiating any examination of the relationship between a
business and a worker. Taxpayers that disagree with the District's
determination regarding the application of section 530 have the option
of immediately requesting early referral of the issue from the District
to Appeals.
Effective August 5, 1997, section 1454 of the Taxpayer Relief Act
of 1997 added a new section 7436 to the Internal Revenue Code. Section
7436, as amended, provides new judicial review rights concerning
certain employment tax determinations. Generally, Code section 7436
applies to employment tax cases in which the IRS has determined that at
least one worker should be reclassified as an employee and/or that the
taxpayer is not entitled to relief under section 530 of the Revenue Act
of 1978. The law requires that any employment tax that depends upon
such determinations cannot be assessed unless the taxpayer has been
given an opportunity to file a petition for Tax Court review of the
IRS' determinations on those two issues. If, during the course of the
employment tax examination, the taxpayer and Examination are unable to
agree on worker classification and/or section 530 issues, the taxpayer
will be strongly encouraged to request early referral of these unagreed
issues from Examination to Appeals. The enactment of I.R.C. Sec. 7436
does not change the early referral procedures.
Mediation
The IRS, in Announcement 97-1, extended the test of the mediation
procedure set forth in Announcement 95-86. Mediation is used later in
the administrative process, after good faith negotiations have failed
to produce resolution. Factual issues, such as valuation and transfer
pricing issues, are appropriate for mediation. Appeals is considering
expanding the mediation program. Cases over $10 million in dispute that
currently qualify for mediation account for only 1 percent of the
inventory in Appeals, but 88 percent of the dollars in dispute. Cases
over $1 million in dispute are 4 percent of the inventory, but 95
percent of the dollars. Mediation is a negotiation between the parties
assisted by an objective and neutral third party mediator who has no
authority to impose a decision. Mediators can come from Appeals or
outside the IRS. Co-mediators can also be used.
Appeals process.--The mediation procedure in Appeals is
specifically designed to be used at the end of the administrative
process, as a final attempt to resolve a dispute before litigation.
Appeals has built a strong record of success through our standard
techniques of dispute review and conferencing. Most tax controversies
are resolved through the time-tested successful negotiation process of
the Appeals conference. Very few cases are litigated--about 1,200 in
any given year. The vast majority of cases are successfully resolved
without the need for any additional resources. While there are
relatively few taxpayers using the ADR initiatives, these cases involve
a significant amount of the dollars in Appeals inventory. As a result,
Appeals ADR processes initially focused on the cases that involve the
majority of disputed dollars coming into Appeals.
Relationship to early referral.--Taxpayers presently can use the
mediation procedure in conjunction with early referral. By combining
the two procedures, taxpayers may be able to expedite their resolution.
After early referral negotiations are unsuccessful, taxpayers are able
to then request mediation if the early referral issue satisfies the
mediation criteria. However, early referral currently has a broader
application and is available for all CEP cases; by expanding mediation,
all early referral cases could be covered.
Simultaneous Appeals/Competent Authority
Section 8 of Revenue Procedure 96-13 allows a taxpayer who has
filed a request for competent authority assistance to also request
simultaneous Appeals consideration of the competent authority issue.
The procedure encourages taxpayers to request competent authority
assistance and the participation of Appeals while a case is under
Examination jurisdiction.
Collection Appeals Program
The Collection Appeals Program (CAP) started in April 1996 and
allows taxpayers to appeal lien, levy or seizure actions proposed by or
made by the IRS. Before this time, the only opportunity a taxpayer had
to appeal these actions was through the Collection manager and up
through Collection's chain of command. This is the first time in the
history of U.S. taxation that an appeal on these Collection actions
through an independent organization such as Appeals was possible. In
January 1997, appeals of installment agreements proposed for
termination were added to the program. This installment agreement
appeal right was provided for in the Taxpayer Bill of Rights 2 and the
IRS decided to add it to CAP.
Any taxpayer may request an appeal and we expect to reach a
decision in 5 days. This ensures taxpayers a quick decision and that
collection activities will not be delayed unnecessarily.
______
Questions Submitted by Senator Shelby
audits of southerners
Question. One explanation the IRS has given in its defense for
auditing a disproportionate number of southerners, is that a
disproportionate number of people from these states file for the Earned
Income Tax Credit which has been targeted because it is known to be an
area where compliance is a problem. Can you tell me if this correlation
can fully explain why so many of my constituents were targeted?
Answer. There appears to be a large number of workers earning less
than $29,290 and claiming EITC qualifying children in the southern
states. Historically, southern states have had the largest percentage
of returns claiming EITC. Where there is a larger population of tax
return filers claiming EITC, there is a high potential for abusive and
erroneous EITC claims. The returns we focus on have the same
characteristics nationwide, but the fall-out is greater in the South.
Question. In the fiscal year 1999 budget request, the IRS is asking
for $143 million and 2,184 FTE positions for the EITC compliance
initiative. Can you please submit a formal plan to the subcommittee
outlining the program's goals and the initiatives that will be used to
accomplish them?
Answer. A formal plan for fiscal year 1999 will be completed and
submitted to the subcommittee by the end of May, 1998.
Question. In the plan please explain in detail what tasks these FTE
positions will perform and how specifically the appropriated funds will
be allocated with the program.
Answer. A formal plan for fiscal year 1999 will be completed and
submitted to the subcommittee by the end of May, 1998.
financial management
Question. On several occasions, the GAO has found that it could not
conduct reliable audits of the IRS because the agency's financial
statements were in such disarray. I have said in the past and continue
to believe now that it is ironic, to say the least, that the IRS
requires more of taxpayers than it does of itself. The IRS requires
taxpayers to keep receipts for several years to justify their
deductions while the IRS cannot reliably account for billions of
dollars worth of tax revenues. Having said that, in a report to
Congress provided by the GAO in December on the financial audit for the
fiscal year 1996 custodial financial statements there is a table that
lists recommendations that GAO has made in the past and the degree of
progress that has been made. Unfortunately, the body of the report and
the table in Appendix 1 provide very little detail as to the response
of the IRS to these recommendations. Can you have your staff provide
the subcommittee with detailed and concise written explanation as to
what specifically the agency has done thus far in order to implement
the GAO recommendations?
Answer. In response to the statement that ``the GAO has found that
it could not conduct reliable audits of the IRS because the agency's
financial statements were in such disarray,'' the IRS is pleased to
report that on February 26, 1998, the GAO has given an unqualified--or
``clean''--opinion on the reliability of the IRS' fiscal year 1997
Custodial Financial Statements. The statements audited by GAO were IRS
reports on taxes collected and refunds paid during fiscal year 1997.
GAO also can attest to and has assured Congress and the American people
that our reports on $1.6 trillion in revenue collected and $28 billion
in accounts receivable are reliable. This GAO opinion means it could
reconcile the total revenue reported to the total taxpayer account
records IRS maintains, substantiate the amounts for various types of
taxes collected and determine that accounts receivable estimates were
reliable.
While we recognize that the IRS needs additional work to assure
that its financial house is in order, we believe this February, 1998
GAO Report is a significant step in this right direction.
In response to the question--the GAO has made 59 recommendations
through their financial statement audits for the last six fiscal years,
which have improved financial management at the IRS. The attached IRS
detailed action plan, developed in cooperation with GAO, addresses
corrective actions and tracks the progress toward correcting
deficiencies and implementing GAO recommendations. Of the 59
recommendations, 51 have been closed. Of the remaining eight
recommendations, IRS and GAO have mutually agreed that no action was
required for one, and we anticipate closure of the remaining seven (six
by September 30, 1998, and one by November 1, 1998). The IRS is
committed to working with GAO to resolve these recommendations and
believes that through mutual cooperation and effort this goal will be
achieved.
taxpayer service
Question. One of the reoccurring problems that I hear about from my
constituents is that when they call the IRS they often cannot get
through. Once they do, they are transferred around multiple times until
they find the ``right'' person. Then after getting the run-around, they
often receive erroneous information from IRS officials. Under current
law, taxpayers can only be relieved of responsibility of bad advice
from the IRS when they have received it in writing. In other words,
there has to be a paper trail. I know you have outlined some of your
plans to deal with this problem, but do you think it would be
reasonable to have the IRS provide advice in writing to taxpayers when
requested so we can avoid these kinds of problems?
Answer. Taxpayers can currently send their questions in writing to
the IRS and request and receive a response in writing. The IRS will
also respond in writing when a taxpayer calls for assistance and
requests a written response. Section 6404 (f) provides for abatement of
penalties and additions to tax that result from erroneous written
advice by the Service. However, in order to qualify for relief, both
the request for advice from the taxpayer and the IRS' response must be
in writing. Requiring that both the request and the response be in
writing allows a proper evaluation of whether the taxpayer provided
sufficient information on which correct advice could have been based.
Most taxpayers requesting tax assistance call the IRS rather than
write, and this is the most effective way for the taxpayers to get
information and for the IRS to provide it. Based on the volume of
individuals calling the IRS for tax assistance, it would require
substantial resources to have taxpayers ask all their questions in
writing and have the IRS respond in writing.
employee disciplinary procedures
Question. In the summary of the IRS fiscal year 1999 budget request
there is a section that outlines the disciplinary action which resulted
from unauthorized accesses of taxpayer files by IRS employees. It
indicates that ``161 employees were removed/separated from the IRS.''
Does this mean that they were fired and are in no way, shape, or form
working for the American Taxpayer any more?
Answer. Employees who are accused of committing an unauthorized
access are accorded due process rights prior to being removed. An
employee can resign without prejudice at any time during an
investigation as long as the departure occurs prior to issuance of
proposed disciplinary action. If eligible, the employee may retire.
Such an employee could be hired by another Federal agency and IRS would
not know about it. If they resign or retire after notification of a
proposed action, a record is placed in their Official Personnel Folder
(OPF) and is available to any prospective government employer.
Similarly, a removal is documented in the OPF. It is unlikely another
agency would choose to hire such a person. IRS would not rehire anyone
for whom an investigation had been opened and it appeared that the
charges would be substantiated.
Question. Were they given incentives to leave?
Answer. The IRS Buyout program specifically excluded paying
incentives to anyone for whom a proposed disciplinary action had been
initiated. If someone was under investigation but the case had not
reached a point where misconduct was substantiated, then it was
possible for a buyout to have been paid.
Question. One taxpayer that my staff has worked closely with
reported that an IRS official told her to ``get a real job'' in order
to help pay off her husband's tax liability. This sort of flippancy is
obviously uncalled for and very inappropriate. Many financial
institutions monitor incoming phone calls to ensure that customers are
being treated politely by customer service personnel when they call in.
Does the IRS have any similar system in place to monitor the conduct of
its employees?
Answer. Yes. In addition to a nationally managed Quality
Measurement Program, IRS managers evaluate their employees through
telephone monitoring to ensure that our customers are treated in a
courteous, professional manner as well as to ensure that the
information we provide is complete and accurate. The Customer Service
Organization redesigned the Critical Job Elements (CJE) and Standards
for the Customer Service Representatives. These are used to evaluate
Customer Service Representative performance and will be implemented
nationally on May 1, 1998. The redesigned CJE's reflect a strong
customer focus. The most important job element is Customer Service.
When managers evaluate their employees on this element they consider
specific standards including Customer Focus, Interpersonal Sensitivity,
Oral Communication and Listening, and Influencing and Negotiating. The
results of the monitoring are documented and shared with the employees
and are used in the Performance Appraisal Process.
We also agree that a comment like the one described in your
question is completely unacceptable. We believe the implementation of
our new performance standards for Customer Service Representatives will
help assure such comments are not made.
______
Questions Submitted by Senator Kohl
general
Question. The IRS is setting up Special Disciplinary Panels to
provide objective assessments regarding allegations of taxpayer abuse.
The panel will have authority to impose sanctions against employees
when warranted. These sanctions could lead to dismissal. Are you
proposing legislation to provide these executives outside the Federal
Government with the authority to fire a Federal employee?
Answer. The Special Review Panel consists of executives from
Customs, IRS, and Treasury. The panel is receiving assistance from a
small staff of IRS and Treasury employees representing Counsel and
management, and will have IRS technical experts available to provide
guidance or clarification as needed. Adverse or disciplinary actions,
if warranted, will be decided by the Deputy Assistant Secretary of
Treasury (Human Resources). No legislation is currently proposed to
delegate authority for these types of personnel actions.
Question. Are the Taxpayer Advocate Panels and Problem Solving
Forums working together to share information to develop a unified
approach to deciding how to work with Taxpayers?
Answer. Yes. The Taxpayer Advocates are now responsible for the
Problem Solving Day program, including assuring that cases are
completely worked, that case data are analyzed, and systemic problems
and possible solutions are identified. In addition, in the future when
Citizen Advocacy Panels become operational, the Taxpayer Advocates will
be responsible for integrating data flowing from the panels into their
advocacy efforts and assuring the inclusion of such data where
appropriate in the Taxpayer Advocate's report to the Congress.
Question. Are the groups working with the Special Disciplinary
Panels? And, what about the contractor that is putting together the
plan to restructure the IRS along customer service lines?
Answer. The special disciplinary panel, which includes individuals
from outside the IRS, was established to provide fairness, objectivity,
and consistency in reviewing the findings of Inspection reports,
recommending corrective actions and appropriate administrative actions.
As an independent panel, it will not be working with the Taxpayer
Advocate Panels (officially known as the Citizen Advocacy Panels),
individuals working on Problem Solving Days, or the contractor that is
conducting the validation study of the modernization concept. However,
any lessons learned from the work of the disciplinary panels will be
shared with the Taxpayer Advocate, the CAP's, and the contractor.
electronic filing
Question. I know the IRS agrees that by the year 2007 no more than
20 percent of all returns should be filed on paper. Has the IRS
estimated the number of returns that could be filed electronically with
existing equipment?
Answer. As would be required by the pending IRS reform legislation,
the IRS is currently in the process of developing a Strategic Plan for
Electronic Tax Administration which is designed to eliminate barriers,
provide incentives and use competitive market forces to make
significant progress towards the overriding goal that 80 percent of all
tax and information returns be filed electronically by 2007. As part of
this effort, the IRS will be clearly articulating the strategic
objectives and business goals for 2007 that it is proposing for
Electronic Tax Administration.
Furthermore, the IRS believes that it has sufficient capacity to
process the projected electronic filing volumes. However, as part of
its strategic planning process for Electronic Tax Administration, the
IRS will be re-assessing its current technical infrastructure to ensure
that it is positioned to handle the expected demands of the future. Not
only does the IRS expect a significant increase in the number of
Electronic Return Originators who transmit returns for taxpayers, but
it also envisions developing additional products and services which
will enable individual taxpayers and businesses to transact and
communicate directly with the IRS.
Question. What percentage of all taxes filed are filed
electronically?
Answer. The following chart provides the projected volumes for
1998.
PROJECTIONS FOR 1998 \1\
------------------------------------------------------------------------
Percent
Form Total volume Total ETA of total
------------------------------------------------------------------------
1040......................... 123,950,600 \2\ 20,979,700 17
941.......................... 24,109,600 3,521,000 15
1041......................... 3,517,800 1,032,100 29
1065......................... 1,745,800 .............. .........
5500......................... 1,215,700 14,400 1
------------------------------------------------------------------------
\1\ Source of data: Document 6194, Calendar Year Return Projections for
Districts & Regions (Rev. 1-98) except for Form 941 Total ETA volume
which includes the Form 941 mag tape volume.
\2\ Includes TeleFile returns.
Question. I know we have discussed this, but could you tell me once
again what the estimated savings are from filing electronically?
Answer. A study was recently initiated by the IRS to better
understand the cost tradeoffs between electronic and paper filings
which will involve further analysis of the fixed and variable
components of these costs at various points in the electronic/paper
filing mix. Until this study is completed, we do not have a definitive
answer to this question. However, at this point, we can get some idea
of this by looking at certain known costs for fiscal year 1996 for the
Form 1040 family of returns and making preliminary judgments.
In fiscal year 1996 the cost per return for electronically filed
Form 1040 family of returns was $4.76, while the cost for paper filings
was $4.49. Capital investments obligated in fiscal year 1996 are
included in full. Capital investments obligated prior to fiscal year
1996 are not included in the costing process. Costs incurred upstream
of the data capture processing (e.g. design, printing, and distribution
of tax forms and instructions) and downstream of data capture (e.g.,
archiving and retrieval of tax returns, compliance activities) are not
included. The small differentiation in cost between paper versus
electronic processing is encouraging, as electronic filing expenses are
amortized across 15 million Form 1040 family of returns versus the 95
million for paper Form 1040 family of returns. Also, it is clear that
much of the paper filing costs in fiscal year 1996 are related to
labor, which results in high variable costs, while most of the
electronic filing costs were fixed costs. Also, there may be other non-
financial reasons (such as reduced taxpayer burden) that would compel
an aggressive pursuit of electronic returns.
If this data holds up in our study, this means that as electronic
returns increase we will have substantial opportunity for savings in
our variable (labor) costs. However, this data is preliminary. We do
not yet know whether any additional fixed cost investments will be
necessary to support increased electronic filing. It seems clear though
that the cost differences in variable costs favor increased electronic
filing, and will result in labor savings.
Question. Can the IRS make any additional incremental changes or
investments that would increase the electronic filing such as
leveraging the existing Third Party filing program?
Answer. Yes. The IRS has a number of initiatives underway for
leveraging the existing Third Party filing program. To begin with, the
IRS recognizes that it needs to do a better job of informing and
educating taxpayers and practitioners about the benefits of electronic
filing and plans to build on its 1998 Filing Season Public Service
Campaign which was developed in conjunction with its advertising
agency, Emmerling Post. This year's campaign, which introduced a new
name and logo, IRS e-file, promoted the use of electronic filing
options with primary emphasis on practitioner electronic filing. This
year's campaign also included an evaluation component consisting of
third party preparer surveys, an attitude and awareness survey among
taxpayers, and an analysis of paid media tests. In addition, a
quantitative market research survey was conducted by Russell Marketing
Research, Inc. from March 13, 1998 through March 27, 1998. The final
report which is due in May will provide demographic and psychographic
data that will assist IRS in targeting taxpayers within markets more
efficiently. Furthermore, the IRS recognizes that tax practitioners
authorized to electronically file tax returns to the IRS (Electronic
Return Originators) must be recognized, managed and motivated as ETA
product and service distributors. Much as the private sector employs
store front operations (whether independent, franchise or corporate
owned), the IRS depends upon tax practitioners to promote electronic
filing and payment to taxpayers. In support of this vital channel, the
IRS will seek to support ERO's with national advertising, promotional
kits, education and training, secure communications, management
information systems and various product and service incentives
available depending upon an ERO's success in marketing Electronic Tax
Administration products and services.
Question. $2.5 million is requested to expand electronic filing
including electronic taxpayer ``authentication'' that eliminates the
need for them to issue a separate written document. Where are you in
terms of providing electronic authentication?
Answer. Electronic Tax Administration prepared a Draft IRS
Electronic Authentication Principles and Strategy document in late
January, 1998. The document will be used as a starting point to develop
and publish an authentication policy. The policy will be subject to
public review and the Internal Revenue Manual procedure before becoming
an official IRS policy.
The intent of the policy will be to establish a frame work for the
selection, implementation, and use of alternative methods of signature.
A strategy and tactical plan will be developed to support the
electronic authentication policy.
For 1999, the IRS will work toward an authentication pilot(s) as a
means of increasing electronically filed returns. The pilot will use an
alternative method of signature to replace the paper Form 8453. In
addition, a waiver will be requested to eliminate the need for
submission of paper W-2, W-2G, and 1099R attachments by pilot
participants.
Our preference is to accept private sector proposals through ETA's
Request for Proposal (RFP), which will require minimal IRS involvement
for the 1999 authentication pilots. However, as a parallel activity, we
are developing a Request for Information Services for an IRS-built
pilot to be used in the event that no acceptable proposals are received
through the RFP.
In addition, the Office of Chief Counsel is analyzing the paper
attachments which are currently required by statute and regulations.
Chief Counsel's analysis will identify those attachments which may be
received electronically rather than as a paper attachment. Based on the
analysis, Electronic Tax Administration will determine, from a business
perspective, how IRS e-file will be expanded to include attachments
identified by Chief Counsel. For example, this expansion could be done
through additional programming or through a request to waive the
requirement to send the attachment.
Question. Does the IRS have the systems in place to continue
electronic communication with the taxpayer. How would you ensure the
system provides sufficient privacy?
Answer. The IRS has been answering general tax law questions
submitted over the Internet since 1996. These questions submitted over
the Internet are held by a Fedworld server until downloaded into an E-
mail processing system for review and response. Currently, the
questions must be downloaded one at a time. Within the processing
system, the answer is entered into a response box and sent (with the
original question) back to Fedworld to be sent to the E-mail address
provided by the customer. The IRS employee must have Internet access
and a login and password to have access to the questions.
Beginning in March, 1998, questions will be automatically
downloaded (every 15 minutes) to a server that is within the ``Treasury
firewall''. When the questions are answered, the server will
reformulate the response into an E-mail to be sent to the customer.
The IRS is not currently accepting specific tax account questions
through the Internet. Customers are told on the site that we will not
answer such questions and they should not provide personal identifying
information.
Question. IRS' date for preparing an electronic commerce strategy
has slipped several times. When can we expect to see a final product
and what factors contributed to delays?
Answer. As would be required by the pending IRS reform legislation,
the IRS is developing a Strategic Plan for Electronic Tax
Administration. This effort is headed by Bob Barr, the new Assistant
Commissioner for Electronic Tax Administration, who joined the IRS last
fall and who has made the development of the strategic plan one of his
top priorities. A draft version of the strategic plan is expected to be
made available for public comment later this spring.
Ownership and accountability are two key factors which affected
completing the strategy. In the past, the Administration, Congress and
other external stakeholders have been frustrated by the lack of a focal
point for Electronic Tax Administration activities within the IRS. Last
year, the IRS took an important step toward clarifying the
responsibilities for Electronic Tax Administration by establishing a
new organization headed by an Assistant Commissioner devoted
exclusively to the management of existing and planned programs.
earned income tax credit
Question. Given that there are already high error rates in filing
the EITC--half of which are honest mistakes--have you considered a new
communications effort to ensure that these individuals are made aware
of their eligibility for the EITC and that they file correctly for it?
Answer. The IRS has taken a number of proactive efforts to inform
and educate taxpayers about the Earned Income Credit. These efforts
include:
--Sending notices to over 6 million EITC recipients informing them of
the advance EIC payment option;
--Sending an informational letter to each of the top 100 employers
most likely to employ taxpayers who would be eligible for the
credit; Sending notices to the approximately 2.5 million
taxpayers who did not claim the credit but appear eligible for
the credit;
--Providing toll-free assistance for EITC questions 24 hours per day,
seven days a week;
--Expanding outreach efforts to service EITC eligible low income and
elderly taxpayers by providing tax information and return
preparation during the last three Saturdays of the filing
season beginning March 28, 1998;
--Designating March 28, 1998 as EITC Awareness Day, where walk-in
sites provided taxpayers with up-to-date information regarding
the new tax laws and the penalties associated with intentional
noncompliance, and assisted EITC eligible taxpayers with return
preparation; and
--Providing informational products such as stuffers, posters,
employee and employer brochures to local offices to use in
partnering efforts with groups and agencies.
Question. GAO's review of the IRS audit techniques has determined
that the IRS is focusing its resources on audits of taxpayers claiming
the EITC? Why?
Answer. District Examination is focusing a very small part of its
resources on EITC returns. As of February 20, 1998, there were
1,506,173 returns in inventory. Of these returns, 38,207 were
identified as having EITC as an audit issue. This represents less than
three percent of returns. Resources are focused on EITC because of the
high degree of concern over error rates in EITC filing.
Question. What is the IRS' return on investment in these cases?
Answer. The IRS has not conducted a study on return on investment
for EITC cases. Resources are devoted to EITC because it is a
recognized area of noncompliance.
Question. Has the IRS conducted a study to determine that these
types of cases provide the greatest return on investment?
Answer. No. However, return on investment is not the sole criterion
used to select returns. A system based solely on return on investment
would omit issues such as the indirect impact of examining returns and
insuring that all classes of returns are subject to examination.
information systems
Question. Does the language on Page 9 of your statement:
``Additional sub-releases of the blueprint will be very carefully
planned and coordinated with modernization of the business processes
and organization before they are allowed to proceed'' indicate that
there may be a change in the modernization plan for totally integrated
and secured data bases and infrastructure as detailed in the
modernization blueprint?
Answer. No. As defined in the Commissioner's Statement before the
Senate Finance Committee on January 28, 1998, the Organizational
Modernization is based on five key elements, as follows:
--revamped IRS business practices that will focus on understanding,
solving and preventing taxpayer problems;
--organizational structure built around taxpayer needs;
--management roles with clear responsibility;
--balanced measures of performance; and
--new technology.
The new CIO organization and the recently issued Modernization
Blueprint and the Request for Proposals for a Prime Systems Integration
Services Contractor, provide an outstanding and professional basis for
managing the evolution of our technology. The revamped business
practices and Organizational Modernization will provide a sound basis
for completing and implementing the modernized systems envisioned in
the Modernization Blueprint including the mainframe centric solution
and centralized databases, and will be tied to the development of lower
level requirements for design and development through the PRIME
contractor.
Question. It is my understanding that in the past field offices
have purchased systems and equipment without worrying about its
integration with the existing IRS systems. How can IRS ensure complete
continuity and commitment to the modernization efforts and to the
Integration Support contractor?
Answer. Several active steps have been taken to ensure that newly
purchased systems and equipment are approved only if they are
consistent and compliant with existing systems, the Modernization
Blueprint architecture and sequencing plan. With the issuance of the
Modernization Blueprint in May, 1997, a Standards Profile was issued.
All purchases must be technically consistent with the Standards
Profile. To ensure consistency across the board, effective October,
1997, the Office of Procurement no longer accepts paper requisitions.
Requisitions are only accepted electronically using a Request Tracking
System. Within this system, the appropriate approvals are required from
the Chief Information Officer organization. Requisitions for more than
$100,000 require the approval of the Director, Government Program
Management Office, who is responsible to ensure consistency with the
Modernization plan and compliance with the technical standards. In
addition, a Project Office has been established to centralize
procurement of key infrastructure components and ensure workstation and
system standardization in the field.
The Request for Proposal for a PRIME Systems Integration Services
Contractor, issued March 26, 1998, demonstrates our strong commitment
to the modernization effort and to the existing Integration Support
Contractor. The IRS and the PRIME must ensure the continuity and
commitment of the Integration Support Contractor to provide for the
near-term completion of process improvement projects and the longer
term engineering and architecture service. As part of the proposals,
the PRIME Offerors must ensure continual involvement of our existing
Integration Support Contractor.
Question. As it relates to Y2K efforts, where is the IRS in terms
of its inventory of the computer code comprising IRS' Core Business
Systems?
Answer. IRS' inventory has been completed and is maintained on the
IRS Integrated Network & Operations Management System (INOMS). IRS
inventory includes all applications developed either by IRS employees
or contractors, all commercial-off-the-shelf (COTS) products,
telecommunications systems and Tiers 1, 2 & 3 hardware. IRS created an
application inventory for Y2K. We are working to ensure we can keep it
accurate and current. IRS has had an inventory of hardware and
commercial software but to be useful to Y2K we have had to upgrade it
to make it more of a management tool. The upgrade has included a four-
month effort to insure every product has an industry standard name and
appropriate management control assigned. IRS has had telecommunication
products in several separate inventories, some controlled by IRS, some
by vendors, and some by Treasury. We are acting to consolidate these
inventories.
Question. When do you expect to complete the Code Remediation Phase
and be ready to enter into the test and evaluation phase and who will
actually conduct this phase?
Answer. The test and evaluation phase has begun for the majority of
IRS applications. Year 2000 conversion is being done in five phases
between January 1997 and January 1999. Each phase involves code
remediation and testing prior to production. Code remediation and
testing are complete for all programs that were implemented through
January 1998 (Phase 3). All code remediation is scheduled to be
completed prior to January 1999.
IRS tracks data by component (e.g., application program, job
control language), system (consisting of one to many components), and
lines of code. As of February 27, 1998, a total of 66.5 percent of IRS
mission critical applications were Y2K compliant and tested.
Certification of these applications will be completed no later than
October 1999. A total of 46.8 percent of our systems have had all of
their applications software converted to be Y2K compliant and are in
production.
----------------------------------------------------------------------------------------------------------------
Mission critical
--------------------------------------------------------
Inventory tracking category Total To be Converted Tested Implemented
retired --------------------------------------------------------
Number Percent Number Percent Number Percent
----------------------------------------------------------------------------------------------------------------
Components (application program and
COTS software).................... 84,857 11,689 56,789 78.64 48,016 66.49 41,474 57.43
System............................. 127 1 75 59.52 60 47.61 59 46.82
Lines of code (million)............ 49.8 13.1 23 66.09 17.8 51.12 16.6 47.78
----------------------------------------------------------------------------------------------------------------
Unit and compatibility testing are done by the programmer in the
development organization. After unit and compatibility testing, the
application is sent for Systems Acceptability Testing (SAT), which is
primarily conducted by the Product Assurance Division, with the
assistance of contractors, for Information Systems applications. Field
and Customer applications will be SAT tested locally using guidelines
developed by the Product Assurance Division. Certification is being
done by the Product Assurance Division or by the field organizations
using guidelines prepared by the Product Assurance Division and will be
completed by October 1999.
customer service
Question. I have been in touch with the IRS in the past about the
need to improve customer service and I am pleased that the IRS has
increased the number of days and hours during which taxpayers can call
for information, but we are not there yet. Beyond all the training,
what additional steps are you taking to improve customer service?
Answer. In fiscal year 1999, on the toll-free telephone lines, the
IRS plans to further expand its service to provide telephone assistance
seven days a week, 24 hours a day. Also, in fiscal year 1999, IRS plans
to provide its customers with an 86 percent Level of Access and
decreased queue times. The level of telephone access through the month
of February, 1998 was 90 percent. This compares with a 68 percent level
of access at the same time during 1997, and shows a marked improvement
in customer service at the IRS. In the walk-in program, IRS will expand
Saturday service from six Saturdays in 1998 to 12 Saturdays in 1999.
Question. Are you aware that many callers' efforts to get answers
to questions are being routed to a voice mail system that only offers
to call them back within 2 to 3 days. What alternatives are you
considering to this situation?
Answer. In order to optimize customer service when demand far
exceeds the existing staffs' and telephone systems' capability to
handle the volume, we are asking the taxpayer to leave a message on
specific tax topics for callback. We are then utilizing Examination
staff to respond to these messages. This process, commonly referred to
as ``Compliance Messaging'' provides personal call back assistance
while drawing upon the Service's highly skilled technical employees who
are often not co-located with telephone operations/systems. Because our
efforts to increase the taxpayer access to our assistors have had very
good results in 1998, and because we expect greater improvement in
1999, we are reviewing the policy of Compliance Messaging and will
probably not need to use this callback method to respond to taxpayer
inquiries next year.
Question. Many individuals who have been assessed tax penalties
often ask if they can be abated once payment of the tax has been
arranged for. There are numerous categories of ``reasonable cause'' on
which a decision to abate penalties can be based, but they do seem to
lend themselves to varying interpretations by different staff in
different offices. What can be done to ensure that everyone has an
equal chance to have a penalty abated and determinations are more
consistent?
Answer. Internal Revenue Manual (21)000, Customer Service, was
published and distributed to the field on October 31, 1997. The purpose
of this IRM and IRM (20)000, Penalties, is to provide instructions and
guidelines for Customer Service Representatives in responding to all
taxpayer inquiries (including requests for penalty abatement for
reasonable cause). In combining the work processes of various functions
to achieve a greater degree of initial contact resolution, this IRM is
a tool that will allow the assistor to provide more responsive customer
service in a consistent and fair manner.
______
Questions Submitted by Senator Coverdell
Question. In the GAO report entitled ``IRS' Use of Random Selection
in Choosing Tax Returns for Audit'' and in recent press reports, the
IRS claims it is engaging in random audits pursuant to congressional
instruction. Please explain in specific detail how the IRS supports the
notion that the Congress of the United States mandated the IRS engage
in random audits.
Answer. The IRS does not support the statement that Congress
mandated random audits. Because Congress specifically asked the IRS to
study the compliance level of EITC filers, a scientific statistical
sample of that filing population was examined. This statistical sample
limited the inconvenience to the taxpaying public by limiting those
affected to the 2,472 returns examined. The report does state that,
``Traditionally, the only IRS program using widespread random selection
has been the Taxpayer Compliance Measurement Program (TCMP).''
Question. Please comment on the appropriateness of the IRS using
random audits when more than ninety percent of random audits of
individuals from 1994 to 1996 are employed against low income taxpayers
earning less than $25,000 as reported in the GAO report entitled ``IRS'
Use of Random Selection in Choosing Tax Returns for Audit.''
Answer. The population of EITC filers is approximately 20 million
taxpayers. The IRS conducted a compliance study of that filing
population. A scientific statistical sample needed to be employed to
efficiently perform that study. Using this technique, 2,472 returns
were examined which represented a very small percentage (approximately
0.01 percent) of that filing population. Those who claim EITC are
typically low income and earn less than $25,000; therefore, we were
sampling lower income taxpayers.
Question. Please comment on the appropriateness of the IRS
confining random audits within individual states when conducting an
information gathering project or compliance initiative, for example
focusing on small business in Georgia that simultaneously file Schedule
C losses and qualify for EIC benefits.
Answer. As previously stated by GAO in ``IRS' Use of Random
Selection in Choosing Tax Returns for Audit,'' ``During fiscal years
1994 through 1996, IRS did not randomly select returns for audit from
either the population of all taxpayers or all returns . . . IRS audit
sources do not rely on random selection from the population of all
returns but rather IRS selects returns having characteristics
indicative of potential noncompliance.''
This information gathering project identified a population of
returns having characteristics of potential noncompliance. Available
resources would not permit the examination of all returns in this
population to determine the level of noncompliance within this
population. Therefore, a sample of this population was examined by the
Georgia District which initiated the project.
The Information Gathering Project is a tool that is used to
identify and measure the level of noncompliance. It usually involves a
relatively small sample of returns in a limited geographical area.
Based on the results of the sample, the enforcement action may be
expanded to other taxpayers with similar return characteristics within
or outside the sample geographical area, action other than enforcement
may be taken (taxpayer education or seeking legislative change), or no
further action may be deemed necessary.
To summarize, if an information gathering project uncovers a
significant area of noncompliance, the enforcement or non-enforcement
action taken will not be confined to an individual state.
Subcommittee Recess
Senator Campbell. With that, I appreciate you being here
and this subcommittee is recessed.
[Whereupon, at 2:48 p.m., Thursday, March 5, the
subcommittee was recessed, to reconvene at 10:17 a.m.,
Thursday, March 12.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, MARCH 12, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:35 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Faircloth, and Kohl.
DEPARTMENT OF THE TREASURY
Office of the Secretary
STATEMENT OF HON. ROBERT E. RUBIN, SECRETARY
ACCOMPANIED BY NANCY KILLEFER, ASSISTANT SECRETARY FOR MANAGEMENT
Opening Remarks
Senator Campbell. The Treasury Subcommittee will be in
session. Good morning. Today, we will be reviewing the fiscal
year 1999 budget request for the Department of the Treasury.
With us this morning is Secretary of the Treasury, Robert
Rubin, and he will be accompanied by his assistant secretary
for management, Nancy Killefer.
The Treasury Department is our Nation's tax administrator,
revenue collector, law enforcer, and financial manager. For
example, the IRS collected $1.5 trillion in taxes last year,
the Customs Service collected almost $20 billion, and the ATF
collected almost $13 billion last year alone. The Department's
law enforcers include the Secret Service, the IRS enforcement
arm, ATF, Customs, and FinCEN. It also includes FLETC, which
provides consistent training for law enforcement, not only for
Federal agencies but for States and locals as well.
However, there is much more to the Department of the
Treasury than just the law enforcement and collecting of taxes
and fees. For example, there is someone actually responsible
for keeping track of how much money the Government spends and
receives every single day. The savings bond program is part of
the Bureau of the Public Debt, which encourages the country to
invest and save.
The Comptroller of the Currency protects American citizens
by making sure that our local banks comply with the law. The
Bureau of Engraving and Printing which prints our paper money
and the U.S. Mint which makes our coins are part of the
Treasury Department also. In addition, if there is a monetary
crisis somewhere in the world, such as in Mexico or Asia, it is
the International Affairs Office that develops recommendations
for how this country should respond.
In short, the Department of the Treasury is responsible for
making, protecting, and tracking our Nation's money.
Perhaps one of the biggest problems facing the Department
right now is the year 2000 century date change conversion. The
Treasury Department has identified almost $174 million in
additional costs in fiscal year 1998 to make sure that when
January 1 in the year 2000 rolls around that the Department's
computers do not crash. This is an addition to the funds
provided during the regulatory fiscal year 1998 budget cycle.
I want to welcome you, Mr. Secretary. And with that, I
would ask Senator Kohl if he has an opening statement.
Statement of Senator Kohl
Senator Kohl. I thank you, Mr. Chairman. I have just a few
brief remarks.
As usual, Secretary Rubin, it is a pleasure to have you
before us. We appreciate you taking the time to meet with us
here today, especially since we know that you are busy with the
International Monetary Fund and the Asian governments.
As you know, the Treasury agencies involved in the Asian
crisis are not within the jurisdiction of this subcommittee.
However, I hope that we will have an opportunity to discuss
some of these issues during the course of the hearing, even if
it is just to get you to tell us whether or not this is the
time to invest in an Asian emerging market stock fund.
[Laughter.]
In terms of appropriations, let me say that I have enjoyed
working with you on a number of Treasury issues this past year.
I especially appreciate all the help that you gave us in
getting my child care tax credit included in the President's
budget and I hope that we can get it done this year.
I look forward to working with you on this year's
appropriation for the Department of the Treasury. I know that
you have a number of priorities that you want to see funded in
fiscal year 1999. I am not sure whether we will be able to
accommodate all of them, but I very much hope that we will be
able to fund those departments and those programs that will
help you carry out your vision of the Department of the
Treasury.
Thank you, Mr. Chairman.
Senator Campbell. Senator Faircloth, do you have any
comments before we start?
Statement of Senator Faircloth
Senator Faircloth. Thank you, Mr. Chairman. Thank you for
holding this hearing. I welcome our two witnesses this morning.
Thank you, Secretary Rubin and Ms. Killefer.
The President is requesting $12.3 billion in fiscal 1999
for the Treasury Department, which is an increase of a little
over 7 percent. The funding, as we all know, supports a wide
range of things including banking policy, law enforcement,
domestic economic policy, tax policy, and tax administration.
Mr. Chairman, as you well know, I have a particular concern
over one of the agencies involved, and that is the Internal
Revenue Service. I was pleased to have a very good meeting with
Mr. Rossotti, the new Commissioner of Revenue last week, and he
readily said that much had to be done to reform the IRS. It was
a very good meeting. I would also note that Secretary Rubin has
said that many things needed to be done to change the IRS.
IRS Oversight Board
I have introduced legislation that I think will do the job.
It is an oversight board composed entirely of private citizens
with authority to oversee the Internal Revenue Service and to
delve into--pretty much a free hand to delve into whatever is
going on in the Internal Revenue Service. I think it has become
such an in-house unit and that the commissioners have only been
there for a very short time.
I mean, I cannot quote them specifically, but the history
of people that have served as head of the Internal Revenue
Service, their tenure has been very, very short. So it has
become an entrenched group of people who simply have run it as
they saw fit without any real oversight from the rest of the
Government really.
The $4 billion they wasted on a failed computer system is
just the ultimate in how not to run a business. So in my view,
the board needs to be totally separate from the influence of
anyone; a total civilian board. And this legislation also gives
the board explicit authority to delve into such areas as
audits, collection, and procurement, which have been the
subject of much of the abuse.
Mr. Chairman, I thank you for holding the hearing and I
look forward to working with you and, Mr. Secretary, also with
you. I thank you.
Senator Campbell. Thank you.
Mr. Secretary, if you would like to proceed?
Statement of Secretary Rubin
Secretary Rubin. Thank you very much, Mr. Chairman. Let me
say that we are delighted to be here. Nancy Killefer is our
Assistant Secretary for Management and Chief Financial Officer.
As you said, we are requesting an appropriation of $12.3
billion, which is an increase of 7.2 percent. But we have gone
over this very carefully. It has been developed in a manner
consistent with the administration's focus on fiscal discipline
and getting to a surplus. Basically, the increase is necessary
to maintain current operations by supporting mandatory cost
increases as well as increased workload. We also feel it is
extremely important to invest in critical capital improvements
and important program enhancements.
As you said, Mr. Chairman, Treasury plays a key role in an
extraordinarily wide range of the core functions of Government,
from tax collection, law enforcement, financial management, tax
policy, banking policy, and very importantly, international
economic policy, and domestic economic policy. We have focused
very hard, with such a broad portfolio, on both the question of
customer service and greater efficiency--that is to say,
reducing the cost of what we do.
Our budget was designed in a manner consistent with and
pursuant to a Treasury strategic plan. We have performance
plans for each of our missions. We have taken the GPRA, this
planning requirement that had come from Congress, with great
seriousness, and we have tried to conduct, and I believe have
conducted it in a way that makes it not just a bureaucratic
exercise but a living part of our thinking about Treasury today
and in the years ahead.
We have provided the committee with a detailed presentation
of our 1999 request. I would like to, if I may, just focus on,
or highlight I should say, four areas: departmental offices,
the IRS, law enforcement, and then the area you mentioned, Mr.
Chairman, the year 2000 issue.
Let me start with departmental offices, if I may, because
it is something that I think is very often overlooked in the
budget discussion and yet is exceedingly important to the
contribution the Treasury makes to the affairs of our country.
Departmental offices contain policy groups that have
experienced enormously increased challenges this year. Tax
policy through regulation implementing the tax changes that
were made last year in 1997--that is, the tax cuts, loophole
closures, and simplifications. They have an enormously expanded
workload as a consequence.
International economic policy area is providing leadership
not just for this country, but I think it would be fair to say
in some fair measure for the world in dealing both with the
immediate crisis in Asia, and I would say equally importantly
with the question of modernizing the architecture of the global
financial system.
Economic policy, which is deeply involved in international
areas as well, is very much focused on entitlement issues that
the President raised, particularly Social Security, in the
State of the Union Address.
And law enforcement, which has both expanded policy
objectives and also expanded oversight objectives.
We also have in departmental offices our centralized
management functions for the whole of Treasury, and we have had
a very strongly enhanced focus on management at Treasury over
the last few years. The consequence is an expanded workload
focusing particularly on human resources and technology; this
focus will not only maintain the excellence of Treasury now but
create the Treasury of the future.
In addition, our budget request has a 5-year restoration
repair program for our historic building. The total cost is
expected to be $130 million over 5 years. As you know from
having visited our building, it is really a marvelous building.
It is a historic gem. At the same time, it is one of those rare
historic gems that is a good working building. But it is in
desperate need of repair.
Second, let me turn to the Internal Revenue Service which
Senator Faircloth raised. I would say it was not longer than a
month or two after I became Secretary of the Treasury that I
became aware of--say 2, 3 months--of the serious problems at
the IRS--in some measure, I might say, as a result of the work
of this committee and your companion committee on the House
side.
IRS Reform
Over the last 2\1/2\ years, Senator, we have been involved
in a highly intensified focus on reform and change at the IRS.
This has led to dramatic change in certain areas. Technology is
on a different path, and I think now on a constructive path,
though there is an enormous amount of work to do going forward.
There has been increased electronic filing. There has been
increased telephone access, and we have very substantially
strengthened the taxpayer advocate.
Perhaps as importantly as anything, we have brought in a
new type of Commissioner, as you know. A man who instead of
being a tax person, had been a CEO of a large private sector
company and happens to also have very substantial computer
expertise. You all have met with Charles Rossotti, who I must
say, is off to an extremely good start.
We have lost our Chief Information Officer, as you know,
who made a tremendous contribution and we are very
energetically involved in a search for a new CIO. Meanwhile,
Charles Rossotti, who has great expertise in this area, is
himself spending a lot of time on this.
While a great deal, I believe, has been accomplished, there
is also an enormous amount, far more to do I would say going
forward than we have done in the past, although I do think this
2\1/2\ years has been a period of really very substantial
change and very important change. These problems took a long
time to develop and they are going to take a long time to
resolve.
Our budget request includes a whole series of measures that
we think will help move forward the reform of the IRS. Let me
just mention a few, if I may. First, we asked for additional
resources for customer service, including increasing and
improving the quality of telephone access, the rewriting of
notices and forms, expanding the taxpayer advocate staff, and
implementing citizen advocacy panels.
Second, our request would position the IRS to move forward
with implementing the modernization blueprint. I do not think
there is any question that modernizing technology is absolutely
requisite to accomplishing improvements in customer service,
efficiency, tax compliance, and financial reporting.
On a broader front, as you all know, Commissioner Rossotti
has a broad organizational concept for changing the structure
of the IRS, and we requested funding to move forward with that.
And I might add, it is a very constructive plan.
Finally, our request includes important restoration funding
for essential business line investments. What has basically
happened is over the last couple of years we have deferred and
reallocated what would have been our business line investment
into the critical Y2K project. But the result is that our
frontline people are using a tremendous amount of outmoded
computer equipment. We believe that any good business that had
diverted funds to these issues, they would provide money to
replace that equipment. I will return to Y2K in just a moment.
Law Enforcement
On the law enforcement side we have, as Mr. Chairman said,
extensive and critical law enforcement responsibilities. We
request an increase of 5.7 percent, or $172 million, to a total
of $3.2 billion for law enforcement. That requested increase
goes to meet mandatory cost increases and also to fund
increased activities in dealing with narcotics trafficking,
illegal firearms--including the youth crime gun interdiction
initiative, a special program we have with respect to reducing
trafficking of illegal firearms to young people--and then
Presidential protection and improving White House security.
There will also be increases with respect to fighting
financial crime, particularly counterfeiting and money
laundering, and for training law enforcement officers, which as
you know, we do for most of the agencies in the Federal
Government.
Let me say, if I may, on law enforcement that we have
enormous pride in both the quality and the esprit of our
bureaus. I spend time on this on a regular basis, on an ongoing
basis. We have been extremely supportive of our law enforcement
bureaus at Treasury. For example, we have supported Secret
Service's decision to enhance White House security, protected
the ATF against strident attacks, and assisted all the bureaus
in the securing of appropriate funding. At the present time, we
are moving forward with initiatives on new threats with respect
to counterfeiting.
Year 2000
Finally, let me say a word or two about the issue you
raised, Mr. Chairman, and one that I do believe--I agree with
you--is of pressing importance to our Nation, which is the
question of Y2K. As you know, many computer systems only have
two digits, the two zeroes, because that was the way of
shortcutting with respect to programming, which was fine and
dandy except we are now getting to the year 2000 and the two
zeroes will come up as 1900, which is not optimal. The
consequence is many computers will not be able to perform their
functions.
We are an agency with massive computer activities; the
second most, I believe, in the Federal Government after the
Department of Defense. Year 2000 compliance is an exceedingly
high priority with us. I meet biweekly with our Assistant
Secretary, and also with our highly respected Treasury CIO to
track progress to try to identify problems.
Our fiscal year 1999 budget includes $253 million to
address the Y2K problem. We have also submitted a supplemental
request for close to--I think the supplemental request is
actually $250 million, and we have identified close to $200
million, I think in the neighborhood of $175 million actually,
that we currently see as needing for 1998, this year. We look
forward to working with you very closely on the Y2K funding,
and as I say it is absolutely critical that this get done, and
tested, and implemented in time.
In both the public sector and the private sector, the cost
estimates and timelines on Y2K compliance have exceeded
expectations. In order to make sure, or do everything we
possibly can to make sure that we meet the challenges on time,
what we are focusing on is our critical missions. It is an
enormous challenge but we have made great progress. I think it
would be fair to say that we are on schedule for almost
everything. Not everything, but almost everything, with respect
to our mission critical systems.
Let me conclude on one personal note if I may, Mr.
Chairman. When I became Secretary I went to dinner with a
friend of mine who had been in two administrations at Treasury.
What he said was that any Secretary will be faced with an
enormous array of issues, including a multitude of policy
issues and you have to decide what your priorities are. He said
having served in the Treasury Department in two administrations
that in his judgment your No. 1 priority should be continuing
the excellence of a truly extraordinary institution.
I think he was absolutely right. We have a terrific group
of people at Treasury and we are trying to do everything that
we can to make sure this continues to be an outstanding
institution to serve the American people. We very much look
forward to working with this committee, as we have had a very
good working relationship with in the past, toward meeting this
objective.
Thank you very much. Ms. Killefer and I would be delighted
to respond to anything you would like to ask us.
Prepared Statement
Senator Campbell. Thank you very much, Mr. Secretary. We
have your complete statement and it will be made part of the
record.
[The statement follows:]
Prepared Statement of Robert E. Rubin
Mr. Chairman, members of the Committee, I appreciate the
opportunity to testify on the Treasury Department's fiscal year 1999
budget request. With me today is Nancy Killefer, our Assistant
Secretary for Management and Chief Financial Officer.
Treasury is requesting $12.3 billion in fiscal year 1999, an
increase of 7.2 percent over fiscal year 1998. This increase is
necessary to maintain current operations by supporting mandatory cost
increases and meeting anticipated workload requirements in fiscal year
1999; to invest in critical capital improvements for future
efficiencies and program improvements and for addressing future
workload growth; and to accomplish important program enhancements.
Our request is critical to supporting Treasury's important and
wide-ranging mission. The Treasury plays a key role in the core
functions of government, including tax administration, revenue
collection, law enforcement, financial management, tax policy, banking
policy, international economic policy and domestic economic policy. As
just a few examples, we fight narcotics trafficking and money
laundering through Customs and other agencies, and manage the federal
government's debt structure at the Bureau of Public Debt. We
manufacture and protect the nation's currency, process the federal
paychecks for millions of Americans, and help develop policies related
to the budget, the nation's tax structure, international economic
matters, and inner city economic development.
With such a broad portfolio, we take very seriously the notion that
we must continually seek new ways to improve services and lower costs.
Towards meeting these purposes, our budget request supports Treasury's
Strategic Plan and provides a performance plan for each of Treasury's
primary missions and we, and I as Secretary, have worked to make GPRA
not a required exercise, but rather a live, integral part of our
thinking to improve how we fulfill our many missions. More broadly, we
believe that we must not do anything that threatens the fiscal
discipline so many have worked so hard to restore in this country, and
which has been critical to the strong economic conditions of the past
five years.
We've already provided the Committee detailed presentation material
on the extent of our fiscal year 1999 request. Let me now highlight
four areas--Departmental offices, the IRS, law enforcement, and the
year 2000 problem.
First, let me discuss Departmental Offices. Departmental Offices
contain the policy groups that are meeting greatly increased challenges
in the current environment: tax policy, which is developing the
regulations to implement the tax cuts, loophole closers and
simplifications of last year's budget; international economic policy,
which is providing leadership for the United States and the world in
response to the short and long-term issues of financial instability in
the global economy; economic policy, which is deeply involved in
international economic issues, entitlement reform, and the economic
initiatives in the President's budget; and law enforcement, which has
expanded policy and oversight objectives. Departmental Offices also
contain the central management functions for all of Treasury, and in
furtherance of our very serious focus on management, human resources,
and technology, these functions are being enhanced.
In addition, our budget request includes funding for a five year
restoration and repair program of the historic Treasury Department
building. Part of this funding--which totals $130 million over five
years--is needed for our ongoing restoration of areas damaged by the
fire in 1994, and part is needed for general restoration. The Treasury
building is one of the gems of our government, as well as being a
workplace. It is important to maintain this historically significant
and beautiful building for future generations.
Second, let me turn to the Internal Revenue Service.
Shortly after I first became Secretary, I became aware of serious
problems at the IRS. In many cases, those problems came to my attention
as a result of the work and diligence of this Committee. Over the last
two and a half years we have been engaged in a highly intensified
process of change and reform at the IRS that has led to dramatic change
with respect to technology--though that is just the beginning of
getting to where we need to go--increased electronic filing, improved
telephone service and a greatly strengthened Taxpayer Advocate. Perhaps
most importantly, and symbolizing our commitment to thoroughgoing
change, we brought on board a new type of Commissioner, Charles
Rossotti, who had extensive experience as a CEO in the private sector,
with expertise in computer systems. And, let me just add, we are
looking very hard to find a new CIO to replace Art Gross, who has done
such an outstanding job in that position.
However, while important steps have been taken, the great bulk of
the challenges lie ahead. Just as these problems took a long time to
develop, it is going to take a great deal of time and effort by all of
us to build the kind of IRS that the taxpayers deserve. We are
committed to working with you to accomplish that goal. Our budget
request includes a series of items to advance this effort.
First, our request includes additional resources to improve
customer service, including increasing and improving the quality of
telephone access, rewriting of notices and forms, expanding the
Taxpayer Advocate staff, and implementing Citizen Advocacy Panels.
Second, our request positions the IRS to move forward with
implementing the Modernization Blueprint, which is absolutely a
requisite to improvements in customer service, efficiency, tax
compliance and financial reporting. On a broader front, the budget
provides seed funding as the Service moves more fully to implement its
new organizational concept.
Finally, our request includes important restoration of funding for
essential business-line investments. This funding has been deferred and
reallocated over the past two years to address immediate Year 2000
requirements, about which I will say a few words in a moment. However,
significant needs still exist for these investments in order to replace
critical items such as aging computer equipment for front-line
examination personnel. This investment is essential to our goal of
providing efficient compliance operations and effective service to
taxpayers.
Let me turn now to our budget request for Treasury's law
enforcement activities.
As this committee well knows, Treasury has extensive and critical
law enforcement responsibilities executed by Customs, the Secret
Service, Alcohol, Tobacco and Firearms, the IRS, FinCEN, and the
Federal Law Enforcement Training Center. To strengthen these critical
efforts, the President's fiscal year 1999 budget for Treasury law
enforcement bureaus totals $3.204 billion, an increase of $172 million
or 5.7 percent above last year. We need this increase to meet certain
mandatory cost increases, and to enhance our activities in combating
narcotics trafficking, reducing illegal firearms trafficking to young
people, improving Presidential protection and White House security,
investigating financial crimes, and training law enforcement officers.
Mr. Chairman, we at Treasury have enormous pride in the quality and
esprit of our law enforcement bureaus, and of the men and women who
serve in them, often putting their lives on the line. I spend time on
an on-going basis on law enforcement issues, and we at Treasury are
committed to fully supporting the efforts by the law enforcement
bureaus to do their jobs, as in the Secret Service decision to enhance
White House security, ATF's reforms and its defense against strident
attacks, and the securing of appropriate funding.
Finally, Mr. Chairman, let me say a word about an issue of pressing
importance to our nation and one on which we are keenly focused at
Treasury: the Year 2000 date change problem. As you know, many computer
systems rely on two digit dates as a result of a short cut computer
programmers widely used until recently. The year 2000 would be entered
as ``00'' but interpreted as ``1900.'' As a result, these computers
will not be able to execute many required functions properly as of
January 1, 2000. As an agency with massive computer system activities
second only to the Defense Department in the Federal government, this
issue is one of the highest priorities to us. I meet bi-weekly with
Assistant Secretary Nancy Killefer and our highly respected Treasury
CIO to track progress and focus on problems.
Our fiscal year 1999 budget includes $253 million to address this
problem at Treasury. Treasury's date change needs are also part of the
Administration's fiscal year 1998 Supplemental Budget Request. We have
identified close to $200 million in additional needs in the current
year that must be funded if we are to complete the fixes in time, but
the supplemental proposed by the Administration includes additional
flexibility of up to $250 million in order to fund these requirements.
To date, we have identified new requirements of approximately $175
million that need to be addressed this fiscal year. We look forward to
working together with the Committee in addressing these critical
requirements.
In both the private and public sectors, cost estimates and time
lines on Y2K compliance have exceeded expectations. So that we can meet
this challenge in time, Treasury is focussing on only those systems
most critical to its mission. The challenge is enormous, but we have
made significant progress thus far and continue to be on schedule for
almost all our mission critical systems.
Mr. Chairman, let me conclude on a personal note. Throughout my
experience in government, which includes two years at the National
Economic Council, and three years at Treasury, I have been continually
impressed by the intelligence, professionalism and dedication of the
people with whom I've had the opportunity to work.
A Secretary of any Department faces a lot of challenges, including
a multitude of policy issues, and has to make judgments about
priorities. When I was first nominated to be Treasury Secretary I had
dinner with a former Treasury official who had served with two
administrations and who advised me that my highest priority should be
to focus on maintaining and building on the excellence of this
institution. He was absolutely right. We have been intensely focused on
management issues in my tenure and it is in that spirit that I ask you
to approve our budget request. Let me also say that I have been
continually impressed by the capability, the professionalism, and the
commitment of the people at Treasury and the Bureaus, and they deserve
our support on their work to fulfill their wide range of
responsibilities in serving the American people. I also feel that in my
time at Treasury this Committee has made a major contribution to the
management of Treasury through its constructive and knowledgeable
analysis and review, and through its support for funding. Thank you
very much and I look forward to working with all of you in the future
as we face our challenges.
Year 2000
Senator Campbell. Ms. Killefer, do you have any additional
comments?
Ms. Killefer. No; I do not.
Senator Campbell. Priorities, we have some around here too,
as you know, Mr. Secretary. You talked at length about the Y2K
problem. We are going to do our best, but clearly we have some
limited resources too, as you know. I was going to ask you,
between the Y2K and funding for the IRS modernization do you
see the Y2K as a priority? I know they are somewhat hooked
together.
Secretary Rubin. That is a good question, Mr. Chairman. I
think the problem that we have had is the problem that you are
correctly raising. On the one hand, Y2K is imperative. We
cannot come to the year 2000 and not have the IRS and FMS and
the other parts of Treasury have computers that are
ineffective. On the other hand, it is for exactly that reason
that for the last 2 years we have not invested in upgrading
equipment.
I think what we have got to do, and we did--what the
administration did--was to weigh all of our priorities and
everything else. We did not request money for a lot of things
we would love to do, but anything that you see in our request
was a result of triage. It was a result of a lot of things
dropping off the table.
So I think we must have the Y2K money. But I also think we
need to continue our modernization if we are going to have a
modern IRS, and I think we have to replace this outmoded
business equipment.
Senator Campbell. What is the total estimated cost for the
Y2K problem?
Secretary Rubin. Overall? About $1.4 billion over 4 or 5
years. And we have spent some of that already. We are expecting
to spend about $600 million this year, if I remember correctly,
and about $400 million next year.
Senator Campbell. So is it your belief that we are on track
to be able to complete all the necessary changes by January 1,
2000?
Secretary Rubin. Let me give you a first answer and let me
ask Nancy Killefer to follow up, if I may. I think it is fair
to say, though I think you really should get Nancy Killefer's
comment on this, that we are on schedule with virtually
everything. I think in FMS, the part of FMS that has to do with
accounting--not payments, not Social Security checks or things
of that sort, but intragovernmental accounting, I think that we
are behind where we would like to be. Nancy.
Ms. Killefer. That is correct. We do view ourselves on
track for all our major mission critical systems, with the
exception of the GOALS Program at FMS which deals with
intragovernmental accounting. So it will not affect payments to
the American citizen. Our concern in FMS, which is slightly
behind where we would like them to be, is that we have
prioritized the systems to deal first with those systems that
affect the American citizen, to ensure that they get their
Social Security payments on time, all of their payments. Those
systems are actually well on track.
Senator Campbell. It sounds like a really complicated
system to me, so I assume you do not just turn on the switch on
January 1, 2000. Is there a testing process that you have to go
through?
Ms. Killefer. Yes.
Senator Campbell. And some way of measuring the mistakes,
the normal discord you have from mistakes?
Ms. Killefer. Absolutely. The systems are already being put
in production and tested as we speak. Our desire for 1998 money
is to ensure that we get all of the systems completed by the
end of this fiscal year and are in a testing mode in 1999,
correcting any problems before we go live in 2000. So we have
test sites and contingency plans in place. You are exactly
right, it is not an easy process.
Senator Campbell. It is not an easy one to understand for
me either. When you are testing--this is maybe off the subject
a little bit--while you are testing you have the backup systems
still in place that cross-check with the tests?
Ms. Killefer. We actually have separate test sites, so that
we are not testing on the production systems as they are
working. We are testing in the same environment with which they
work, but it does not affect our ongoing operations. One of the
challenges will be bringing it all live so that we check every
interface.
IRS Chief Information Officer
Senator Campbell. Thank you. I am glad you did mention Mr.
Rossotti. I met with him too, as Senator Kohl has, and Senator
Faircloth has too, and I am impressed, to say the least, with
his energy and his thoughtfulness and his determination to try
and correct an awful lot of problems that we hear about from
our own constituents. I just think he is a terrific addition to
the IRS.
In light of Arthur Gross' departure, I would think that the
importance of not delaying the search for the prime contractor
to fill his shoes is very important. How is that going?
Secretary Rubin. There are two separate issues there I
think, Mr. Chairman. One is getting his replacement, and we are
very energetically involved in doing so. It is not an easy task
but we are extremely focused. I can tell you that Commissioner
Rossotti is extremely focused on it because right now he is
doing a lot of that. He knows he wants to get the right person
in there so he does not have to do it as much as he is doing
it. So I can assure you we are focused on that.
On the question of a prime contractor which is a slightly
different question, I think our RFP has gone out--no, it is in
draft form. Where do we stand on that?
Ms. Killefer. It has gone out for comment. We have already
received comments back from the two primes that they are able
to respond, and we expect to have it out by the end of the
month for them to then submit bids. So we are on track with
that.
Senator Campbell. My own personal view is that to get
really top, qualified people in the IRS when they are taking
such a beating nationwide is not an easy thing to do. I think a
lot of people that would normally consider serving in a
Government office would think twice about taking on that job.
Secretary Rubin. You are right and yet I think there is--
you are absolutely right on the one hand. On the other hand,
this is a sort of two-sided coin. This is why Charles Rossotti
came with us, because he saw something that had a lot of
problems and he felt, and I think rightly felt, that he had a
leadership at Treasury that was committed to change. And he
said, here is an opportunity to really do something. We need to
find somebody now to be CIO who has exactly the same feeling.
Senator Campbell. If he makes the kind of changes and
improvements that are necessary over there before he leaves we
will have to talk to them about printing up a special medal for
him.
Secretary Rubin. We can put him on the dollar bill or
something. [Laughter.]
IRS Customer Service
Senator Campbell. The IRS is requesting $103 million for
improved customer service based upon national performance
review recommendations. Has the IRS begun implementation of any
of those recommendations?
Secretary Rubin. Yes, and I think with effect. The problem
solving days have turned out to be very successful. I went to
the first one, and it was very interesting. You see people
there and they come and they meet with people from the IRS. It
is really an opportunity to get access to people and get
problems solved.
Another thing that struck me about it, I think maybe that
struck me most about it was the IRS people wanted to be of
service. They felt good about being of service to the people
who came. So I think that has been very successful. They have
started now opening their offices, on March 6, for what 6 days
a week now?
Ms. Killefer. Actually, many of those things have been
implemented. I had the opportunity to cochair that task force
and we have implemented many of the changes. As you know,
starting last Saturday, we opened the IRS offices on Saturdays.
There are over 150 locations to help people prepare their
forms, in order to get out in front of April 15. We have
extended already the access to the telephone system to 6 days a
week, 16 hours a day, and we are going to 24 hours a day
beginning in 1999. We have started rewriting the notices. We
have instituted problem solving days.
We have banned measurements that we thought led to
potentially unfair treatment of taxpayers.
Senator Faircloth. I am sorry, you have banned what?
Ms. Killefer. We have banned measurements that we thought
were detrimental to our service to the taxpayers. We have and
are launching this month a customer service survey that will be
used as a measurement system to truly understand customer
satisfaction.
So there are an enormous number of the recommendations that
are already being implemented. We do need additional funding to
continue to support all of the many measures that I think will
make a very meaningful difference to the American taxpayer.
Secretary Rubin. Could I say one other thing, Mr. Chairman?
Senator Campbell. Yes.
Secretary Rubin. I think people are seeing the effect--we
had dinner about 3 or 4 weeks ago with a group of Senators on a
totally different subject; nothing to do with any of this. But
we were sitting around having drinks before dinner--one drink
each or something. But anyway, sitting around having drinks
before dinner. [Laughter.]
Senator Campbell. That is on the tape.
Secretary Rubin. It was interesting. A number of them said
that constituents had told them that there was a noticeable
difference in the atmosphere at IRS offices. So I think this is
not only doing exactly what Nancy just said, but I think it is
starting to affect the culture and the way people behave.
Senator Campbell. I commend you for that. I had an
opportunity last year to visit the IRS office in Colorado
Springs that had just been firebombed a few days before. I do
not even know if they have caught that guy yet. He did leave
some clues around there that the ATF got a hold of.
Senator Faircloth. Was it a bad audit? [Laughter.]
Senator Campbell. I do not know. To my knowledge, they have
not caught him yet.
Senator Faircloth. I thought you got an audit.
Senator Campbell. I did get an audit, but I did not go to
that extreme. I know that some people are just at their wits
ends and literally take up arms against the IRS. If we can make
an improvement to try to make sure people feel they are being
treated fairly, I think that they would rather come to us and
talk to us about it than just getting the fire out and going
straight to the IRS at nighttime.
Interface Between International Affairs and Law Enforcement
Mr. Secretary, most, if not all the Treasury law
enforcement bureaus are impacted by events that are really in
an international arena. The counterfeiting of money is an
example, and international drug trade and so on. Is there any
overlap or formal cooperation internally of the Treasury law
enforcement bureaus and the international affairs division of
Treasury?
Secretary Rubin. Yes; I would say it is both formal and
informal. It is informal in the sense that everything reports
into the Deputy Secretary and myself, so we will bring people
together as needed on issues. But it has also been formalized
in quite a number of areas. For example, there are very
important issues with respect to the application of sanctions.
OFAC applies sanctions against terrorist groups, narcotics
groups, and the like. They now review their activities with
people from the international area because there are
overlapping concerns, as you correctly say.
On sanctions policy for the administration there is now an
interagency process. But within Treasury we have an intraoffice
process, if you will, that meets on a regular basis. Areas like
money laundering and counterfeiting, which are both law
enforcement and international. There is a great deal of
formalized interface. So the answer is yes.
Renovation of Treasury Building
Senator Campbell. You talked about the importance of $16.5
million for renovation and modernization of the main Treasury
Building. Is that the total estimated cost, and what is the
completion date if we can fund that?
Secretary Rubin. The total estimated cost at this time is
about $130 million. When is the completion?
Ms. Killefer. It is a 5-year program.
Senator Campbell. Thank you.
Senator Kohl, do you have some comments or questions?
Senator Kohl. Thank you, Mr. Chairman.
IMF
Secretary Rubin, as we understand it, the U.S.
participation in the IMF does not increase the Federal budget.
Our current core contribution to the IMF now totals
approximately $36 billion and the administration is asking that
we increase that contribution by approximately $15 billion
more. That would be $50 billion committed to IMF's core
funding.
Now many people perceive this money to be another form of
foreign aid. We may say it is still ours, but I and others say
that we will probably never see that money again. So can you
explain in simple terms how this works?
Secretary Rubin. Sure. Let me start by saying, Senator,
that I think it is imperative that we do it and we do it
quickly. We live in a very dangerous world right now. Hopefully
it is a world that will not--hopefully it is a world in which
we will work our way through the Asia crisis, and other things
will not ignite, and a reasonable degree of stability will
remain. But there is a risk. I think a low probability risk,
but a risk.
Senator Faircloth has heard Chairman Greenspan and me
address this in another committee. He said the exact same
comment I have. Low probability, but nevertheless there is
always risk that the kind of thing that we have seen happen in
Asia could expand out and envelop developing countries around
the world. If that happened, that could have severe impacts on
us, on our economy, our workers, our businesses, and our
farmers.
The IMF is badly underfunded right now. So every day that
it goes on being underfunded we do not have the capacity to
deal with that problem, should it develop. The consequence is,
we believe it is imperative to get funding and get it now.
In terms of your direct question, what we do is we--we are
asking for, as you correctly said, another $14.5 billion of
what is called quota money. What happens is, it is a
commitment. If the IMF draws it down, then without going
through all the technicalities, the bottom line of it is that
we put up cash at the IMF and we get back a claim against the
IMF. And the IMF is a rock, solid credit.
The Congressional Budget Office will score that at zero
effect. So there is no effect on the deficit. It is a little
bit like a credit union or a bank. When the IMF is finished
using that money, our commitment remains. Think of it as a line
of credit in a sense from a bank. Maybe that is the way to
think about it. When the IMF is finished using it, they will
give us the money back but they still have the right to take it
down from us again.
If we want to cancel that right, if we actually want the
money back permanently, we have the right to say we need it for
balance--we can get it back. We have the absolute right to get
it back. But what we have to do is say we need it for balance
of payments purposes, in which case it is then ours again, not
theirs.
Senator Kohl. I understand. But in reality, is it not fair
to say that the money that we contribute to the IMF is money
that we are not likely to ever see again?
Secretary Rubin. No; I do not think I would agree with that
actually. I think my reaction would be slightly different. I
presume what we will do is make a practical judgment as time
goes on what best serves our economic and national security
interests. Unlike foreign aid, once you have given foreign aid
to a country, it is gone.
Senator Kohl. Legally gone.
Secretary Rubin. You cannot get it back. You have not
loaned it to them. You have given it to them.
Senator Kohl. Right.
Secretary Rubin. This is a situation where we, in effect,
have loaned it to the IMF or put it on deposit, if you will,
and we can get it back as long as we assert--and there is
nobody who has a right to overrule our assertion--as long as we
assert that we need it for balance of payment purposes. So 5
years from now, or 10 years from now, or whatever, if the U.S.
Government decides it wants the money back, unlike foreign aid,
it just says we need it for balance of payments purposes and
they get it back.
Senator Campbell. Senator, would you yield just for one
comment?
Senator Kohl. Yes, go ahead.
Senator Campbell. You talked about risk. Let me tell you,
we face some risk too. When you go home and tell constituents
that you want to increase America's share of the IMF and they
read every day in the paper stories like the President of
Indonesia, Suharto, who they say is worth $40 billion whose
whole government is just rife with nepotism and cronyism and
literally everything else, and they know many times in our past
history, whether it was Bautista, or Rhee, or Peron or whoever,
so much money has been siphoned off to put in Swiss bank
accounts, believe me it is a hard sell at home. You should
understand that.
Secretary Rubin. Senator, I totally relate to that. I do
understand it. Let me say, as far as I am concerned, I do
understand that and I think that is what makes it such a
difficult issue in this body. And our judgment is a judgment
based on only one thing and one thing only, and it is what
Chairman Greenspan and I have testified to now before a number
of committees. That is our economic interest. That is the
sole--and our national security interest. Our economic and
national security interest.
But this is one of those very difficult things, politically
difficult, but I think economically imperative.
Senator Campbell. Thank you, Senator.
Secretary Rubin. Could I just add one other thing, if I
may, Senator? What you said is absolutely right. On the other
hand, it is interesting, we have had the Farm Bureau strongly
supporting what we are doing and very actively supporting us.
The Business Roundtable is very actively supporting us, the
Chamber of Commerce is very actively supporting us, the
National Association of Manufacturers is very actively
supporting us. These are not groups that have automatically
supported this administration on all of our initiatives. But
they are all not only----
Senator Campbell. I think they understand that the ripple
effect of lost exports to that country could be in the long
term more detrimental than putting the money in the IMF. I
understand that, too. But to talk to the average person on the
street in your hometowns, they have real problems.
Secretary Rubin. You are right. It is a difficult issue.
Senator Campbell. Senator Kohl.
Senator Kohl. Just to go on in connection with that. We
have heard that there is criticism that the IMF should focus
more on being an effective force in working with countries that
receive credit to ensure that they are aware of steps that they
must take to demonstrate political and economic progress. Is
this a role that you believe the IMF should focus more
resources on?
Secretary Rubin. Let me divide it in three pieces, if I
may, Senator. It is obviously a very important question. I
think that for all kinds of reasons, political pluralism, human
rights, and similar kinds of issues are issues that we should
pursue. They are our traditional values as a country.
There was a little piece in the Washington Post today about
Thailand. It was very interesting. They quoted the new Prime
Minister of Thailand as saying that because he has a democracy
it was easier, or they could more readily adopt the kind of
reforms they need to come back. I do believe that democracy,
over the long term at least, is a better form of government
economically. That is in the interest of these countries and
also in our interest. So I think that we should pursue these
objectives in all possible fora.
Now having said that, in the programs that are designed to
deal with financial instability that take place in a time of
crisis and where wrenching changes have to be made very
quickly, there are practical limits on how much you can do--
these are extremely difficult to get done. I have now lived
through a few of them. They are very difficult to get done.
I think that in those kinds of programs what you need to
do, at least I think, is to limit yourself, or the IMF needs to
limit itself I should say, to the reforms that will help
reestablish financial stability and confidence, because that
itself requires wrenching change and is extremely difficult to
do. But I think we need to pursue these other objectives in all
ways that are practical.
Now in these reform programs there are very often measures
that do address some of what you are talking about.
Senator Kohl. All right. What do you think, Mr. Secretary,
of establishing a formal IMF advisory committee that would
oversee IMF lending decisions?
Secretary Rubin. If you mean oversee them in the sense of
before they are made, I think that that is probably not
practical. These decisions tend to get made in a very short
period of time. In the case of Korea I think it would be fair
to say that there were three or four critical days, and if the
IMF and the international community had not moved with
dispatch, that there was a very realistic chance that the
banking sector in Korea might have been in default with untold
possible consequences for our country because of the possible
ripple effects and so forth.
If you are talking about some sort of a review process, I
think those are the kind of things that are realistic and worth
considering.
Budget Surplus
Senator Kohl. Mr. Secretary, there has been a lot of
discussion on the budget surplus. It is my understanding that
the Federal Government as we know will spend over $1.7 trillion
in 1999 and yet our revenues will exceed the outlays. Do you
believe we are entering into a new era of surplus which will be
longlasting? Are you concerned about whether that, in fact, is
a conversation that will not become reality? And if we do have
surplus, what should we be doing with our surplus?
Secretary Rubin. It is obviously a very important question
you raise. The Office of Management and Budget and the CBO both
project surpluses that go on for a long time. And I know in the
case of OMB because I was involved in it, the assumptions are,
I think it would be fair to say, quite conservative.
Senator Kohl. Let me just ask this question.
Secretary Rubin. But I must say, life----
Senator Kohl. Just a couple years ago we were seeing
deficits as far as the eye can see. What has changed?
Secretary Rubin. One thing certainly changed. In 1993, you
had a powerful debt reduction program put in place that had I
think--not I think, it did have very dramatic effects. That in
turn spurred a recovery. Then the recovery reduced the deficit
further. You had a healthy interaction between deficit
reduction policy and a strong economy. That I think has really
dramatically changed the fiscal position of the United States
and economic conditions in this country. And I think as a
consequence we are for the first time in a long, long time a
nation with its economic house in order.
Having said that, going forward all that I said about these
conservative assumptions notwithstanding, your point is also
correct, or at least the implicit point, which is life
sometimes has some surprises and can take turns one had not
expected. So I think one needs to be very prudent about how one
thinks about this surplus. I think the President had it exactly
right. By addressing Social Security we are dealing with the
long-term fiscal position of the country, and I think his idea
of not doing anything with this surplus until we address Social
Security is a fiscally sound thing to do in an uncertain world.
Tax Code
Senator Kohl. Mr. Secretary, some people say we should
sunset the IRS, or that we should replace the income tax with a
sales tax, or perhaps we should go to a simplified flat tax.
Mr. Secretary, what do you think about these proposals? How do
you respond when people say that we should eliminate the IRS or
that we can eliminate income taxes?
Secretary Rubin. You could eliminate income taxes but you
are still going to have some expenditures. So I think you need
some revenues. I did not go to business school, but I sort of
picked this stuff up when I was on Wall Street. [Laughter.]
Senator Kohl. I just want to make the point that some of
those people who talk about eliminating the IRS, eliminating
income taxes then do not say what you just said.
Secretary Rubin. I will give you a more serious answer. I
think that the idea of sunsetting--I have said this before and
probably I will say it again--I think the idea of sunsetting
the Tax Code without having a fully developed alternative that
you can evaluate is a genuinely terrible idea. Because I think
the problem is that if you ever enacted such a thing, you
create an uncertainty that could undermine our economy.
If you do not know what a house is worth because you do not
know whether the mortgage interest is deductible--I know you
are very involved with business, Senator. If you do not know
how to evaluate investment because you do not know how
depreciation is going to be treated, it seems to me the
uncertainty could truly undermine our economy. So I think it is
a genuinely terrible idea.
Senator Kohl. So you would say some of the discussion I
have heard in the House about taking a vote to sunset the IRS
in and of itself, standing all by itself, is ludicrous?
Secretary Rubin. Sunsetting the Tax Code I think is
ludicrous. Not ludicrous, I just think that it--yes, it is in
the neighborhood of ludicrous. It is in that neighborhood, I
think. If you get rid of the IRS you are going to have to have
somebody else perform that--if you are talking about the IRS as
an administrative unit, then you have to eliminate that IRS and
immediately create a new IRS to enforce the Tax Code. So I do
not think that that is a particularly practical idea.
IRS Collections
Senator Kohl. Mr. Secretary, it is my understanding that
the IRS is losing the potential to collect hundreds of millions
of dollars in overdue taxes due to the problems in determining
which accounts are collectible and which are not collectible.
What action is the IRS taking to develop information on
written-off accounts to determine whether cost-effective
collection measures can be developed and applied?
Secretary Rubin. We have a 10-year writeoff rule if I
remember correctly.
Ms. Killefer. Yes; that is correct.
Secretary Rubin. I am not quite sure what that question
goes to. There are a lot of questions about collection. For
example, Commissioner Rossotti feels that the IRS should move
more quickly on collections than it does today, and that it
will get a higher collection--a better result in terms of
collections as a consequence. But beyond that--Nancy?
Ms. Killefer. A couple of things. I am not quite sure of
the ramifications of all your questions. In looking at business
practices at the IRS I think it is very clear to the
Commissioner, and I would agree with that, that many of them,
in addition to our technology, need to be modernized.
Collections is clearly an area--my background is all in the
private sector--that suggests that we need to make some major
changes.
Private sector collection practices specialize in getting
to the delinquent person very early in the process--literally
within the first 60 days--and dealing with them. They tend to
come in three groups: the people that want to pay that just
have to figure it out and are able to pay, the people that also
want to pay but are unable to financially and you work out a
payment system with them, and the people that will not pay and
those you use enforcement activities on.
We believe very strongly that the IRS needs to modernize
its collection processes today. We do not get tax debts until
they are virtually 180 days old, which is not the time to be
dealing with them. It is going to take systems modernization to
get those records earlier in the process. So really it is a
very long term change. But I do think collection practices need
to be modernized.
In addition, you may be referring to a couple of programs
now that deal with taxpayers who want to pay but are
financially unable. One is called the Offers in Compromise
Program, and then there is an appeal program. We are actually
looking at the Offers in Compromise Program now. There are two
study groups working on improving it, and the Commissioner is
part of that. The appeals process has actually been a very
successful program at the IRS.
Senator Kohl. That is good. Thank you.
Thank you, Mr. Chairman.
IMF
Senator Campbell. Before I ask Senator Faircloth, there was
one thing that came across my mind when you were talking about
the IMF, and that is how much we actually pay into the IMF
fund. What is our contribution to the IMF?
Secretary Rubin. As a percentage?
Senator Campbell. As a percentage and a dollar amount?
Secretary Rubin. I think Senator Kohl had it right, we have
$36 billion of commitment of which about $18 billion has been
drawn down and $18 billion is----
Senator Campbell. $36 billion commitment?
Secretary Rubin. Yes; of which $18 billion has been drawn
down.
Senator Campbell. How often?
Senator Kohl. That is total.
Secretary Rubin. It gets drawn down as needed. The last
time you actually increased the commitment, which may be what
you are driving at, was in 1992. As was true then, so is true
now, the rest of the world was ready to go. We were the only
ones who were holding back. When Congress approved the increase
in 1992, the rest of the world completed their approval
process, I think, within 6 days.
Senator Campbell. Is our commitment the largest of any of
the contributors to the IMF?
Secretary Rubin. Sure. We also have the largest economy. We
have about 18 percent of the votes and we put up about 22
percent of the money, which just so happens is about our
percentage of world GDP.
Senator Campbell. Thank you.
Senator Faircloth.
Secretary Rubin. Which does internationalize the burden,
because it means the rest of the world has put up 78 percent or
thereabouts. I may be off by a percent or two.
Senator Faircloth. Thank you, Mr. Chairman.
Tax Code
Mr. Secretary, I do want to give praise in bringing Mr.
Rossotti and being able to bring that type of man into the
Internal Revenue Service. He is, as you mentioned or you
alluded to, his expertise is running a major corporation. Not
only he ran it, he put it together and made it run, and it is
in electronic data processing. So he sounds like exactly what
we need.
Ms. Killefer, are you with the IRS?
Ms. Killefer. No; I am not, sir. I am the Assistant
Secretary for Management with Treasury, but I do work closely
with Commissioner Rossotti.
Senator Faircloth. We hear over and over, the biggest
complaints we get in the office are private citizens and IRS
problems. Some of them--I have held a couple of hearings and
people come that are just appalling stuff. You could not
believe it, but yet it proves to be true in many cases.
I must say that I have been in business all of my life
since I was 18 and have had many, many audits by the IRS and
have all been very satisfactory. I have never felt abused or
put upon or anything else. But I see these people come in. And
the thing that really bothers me, they are usually very small
taxpayers. In fact we have never had what I would consider a
major taxpayer that had a competent auditing firm call us or
bother us. It is always a mom-and-pop type thing, and usually
the amounts involved are just not that much money.
You said to sunset the code is a mistake. And we all know
that income has ultimately got to meet outgo, so we have to
collect the taxes. But what happens to the boondoggle of 17,000
stacked up pages, the incomprehensible code that we have today?
Now I think anybody would know that that is as bad as--what
do you do? How do you get rid of 15,000 of those pages?
Secretary Rubin. Let me try and take it in two pieces, if I
may, because you said something that I think, Senator, we very
strongly identify with. So let me, if I may just comment on
that. I think you correctly have a concern about the people who
have been abused or have not been treated properly by the IRS,
something we very much agree with. I think as much as any of us
agree, Commissioner Rossotti agrees even more, and his
commitment is to try to change that.
One of the things that he is doing is putting in place a
program--his reorganization plan involves having a unit that
will deal with small business. In addition, the NPR made some
similar, or the NPR/Treasury/IRS Customer Service Task Force
made some similar suggestions of having special capabilities to
deal with the problems of small business. So I think your point
is well taken.
But the code is overcomplicated. We have tried to--not
tried to, we have introduced and then had enacted a number of
simplifications as we have gone along. But it is still too
complicated and I think all of us need to focus on
simplification every way we can. I think we can have good
debates about different simplification measures, whether we
should do them or not do them.
But what I was saying was that having a debate on a
simplification measure, or even debating the progressive tax
system versus the flat tax--I do not happen to think flat tax
is a good idea. But that is a legitimate debate it seems to me
reasonable people can have, and Congress can decide one way or
the other. All I was saying was that to simply do away with the
code and not have a fully developed alternative seems to me to
have enormously serious and negative implications.
Senator Faircloth. We have to collect taxes, and if the
code is called the law--there is nobody foolish enough to think
that----
But I am still saying that the 17,000 pages, how do we
simplify it to a process that most citizens, or the intelligent
people can understand it? As it is today even CPA's do not
understand it.
Secretary Rubin. You are right. It got complicated because
an awful lot of people wanted to accomplish an awful lot of
economic, social, and other purposes. I think that the only way
it is going to get simplified is if Congress and the
administration work together on trying to reduce its
complexity. As I said, we had something like--I apologize for
not remembering the number, Senator, but something like 40 or
45 or 50 simplification measures that were enacted in 1997,
some of which were quite meaningful. Some of them were
relatively small. And we continue working along those lines.
But we do have a complex economy and a complex society, and
that is reflected in our Tax Code. But I totally agree with
you. I think we should work toward simplification, but I think
that, as I said a moment ago, I think sunsetting is, for the
reasons I said, a very undesirable idea.
Senator Faircloth. If the Congress simplifies anything, the
leopard will have shed his spots.
Secretary Rubin. The what?
Senator Faircloth. If the Congress simplifies anything, the
leopard will have shed his spots, because simplification is not
what we usually do.
Secretary Rubin. I think there is a bit of truth to that,
but that is part of the problem. Both Congress and the
administration have--not necessarily this administration, all
administrations have a lot of problems as they try to simplify
the Tax Code. But I agree with you, I think simplification is a
very important objective.
I might add, I do think, Senator, that there are measures
that one could take that could make this Tax Code simpler for
the great preponderance of people, the people of relatively
simple economic situations, and I think that is something we
can all work on. For example, last year we made profits on
homes not subject to tax if they were under $500,000. That
actually makes a difference for a lot of people.
IMF
Senator Faircloth. I was being a little flippant, but
usually when we get into it it gets more complex rather than
simpler.
The IMF problem that bothers me, the core of the problem is
this. In the new arrangement for borrowing, the use of the
stabilization fund, is it not inevitable that we are
encouraging high-risk loans, high-interest loans around the
world? Now we have all seen the buildings that were built in
Asia that were not needed, that were not financially feasible.
They just built a building. No. 1, as a monument to the
building or the financier, because his building was higher than
somebody else's building. And the propensity of international
bankers to lend pretty freely; very freely.
We have seen all sorts of harebrained projects throughout
the world, but now we are looking at them in Asia. The
International Monetary Fund, by whatever method it does it, is
bailing these banks out. It props up the country, it props up
the economy. One way or another, the money is funneled back to
stabilize a loan that should never have been made. That is what
bothers me about the monetary fund.
Would you comment on what I said, or is it totally wrong?
Secretary Rubin. No; I do not think it is totally wrong.
You and I have discussed this before. I think it is a
legitimate and serious concern. It is one that, as you know, we
share. I think the problem that we have, as we have discussed
before, Senator, is that the kind of financial instability that
we are now trying to deal with in Asia--and that is an
extremely complicated, difficult situation that, although some
countries are on better footing than they were, is still a very
complex situation with a lot of work lying ahead and a fair bit
of uncertainty.
These situations create an enormous threat to our economic
well-being. It is because of that that we have the view, and
Chairman Greenspan and I have testified on a number of
occasions that our view is that, while what you say is a
serious concern and a byproduct of these programs, what we need
to do is to work to restore financial stability, strengthen the
IMF so that we can do that and at the same time, try to improve
the architecture so that in the longer run we can deal with
this problem. I think that is the answer.
Now having said that, in Asia--and I think I take some
comfort from this and I suggest you might as well--there have
been and will be enormous losses by creditors. Creditors and
investors have been very badly hurt in Asia, and I think that
is actually a salutary effect. I also think, and I have spoken
to a lot of people in the international banking world, and
Chairman Greenspan said the same thing in an open hearing, I do
not think that bankers have been influenced in their judgments
by an expectation that the IMF would be available to provide
support if trouble developed.
I think there was overlending. But I think what happened is
what you always see in markets, or virtually always, which is
markets tend to go to extremes. I think as the years went on
and people were doing well, they started to forget about risk.
So do I think we need to deal with the problem that you
have raised? Yes; but do I think that we have an overwhelming
imperative to have a strong IMF that can protect our interests
while we are trying to improve the architecture to deal with
this problem better? The answer would also be yes.
Senator Faircloth. What was that word that I know we
discussed at one time, moral?
Secretary Rubin. Moral hazard. That is precisely the issue.
We agree.
IMF Proposed Reforms
Senator Faircloth. There is much talk we are hearing in the
Congress about reforming the--reforms, imposing reforms and
constraints on the IMF. Has the Treasury come up with any
proposed reforms of IMF?
Secretary Rubin. We have not formally submitted proposed
reforms. Let me say, there are two types of reforms that are
being discussed. One are reforms of the IMF. We have been
working with members in both parties and in both houses on----
Senator Faircloth. I know Chuck Hagel is----
Secretary Rubin. Exactly, precisely. We have been working
with Senator Hagel. He has taken the lead in it. We have been
trying to help as he has worked his way through this.
There is another set of reforms which are, I think in a
larger sense maybe even more significant. In fact, I do think
they are more significant, which are the changes that need to
be made in the architecture of the international financial
system. Those are going to take longer to put in place.
But they all revolve around the same kinds of things:
greater transparency and disclosure, which can be helpful in
preventing crises and can be helpful in terms of providing
public awareness of how the IMF functions; mechanisms that
relate to the problem you just mentioned, which is how do we
bring the private sector in more so they bear as fully as
possible the consequences of their actions; reforms that go to
the question that Senator Kohl raised of what the content of
these programs are, although I think we have to recognize the
realistic limitations on that. Those are the kinds of things
that we are talking about.
Senator Faircloth. Thank you, Mr. Secretary.
Secretary Rubin. Thank you, Senator.
Senator Campbell. Do you have anything further?
Senator Kohl. No.
Senator Campbell. I think we are done grilling you for the
morning, Mr. Secretary. We certainly appreciate you being here
and wish you the best.
Secretary Rubin. Thank you, Mr. Chairman. We look forward
to working with you.
Submitted Questions
Senator Campbell. Mr. Secretary, we have additional
questions for the Department and we would ask that you respond
as quickly as possible.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
fiscal year 1999 budget request
Question. Mr. Secretary, Treasury has two distinct functions--
fiscal management and law enforcement. How do you balance the needs of
these two functions?
Answer. These functions are equally important within the Department
as is demonstrated by the equal under secretary capacity they both hold
within the Department. Treasury, in both its program direction and in
resource allocation, looks carefully at the individual issues all
across the Department in an effort to direct proper attention to all
essential functions. At any particular time, it may appear that one
area has more attention than another, however, over time, all areas are
balanced as part of the senior policy deliberations in the Department.
Mr. Secretary performance goals for the Department have been
included with the budget request for the past three years. In some
cases, the Department has done very well in reaching stated goals.
Sometimes though the agency just doesn't quite make it.
Question. Based on your experience of the past three years, what
lessons has the Department learned about setting realistic goals? How
does the Department develop performance goals for agencies who are
totally dependent on others to reach those goals?
Answer. As you point out, Treasury has made a serious and sustained
effort to base its resource requests on quantitative performance goals,
to manage to achieve those goals, and to report on achievements to
Congress and the public. This has been a difficult process for our
programs. In many cases, we have struggled to identify appropriate
performance measures for programs where results are inherently
difficult to measure. However, we are committed to continuing to use
performance measures to manage our programs because of their great
promise to help us achieve the best possible mission results.
Once measures have been identified, goal achievement has often been
impacted by unpredictable changes in external factors (e.g. shifts in
demand, crises such as terrorist incidents which affect priorities). As
we gain more experience with measurement, our ability to forecast and
set realistic, but challenging, targets will continue to improve.
However, there clearly will always be some limits to our ability to set
the right goals.
Question. Mr. Secretary, what is the status of the search for a new
Treasury Inspector General? Are you looking for an auditing or law
enforcement background in your search for a new I.G.?
Answer. The IG is appointed by the President and confirmed by the
Senate. We are looking for the best qualified candidate consistent with
the statutory obligations of the office, particularly, as it relates to
investigations and financial audits. We are moving on a expedited
basis.
Question. Although Secretary Albright's report is not due to
Congress until later this month, I would be interested to know the
current status of your participation in this task force. Are there any
preliminary thoughts you wish to share on what the Justice Department
can do to help countries reduce and prevent crime?
Answer. Although The Department of Treasury cannot address
Department of Justice efforts in the international crime realm,
Treasury's law enforcement bureaus--including the Bureau of Alcohol,
Tobacco, and Firearms (ATF); the Customs Service; the Internal Revenue
Service (IRS); the Secret Service; the Financial Crimes Enforcement
Network (FinCEN), and the Federal Law Enforcement Training Center
(FLETC)--have numerous initiatives to help other nations prevent and
combat crime in their societies that may impact U.S. citizens, our
economy, and institutions.
Treasury's law enforcement personnel stationed abroad work closely
with their foreign counterparts to pursue violations involving trade;
smuggling of contraband such as drugs, alcohol, tobacco, firearms,
stolen vehicles, wildlife, and child pornography; and financial crimes
including money laundering, counterfeiting, and electronic access
device schemes. Treasury currently has 115 agents stationed in foreign
countries. In fiscal years 1996-1997, the Customs Service handled more
than 5,664 international cases, the Secret Service closed over 3,200
cases abroad, and the Internal Revenue Service's Criminal Investigation
Division (CID) handled more than 230 foreign cases.
Treasury has implemented extensive bilateral training programs for
foreign counterparts to improve their abilities to collect, analyze,
and share financial and other law enforcement information. Treasury has
taken the lead in creating a new International Law Enforcement Academy
(ILEA) for Latin America. The ILEA promotes regional cooperation
against crime and forges valuable working relationships between U.S.
and overseas law enforcement officers. U.S. and foreign law enforcement
officers utilize techniques learned at the academy and participate in
investigations leading to the dismantling of organized crime
syndicates. Treasury law enforcement bureaus are also active
participants in the training provided to eastern European countries at
the ILEA in Budapest, Hungary. For example, agents from the IRS's CID
present instruction covering basic financial investigative techniques
designed to provide the students with an understanding and appreciation
of financial crimes.
By strengthening its presence abroad and establishing domestic and
foreign programs, the U.S. Secret Service is a forerunner in combating
counterfeiting, advance fee and credit card fraud, and other financial
crimes that cost consumers, financial institutions, and governments
billions of dollars each year.
IRS's CID continues to emphasize State Department initiatives under
the Freedom Support Act (FSA) and the Support for Eastern European
Democracies (SEED). Emphasis is also placed on South and Central
American countries as well as Caribbean nations. These areas represent
CID's primary international concern because they are areas that most
impact the U.S. in financial crime matters, including money laundering
and other financial crimes.
Another example of the Treasury Department's strategic goal of
fighting crime and violence internationally is the role ATF plays in
support of the Office of National Drug Control Policy (ONDCP) in its
international war on drugs. ATF participates in ONDCP projects such as
Achilles and Gang Resistance Education and Training (GREAT) and with
both the High Intensity Drug Trafficking Area (HIDTA) and Organized
Crime Drug Enforcement Task Force (OCDETF) enforcement efforts. Beyond
OCDETF support, ATF's International Response Team directly responds to
international bombing incidents and provides training to international
law enforcement officers on post-blast and improvised explosives
investigative techniques. ATF's International Trafficking in Arms
(ITAR) expertise is of interest in United Nations and Organization of
American States negotiations to curb the illegal manufacture and
trafficking of arms, as is ATF's training of international
investigators on firearms identification and tracing. Additionally, in
the strategy of prevention of criminal exploitation of international
trade, ATF works with the Office of the United States Trade
Representative and through oversight of the regulated industries to
prevent illegal diversion of regulated commodities (e.g., beverage
alcohol and firearms).
Another component of prevention is coordination between federal
agencies and private sector organizations that operate overseas. For
example, the Customs Service has implemented two industry partnership
programs--the Carrier Initiative Program (CIP) and the Business Anti-
Smuggling Coalition (BASC) that involve foreign and domestic importing,
manufacturing, distribution, and carrier communities in anti-drug
efforts. These and other programs, such as the Americas Counter
Smuggling Initiative, have strengthened cooperative efforts with the
international trade community, increased awareness of contraband
trafficking in the commercial environment, and disrupted internal
conspiracies.
Treasury is actively engaged in negotiating with other governments
to eliminate financial safe havens. These cooperative efforts include
providing assistance in drafting money laundering laws and regulations,
assisting in the establishment of anti-money laundering institutions,
and providing training in civil and criminal financial crimes
enforcement.
With Treasury's support, for instance, Mexico has enacted anti-
money laundering regulations that impose large currency transaction and
suspicious activity reporting requirements on Mexican financial
institutions. Treasury has assisted Mexico in creating a Financial
Intelligence Unit (FIU) to collect and analyze financial investigative
information. FinCEN, the U.S. FIU, is recognized as a leader in the
field and has supported the development of FIU's throughout the world.
There are currently 28 FIU's worldwide.
Treasury, in conjunction with our counterparts in the United
States, works with other countries to develop and promote anti-money
laundering standards through multilateral efforts such as the Summit of
the Americas, the Financial Action Task Force, the Caribbean Financial
Action Task Force, the Inter-American Drug Control Commission, the
Egmont Group (of FIU's), and others. Through these processes, Treasury
supports a system of common standards, the cooperation of FIU's, and
asset forfeiture and sharing. It also participates in mutual
evaluations of other countries' compliance with international anti-
money laundering standards and recommended improvements.
Multilateral efforts have contributed to the enactment of anti-
money laundering laws and regulations in several countries. In Europe,
for example, since January 1994, Austria, Finland, Greece, Ireland,
Monaco, the Netherlands, and Spain have implemented new money
laundering legislation ranging from the criminalization of money
laundering to the creation of monetary transaction reporting systems.
The Treasury Department has worked with more than a dozen countries
especially vulnerable to money laundering to encourage them to address
their deficiencies through a two-pronged approach of assistance with
anti-money laundering programs and warnings about the consequences of
inaction. In cooperation with our counterparts in the Departments of
Justice and State, Treasury has contributed to maximizing the efforts
of foreign police forces, prosecutors, and judges through training and
technical assistance programs.
Treasury has also actively participated in the negotiation of
bilateral treaties and other arrangements with other nations. One
example has been to effect the recovery and return of stolen vehicles
taken abroad by criminal gangs operating in the U.S.
Additionally, through Presidential Executive Order 12978 issued
under the International Emergency Economic Powers Act (IEEPA), the
Treasury Department has identified businesses and individuals acting as
fronts and middlemen for significant narcotics traffickers centered in
Colombia. Through the IEEPA economic sanctions that the Executive Order
imposed against the Colombian narcotics cartels, those fronts and
middlemen known collectively as Specially Designated Narcotics
Traffickers (SDNT's), are prevented from doing business with U.S.
persons anywhere in the world and are denied access to the U.S.
financial system.
These SDNT's have been denied access to banking services not only
in the U.S., but also in Colombia by Colombian financial institutions.
For example, the Treasury agency that administers the IEEPA sanctions,
the Office of Foreign Assets Control (OFAC), has identified nearly 400
closed Colombian bank accounts affecting nearly 200 SDNT's; and
anecdotal evidence points to hundreds more closed accounts affecting
SDNT's. In addition, SDNT's have been forced out of business or are
suffering financially. Over 40 SDNT companies, with estimated combined
annual sales of over $200 million, were liquidated or were in the
process of liquidation by February 1998. These effects are in addition
to the as yet unquantified, but very real, costs to the SDNT companies
and individuals of being denied access to the U.S. financial and
commercial systems.
Economic sanctions under IEEPA directed against non-state foreign
national security threats are a powerful weapon that is being used
against not only drug traffickers but also certain Middle East
terrorists.
As outlined above, the Treasury Department and its bureaus are
taking a proactive approach to help other countries reduce and prevent
crime. We plan to continue sharing our knowledge and experience with
foreign law enforcement officials and believe that we will continue to
reap many benefits from doing so, both domestically and abroad.
the performance plan
On September 30 of last year, agencies submitted their first
strategic plans as required by the Government Performance and Results
Act, popularly known as the Results Act. With this year's budget
justifications, agencies are submitting their first annual performance
plans under the Results Act. To its credit, the Treasury Department has
voluntarily done performance plans and reports at its own initiative
for several years. Therefore, Treasury already has some experience
under its belt.
Question. In general, how satisfied are you with Treasury's
performance goals and measures in the law enforcement area? For
example, are they as results-oriented as they could be? Do they target
and measure the right outcomes? Do they set the bar neither too low nor
too high?
Answer. I am pleased with the progress Treasury has made to date in
developing performance measures for its many and varied programs, but I
also recognize that much more work is needed--particularly in the law
enforcement arena--to institute an effective performance management
system throughout the Department.
Over the last several years we have moved from limited reporting of
traditional workload statistics to a planning and reporting process
based on a mixture of workload, quality, customer service, and outcome
measures. But, as you know, measuring the true impact of government
programs is rarely a straight-forward exercise. We cannot normally use
established private sector measures like return-on-investment.
Measuring results is especially challenging for our law enforcement
programs. We are working within the Department to address this issue
and we have begun discussions with Justice on creating a performance
measures working group. Treasury personnel are rising to this
challenge, and with their continued hard work combined with feedback
from our stakeholders (Congress, customers, partners, etc.) we will
continue to improve our capacity to define and measure program success.
Question. Are you confident that the law enforcement components
have reliable data sources, information and financial management
systems, and other resources needed to set realistic performance goals
and measure actual accomplishments under these performance goals?
Answer. The Department--including our law enforcement bureaus--has
made substantial progress in the last several years in improving the
data systems which support our financial and performance reporting. You
can see this progress in the dramatic improvements in our audit
results. As our measurement systems evolve and change over the next
several years, we will continue to focus on data validity and
reliability. In addition, in our performance plans and reports we will
seek to provide the reader with a full description of each performance
measure, including its definition, data sources, and the reliability of
the data (e.g., confidence intervals for statistical data).
Question. Does your plan include any performance measures for which
reliable data are not likely to be available in time for your first
Results Act performance report in March 2000? If so, what steps are you
taking to improve the reliability of these measures?
Answer. We recognize that improving the reliability and validity of
performance data is a major challenge to the efforts by both Congress
and this Administration to successfully use performance management to
maximize our program results. We are working with Departmental, bureau,
and Inspector General staff to improve the quality of our data. As
noted above, we believe in ``truth-in-reporting'' and will seek to
provide the reader with a full description of each performance measure,
including its definition, data sources, and the reliability of the data
(e.g., confidence intervals for statistical data).
Question. Based on your fiscal year 1999 performance plan, do you
see a need for revisions to the strategic plan you issued on September
30, 1997? If so, what revisions are needed and when do you plan to make
them?
Answer. No. We currently do not plan to engage in an early revision
of the Department-wide strategic plan. We want to make use of the
strategic thinking and direction that evolved during last year's
planning process to craft our fiscal year 2000 budget request and to
improve our performance measures. Some Treasury bureaus may revise
their individual strategic plans during 1998. If so, they will consult
with Congress and other stakeholders during their plan revision
processes as required under the Results Act.
Question. The IRS hearings last Fall highlighted the familiar
principle that you get what you measure, and demonstrated how the wrong
performance measures can give the wrong incentives to federal
employees. Balanced performance measures that take into account to
citizens as well as other objectives are particularly important in law
enforcement. What are you doing to ensure that your performance
measures do not cause unintended consequences or undesirable effects on
employee behavior?
Answer. Feedback from the National Performance Review/IRS/Treasury
Customer Service Task Force, recent congressional hearings, and
Internal Audit reports indicated that the IRS performance measures used
in fiscal year 1997 did not strike a proper balance between customer
service and fair enforcement of tax laws. As a result, the IRS has
designated a task force to develop a balanced scorecard of performance
measures. During fiscal year 1998, the IRS will be working with OMB,
Treasury, and the National Treasury Employees Union and a contractor to
develop this balanced scorecard that will evaluate the IRS on: customer
satisfaction, employee satisfaction, and business results. A primary
goal of this balanced scorecard measurement system will be to ensure
that IRS treats all taxpayers fairly, while emphasizing quality
customer service and respect for their rights.
More generally, the Department is very sensitive to the fact that
inadequate measures--for law enforcement and other programs--can result
in undesirable behavior. Our common challenge is to continue to refine
and improve our measures for all of our programs, making certain that a
proper balance is maintained and that unintended consequences are
avoided. Congress is encouraged to help us in this effort by giving us
feedback on our recently submitted performance plan, especially where
there is a sense that the current set of measures may lead to improper
results.
Question. What have you done to ensure accountability within your
agency for achieving performance goals? Is achieving performance goals
tied directly to your systems for evaluating and rewarding agency
managers?
Answer. I have designated a senior Treasury policy official as the
lead official responsible for implementing each objective in the
Treasury-wide strategic plan. These objectives are supported by bureau
strategic goals and objectives. The bureau goals and objectives in turn
are supported by the individual annual performance targets in our
performance plan. I intend to hold these lead officials responsible for
achieving their objectives. I expect them to manage their subordinates
accordingly.
Our current performance evaluation process for evaluating agency
managers is not tied directly to the Department's strategic and
performance plans. However, we are currently studying how to strengthen
the connection between these evaluations and our plans.
Question. How were your performance measures chosen? How did the
agency balance the cost of data collection and verification with the
need for reliable and valid performance data?
Answer. Treasury's current performance plan has evolved over the
last several years. Measures are prosed by individual programs which
make changes in response to their own experiences in using their
measures to manage, and in response to feedback Treasury, OMB, Congress
and other stakeholders. Our measures are in the process of being
evolved from traditional output indicators to a balanced set of
customer satisfaction, employee satisfaction and business results
measures. For each new measure which involves new data collection
efforts, program managers need to balance the cost of collection
against the usefulness of the measure. In many cases, significant
investments in data collection are justified by the ability of managers
to run their programs more efficiently using the new data.
management problems
GAO has identified 25 ``high-risk'' areas within the federal
government that are particularly vulnerable to fraud, waste and error.
Two of these areas are specific to Treasury law enforcement operations:
Customs Service financial management and Treasury forfeited asset
management. Based on an initial reading, your performance plans don't
appear to significantly address these problems. The only reference I
found was a goal to ``focus on internal controls of the asset
forfeiture program to eliminate weaknesses in the program that can
result in lost revenue.'' However, this goal is very general and is not
accompanied by any performance measures.
Question. Your performance plans include specific goals, measures,
and timetables to resolve your two high-risk areas? If not, why not?
Answer. The ways in which these GAO high risk issues are addressed
in the fiscal year 1999 Treasury performance plan are detailed below.
Forfeited Assets Management.--The Forfeiture Fund chapter of the
performance plan addresses this issue and the GAO's concerns (page TFF-
17) but does not include a specific performance target on the subject.
Customs Service Financial Management.--Treasury's performance plan
includes a goal to achieve an unqualified audit opinion on the
Department-wide consolidated financial statement for fiscal year 1999
(page DO SE-43). Achieving this goal will require an unqualified
opinion on the Customs financial statement. Customs achieved an
unqualified opinion for fiscal year 1997 on its financial statement.
However, despite this opinion, Customs continues to have material
weaknesses which the Department is committed to correcting. Customs has
specific action plans and timetables in place to address its material
weaknesses.
Question. Are you willing to amend the performance plans to do
this?
Answer. My staff would be happy to work with Congressional staff on
how we can refine the performance plan to make it more useful to
Congress. They are available to discuss how these management issues are
addressed and any other areas where Congress believes improvements can
be made.
GAO has indicated that a key factor in resolving high-risk areas is
a real sense of commitment and accountability on the part of agency
managers. At least one agency has adopted a specific performance
measure of getting off the GAO high-risk list by a date certain.
Question. Are you prepared to revise your plans to include
performance measures making such a commitment for your high-risk areas
and establishing such accountability for you and your managers?
Answer. The ways in which the GAO's high risk list is addressed in
the fiscal year 1999 Treasury performance plan are detailed below.
Forfeited Assets Management.--The Forfeiture Fund chapter of the
performance plan addresses this issue and the GAO's concerns (page TFF-
17) but does not include a specific performance target on the subject.
Customs Service and IRS Financial Management.--Treasury's
performance plan includes a goal to achieve an unqualified audit
opinion on the Department-wide consolidated financial statement for
fiscal year 1999 (page DO SE-43). Achieving this goal will require
unqualified opinions on the Customs and IRS financial statements. Both
of these bureaus achieved unqualified opinions for fiscal year 1997 on
their financial statements. However, despite these opinions, they
continue to have material weaknesses which the Department is committed
to correcting. Both Customs and the IRS have specific action plans and
timetables in place to address their material weaknesses.
Collection of IRS Tax Receivables and IRS Filing Fraud
(Particularly Earned Income Credit (EIC) Claims).--The IRS chapter of
the performance plan addresses accounts receivables (page IRS, SD-11)
and includes a number of performance measures related to its compliance
activities. However, as noted in other answers, feedback from the
National Performance Review/IRS/Treasury Customer Service Task Force,
recent congressional hearings, and Internal Audit reports indicated
that the IRS performance measures used in fiscal year 1997 did not
strike a proper balance between customer service and fair enforcement
of tax laws. As a result, the IRS has designated a task force to
develop a balanced scorecard of performance measures. During fiscal
year 1998, the IRS will be working with OMB, Treasury, and the National
Treasury Employees Union and a contractor to develop this balanced
scorecard that will evaluate the IRS on: customer satisfaction,
employee satisfaction, and business results. Consequently, the current
plan for the IRS is an interim plan, and may be changed as the balanced
scorecard measurement system is developed.
IRS Tax Systems Modernization.--The IRS's plans to ensure the
effective use of its information technology investment resources are
discussed in the IRS chapter of the plan on pages IRS, IS-1-25 and IRS,
IT-1-8.
Year 2000.--Treasury's performance plan includes a goal to have all
``Mission Critical'' information technology systems Year 2000 compliant
in fiscal year 1999 (page DO SE-43).
Information Security.--GAO's information security concerns and
IRS's security plan are discussed in the IRS chapter of the fiscal year
1999 Treasury Performance Plan (page IRS SD-11). In addition,
information security for the Department as a whole is addressed with
the goal ``Regularly review those Treasury bureau security programs,
for compliance with national and departmental policy, that have been
established to ensure security of Treasury's vital assets.'' In fiscal
year 1999, the goal is to review four of these programs (page DO SE-
41).
My staff would be happy to work with Congressional staff on how we
can refine the performance plan to make it more useful to Congress.
They are available to discuss how these management issues are addressed
and any other areas where Congress believes improvements can be made.
With respect to the forfeited assets fund, GAO recommended that
Treasury and Justice achieve greater efficiency by working together on
the management and disposition of property from their parallel but
separate forfeited asset inventories. Yet, neither agency appears
willing to do so.
Question. This seems like an easy thing to do. Why can't the two
agencies cooperate here?
Answer. The two agencies are working together. Last fall, the
Director of Treasury's Executive Office for Asset Forfeiture and the
head of the Marshals Service's asset forfeiture office met with GAO
representatives to explore the best way to help get federal seized
property programs off GAO's high risk list. Following that meeting,
Treasury and marshals have taken practical steps to achieve greater
efficiencies through cooperation. In December and January, real
property auctions conducted by Treasury's seized property management
contractor, EG&G Services, for the first time included properties in
the forfeited inventory of the Marshals Service. Not only did the
auction results far exceed the expectations of the Marshals property
managers but the January sale in Puerto Rico brought in 112 percent of
fair market value.
Our cooperation and search for greater efficiencies has not stopped
with this one initiative. Treasury and Marshals are also underwriting a
series of joint conferences as part of an extensive training initiative
to focus attention on the management of the forfeiture program and,
particularly, its seized property component. These conferences are
geared toward mid-level managers from Treasury and Justice law
enforcement bureaus as well as U.S. Attorneys' Offices. Our first
conference was held in early April in Miami with several more planed
for the balance of the year in those districts with the greatest
volumes of seized property.
Question. If Treasury and Justice are unwilling or unable to
cooperate on something as straightforward as this, what does it say
about their ability to work together on more complex law enforcement
activities?
Answer. Seized property management issues are but one segment of
the very broad area in which Treasury and Justice law enforcement
organizations cooperate every day. Reverse asset sharings are those
monies deposited in the Treasury Forfeiture Fund as a result of
equitable sharing with Treasury law enforcement bureaus based on their
contributions to other federal, mostly Department of Justice,
investigations. Such reverse asset sharings have gone from just under
$3 million in fiscal year 1995, to almost $10 million in fiscal year
1996 and to over $11 million in fiscal year 1997. Clearly, Treasury and
Justice law enforcement organizations are cooperating not only in the
seized property arena, but also on operational matters of increasing
scope, complexity and value.
Question. Can we have your commitment to follow up on this issue
and report back to the Subcommittee?
Answer. We appreciate the Subcommittee's concern with this matter
as it reflects our own desire to make seized property management as
efficient as possible so that savings realized there will be available
to directly strengthen law enforcement through the other payment
authorities of the federal forfeiture funds. We will be glad to keep
you apprised of our progress in this area.
In addition to the agency-specific high-risk areas, two other
government-wide high-risk areas are particularly serious at Customs:
the Year 2000 computer conversion problem and information security.
Treasury's Inspector General also has identified these areas as among
the Department's 10 most serious management problems.
Question. Do your plans contain specific goals, measures, and
timetables to resolve these problems? If not, why not? If so, what are
they? Are you confident that these goals and measures are sufficient to
resolve the problems? If not, what more can you add to get the job be
done?
Answer.
High-Risk Area--Year 2000:
The Year 2000 problem is the most important information technology
issue facing the Department of the Treasury today. If not addressed and
resolved, this issue could have a substantial impact on our critical
mission systems and the delivery of essential government services.
Continuous executive level involvement in this matter is essential to
our success. The high priority of this issue is reflected in the
Treasury Strategic Business Plan for fiscal years 1997-2002 in which
Ensuring Year 2000 compliance is a major objective to achieve the goal
of improving management operations. The specific Year 2000 goal is to
accomplish the century date change to ensure that Treasury systems will
operate properly in the Year 2000. Treasury has an aggressive overall
Year 2000 program in place that actively involves senior executives
across the Department and bureaus, and incorporates metrics reported at
least monthly to ensure that sufficient resources and efforts are
applied to resolve the problem. For those mission critical systems
requiring repair or replacement, the milestones are completion of
renovation or development by October 1998 and implementation by
December 1998. Treasury is on target to complete the conversion,
testing, validation, and implementation of all mission critical systems
to ensure continuous operation in the year 2000 and beyond.
High-Risk Areas--Information Security:
Information security for the Department as a whole is addressed
with the goal, ``Regularly review those Treasury bureau security
programs, for compliance with national and departmental policy, that
have been established to ensure security of Treasury's vital assets. In
Fiscal 1999, the goal is to review four of these programs (page DO SE-
41).
Reviews of these programs highlight areas for program improvement.
We are confident that the compliance review program is sufficient to
resolve the problems.
Customs Service problems with ACE:
Customs' new Automated Commercial Environment (ACE) system for
handling import data has been under development for some time and has
experienced many problems. This Subcommittee, other Congressional
committees, GAO, and the Treasury Inspector General all have pointed
out the problems with this troubled system.
Question. Do your plans contain specific goals, measures, and
timetables to resolve the problems with the ACE System? If not, why
not? If so, what are they?
Answer. The development of ACE is being monitored on an ongoing
basis under the auspices of the Department's Chief Information Officer
(CIO) and the Treasury Investment Review Board (TIRB). The development
of ACE is underway in phases and the CIO, with the concurrence of the
TIRB, has instituted a review process of weekly progress reports from
the ACE Team, monthly reports to the TIRB, and quarterly reports to the
Congressional appropriation committees. These reports include tracking
of expenditures, milestones, and identification of project problems.
Customs is reporting specific performance measures on the development
phase of ACE, while operational performance results await the outcome
of the operation of the upcoming NCAP prototype, a major part of ACE.
The GAO concerns related to ACE are primarily associated with
problems regarding the establishment of Customs information systems
architecture. The architecture has been reviewed recently by the
Private Sector Council, composed of CIO's from major private sector
companies, and an independent review of that architecture has been
completed as well. Based on these reviews, plans and a schedule are in
place to refine the IT architecture to make it a ``best practice'' in
conformance with the Treasury Information Systems Architecture
Framework.
Question. Are you confident that these goals and measures are
sufficient to resolve the problems? If not, what more needs to be done?
Answer. We are confident that the processes in place at the Customs
Service and at the Department to manage ACE development, and to resolve
the architecture issues as they affect ACE, are sufficient to ensure
success of the ACE project. Customs has made significant improvements
in its development approach with respect to major projects such as ACE
and in the establishment of its information architecture. The attention
being devoted to ACE and the Customs architecture efforts by the
Treasury CIO office and the TIRB will provide that assurance. The
Treasury CIO office will continue to keep the Congressional staff
informed as to the progress and problem resolutions with respect to
ACE, and will ensure that the concerns of GAO and the Congressional
committees are addressed.
In a letter to Majority Leader Armey dated January 16, 1998, the
Treasury Office of Inspector General described what they consider to be
the 10 most serious management problems within the Department.
Question. I would like to submit this letter for the record, and I
request that you submit for the record a response that describes what
specific goals and measures in your performance plan, if any, address
each of these 10 areas.
Answer. The ways in which these issues are addressed in the fiscal
year 1999 Treasury performance plan are detailed below.
Information Technology Investment Management.--Treasury's
performance plan includes a goal to have Clinger-Cohen compliant
investment controls in place in all bureaus in fiscal year 1998 (page
DO SEE-42).
Year 2000 Compliance.--Treasury's performance plan includes a goal
to have all ``Mission Critical'' information technology systems Year
2000 compliant in fiscal year 1999 (page DO SEE-43).
Data Security at IRS, FMS, and USCS.--GAO's information security
concerns and IRS's security plan are discussed in the IRS chapter of
the fiscal year 1999 Treasury Performance Plan (page IRS SD-11). In
addition, information security for the Department as a whole is
addressed with the goal ``Regularly review those Treasury bureau
security programs, for compliance with national and departmental
policy, that have been established to ensure security of Treasury's
vital assets.'' In fiscal year 1999, the goal is to review four of
these programs (page DO SEE-41).
FMS's Ability to Produce Government-Wide Financial Statements.--The
FMS section of the Treasury Performance Plan contains a preliminary
statement ``To comply with the Government Management Reform Act (GMRA),
FMS will prepare a Government-wide Audited Consolidated Financial
Statement in Spring 1998.'' Specific performance measures address the
percentage of agency reports for the consolidated financial statement
(CFS) processed by FMS within the established standard accuracy range,
and the decrease in unresolved prior year recommendations and audit
findings that prevent a clean opinion on the audit of the Consolidated
Financial Statement (page FMS-34). To enhance the systems to collect
data, it also has a measure regarding enhancement to the Government On-
line Accounting Link System (GOALS) (page FMS-34 and 35).
Treasury's Ability to Produce Consolidated Financial Statements.--
Treasury's performance plan includes a goal to achieve an unqualified
audit opinion on the Department-wide consolidated financial statement
for fiscal year 1999 (page DO SEE-43).
Financial Management at IRS.--As noted above, Treasury's
performance plan includes a goal to achieve an unqualified audit
opinion on the Department-wide consolidated financial statement for
fiscal year 1999 (page DO SEE-43). Achieving this goal will require an
unqualified opinion on the IRS financial statement. The IRS achieved an
unqualified opinion for fiscal year 1997 on its financial statement.
However, despite this opinion, the IRS continues to have material
weaknesses which the Department is committed to correcting. The IRS has
specific action plans and timetables in place to address their material
weaknesses.
Department's Debt Collection Initiatives.--The FMS chapter of the
performance plan contains the following Performance Goal: ``By fiscal
year 2002, FMS manages a consolidated debt management function that
will concentrate all Federal delinquent debt collection efforts and
produce improved results.'' Specific measures monitoring achievement
include the percentage increase over fiscal year 1997 baseline of FMS-
managed Government-wide collected delinquent debt, percentage of
current market share of Federal Program Agencies (FPA's) with debt
servicing requirements which have referred their debts in compliance
with the Debt Collection Improvement Act (DCIA) of 1996, and increased
Government-wide delinquent non-tax debt collections over fiscal year
1995 baseline (page FMS-31 and 32).
Electronic Fund Transfer (EFT)/Electronic Benefits Transfer
(EBT).--The FMS section of the performance plan dealing with payments
contains the following performance goal: ``By fiscal year 2000, there
is a world-class delivery of all Federal government payments and
associated information to their ultimate destination.'' Success
indicators of this goal include the dollar savings by reducing the
number of check payments, the percentage of transmissions of value
(payments) and associated information made electronically, the number
of states in which direct Federal EBT is available, and the percentage
of planned EBT systems implemented (page FMS-23 and 24).
The FMS section dealing with collections contains the Performance
Goal: ``By fiscal year 2002, the Federal Government's cash management
environment has integrity, meets customer requirements and results in a
lower cost of Federal Government.'' This goal is supported with
measures of electronic collections as a percentage of total
collections, the percentage of corporate withholding taxes collected
electronically, the percentage increase over prior year in
transmissions of value (collections) and associated information made
using financial Electronic Data Interchange (page FMS-28).
Protecting Taxpayer Rights and Compliance Activities and Revenue
Protection.--The IRS chapter of the performance plan addresses accounts
receivables (page IRS, SD-11) and includes a number of performance
measures related to its compliance activities. However, as noted in
other answers, feedback from the National Performance Review/IRS/
Treasury Customer Service Task Force, recent congressional hearings,
and Internal Audit reports indicated that the IRS performance measures
used in fiscal year 1997 did not strike a proper balance between
customer service and fair enforcement of tax laws. As a result, the IRS
has designated a task force to develop a balanced scorecard of
performance measures. During fiscal year 1998, the IRS will be working
with OMB, Treasury, and the National Treasury Employees Union and a
contractor to develop this balanced scorecard that will evaluate the
IRS on: customer satisfaction, employee satisfaction, and business
results. Consequently, the current plan for IRS is an interim plan and
may be changed as the balanced scorecard measurement system is
developed.
Implementing the Government Performance and Results Act.--
Treasury's performance plan includes a goal to achieve full compliance
with GPRA for the Department and its bureaus in fiscal year 1998 (page
DO SEE-43).
specific performance goals and measures
Customs' goals and measures for its drug interdiction efforts focus
on activities and outputs, such as quantities of illegal drugs seized.
While these may be useful, they do not measure the effectiveness of
drug interdiction efforts in achieving their ultimate objective:
reducing the supply of illegal drugs in the United States.
Question. In order to better comply with the Results Act, have you
considered more outcome-oriented goals and measures?
Answer. Yes we have. In fact, we have adopted outcome measures for
narcotics and money laundering in our fiscal year 1999 Annual
Performance Plan. They are:
1. Drug Smuggling Organizations' transportation costs,
2. Changes in smuggling behavior,
3. Costs for Criminal Organizations to launder money, and
4. Money laundering systems disrupted.
Initial feedback on the use of these measures as outcomes has been
very favorable. fiscal year 1998 will be the year baseline data is
developed for these measures.
Although we have adopted these new measures, we will continue to
monitor and report traditional enforcement measures, i.e. seizures,
arrests, and indictments, because they help in the analysis of our
overall impact on the supply reduction problem. In addition, they along
with other performance measures complement the ONDCP measurement
approach.
Question. For example, aren't there indicators that do reflect the
availability of illegal drugs in the community.
Answer. Unfortunately, indicators such as ``street price'' are used
solely, at times, to provide an assessment. That is why the ONDCP
measurement approach complemented by our internal measures may be more
useful. It recognizes that a number of indicators common to several
agencies taken in combination have the potential to provide more
meaningful information than attempting to look solely at individual
agency performance.
In the ONDCP measurement scheme, Customs, along with other federal,
state and local interdiction (supply reduction) agencies reports its
performance on a variety of measure, including number of incidents and
seized quantities of both drugs and currency. We believe that this
comprehensive approach, once fully refined and accepted, will provide
more meaningful information to assess individual agency performance in
the context of overall performance.
In the area of Reducing Violent Crime, ATF includes as performance
measures: ``Crime related costs avoided'' and ``Future crimes
avoided.'' Specifically, its proposed measures for fiscal year 1999 are
$1 billion in future crime related costs avoided and 450,000 future
crimes avoided. These certainly are outcome-oriented measures, but I
wonder how reliable they are.
Question. How did you arrive at these goals and measure?
Answer. This performance measure was designed to show the program's
beneficial financial impact to the public as required by the Government
Performance and Results Act (GPRA). The average number of crimes
committed by an armed career criminal in one year ( x ) the average of
years an armed career criminal is sentenced (in other words, the number
of crimes which will not be committed while the armed career criminal
is incarcerated) ( x ) the average cost of a crime (-) the cost of
incarceration over the length of sentence (=) the total cost savings to
the public in firearms related crime costs avoided. (See Attachments)
[The information follows:]
Federal Firearms License (FFL) Inspection Program Performance Measure
This Performance Measure focuses on the crimes and crime-related
cost prevented due to the effective regulation of the firearms industry
through compliance inspections. This measure encourages RE to focus
their inspections on Federal firearms licensees with the highest volume
of crime gun traces attributed to them because this is where the
problems are and this is where the most impact can be achieved. This
measure is currently under development.
During a study recently performed for ATF by Northeastern
University, the researchers did some preliminary work to determine the
effect that a little attention from ATF had on an FFL who had a high
frequency of crime gun traces. They found that an FFL who had a large
number of crime guns traced back to them would go into a lull after
having received added attention in the form of trace request contacts
from the NTC.
Along those lines, it is presumed that if attention in the form of
a compliance inspection were focused on an FFL with high mime gun trace
requests, there would be an even larger lull/impact in the deterring
this situation. To measure this, Program Officials would identify high
crime gun trace request FFL's for inspection and compare the number of
crime gun trace requests for a one year period before the inspection to
the number of crime gun trace requests on firearms sold during a one
year period after the inspection to show the impact/reduction. The
total number of crime gun trace requests not received is the total
number of crimes prevented in that year due to effective compliance
producing a deterrent effect. The crime costs could be figured in the
same manner as they are under the Achilles program and Trafficking
Program. The crimes and crime-related costs prevented by the RE
inspection program could then be rolled forward with all the other
programs which report their impact in the same manner.
Bureau of Alcohol, Tobacco and Firearms
achilles program
Achilles Program/Protecting America Performance Measure
Average number of crimes committed by an armed career criminal in
one year ( x ) the average number of years an armed career criminal is
sentenced (in other words, the number of crimes which will not be
committed while the armed career criminal is incarcerated) ( x ) the
average cost of a crime (-) the cost of incarceration over the length
of sentence (=) the total cost savings to the public in firearms
related crime costs avoided.
Beneficial Financial Impact
This performance measure is designed to show the program's
beneficial financial impact to the public as required by the Government
Performance Results Act (GPRA).
ATF Achilles Program Performance Measure
ATF believes the Achilles Program, with its task forces and Violent
Offender Program elements, are focused in the right areas. According to
the Protecting America study completed by ATF, long-term incarceration,
and thus the removal of the violent habitual offender from society, is
a realistic and cost effective approach to reducing violent crime.
Long-term incarceration is, in its truest sense, the best deterrent to
crime. This study showed that the average career criminal commits about
three criminal acts a week, or about 160 crimes a year.
The National Institute of Justice conducted a study that estimated
the cost per crime in the United States to be, on average, $2,600. This
equates to at least $432,000 in crime-related costs per year for
allowing a career criminal to remain at large, not including the
physical and psychological damages and associated medical costs
inflicted on the victims of these crimes. When comparing this to the
National Institute of Justice's estimate of $45,000 per year to house
an inmate, mandatory minimum penalties, and, in kind, ATF's Achilles
Program strategy are on target for reducing crime and its related
economic costs.
Using the above-developed statistics, and the fact that the average
sentence under 18 U.S.C. Sec. 924(e) is 18 years' imprisonment, the
Achilles Program's beneficial financial impact to the public can be
measured. This performance measure meets the performance measure
standards required by the Government Performance Results Act of 1993.
The following is a breakdown of the financial aspects of this
incarceration:
Cost Analysis--Per Defendant
Average sentence (years)...................................... 18
Incarceration cost per year................................... $45,000
Total cost for incarceration.................................. $810,000
Cost per crime................................................ $2,600
Crimes avoided per year....................................... 160
Savings for crimes avoided (1 year)........................... $416,000
Crimes avoided over 18 years.................................. 2,880
Savings for crimes avoided....................................$7,488,000
Total savings from a 1 year incarceration..................... $371,000
Total savings from an 18 year incarceration...................$6,678,000
BUREAU OF ALCOHOL, TOBACCO AND FIREARMS--ACHILLES PROGRAM
Armed Career Criminal Annual and Cumulative Benefits (Cost Savings and Crimes Prevented)
----------------------------------------------------------------------------------------------------------------
Defendants Crimes prevented Savings to public
incarcerated ---------------------------------------------------------
Fiscal year -----------------------
Fiscal Fiscal year Cumulative Fiscal year Cumulative
year Cumulative
----------------------------------------------------------------------------------------------------------------
1988........................... 92 92 14,720 14,720 $34,132,000 $34,132,000
1989........................... 122 214 19,520 34,240 45,262,000 79,394,000
1990........................... 157 371 25,120 59,360 58,247,000 137,641,000
1991........................... 217 588 34,720 94,080 80,507,000 218,148,000
1992........................... 367 955 58,720 152,800 136,157,000 354,305,000
1993........................... 305 1,260 48,800 201,600 113,155,000 467,460,000
1994........................... 265 1,525 42,400 244,000 98,315,000 565,775,000
1995........................... 205 1,730 32,800 276,800 76,055,000 641,830,000
1996........................... 160 1,890 25,600 302,400 59,360,000 701,190,000
1997........................... 119 2,009 19,040 321,440 44,129,000 745,339,000
1998........................... ......... .......... ........... ........... .............. ..............
----------------------------------------------------------------------------------------------------------------
Note:
Number of Crimes committed prevented per defendant, per year is 160. This figure was developed through ATF's
Protecting America research project which involved a sampling of incarcerated armed career criminals.
In determining the cost savings to the public, a figure of $2,600 is used as the average cost per crime. This
figure was developed through research by the National Institute of Justice (NIJ) and does not include victim
hospitalization costs. An annual cost savings per defendant is realized by multiplying 160 (the average annual
number of crimes committed by a career criminal left free in society) times the $2,600 cost per crime figure
and then subtracting the annual cost of Federal incarceration which NIJ reports to be $45,000.
Each defendant is sentenced to an average of 18 years in Federal prison as an armed career criminal. The annual
cost savings produced by this program will grow each year until the 18th year of the program when the
program's first year defendants will begin to be released. In the 18th year the program's cost savings will
reach their highest level and remain fairly constant throughout the future life of the program.
Question. Are they premised on baseline or trend data of past
performance, or on bench marking against other organizations that
perform similar activities?
Answer. No. The performance measures are based upon studies
performed by the Federal Government relating to incarceration and cost
of crimes; National Institute of Justice (NIJ) study; Cost and Benefits
of Sanctions: A Synthesis of Recent Research, June 1992.
Question. What experiences do you have in applying these measures?
Answer. ATF has been using these measures in the Achilles Program
area since 1991, and we are also incorporating this methodology to
other firearms strategy areas.
Question. Are you confident that reliable data exist to support
these measures?
Answer. Yes. ATF has drawn upon independent research, National
Institute of Justice (NIJ). ATF has also conducted its own study,
Protecting America study. Additionally, ATF has developed computer
systems to capture/track this data.
performance measures for cross-cutting functions
Treasury is, of course, engaged in law enforcement activities that
involve many other federal agencies as well. Some obvious examples are
drug interdiction, border security, intelligence, border security,
intelligence and other investigative activities, and anti-terrorism
efforts.
Question. How has Treasury coordinated with other federal agencies
in developing the law enforcement portions of its strategic and
performance plans?
Answer. Treasury coordinates on a day-to-day basis with a great
variety of Federal and non-Federal entities in accomplishing our
mission. In addition, in the development of our strategic plan we
sought input from Congress, Treasury's unions, more than 600 non-
Federal stakeholders, the general public (through the Internet), and
other Federal agencies. Our strategic plan was influenced by input--
received formally through the planning process and informally through
years of coordination--from these stakeholders and partners. Our
performance plan reflects out strategic plan.
Question. In particular, how have you worked with ONDCP on drug
control strategies, goals and measures, and with what results?
Answer. Treasury worked closely with ONDCP on all cross cutting
issues that affect the Department. For example, Treasury participated
in the development and review process on ONDCP's 1998 Ten Year National
Drug Control Strategy. Specifically, Treasury provided input to Goal 4
in the strategy, ``Shield America's Air, Land, and Sea Frontiers from
the Drug Threat,'' and the four objectives that support the goal. In
addition, Treasury participated in the development and review of
ONDCP's recently released Performance Measures of Effectiveness
document. This document will serve as the tool for evaluating the
progress of the Nation's drug control efforts. As a result of working
with ONDCP in the development of these documents a very useful and
important step was taken in what will be a long term, iterative process
of developing improved cooperation and measurement capabilities across
the government.
Question. What efforts have you taken to make your strategic
objectives, performance goals, and performance measures complement
those of other agencies carrying out similar programs and activities?
Answer. Treasury coordinates on a day-to-day basis with a great
variety of Federal and non-Federal entities in accomplishing our
mission. In addition, in the development of our strategic plan we
sought input from Congress, Treasury's unions, more than 600 non-
Federal stakeholders, the general public (through the Internet), and
other Federal agencies. Our strategic plan was influenced by input--
received formally through the planning process and informally through
years of coordination--from these stakeholders and partners. Our
performance plan reflects our strategic plan.
Question. Do the objectives, goals and measures for your programs
and activities in fact complement those of other federal agencies with
similar functions?
Answer. We recognize the necessity to make certain that our goals,
objectives and performance measures complement those of related
agencies, and we are working to make certain that they do. The
following are some examples of efforts to-date in this area. First, as
detailed in other questions, Treasury has coordinated extensively with
ONDCP. In addition, Treasury's Office of International Affairs worked
in conjunction with the State Department to develop the ``U.S.
International Affairs Strategic Plan.'' Treasury's international goals
and measures correspond to this common plan. Also, Treasury, Justice,
and Agriculture share a common goal in the Government-Wide performance
plan to reduce passenger wait times at land and air ports (page 243).
Finally, Treasury participates in the Results Act Banking Regulatory
Working Group which is seeking to increase coordination between banking
regulators on GPRA implementation. As we continue to evolve in the
Results Act implementation process, cross-government coordination will
be strengthened through efforts like the various inter-agency groups
mentioned above.
Question. Can more be done to promote consistency among cross-
cutting law enforcement programs and activities? What more do you plan
to do?
Answer. Treasury and other agencies are in the process of learning
how to use Results Act to help improve our program results. We have
dedicated our efforts to-date largely to crafting useful strategic
plans and performance measurement systems. We see improvements in
interagency coordination as the next step in this implementation
process. As part of this next step, Treasury and Justice have begun
discussions on creating a performance measures working group to explore
developing even more effective cross-cutting performance measures.
Question. In your efforts to coordinate and reconcile cross-cutting
programs and activities, did you identify any unnecessary duplication
or redundancy? If so, what? Did you identify a need for legislative
changes to deal prim any unnecessary duplication or redundancy?
Answer. To-date in our Results Act implementation efforts, we have
not identified any unnecessary duplication or redundancy.
Question. There have been past indications of serious duplication
and fragmentation among federal law enforcement agencies in
intelligence activities, particularly in the area of drug interdiction.
Do you believe this is a problem today? If so, what can be done about
it?
Answer. The Office of Enforcement plays an important role in
coordinating and facilitating communications, and in providing a focal
point for information, analysis and policy determinations. Cooperation
between the Departments of Justice and the Treasury has improved
dramatically over the last few years. While there is always room for
additional improvement, I believe that cooperation is currently at an
all-time high. This is a result of the frequent communication and close
coordination between the two Departments.
The Office of Enforcement works with the Department of Justice on a
daily basis. The Under Secretary for Enforcement speaks to and attends
meetings with the Attorney General, Deputy Attorney General, and Heads
of the Justice law enforcement bureaus regularly. Members of the staff
speak to their counterparts at Justice on a daily basis.
A variety of working groups meet regularly on important issues,
such as the Southwest border, white collar crime, money laundering, and
terrorism. The Federal law enforcement agencies each have unique areas
of expertise and jurisdiction. When an investigation involves a matter
that is clearly within the jurisdiction of one agency, that agency will
take the lead and work with other agencies as needed. In those
circumstances where there is overlapping jurisdiction, memorandums of
understanding have been developed which detail the responsibilities of
the respective agencies. Despite these efforts to ensure clear lines of
authority, situations do develop where two agencies may claim
jurisdiction over an investigation. In those instances, the Special
Agents in Charge of the field office of the respective agencies attempt
to resolve the question. If this is not possible, further discussions
between the senior managers of the agencies will occur in Washington.
The Departments of Justice and the Treasury become involved in these
discussions, as necessary.
Treasury law enforcement bureaus have unique areas of expertise
which complement those of other law enforcement agencies. For example,
INS and Customs work together on cases and task forces involving
illegal narcotics and other contraband smuggling. Since INS and Border
Patrol staffing continues to increase, we anticipate that we will be
called upon to participate in even more joint investigations. The
current budget request for Treasury law enforcement for fiscal Year
1999 includes funds for increasing Customs capabilities both through
human resources and technology so that Customs personnel can more
efficiently and intelligently carry-out their responsibilities.
Additional Customs funding and resources would enhance Treasury's
ability to respond to growing workloads at our nation's ports of entry.
______
Questions Submitted by Senator Kohl
banking and regulations
Question. What kind of regulations is Treasury proposing to ensure
that the taxpayers will be treated fairly while conducting business in
the next millennium?
Answer. Treasury maintains and manages regulations governing the
Government's use of electronic funds transfer, in particular the use of
the Automated Clearing House. These regulations address liabilities and
responsibilities of the Government and financial institutions in
processing electronic transactions, and they would apply to the use of
EBT to deliver Federal benefit payments. Currently, the Government's
processing of electronic funds transfer transactions is conducted in a
highly secure environment using the Federal Reserve as Treasury's
processor for most of these transactions. New technologies, such as
smart cards and e-money, present questions and challenges that are
currently under review. The Comptroller of the Currency has led a task
force within Treasury to look at these issues, and is expected to issue
a report shortly that will address security, privacy, and cost
regarding new approaches to doing business.
At present, Treasury's Financial Management Service relies on a
comprehensive security architecture covering systems, personnel, and
physical security in its Electronic Funds Transfer disbursement
operations. This security architecture includes protections for data
networks and host systems, disbursing officers and systems
administrators, and regional disbursing centers. This network security
architecture is probably the most robust and secure among the civilian
agencies.
FMS does not use the Internet in any way as part of its disbursing
infrastructure. FMS has a small pilot planned for late 1998 to use
cryptographic Internet e-mail in support of vendor payments, but it
will likely be at least several years before the Internet is relied on
to deliver Federal payments.
FMS currently relies on two private networks to generate and
deliver Federal payments. First, it administers its own network,
FMSnet, which connects FMS with the over 600 Federal agencies, bureaus,
and offices for whom it disburses payments. This is a protected network
which is not connected to the Internet. Federal agencies use this
network to deliver payment instructions files to FMS using a secure
hardware-based messaging system designed in conjunction with and
approved by the General Accounting Office.
Second, FMS relies on FedNet, the Federal Reserve's network, to
deliver Government payments to the banking system. This network is also
a private, access controlled network which has no direct gateways to
the Internet. In addition to relying on network access controls and
physical security of network sites, all data transmissions on both
networks are generated out of tamper resistant hardware encryption
devices, in accordance with Federal Information Processing Standard
Publication 140-1, ``Security Requirements for Cryptographic Modules.''
The Administration and Congress have been working on legislative
plans as part of the financial modernization legislation. One plan is
to limit housing related government sponsored enterprises to a single
regulator.
Question. Can you explain the pros and cons of having a single
regulator and share with us your views on this plan?
Answer. We are not aware of any Administration proposal to merge
the housing government-sponsored enterprise (GSE) regulators. In recent
years, Congress has held hearings on this issue.
Both the Office of Federal Housing Enterprise Oversight (OFHEO) and
the Federal Housing Finance Board (FHFB) regulate GSE's that are in
basically the same line of business. Therefore, from the narrow
perspective of safety and soundness merging regulatory responsibility
under one entity might result in a more efficient use resources through
a reduction in duplicative functions.
However, the current regulatory responsibilities of OFHEO and the
FHFB are not equal. OFHEO is the safety and soundness regulator of
Fannie Mae and Freddie Mac, while HUD is the mission related regulator.
The FHFB, is both the safety and soundness and the mission related
regulator of the FHL Bank System.
Any merging of OFHEO and the FHFB would likely have to address
these institutions' different regulatory responsibilities. Under a
framework of equal regulatory responsibility either: (1) OFHEO would
have to become responsible for Fannie Mae's and Freddie Mac's mission
regulation--making the new merged regulator a joint safety and
soundness and mission regulator; or (2) the mission regulation of the
FHL Bank System would have to be transferred to HUD--making the new
merged regulator only a safety and soundness regulator.
The Treasury Department has taken no position on merging the two
housing GSE regulators.
management personnel and department of treasury repairs
Question. The Committee understands you have requested the first
increment of funding needed to restore the Historic Department of
Treasury Building. What is the total cost of the restoration and is
this restoration going to renew and restore the systems and physical
structure to meet the 21st century requirements?
Answer. The total cost of renovating the Main Treasury building is
estimated at $132,246,000. All systems will be replaced with energy
efficient, state-of-the art equipment. The external physical structure
will be weatherproofed and windows replaced with energy saving glass.
The internal structure will be restored to provide a balance between
the historic fabric of the facility and the needs of a modern office
building.
There have been discussions in the past about the Inspector's
General's oversight and supervisory authority as it relates to the Law
Enforcement agencies. The IG has responsibility for internal audit,
however, the law enforcement units retain their internal investigative
units.
Question. Is this something you are considering changing under a
new IG?
Answer. While the law enforcement units retain their internal
investigative units, the OIG has the authority to perform any
investigations in these bureaus. Under current policy the OIG
investigates allegations against high-level officials (grade 15 and
higher). Also, the OIG has oversight authority over the operations of
bureau internal investigative units.
At this time, there are no changes being considered. We are in the
process of identifying appropriate candidates for possible nomination
by the President, for the Department and, at that time, there may be
some review of current operations.
Question. What about the IRS where are the audit and investigative
functions retained by the IRS Chief Inspector?
Answer. IRS Inspectors are law enforcement officers who investigate
allegations of illegal and improper acts which include violations of
the privacy provisions of the Internal Revenue Code. Inspection Service
inspectors derive their law enforcement authority from the Internal
Revenue Code section 7608(b). This section authorizes Inspection
Service personnel whom the Secretary of Treasury has charged with the
duty of enforcing criminal laws related to tax administration to
execute and serve search warrants, make arrests, and make seizures of
property. These authorities are essential in the protection of IRS
employees in the investigation of individuals who attempt to bribe,
intimidate or impede IRS employees in the performance of their duties.
Without law enforcement authority, inspectors can not provide the
necessary protection to cooperating employees during bribery, and
threat and assault investigations. Treasury's I.G. does not have this
law enforcement authority and, absent an additional change to the
Internal Revenue Code and the Inspector General Act, the Treasury I.G.
could not assume some of the functions currently performed by the IRS's
Inspection Service.
An understanding of the mission of the Inspection Service can be
seen within the framework of the overall operation of the IRS. The IRS
is a large, complex and geographically dispersed organization which
employs over 100,000 people to collect over $1.4 trillion in tax
revenues and to fairly enforce the tax laws. Considering the
significant amount of the money involved, the discretionary authority
of enforcement personnel, the size of the staff, the massive processing
operations, and the scope of taxpayer contacts taking place daily
throughout the country, it is easy to see the inherent risks associated
with IRS operations and the need for a continuous audit and
investigative presence.
The Inspection Service provides this necessary presence and
emphasizes coverage of IRS activities that most directly relate to the
collection of tax revenues, enforcement of tax laws, processing of
returns and other information, and the protection of IRS employees.
Using their knowledge and expertise of these operations, their
unrestricted access to IRS personnel, tax information and IRS computer
systems, and their law enforcement authorities, Inspection Service
personnel can act promptly and decisively to mitigate concerns by
concentrating coverage on national and local IRS operations with the
highest degree of risk. IRS Inspection Service auditors and
investigators, who are deployed throughout the country and work under
the supervision of the Chief Inspector, can initiate independent audits
and investigations based on their professional assessment of the risk
or allegation.
The placement of the Inspection Service within the IRS also
provides the Commissioner the opportunity to direct internal audit and
investigative coverage to vital areas such as evaluating the
implementation of tax laws or investigating sensitive allegations. For
example, the Inspection Service's reporting of concerns directly to the
Commissioner related to computer security resulted in the agency taking
prompt and definitive actions to strengthen operations.
I do not feel that my ability to manage the internal audit
resources in the Treasury is compromised by the current arrangement. I
have a good working relationship with the IRS Chief Inspector and value
the expertise that is regularly exhibited by IRS Inspection Service
auditors. The Chief Inspector and I discuss audit and investigative
matters almost daily and meet frequently to review the status of
significant audits and investigations. Our staffs are in constant
contact and freely exchange information.
As specified by Section 8C of the Inspector General Act, I can
initiate, conduct and supervise internal audits of the IRS. In fact, my
audit staff has conducted audits of IRS activities that did not involve
the IRS Inspection Service auditors. My authority to conduct any review
in the IRS that I deem appropriate has never been challenged. IRS
Inspection Service auditors continually coordinate their work with my
staff on audits that involve multiple Treasury bureaus. Further,
Treasury Order 114-01 gives me the authority, if a need arises, to
detail personnel from the IRS Inspection Service to conduct audits or
investigations under my direct supervision.
restructure the irs
Last year the Commission to Restructure the IRS recommended placing
certain IRS management decisions under the control of an independent
board. Recently, the CIO of the IRS, Art Gross announced he was
leaving. And, there has been talk that the Modernization procurement
and the architecture requirements may change.
As a result, I'm wondering if the Commission's recommendation to
create an independent board doesn't have some validity.
Question. Isn't it true that having a board oversee the development
and implementation of long range procurement could provide greater
stability?
Answer. As you know, this has been a hotly debated topic. We have
always supported the notion that the IRS receive outside advice.
The proposed Oversight Board would have specific responsibilities
for IRS strategic plans, and reorganization plans. It has the right to
let the Congress have its views on the IRS budget request. And,
Treasury would retain responsibility for tax policy and for general
budget and management supervision. We think this relationship can and
will work.
The idea of establishing a full-time Board of Governors, as some
have suggested, raises a different set of questions. Our response would
depend on the specifics of the proposal. If such a Board had a proper
organic connection with the Treasury and satisfied the overall
objective of making tax administration fairer and more efficient, we
would be happy to discuss it.
Question. It is my understanding that the IRS is losing the
potential to collect hundreds of millions of dollars in overdue taxes
due to problems in determining which accounts are collectible and which
are not. What action is the IRS taking to develop information on
written-off accounts to determine whether cost-effective collection
measures can be developed and applied?
Answer. The Inventory Delivery System, a system under development,
will centralize collection case processing and use automated methods to
evaluate delinquent accounts for collectibility so that the most
productive accounts receive priority attention. The system has three
releases planned. The first release containing Financial Analysis
Profile and basic core functions to support case assignments and data
base updates is scheduled for pilot in February 1999. The second
release with Telephone Number Research is scheduled for August 1999
with a third release containing Address Research in 2000.
year 2000 (century date change)
We are currently reviewing your request to reprogram funds within
the Department to meet Year 2000 requirements. Of course having the
Department Year 2000 compliant is only one part of the equation.
Question. First are you confident that all Treasury systems
including the IRS and the Financial Management Service will be
compliant?
Answer. Yes, I am confident that Treasury has a strong program in
place to address this challenge and has made significant progress to
date. For our mission critical systems, Treasury is on schedule to meet
the implementation milestone date of December 1998 with the exception
of the IRS phase system applications and Financial Management Services
Government On-Line Accounting Link System (GOALS). The IRS systems will
be completed by January 1999 in accordance with the IRS Year 2000
program plan, which calls for implementing renovated systems in 6 month
phases, each January and July, through January 1999. This
implementation strategy was created to accommodate tax processing
season considerations. The Department is working closely with Financial
Management Service to determine actions that can be taken to accelerate
the GOALS schedule.
Question. What do you know about the other financial institutions
such as banks, money management firms and credit card companies?
Answer. The Office of the Comptroller of the Currency (OCC) and the
Office of Thrift Supervision (OTS), with regulatory oversight of the
banks and thrift institutions respectively, have been working in
concert with the Federal Financial Institutions Examination Council
(FFIEC), in issuing guidelines and advisory letters for addressing the
Year 2000 issue. Year 2000 compliance has been incorporated as a
priority within the examination procedures for financial institutions
by all FFIEC regulatory agencies, including OCC and OTS.
general management
Question. Last year GAO identified Customs Financial Management and
IRS financial management as high risk areas. What actions have you
taken to ensure that systems are in place and that we will see
improvements?
Answer. As noted above, Treasury's performance plan for Customs
Service and IRS Financial Management includes a goal to achieve an
unqualified audit opinion on the Department-wide consolidated financial
statement for fiscal year 1999 (page DO SE-43). Both of these bureaus
achieved unqualified opinions for fiscal year 1997 on their financial
statements. However, despite these opinions, they continue to have
material weaknesses which the Department is committed to correcting.
The IRS is aggressively pursuing the closure of its 7 GAO financial
management recommendations. Customs has successfully closed two of 11
material weaknesses during fiscal year 1997 . Both Customs and the IRS
have specific action plans and timetables in place to address their
remaining material weaknesses.
This past December I received a copy of the January 1997 report on
the Department's Personnel System. The Report included three
recommendations: Train and hold managers accountable; revitalize the
Personnel Resources Division; and reform the personnel structure and
strategy to support a high performing organization.
Question. What steps have you taken to implement these
recommendations?
Answer. Some of the highlights of actions taken include:
Managers
We issued to managers and supervisors a Managers' Handbook on Human
Resources. The Handbook also is available through the Department's
intranet.
Most managers in Departmental Offices attended two days of training
in 1997 on performance management and conflict resolution.
We required all managers and supervisors to complete the
performance evaluation process and tracked and reported on their
progress in doing so.
Personnel Resources Division
We are investing in the professional development of the Personnel
Resources staff through on-site workshops, off-site seminars, and
college course work.
We have filled critical vacancies with experienced and talented
personnel specialists.
We have instituted a client service director concept to improve
customer service and strategic focus on critical problems.
High Performing Organization
A Performance Management Advisory Panel, composed of key
Departmental Office (DO) executives, has worked with the human
resources staff to revise the performance management system for DO. The
new system will focus on setting clear and challenging expectations,
providing ongoing feedback, recognizing excellent performance, dealing
with poor performance, and providing appropriate development.
This year all employees in DO will receive training on the new
performance management system.
The new DAS(HR) has formed a Human Resource Advisory Council, which
will develop this year a Treasury strategic plan for human resource
management.
Question. Could you highlight for the committee the background
behind your request for additional personnel for Departmental Offices?
Answer. The Office of the Deputy Assistance Secretary for Human
Resources (DAS(HR)) requires 3 FTE to meet performance goals and
statutory requirements within prescribed time frames. Specifically,
additional resources are required to improve our capacity to recruit,
develop, and retain high caliber employees; improve performance
management; and reengineer human resource systems to provide better
support to Treasury missions.
Last year the Assistant Secretary (Management) and Chief Financial
Officer conducted a reorganization and established new positions of
DAS(HR) to implement a new vision for Human Resource Management in the
Department. All human resource functions were placed under the DAS(HR),
who is responsible for leading, directing, and managing an innovative
and comprehensive human resource program that serves to frame and
advance the Department's missions.
The three critical positions will be focused on continuing to
implement the recommendations of the January 1997 report on the
Department's personnel system by providing leadership in the
Departmental Office operating personnel office and in emerging human
resource initiatives across the Department, e.g., reengineering human
resource systems and dealing with critical staff shortages such as in
information technology. If not funded the DAS(HR) would be seriously
limited in her ability to carry out in a timely manner Treasury's
strategic goals of recruiting, developing, and retaining a high
caliber, diverse work force, and to reengineer the human resource
systems to more effectively and efficiently support Treasury's
missions.
state trading enterprises
One of President Clinton's major campaign issues was to step up
enforcement actions against foreign companies doing business in the
United States. The President estimated during his initial campaign that
an additional 50 billion dollars could be collected by the enforcement
of the tax laws against foreign companies operating in the United
States.
Question. How do the monopoly subsidiaries of the State Trade
enterprises operate? How do they affect competition in the importing
countries?
Answer. These questions do not touch on issues under the Treasury
Department's purview. They should probably be directed to the
Department of Commerce or the Office of the U.S. Trade Representative.
Question. What is Treasury doing to monitor and collect taxes in
regards to ``State Trading Enterprises'' and their subsidiaries
operating in the United States?
Answer. State trading companies and their subsidiaries operating in
the United States are subject to the same tax statutes and regulations
as any other foreign companies operating in the United States. The are
subject to IRS audit to see if their transactions with related parties
abroad are in accordance with the very comprehensive and newly revised
transfer pricing rules. They must file a Form 5472 that gives
information on transactions with any related party offshore. Section
6038A of the Internal Revenue Code requires foreign-controlled U.S.
companies to furnish data to the Treasury that is necessary for the IRS
to verify the proper treatment of transactions with parties offshore.
Failure to comply results in severe penalties.
Foreign-controlled companies are also subject to ``earning-
stripping'' rules that may reduce their allowable deductions for
interest expense if they have high debt-asset ratios and pay interest
to related parties offshore.
Question. How does the New Zealand Dairy Board (NZDB) or any other
State Trading Enterprise do business and must each be profitable?
Answer. The operation of foreign state trading enterprises are not
under the Treasury Department's purview. This issue should probably be
directed to the Department of Commerce, The Department of Agriculture
or the Office of the U.S. Trade Representative.
Question. Do export monopolies benefit their own farmers? How does
the return to the New Zealand dairy farmer compare to the return to the
U.S., EU, and Australian dairy farmer? What is the operating cost of
the New Zealand Dairy board? How much do the farmers pay to maintain
it? Would they be better off without it?
Answer. These questions do not touch on issues under the Treasury
Department's purview. They should probably be directed to the
Department of Commerce or the Department of Agriculture.
Question. What are the advantages of a State Trading Enterprise
being able to totally control supply and price? How do the STE's pay
taxes in the countries in which they operate?
Answer. These questions do not touch on issues under the Treasury
Department's purview. They should probably be directed to the
Department of Commerce or the Office of the U.S. Trade Representative.
Question. Does the monopoly structure allow them to avoid taxes
around the world?
Answer. It is difficult to determine whether their monopoly
structure provides State Trading Enterprises with a greater opportunity
to avoid taxes around the world. As noted above, they are subject to
the same relatively stringent tax rules that apply to all foreign-
controlled companies operating in the United States. If they have
exclusive control over all transactions with their home country, it may
be difficult to find an ideal comparable uncontrolled price as a basis
for determining the appropriate transfer price. But the Section 482
regulations specify various other methods and adjustments that can be
used to establish the arm's length price in the many cases when an
ideal comparable uncontrolled price is not available.
Question. Does this give STE's additional funds which are then used
to cross-subsidize?
Answer. The operation of foreign state trading enterprises are not
under the Treasury Department's purview. This issue should probably be
directed to the Department of Commerce, The Department of Agriculture
or the Office of the U.S. Trade Representative.
youth crime prevention programs
Question. Can you provide additional information about Treasury's
programs to combat gang and youth violence programs?
Answer. The Gang Resistance Education and Training (GREAT) Program
has had tremendous results in teaching the nation's children the
dangers of gangs, guns and drugs. While most of the nation experiences
a decrease in violent crimes, there are some areas of the United States
that are, unfortunately, bucking this trend.
The GREAT Program currently provides training in over 1,400
communities throughout the United States. Of these, only 74 communities
receive federal funding through the GREAT Program. At the beginning of
the 1994-95 school year, a national evaluation of the GREAT Program was
launched by the University of Nebraska at Omaha in conjunction with the
National Institute of Justice (NIJ) and ATF. The five-year longitudinal
part of the study will be completed in the year 2000. In November of
1997, results of the cross-sectional part of the study were published
by NIJ after an intensive peer review process. The study found that
students completing the GREAT Program reported lower levels of
delinquency, impulse behavior, risk-taking behavior and approval of
fighting, as well as higher levels of self-esteem, parental monitoring,
parental attachment, commitment to positive peers, anti-gang attitudes,
perceived educational opportunities and positive school environment.
Dr. Finn-Aage Esbensen wrote that these results are promising, and
that the longitudinal study will also provide a better assessment of
the program's effectiveness, as well as allowing for an examination of
the long-term effects of the program. He also wrote in his study that
gang members reported living in single parent homes more frequently (40
percent) than non-gang youths (30 percent). Gang members' mothers,
fathers, or both were more likely not to have finished high school (20
percent for gang members, 11 percent for non-gang youths). Dr. Esbensen
wrote that these demographic characteristics suggest there may be
qualitative differences in the living situations between gang and non-
gang youths. If the GREAT Program continues to have a positive effect/
impact, over the long term the communities that are teaching GREAT
should continue to benefit from the program. One of these benefits,
again, would be a lower level of delinquency and violence.
earned income tax credit compliance account
Question. What is the status of IRS efforts funded through the new
Earned Income Credit Compliance Account?
Answer. This year, the IRS has taken a number of proactive efforts
as part of the Earned Income Credit Initiative, including:
--Sent notices to over 6 million EITC recipients informing them of
the advance EIC payment option.
--Sent an informational letter to the top 100 employers most likely
to employ taxpayers who would be eligible for the credit.
--Sent notices to approximately 2.5 million taxpayers who did not
claim the credit but appear eligible for the credit.
--We are providing toll-free assistance for EITC questions 24 hours
per day 7 days a week.
--We expanded outreach efforts to service EITC eligible low income
and elderly taxpayers by providing tax information and return
preparation during the last three Saturdays beginning March 28.
--We designated March 28, as EITC Awareness Day, where walk-in sites
provided taxpayers with up-to-date information regarding the
new tax laws and the penalties associated with intentional
noncompliance, and assisted EITC eligible taxpayers with return
preparation.
--Informational products such as stuffers, posters, employee and
employer brochures were provided to local offices to use in
partnering efforts with groups and agencies.
--As of March 19, 1998 we have issued 47,730 EIC Math Error Notices
for Invalid/Missing Social Security Numbers.
non-bank regulation
Question. The Money Laundering Suppression Act of 1994 requires the
registration of Non-Bank Financial Institutions that includes a
methodology for reporting suspicious financial activity. Where is
Treasury in registering non-banks and what regulations are in place to
control non-bank reporting of suspicious activity?
Answer. Proposed rules were announced in May 1997 to respond to
vulnerabilities in the money services business (MSB) industry as well
as to implement the requirement of the Money Laundering Suppression Act
of 1994 that the Treasury register this group of businesses.
The first proposed rule would require that MSB's--which include
money transmitters or remitters, money order issuers and sellers,
travelers check issuers and sellers, retail currency exchangers and
check cashers--register with the Department of the Treasury. A second
proposal would extend suspicious activity requirements to money
transmitters and issuers, sellers and redeemers of traveler's checks or
money orders. The third proposal would require money transmitters to
report currency transactions of $750 or more that involve the
transmission of funds to any person outside the United States.
FinCEN held five public meetings last summer to elicit comments on
the proposed rules. The written comment period ended on September 30.
FinCEN has reviewed the comments and is finalizing the proposed rules
based on industry concerns, where appropriate.
Treasury has indicated it will allocate $2.5 million from Treasury
Super Surplus balances in the Treasury Forfeiture Fund to FinCEN for
MSB implementation fiscal year 1999. This amount would be used for
administration of the new programs, including guidance, interpretive
advice, oversight, coordination and data analysis. FinCEN projects
publication of the final rules by early-mid summer, with full
implementation of all three new requirements no sooner that year's end.
These rules will impose new requirements on a very diverse set of
businesses, including convenience stores, travel agencies, groceries
and other small retail businesses that offer these services as a
convenience to their customers. We anticipate providing the MSB
community with ample time for implementation of the rules.
It should be noted that while there are currently no federal
regulations requiring MSB's to set up programs to detect and report
suspicious activity, virtually all of the national MSB businesses, such
as Western Union, American Express, and the U.S. Postal Service, have
already begun to establish such programs and are voluntarily filing
suspicious activity reports today.
Subcommittee Recess
Senator Campbell. This hearing is recessed. The
subcommittee is recessed until Thursday, March 26.
[Whereupon, at 10:35 a.m., Thursday, March 12, the
subcommittee was recessed, to reconvene at 9:35 a.m., Thursday,
March 26.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, MARCH 26, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:35 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Lauch Faircloth, presiding.
Present: Senators Campbell, Faircloth, and Kohl.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
STATEMENT OF GEN. BARRY R. McCAFFREY, DIRECTOR
Opening Remarks
Senator Faircloth. The subcommittee will come to order. The
chairman of the subcommittee, Senator Campbell, has been
detained briefly this morning but will be joining us in a very
short while. I would like to begin with a few brief remarks and
then turn to the ranking member, Senator Kohl, for any opening
statement he may wish to make.
First, I want to welcome General McCaffrey, the White House
National Drug Policy Director, or more simply, the drug czar.
He is here to present the administration's budget for the
Office of National Drug Control Policy for fiscal year 1999. We
welcome you, General.
General McCaffrey. Yes, sir.
Senator Faircloth. General, I must say, from our
perspective, the Nation is losing the war on drugs. It
certainly seems so. Now I know that you have been working hard
and diligently to fight the current trends of increasing drug
use, but frankly this seems to be a lone voice crying out in
the wilderness. It appears to be getting worse.
But I think you are commended for your efforts, but I do
think it is disingenuous for this administration to continually
compare current drug use rates with the year 1979, perhaps the
worst period ever we had. A much better comparison, and one I
hope you will focus on or elaborate on is comparing current
drug use statistics with the year 1992, when President Clinton
was first elected. I realize that that is not the most
comfortable situation or question for the administration, but
the news is almost entirely bad.
General, according to your testimony, cocaine initiation
rates, or the number of people trying cocaine for the first
time are increasing. Heroin initiation rates are up markedly.
Drug use trends among young people, to quote you, remain
especially troubling. General, I saw that your winter 1997
pulse check recently made the disturbing announcement that
heroin and methamphetamine drug usage is increasing.
General, I have introduced a bill to transfer up to one-
third of the IRS enforcement positions to the Department of
Drug Enforcement because I believe the IRS is waging a war on
the American taxpayers that is unnecessary while we are losing
the war on drugs. My view is that we must change the priorities
of this administration and put the necessary resources behind
an effort to get drugs out of the schools and the life of our
young people certainly.
With that, I turn to Senator Kohl for any statement he
wishes to make.
Statement of Senator Kohl
Senator Kohl. Thank you, Senator Faircloth.
General McCaffrey, we welcome you to the subcommittee today
and we very much appreciate having another opportunity to
discuss our concerns about drugs and their impact on our
society. As we discussed last year, we have invested some $150
billion in drug control activities since 1987. However, drug
abuse costs the taxpayers an additional $70 billion a year by
fueling such things as domestic abuse, accidents, the spread of
disease, and crime.
We have seen some improvements, we are not seeing the
steady decrease in drug abuse and drug trafficking that we were
anticipating, given that level of funding. In 1997, you told
this subcommittee that you were going to provide results and
not rhetoric. That is what we need, concrete examples of
successes.
We cannot continue to provide funds without proof that the
programs that you advocate are working. We need to show some
evidence of success. We need to show some incremental
improvements. We need to show something that will indicate that
taxpayer dollars are making a difference in what our citizens
describe as the most serious problem facing our children in
America today. As a result, we should at least continue to fund
prevention programs with proven successes such as the GREAT
Program and the high-intensity drug trafficking programs.
We also need to make sure that we are providing treatment
to incarcerated individuals who test positive for drugs. And we
need to make sure that communities have programs available to
those that want a better way of life; namely, a drug-free life.
Thank you, Mr. Chairman.
Senator Faircloth. Thank you.
General McCaffrey, we are delighted to hear your statement.
Statement of General Mc Caffrey
General McCaffrey. Thank you very much, Senator. Let me
thank you and your colleagues, those who will come later,
particularly Chairman Campbell, and all of you----
Senator Faircloth. General, if you do not mind, would you
move the microphone a little closer to you there?
General McCaffrey. Yes, indeed. Let me again say I thank
you for your opening comments and for Chairman Campbell and the
rest of your support during the past year. I probably ought to
congratulate you specifically for having been named one of the
top five zealots in the war on pot smokers by NORML. I think it
is a title you ought to be proud of.
Senator Faircloth. I did not know I had been named.
General McCaffrey. We are very pleased with you taking that
visible role.
Let me, if I may, Senator, tell you straight-out that I
share your uneasiness and your concern on the magnitude of this
problem. It is simply atrocious, and I will try and sketch that
out very quickly.
Introduction of Guests
With your permission, let me call to your attention that I
am really honored to have here in the room with me several
people who are enormously important to us. Many of our HIDTA
directors were able to come in--the ones that are close enough
to drive--Joe Peters from Philadelphia HIDTA, Dave Knight from
Gulf Coast, and Tom Carr from Washington-Baltimore HIDTA.
We also have Nelson Cooney, the acting president of the
Community Antidrug Coalitions of America, arguably the most
important group I work with; more than 4,000 community
coalitions all over the country. And this Portman-Grassley bill
will assist us, as you know, in building we hope 14,000
coalitions in the next 5 years.
We have Linda Wolf Jones here from Therapeutic Communities
of America, Sue Thau who is with the Community Antidrug
Coalitions of America, Kathleen Sheehan with the National
Association of State Alcohol and Substance Abuse Directors. And
two very important people that I think are known to both of
you, Dick Bonnet and Mike Townsend from Partnership for a Drug-
Free America. They have done really the bulk of the creative
work on this national youth media strategy that we will talk
about some more.
So I thank all of them because their participation has
helped us outline our strategy and what we are doing.
1998 National Drug Control Strategy
Let me run through some charts very quickly. First of all,
to again reiterate that we are working off a strategy. Senator,
let me just note that there are four documents that are in this
strategy, all of them by law something that I must submit each
year. The first is the document, ``A 10-Year Perspective,''
that was created with the assistance of more than 4,000
individuals and entities who wrote me advice on how to go about
this problem. We think this is extremely well received
throughout the country. It makes sense. It is a way to organize
it.
Senator, for the first time in history we submitted a 5-
year drug budget. Frank Raines and I worked with the nine
appropriations bills that form the more than $17 billion in the
1999 budget request, and it is now in a document. I do not
think it is all that good, but it is our first shot at it and
we are now looking for congressional oversight on how should we
shape the coming 5 years. I really welcome your attention to
this effort. We are proud that we got it on the table and we
are listening for your ideas.
Performance Measures
A very controversial document and I think an important one,
Dr. John Carnevale out of my shop has been leading a yearlong
effort to create the ``Performance Measures of Effectiveness.''
It is 141 pages. We have a modest estimate on how good it will
be, but we said 10 years from now what are the 12 outcomes we
want to achieve. Then we describe 82 targets we have to achieve
to get to those 12 outcomes. I will show you a chart that
summarizes it.
Now in the coming year I have to develop annual targets so
that you can hold us accountable every year when we come down
here, not only for explaining the 5-year budget we are arguing
for, but what did we accomplish in the last year. That is what
this is intended to do.
The numbers we can change. If you have other studies or
experts or a different viewpoint, I will, of course, be
respectful of your thinking. But I would like us to embrace the
idea of accountability, and that it will be a 10-year program
to get a new generation of America drug free.
Classified Strategy
Finally, this is a classified document. It is classified
secret, limited distribution. It is available, of course, for
you to look at. It is the ``Strategic Annex to the Strategy.''
It gives guidance to our intelligence services, et cetera.
Good morning, Mr. Chairman. Mr. Chairman, I just began to
make comments and I outlined the four documents that comprise
the totality of the strategy.
Drug Use Data
Let me quickly run through some other charts. This is where
we are going. This is our target. It is a little bit hard to
read, but let me just tell you that currently drug use is at 6
percent in this country, and when you look at the young kids 12
to 17 it is about 9 percent use. That went down last year for
the first time in 6 years. It was 10.6 percent. It dropped to 9
percent.
Donna Shalala, whose study gives us this data, and I say
that is statistically not significant. But what is significant
is for the first time in 6 years it went down, not up. Now down
below is where we say we are going. The 10-year goals are 3
percent of the population using drugs, and when you look at the
kids, 4.5 percent.
We can get there over the coming decade--we believe this is
achievable. Many think it is too ambitious. If we can get
there, they will be the lowest rates of drug use in our society
since we began keeping data. That would be before my two shiny,
new grandsons hit the eighth grade. And that is our commitment.
Now we can get more ambitious. We can achieve more of it
earlier. I am listening to your own viewpoints. But that is
what 200-some-odd experts and the Federal agencies involved
have come up with. I respectfully submit that to you as a
pretty decent unifying goal. I think next year when you get me
back here, instead of saying the decrease in drug use was
statistically insignificant, I believe next year I am going to
come back and tell you we had a definite drop in drug use rates
among children.
Now here is the cost. Senator, this is why I essentially
buy your entire statement. One hundred thousand dead in the
1990's alone. Look at the cost: a $70 billion hit on our
society and 1.5 million Americans arrested a year. The dominant
cause of problems in our hospital emergency rooms, if you talk
to a doctor, relates to drugs. And you can go on down the list.
We have now revised our estimates on who is addicted to
heroin; 810,000 Americans. Only 2 percent of the world's demand
for heroin is in this country, but 810,000 Americans are
compulsive heroin users. We say probably a little under 4
million Americans are chronically addicted to some illegal
drug, primarily cocaine, then heroin, then other drugs. So this
is a pretty big challenge to us.
Now, are we making any progress? Absolutely--if you look at
1979, the worst time in modern America. Although that was
probably not as bad as just prior to 1916, when we passed these
modern laws and it was worse with both cocaine and opiates. But
if you go back to 1979, we have come down by one-half. Cocaine
use has come down by 75 percent.
We hit the low probably around 1992, but around 1990 we saw
values among kids start going bad on us. The disapproval rate
of drugs and the fear of drugs personally went the wrong way in
1990 and 1991. In 1992, drug use rates went up and they
increased every year until last year when they went down.
Meth use, which is one of the worst drugs that we ever have
encountered in this Nation----
Senator Faircloth. What drug did you say?
General McCaffrey. Methamphetamine. Chemically produced. Go
get a $100 bill, the recipe off the Internet, get a high school
laboratory level of equipment and you can make the poor man's
cocaine. Six to sixteen hours of dangerous drug-induced highs.
It is destructive physically, mentally, and spiritually. It is
horrendously dangerous to our law enforcement personnel.
Yet as that thing has spread, maybe--maybe Attorney General
Janet Reno and I, with a new strategy, and you having given us
new legislation, maybe last year we got in front of this. This
should not become the crack cocaine epidemic of the 1990's. As
you remember, in 1985 that almost killed American cities. And
meth is out there, and it is not just in the cities either. It
is in rural Georgia, Kansas, Missouri, Arizona, Idaho, Hawaii,
and southern California. But we think we may be in front of it.
Cocaine production is down. The facts are we finally have
started to bite into it. Except for poor Colombia where it is a
disaster. In Peru the production of coca is down 40 percent in
2 years. It is down 9 percent in Bolivia. It is astonishing the
progress we have made. That is just the beginning, but at least
we are starting to turn the corner.
United States spending on drugs is down and some aspects of
drug-related crime are down. It is hard to tell that to a
police officer, dealing with the impact of drug-related
violence. We have a man in the room whose son was almost
murdered as a Maryland State police officer by drug dealing. So
the violence is still out there. But if you look at the gross
numbers, it has come down--thank God--dramatically.
This is another, I find, bit of encouraging news. One of
the four major studies we do every year, federally funded, is
Monitoring the Future, by Dr. Lloyd Johnson up at the
University of Michigan. Since the 1960's they have been
watching what kids say about their values, including drugs.
Last year, his data showed 12th graders' drug use still going
up. But if you look at the eighth graders and their values
relating to cigarettes, alcohol, pot, and other drugs,
apparently they have started to turn around. Let us watch that.
That is our goal: to take eighth grade drug use rates and run
them down.
Our kids now are drug free when they finish the DARE
program in the fifth and sixth grade. In the 8th, 9th, 10th,
11th, and 12th grade they encounter drugs, so by the time they
are seniors one out of five are regularly using an illegal
drug. Ten years from now, those kids will produce the next
generation of compulsive drug users. That is why we have to
focus on middle school kids, and high school kids, and keep
them from smoking pot and abusing alcohol and using cigarettes.
National Youth Media Campaign
The National Youth Media Strategy that you funded as part
of the ONDCP budget is starting to pay off. We are so proud of
what not only the Partnership for a Drug-Free America, but also
the Quad A, the Annenberg School of Journalism, the Advertising
Council of America, and the entertainment industry. I have a
report which hopefully is in your packet that gives you our
initial feedback on the 12 pilot cities. In June we will go
nationwide. By the fall, PDFA will have our new generation of
ads coming out.
Our key is that by the time December rolls around, we will
have messages on radio, local billboards, and local TV, as well
as national programs that sound like your district, your State:
Native American, Hispanic-American, African-American, Southern,
Northeast corridor. The work we are doing right now has
produced a wave of phone calls to coalitions that we find very
encouraging.
Finally, I would just sort of show you this. Here is the
next step to all of this. Although paid advertising is the
heart and soul of it, and the Partnership for a Drug-Free
America is really our dominant partner in that area, there's
also partnerships with private industry. We are working with
the industry council. We are going to get on the Internet.
Right now it is dominated by prodrug forces. We are going to
make sure we have interactive capacity to deal with young kids
as well as high school kids.
Drugs and Prisons
Yesterday we finished a 2-day conference cochaired by
Attorney General Janet Reno and Secretary Donna Shalala. We
brought in a couple hundred experts from all over the country
on drugs and prisons. I do not need to tell this committee, we
have 1.7 million people behind bars; more than any other nation
on the face of the Earth. It is probably going to go up 25
percent in the coming years. It is a national nightmare.
It helps to keep the violent criminals off the streets.
Somewhere between 50 and 80 percent of those incarcerated are
compulsive drug users. So we know--and we have learned this
from Attorney General Reno and Secretary Shalala's studies and
their experience--that we have to provide effective drug
treatment, and then we have to put people back in the halfway
houses with drug testing. And when they predictably fall off
the wagon, we have to have a tough love approach where we
reincarcerate them for 21 days or 14 days--and we have a judge
running this system--instead of allowing them to go back to a
life of addiction.
We are going to work on that. By next December we are going
to bring in the country's law enforcement and correction
specialists and try and give them some solutions on all of
this. But I think it is a very encouraging situation, and some
of those in the room are helping us design that.
HIDTA
Final one, let me just mention the HIDTA program which I am
very grateful for your support on that. We now have 20 HIDTA's,
three of which have funds appropriated and are pending
obligation. Those are moving along the right way. The 20
HIDTA's include five Southwest border partnerships. All along
that border now, 2,000 miles with Mexico, we have a high-
intensity drug trafficking area with Federal funding allowing
State, local, Federal cooperation on this drug issue.
We are getting a tremendous amount of good out of this.
There are probably more HIDTA's that deserve consideration. By
this summer I will have a study done and we will come back to
Congress and to this committee and recommend an expansion of
that program. But I think there is every reason to be very
proud of the way prosecutors and law enforcement have come
together on this issue.
Budget
Mr. Chairman, with that, let me, if I may, just say that I
think we have an aggressive, balanced fiscal year 1999 budget
proposal in front of you, for the ONDCP element of the drug
control effort, which is really the smallest piece of it. It is
a $17 billion overall program in nine different bills of which
our ONDCP salaries and budget are a pretty small piece of it: a
little over $19 million. There is $162 million in the HIDTA
program, $1 million in there for ONDCP research, and then $251
in the so-called special forfeiture fund.
The big ticket items are the media campaign, the drug-free
communities program, and then also a hardcore user study and
some other assorted activities that I would be honored to talk
you through.
Prepared Statement
With your permission, Mr. Chairman, I would submit for the
record a written statement that we have pulled together which
includes the best judgments we have in response to your own
interests.
Senator Campbell. Without objection, it will be included in
the record.
General McCaffrey. Sir, I look forward to answering your
own questions and listening to your own ideas.
[The statement follows:]
Prepared Statement of Barry R. McCaffrey
Chairman Nighthorse Campbell, Senator Kohl and members of the
Committee, thank you for the opportunity to testify on the Office of
National Drug Control Policy's budget. The Office of National Drug
Control Policy (ONDCP) appreciates your longstanding support, as well
as the guidance and leadership of the Committee. The Strategy we have
presented to the Congress, developed in close consultation with the
members of this Committee and the Congress as a whole, reflects the
strength of our enduring bipartisan commitment to focus our efforts to
diminish America's drug problem on realistic results. We appreciate
your good counsel on setting our sights on aggressive, but plausible,
targets.
Much of our current progress results from the fact that you have
enabled us to reinvigorate the Office of National Drug Control Policy.
Mr. Chairman and Senator Kohl, I want to particularly thank each of you
for your wise judgments and tireless efforts in this regard. Through
the support of this Committee, we now have an ONDCP that is ready for
the task ahead.
The importance of your bipartisan support in the success of this
effort is evident from one of the most significant programs we are now
undertaking: the National Anti-Drug Youth Media Campaign. Mr. Chairman
and Senator Kohl, your efforts to ensure the success of the National
Youth Media Campaign are now paying off; in twelve pilot cities we are
reaching out to our young people with a simple, yet vital message:
``drugs are wrong, and they can kill you and your dreams.'' Absent the
support of you and this committee, this program would not exist today.
The other efforts of Committee members, such as Senator Mikulski's
support of the Baltimore HIDTA and Senator Shelby's efforts on the
intelligence review, are also vital to our success. Let me congratulate
Senator Faircloth on being designated one of the ``Top Five Zealots in
the War on Pot Smokers'' by NORML.
Our common efforts have had a direct and substantial impact on the
success America has enjoyed in reducing drug use. Over the past
seventeen years, this bipartisan partnership has contributed to a 50
percent overall reduction in the number of Americans using drugs and a
70 percent reduction in the number of Americans using cocaine. But we
can and must do more. If unchecked, America's drug abuse problem will
kill 140,000 Americans and cost our society $700 billion over the
coming decade. Our progress must be steady; we cannot afford to lose a
moment's time or spare any effort in significantly reducing the threats
of drug use in America.
We welcome the opportunity at this hearing is to put forward the
fiscal year 1999 budget for ONDCP. However, to provide a framework for
understanding this budget, this testimony must begin with an analysis
of current drug use trends in America, and an overview of the 1998
National Drug Control Strategy.
When you considered my appointment as Director of ONDCP in February
1996, I pledged to forge a coherent counter-drug strategy that would
substantially reduce illegal drug use and protect our youth and our
society. The 1998 National Drug Control Strategy reflects ONDCP's
ongoing commitment to this goal. This Strategy is a ten-year plan to
reduce drug use in America by half--to the lowest levels in the past
thirty years. The following table offers examples of the progress that
will be attained if this plan is fully implemented by all sectors of
American society:
----------------------------------------------------------------------------------------------------------------
Measure Current figure 10-year goals 30-year lows/highs
----------------------------------------------------------------------------------------------------------------
Current drug use (all ages)........ 6.1 percent............ 3 percent.............. 5.8 percent (low).
Marijuana initiates................ 2.37 million........... 1.18 million........... 1.37 million (low).
Age of initiation (marijuana)...... 16.7 years............. 20 years............... 20.1 years (high).
Current use of illicit drugs (among 9.0 percent............ 4.5 percent............ 5.3 percent (low).
12-17 year olds).
----------------------------------------------------------------------------------------------------------------
Let us be clear on this: never before has America had so solid a
commitment to a long-term counter-drug strategy, which is determined to
achieve such an ambitious a goal in fighting drugs. The Strategy is
backed by a system of Performance Measures of Effectiveness by which
this Congress and the American people can hold us accountable to
achieve these ends. However, whether the issue was balancing the
budget, defeating Nazi Germany, or ensuring civil rights to our
citizens, we have triumphed as a nation only when we have worked
together without regard to party or politics. If we lose the bipartisan
anti-drug cooperation and momentum we currently have, it could take us
up to three additional years to begin to meet our goals. We need a
partnership among the Administration, members of Congress, community
coalitions, and state and local governments to achieve our purpose. The
National Drug Control Strategy is sound; our task is to work together
to successfully achieve the defined outcomes for all five of our goals
with their 32 supporting objectives.
i. drug use trends--the threat is great, but we are making solid
progress
Illegal Drug Use Places a Tremendous Burden on America.--The social
costs of drug use in America total over $67 billion per year, including
$46 billion in crime, $6.3 billion in AIDs-related costs and $8 billion
in illness-related costs. Cocaine initiation rates--the number of
people trying the drug for the first time--have begun to increase.
Heroin initiation rates are up markedly. Drug use trends among young
people remain especially troubling. Drug-use rates among youth, while
still well below the 1979 peak of 16.3 percent, remain substantially
higher than the 1992 low of 5.3 percent. One in four twelfth graders is
a current illegal drug user, while for eighth graders, the figure is
approximately one in eight. Elevated drug-use rates are a reflection of
pro-drug pressures and drug availability. Almost one in four twelfth
graders say that ``most or all'' of their friends use illegal drugs. A
Columbia University Center on Addiction and Substance Abuse survey
reported that 41 percent of teens had attended parties where marijuana
was available, and 30 percent had seen drugs sold at school.
Illegal Drug Use Rates are 50 Percent Lower Than 1979's Historic
High Level.--In 1996, an estimated thirteen million Americans (6.1
percent of the U.S. household population aged twelve and over) were
current drug users. This figure is roughly half the number in 1979 when
twenty-five million (or 14.1 percent of the population) were current
users.
Illegal Drug Use Has Begun to Level off Among Youth.--The
University of Michigan's 1997 Monitoring the Future (MTF) study and
SAMHSA's 1996 National Household Survey on Drug Abuse (NHSDA) indicate
that youth drug use rates seem to be leveling off, and in some cases
are declining. The MTF found that, for the first time in six years, the
use of marijuana and other illegal drugs stabilized among eighth
graders. Use of marijuana and other illegal drugs among tenth and
twelfth graders also appears to have leveled off. The NHSDA reported
that current drug use among twelve to seventeen-year-olds declined
between 1995 and 1996 from 10.9 percent to 9 percent. The MTF study
also reported that attitudes regarding drugs, which are key predictors
of use, began to reverse in 1997 after seven years of erosion.
Crack Use is Declining.--The most recent data from the Drug Use
Forecasting Program, which monitors arrestees, show a coast-to-coast
decline in crack use (from a 29 percent decline in Washington, D.C.,
from 1988 to 1996, to 15 percent decline in San Jose, from 1989 to
1996)--a good indication that the crack epidemic that began in 1987
continues to abate.
Good News on Methamphetamine.--Meth use, as reflected by the Drug
Use Forecasting Program's testing of arrestees, is down in the eight
cities that had been suffering the highest increases in use: 52 percent
drop in Dallas; 20 percent drop in San Jose; 19 percent in San Diego;
34 percent in Portland; and over 40 percent in Denver, Omaha and
Phoenix.
Cocaine Production Down Sharply.--Indications are that cocaine
production in the Andean region--the primary producing area--may be
down as much as 100 tons from last year.
Spending on Drug Consumption is Down.--The most recent data shows
the amount Americans spend buying illegal drugs is down roughly 37
percent from 1988 to 1995--a total per annum decline of $34.1 billion
reinvested in American society.
Drug-Related Crime is in Decline.--In 1989, according to the FBI,
there were 1,402 murders related to narcotic drug laws. In 1992, that
number dropped to 1,302. By 1996, that number hit a low of 819.
Drug-Related Medical Emergencies May Have Peaked but Remain Near
Historic Highs.--SAMHSA's Drug Abuse Warning Network (DAWN) reported
that drug-related episodes dropped 6 percent between 1995 and 1996,
from 518,000 to 488,000. Heroin-related episodes declined slightly, the
first decline since 1990. Methamphetamine-related incidents decreased
33 percent to 10,787, the second year of decline since the 1994 peak of
17,665.
Drug Offenders Crowd Our Prisons and Jails.--In June 1997, the
nation's prisons and jails held 1,725,842 men and women--an increase of
more than 96,000 over the prior year. More Americans were behind bars
than on active duty in the Armed Forces. The increase in drug offenders
accounts for nearly three-quarters of the growth in the federal prison
population between 1985 and 1995, while the number of inmates in state
prisons for drug-law violations increased by 478 percent over the same
period.
Public Awareness About the Dangers of Drugs is Increasing.--A 1997
Harvard University poll found that adults believe the number one
problem facing America's children is drug abuse. A 1997 study by the
Center on Addiction and Substance Abuse found that over half of our
young people support drug testing in their schools and say they are
willing to report a drug user to school officials.
ii. the 1998 national drug control strategy
A. Highlights of the Strategy
The 1998 Strategy focuses on expanding programs that work and
building targeted new initiatives designed to directly attack the
problem of drug use. Highlights of this comprehensive, balanced, ten-
year plan include:
A Ten-Year Strategy to Reduce Drug Use and its Consequences by Half
--First-ever, comprehensive ten-year plan to reduce drug use and its
consequences by half.
--This ten-year plan is backed by a five-year budget projections, and
Performance Measures of Effectiveness to improve accountability
and efficacy.
--Supported by the largest counter-drug budget ever presented: $17.1
billion.
--Dynamic and comprehensive: focuses on results not programs; each
element supports all the other initiatives.
Providing the Resources Necessary to Make a Difference
--The $17.1 billion recommended drug control budget for fiscal year
1999 represents a $1.1 billion increase (6.8 percent) over the
fiscal year 1998 enacted level.
--The fiscal year 1999 budget includes an increase of $491 million
for treatment and prevention programs and $602 million for
supply reduction programs.
--The fiscal year 1999 recommended drug budget is 43 percent larger
than the fiscal year 1992 enacted budget.
--Prevention efforts in the fiscal year 1999 budget are provided $.7
billion more than in fiscal year 1992; treatment programs are
provided $3.5 billion more than in fiscal year 1992; domestic
law enforcement efforts are provided $3.7 billion more than in
fiscal year 1992.
Protecting America's Young People
--The Strategy's first goal is educate children and adolescents to
enable them to reject drugs.
--This Strategy builds on programs that work and launches new
initiatives:
National Youth Anti-Drug Media Campaign ($195 million)--will ``go
national'' in June.
School Drug-Prevention Coordinators Initiative ($50 million)--
providing prevention professionals to 6,500 middle schools
nationwide.
President's Youth Tobacco Initiative ($146 million)--preventing
behavior with a relation to future drug use.
The Civic Alliance--helping 33 national civic and service groups,
representing 55 million people, to fight youth drug use.
Youth Drug Research--expanding understanding of youth drug use and
addiction.
--Largest percentage budget increases--15 percent or $256 million--
for youth programs.
Strengthening Communities and Workplaces
--Launches the Drug-Free Communities Program, a five-year, $140
million effort that will strengthen the existing 4,000
community-based anti-drug coalitions, and build 10,000 new
coalitions across the nation.
--Works with 22 million small businesses to initiate drug-free
workplaces.
Reinforcing Our Borders
--Launches a $105 million Port and Border Security Initiative.
--Puts 1,000 new Border Patrol agents, and increases barriers along
the Southwest Border.
--Deploys new technologies, such as advanced X-rays and remote video
surveillance, along the Southwest Border--including $41 million
for nonintrusive inspection technologies.
--Strengthens oversight over federal Southwest Border drug control
efforts.
Strengthening Law Enforcement
--Focuses on full implementation of the Community Oriented Policing
Services (COPS) program.
--Expands DEA's counter-heroin initiative: $12.9 million and 95 new
agents.
--Expands anti-methamphetamine initiative: $24.5 million including
100 new DEA agents.
--Expands DEA's Caribbean Corridor Initiative: $9.8 million and 56
new agents.
Breaking the Cycle of Drugs and Crime
--Provides treatment to nonviolent first-time offenders in the
criminal justice system to free them from the addictions that
drive their actions. Punishment alone cannot diminish drug-
related crime; it is necessary to break the cycle of drugs,
crime and prisons.
--Provides $85 million in funding and other support to help state and
local governments implement drug testing, treatment, and
graduated sanctions for drug offenders.
Reducing the Supply of Drugs and Enhancing Multinational Cooperation
--In 1997, Andean cocaine production dropped by as much as 100 tons
less than the prior year.
--Despite this overall progress, Colombian coca production is up 56
percent over the last two years, with much of the expanded
capacity occurring in guerrilla or paramilitary held
territories.
--The Strategy adds $75.4 million in Department of Defense support to
U.S., Andean, Caribbean and Mexican interdiction efforts.
--Adds $45 million to support Andean nation counter-drug efforts,
including interdiction, crop replacement, and support to law
enforcement.
--Continues to build multinational cooperation against drugs,
focusing on US-Mexico bilateral efforts, the Caribbean
Initiative, and the upcoming Santiago Summit and U.N. General
Assembly Special Session.
Closing the Treatment Gap
--The number of people who require drug treatment but who are not in
treatment--the ``gap''--is estimated at 1.7 million.
--Provides an added $200 million in Substance Abuse Block Grants to
States to assist in closing the gap, increasing the total
funding to $1.5 billion.
B. Goals and Objectives of the 1998 Strategy
The goals of the 1998 Strategy remain unchanged from the 1997
Strategy; reflecting both the need for consistency and the importance
of sticking to those programs that make sense and are working. The
thirty-two drug control objectives are aligned with the Performance
Measures of Effectiveness and outline the specific accomplishments this
Strategy is designed to achieve. The objectives are aggressive. The
Administration is committed to meeting these goals, as well as to
continually examining and refining the targets set forth in the
performance measures system. There will be an annual review during the
budget process to determine the relationship between the goals and the
level of available federal and nonfederal resources.
Goal 1: Educate and enable America's youth to reject illegal drugs as
well as alcohol and tobacco.
Drug abuse is preventable. If boys and girls reach adulthood
without using illegal drugs, alcohol, or tobacco, they probably will
never develop a chemical-dependency problem. To this end, the Strategy
focuses on educating children about the real dangers associated with
drugs. ONDCP seeks to involve parents, coaches, mentors, teachers,
clergy, and other role models in a broad prevention campaign. The
Strategy encourages businesses, communities, schools, the entertainment
industry, and coaches to join these anti-drug efforts. In addition, we
must limit drug availability and treat young substance abusers.
Objectives.--The Strategy's mid-term objectives are to reduce the
prevalence of past-month drug use among youth by 20 percent and
increase the average age of first use by twelve months before the year
2002. The long-term objectives are a 50 percent reduction in current
drug use and an increase of thirty-six months in the average age of
first use by the year 2007.
Goal 2: Increase the safety of America's citizens by substantially
reducing drug-related crime and violence.
The social ruin caused by drug-related crime and violence mirrors
the tragedy that substance abuse wreaks on individuals. A large number
of the twelve million property crimes committed each year are drug-
related as is a significant proportion of nearly two million violent
crimes. The nation's 3.6 million chronic drug users contribute
disproportionally to this problem, consuming the majority of cocaine
and heroin on our streets.
Drug-related crime can be reduced through community-oriented
policing, which has been demonstrated by police departments in New York
and numerous other cities where crime rates are plunging. Cooperation
among federal, state, and local law-enforcement agencies and operations
targeting gangs, trafficking organizations, and violent drug dealers
are making a difference. Equitable enforcement of fair laws is a must.
Punishment must be perceived as commensurate with the offense. Finally,
the criminal justice system must do more than punish. It should use its
coercive powers to break the cycle of drugs and crime through linkage
of the criminal justice system to effective treatment programs.
Objectives.--The Strategy's mid-term objective is to reduce drug-
related crime and violence by 15 percent by the year 2002. The long-
term objective is a 30 percent reduction by the year 2007.
Goal 3: Reduce health and social costs to the public of illegal drug
use.
Drug dependence is a chronic, relapsing disorder that exacts
enormous costs on individuals, families, businesses, communities, and
the nation. Addicted individuals have lost their ability to resist
drugs, which results in self-destructive and criminal behavior.
Effective treatment can manage addiction and lower the cost of chronic
drug use to society.
Providing effective drug treatment for America's 3.6 million
chronic drug users is both prudent public policy and a sound
investment. For example, a recent study by the National Institute on
Drug Abuse found that outpatient methadone treatment reduced heroin use
by 70 percent, cocaine use by 48 percent, and criminal activity by 57
percent. It also increased employment by 24 percent. Long-term
residential treatment had similar success.
Objectives.--The Strategy's mid-term objectives are to reduce use
by 25 percent and health and social consequences by 10 percent by the
year 2002. The long-term objectives are a 50 percent reduction in drug
use and 25 percent reduction in consequences by the year 2007.
Goal 4: Shield America's air, land, and sea frontiers from the drug
threat.
The United States is obligated to protect its citizens from the
threats posed by illegal drugs crossing our borders. Interdiction in
the transit and arrival zones disrupts drug flow, increases risks to
traffickers, drives them to less efficient routes and methods, and
prevents significant amounts of drugs from reaching the United States.
Interdiction operations also produce intelligence that can be used
domestically against trafficking organizations.
Each year, more than sixty-eight million passengers arrive in the
United States aboard 830,000 commercial and private aircraft. Another
eight million individuals arrive by sea, and a staggering 365 million
cross our land borders each year driving more than 115 million
vehicles. More than ten million trucks and cargo containers and ninety
thousand merchant and passenger ships also enter the United States
annually, carrying some four hundred million metric tons of cargo. Amid
this voluminous trade, traffickers seek to hide more than 300 metric
tons of cocaine, thirteen metric tons of heroin, vast quantities of
marijuana, and smaller amounts of other illegal substances.
Objectives.--The Strategy's mid-term objective is to reduce the
amount of illegal drugs entering the United States by reducing
trafficker success rates through the transit and arrival zones 10
percent by the year 2002. The long-term objective is a 20 percent
reduction in trafficker success rates by the year 2007.
Goal 5: Break foreign and domestic drug sources of supply.
The rule of law, human rights, and democratic institutions are
threatened by drug trafficking and consumption. International supply
reduction programs not only reduce the volume of illegal drugs reaching
our shores, they also attack international criminal organizations,
strengthen democratic institutions, and honor our international drug-
control commitments. The U.S. supply reduction strategy seeks to: (1)
eliminate illegal drug cultivation and production; (2) dismantle drug-
trafficking organizations; (3) interdict drug shipments; (4) encourage
international cooperation; and (5) safeguard democracy and human
rights. Additional information about international drug-control
programs is contained in a classified annex to this Strategy.
Objectives.--The Strategy's mid-term objectives are a 15 percent
reduction in the flow of illegal drugs from source countries and a 20
percent reduction in domestic marijuana cultivation and methamphetamine
production by the year 2002. Long-term objectives include a 30 percent
reduction in the flow of drugs from source countries and a 50 percent
reduction in domestic marijuana cultivation and methamphetamine
production by 2007.
C. Assessing Performance
The Strategy's supporting performance-measurement system
establishes the interrelationship between outcomes, programs, and
resources. The performance measurements detailed in a companion volume
to the Strategy--Performance Measures of Effectiveness: A System for
Assessing the Performance of the National Drug Control Strategy--will
gauge progress toward that end using five and ten-year targets. The
heart of the system consists of twelve impact targets that define
strategic end-states for the Strategy's five goals. Eighty-two
supporting performance targets establish outcomes for the Strategy's
thirty-two objectives. These targets were developed by federal drug-
control agencies working with ONDCP and were reviewed by state and
local agencies and drug-control experts.
While the drug-control performance measurement system can offer
valuable information on program effectiveness, it will not determine
federal budgets. No responsible level of federal spending alone can
bring about a 50 percent reduction in America's illegal drug use
problems. State and local governments, the private sector, communities,
and individuals must all embrace the commitment to reduce demand by 50
percent over the next ten years. However, by providing clear benchmarks
of our progress, the performance measures will assist policy makers,
legislators, and managers in considering the adequacy of specific drug-
control programs and increase accountability; these measures will
assist in a considered review of whether we are achieving the maximum
impact for the resources being used . In turn, we will gauge whether
the performance targets need to be adjusted to reflect new or changing
circumstances.
Progress will be measured using both existing and new survey
instruments. The Monitoring the Future survey and the National
Household Survey on Drug Abuse, for example, estimate risk perception,
current use rates, age of initiation, and life-time use for most
illegal drugs, alcohol, and tobacco. The Arrestee Drug Abuse Monitoring
system and Drug Abuse Warning Network provide indirect measures of
consequences. The principal measuring device for international progress
is the International Narcotics Control Strategy Report. This annual
State Department document provides country-by-country assessments of
initiatives and accomplishments. It summarizes drug cultivation,
eradication, production, seizures, arrests, destruction of
laboratories, drug flow and transit, and criminal justice efforts. The
Office of National Drug Control Policy's Advisory Committee on
Research, Data, and Evaluation will consider additional instruments and
measurement processes needed to address the demographics of chronic
users, domestic cannabis cultivation, drug availability, and other
drug-policy data shortfalls. (Because our performance assessments
depend on the quality of the data developed, improved and expanded
research will contribute greatly to this effort.) Annual progress
reports will be submitted to Congress.
iii. the ondcp budget
ONDCP's fiscal year 1999 budget request of $449.449 million
includes:
--$19.442 million for salaries and expenses to support ONDCP's 154
positions (124 full time employees and 30 detailees)
--$162.007 million for the High Intensity Drug Trafficking Area
(HIDTA) program.
--$251 million for the Special Forfeiture Fund to support a National
Youth Anti-Drug Media Campaign ($195 million); a Drug-Free
Communities Program ($20 million); a Hardcore Users Study ($10
million); and discretionary funding to enhance drug control
activities and address emerging drug threats ($26 million).
--$16 million for the Counterdrug Technology Assessment Center
(CTAC).
--$1 million for ONDCP-coordinated policy research.
A. The Capacity to Lead the Fight Against Illegal Drugs: $19.442
Million for ONDCP Salaries and Expenses.
The $19.442 million for ONDCP salaries and expenses is the smallest
programmatic component of the ONDCP budget. However, this funding is
the linchpin for all the other programs funded through the ONDCP
budget. Without a fully staffed and funded ONDCP, none of these other
initiatives can be carried out.
ONDCP serves as the President's primary Executive Branch support
for drug policy development and program oversight. ONDCP advises the
President on national and international drug control policies and
strategies, and works to ensure the effective coordination of drug
programs within the Federal Agencies and Departments. ONDCP
responsibilities include:
--Developing an annual National Drug Control Strategy.
--Developing a consolidated National Drug Control Budget for
presentation to the President and the Congress (including
budget certifications and quarterly reprogramming reports).
--Certifying the budgets of programs, bureaus, agencies and
departments.
--Issuing Funds Control Notices--ONDCP may direct that all or part of
an amount appropriated to a national drug control agency be
obligated by months, fiscal year quarters, or other time
periods, as well as activities, functions, projects, or object
classes. This authority is discretionary.
--Evaluating Program Effectiveness--ONDCP is required to include in
each National Drug Control Strategy an evaluation of the
effectiveness of Federal drug control during the preceding
year. This assessment must include the following elements: (1)
changes in drug use, including estimates of drug prevalence and
frequency of use in Federal, state, and local surveys, as well
as special studies of high-risk populations and drug use in the
workplace; (2) changes in drug availability as measured by the
quantities of illicit drugs available and the amounts entering
the United States, in addition to the interdiction efforts and
their effectiveness; (3) changes in drug use consequences,
which must encompass ONDCP's estimation of the burdens drug
users place on national and other social services, including
the resulting drug-related crimes and criminal activity, in
addition to the contribution of drugs to the underground
economy; and (4) drug treatment capacity by assessing total
public and private treatment slots' efficiency and
effectiveness within each state.
--Coordinating and overseeing Federal anti-drug policies and programs
involving approximately 50 Federal agencies and the programs
they administer.
--Encouraging private-sector, state, and local drug prevention and
control programs.
--Conducting policy analysis and research to determine the
effectiveness of drug programs and policies in addressing the
Strategy's goals, priorities, and objectives.
--Designating High Intensity Drug Trafficking Areas (HIDTA's) and
providing overall policy guidance and oversight for the award
of resources to Federal, state, and local law enforcement
partnerships in these areas.
--Developing and overseeing a National Youth Anti-Drug Media Campaign
that will be a multi-faceted communications campaign that
harnesses the energies of parents, mass media, corporate
America, and community anti-drug coalitions. This campaign will
emphasize that prevention can work and will seek to empower
parents to discuss this critical subject with their children.
--Operating CTAC to serve as the central counterdrug enforcement
research and development center for the Federal Government.
--Overseeing the Drug-Free Communities Program, which will serve as a
catalyst for increased citizen participation in our efforts to
reduce substance abuse among our youth and provide community
anti-drug coalitions with much needed funds to carry out their
important missions.
ONDCP is an organization of 154 committed professional men and
women. It will have 124 full-time employees (FTE's) and 30 detailees
once hiring has been completed. The fiscal year 1999 request for
$19.442 million represents a $1.426 million increase over the enacted
fiscal year 1998 total of $18.061 million. Major expenses include:
--$9.180 million for compensation of 124 FTE's. This represents an
increase of $457,000 over the fiscal year 1998 enacted total of
$8.723 million.
--$2.020 million for total personnel benefits.
--$4.218 million for guard services, professional services contracts,
maintenance services, and related costs. Combating the threat
of drugs is not without its risks. For example, in 1997, 152
law enforcement officers were killed in the line of duty. Over
the last year, we have taken prudent steps to increase the
security of both our personnel and sensitive information within
the office's purview.
--$2.170 million for rental payments to GSA.
--$734,000 for travel and transportation costs. The bully pulpit is
one of the most valuable tools ONDCP has at its disposal in the
fight against drugs. Since taking office, I have traveled to 33
of the 50 United States, touching over 60 cities, countless
towns and communities--ranging from New York City to Las
Cruces, New Mexico--and meeting with hundreds of thousands of
people. These efforts are vital to helping Americans of all
ages hear the message that drugs are wrong and can kill you.
Additionally, by getting out into the field and walking the
frontlines of our struggle against drugs, we ensure that our
policies and programs respond effectively to the realities of
life beyond the Beltway.
Similarly, through foreign travel to 13 nations, I have personally
pressed the vital counter-drug foreign policy objectives of the
United States. By building face-to-face understandings and
common strategies we are making real progress internationally.
For example, coca production in the Andean region is down as
much as 100 tons below last year's production level.
--$821,000 for communications, utilities, printing, reproduction, and
related miscellaneous costs.
--$299,000 for equipment, supplies and materials, and
representational funds.
B. Educating America's Young People, Empowering Communities, and
Advancing Our Understanding of America's Drug Problem: $251
Million for the Special Forfeiture Fund
($195 million) National Youth Anti-Drug Media Campaign
ONDCP, with the assistance of the Partnership for a Drug-Free
America (PDFA) and the Ad Council, is implementing a multifaceted
communications campaign involving parents, mass media, corporate
America, and anti-drug coalitions. The National Youth Anti-Drug Media
Campaign will counteract media messages and images that glamorize,
legitimize, normalize, or otherwise condone drug use. Youth aged nine
to seventeen, and the adults who influence them, will be targeted by
the campaign. Campaign messages will accurately depict drug use and its
consequences and encourage parents to discuss drug abuse with children.
Congress appropriated $195 million for the campaign last year,
making it one of the largest paid advertising efforts ever undertaken
by government. Over the past year, ONDCP has consulted with hundreds of
communications and marketing professionals, educators, prevention and
treatment experts, public health specialists, and public officials to
design the campaign's development process. Anti-drug ads for phase I of
a pilot program began airing in Atlanta, Baltimore, Boise, Denver,
Hartford, Houston, Milwaukee, Portland (OR), San Diego, Sioux City,
Tucson, and Washington, D.C. in January.
This summer, in phase II, ONDCP will expand the anti-drug
advertising component nationwide, using national and local television
(both broadcast and cable), radio, the Internet, and print media. In
the fall, during phase III, a fully-integrated campaign will reach
target audiences through TV, radio, print, Internet, and other media
outlets. The campaign's advertising component is currently estimated at
$150 million. (The remaining monies will be used to support the
campaign through corporate sponsorships, interactive media, evaluation
processes, and other appropriate efforts.) This figure was determined
based on ONDCP's goal of reaching on average 90 percent of the target
audiences at an average frequency of four exposures per week. ONDCP
contracted with experts in the fields of media planning and buying, and
held consultations with a wide range of other experts, to develop a
prototype national media plan that meets these goals. The projected
breakout of expenditures by media category for the national advertising
component of the overall media campaign is as follows:
--television and radio: 72 percent
--print (magazines and newspapers): 11 percent
--other (e.g., in-school, cinema, online, billboards): 17 percent
The campaign's reach will be extended through corporate
sponsorship, cooperation with the entertainment- industry, programming
changes, and media matches (for example, contributions to cover public-
service time and space). Prevention experts believe this public-private
campaign will influence attitudes of youths towards drugs within two to
three years.
($20 million) Drug-Free Communities Program
Whether the challenge is to prevent young people from using drugs,
or to take our nation's streets back from drug dealers, strong
communities are vital to fighting drugs in America. Presently, there
are an estimated 4,000 community anti-drug coalitions in America. The
Drug-Free Communities Act of 1997 recognizes that the problem of
illegal drugs must be addressed at the community level. The Drug-Free
Communities Act authorizes $143.5 million in matching grants over the
next five years to support these existing coalitions and expand the
number of coalitions by ten thousand. The Act authorizes the President
to establish a Commission on Drug- Free Communities to advise ONDCP
concerning matters related to the program. We expect the President to
name the members of this Commission this Spring.
ONDCP will award grants to community coalitions of representatives
of youth, parents, businesses, the media, schools, youth organizations,
law enforcement, religious or fraternal organizations, civic groups,
health care professionals, State, local, or tribal government agencies,
and other organizations.
In carrying out the Program, the Director of ONDCP will: (1) make
and track grants to grant recipients; (2) provide for technical
assistance and training, data collection and dissemination of
information on state-of-the- art practices that the Director determines
to be effective in reducing substance abuse; and, (3) provide for the
general administration of the Program.
($10 million) Hardcore Users Study
This amount will assist with the research and development of a
national estimates of the size and composition of the hardcore dug user
population. A pilot project for this research conducted in Cook County,
Illinois, concluded that hardcore users are significantly under-counted
in current surveys.
($26 million) Director's Discretion
This amount would be available at the discretion of the Director of
ONDCP to use to enhance drug control activities and address emerging
drug threats.
C. Strengthening Law Enforcement: $162.007 Million for the High
Intensity Drug Trafficking Area Program
The HIDTA program facilitates coordination of anti-drug activities
and investigations of federal, state, and local law enforcement
agencies. The HIDTA program designates geographic areas to which
federal resources are allocated to link local, state, and federal drug
enforcement efforts. Properly targeted, HIDTA's offer greater
efficiency in countering illegal drug trade in local areas. HIDTA
programs are based on a logical, comprehensive methodology for
prioritizing needs and working with other initiatives.
Specific counties in 20 areas have been designated as HIDTA's:
Southwest Border (which contains the five partnerships of the
California Border, Arizona, New Mexico, West Texas, and South Texas),
Los Angeles, Houston, Miami, and New York (designated in 1990);
Washington D.C./Baltimore and Puerto Rico/U.S. Virgin Islands
(designated in 1994); Atlanta, Chicago, Philadelphia/Camden (designated
in 1995); Rocky Mountain, Northwest, Lake County (Indiana), Midwest,
and Gulf Coast (designated in 1996); Southeast Michigan and San
Francisco Bay (designated in 1997); and, counties in three areas have
received official designation by the Director of ONDCP in fiscal year
1998: Central Florida; Kentucky/West Virginia/Tennessee; and Milwaukee.
This fiscal year 1999 request for $162,007,000 for the HIDTA
program is the same as the fiscal year 1998 enacted HIDTA budget. At
least half of the resources will go to state and local participants to
support more than 250 task forces and initiatives. HIDTA funding is
primarily used for intelligence, investigation, and enforcement
activities. A small percentage of HIDTA funding supports prevention and
treatment initiatives. Included in the fiscal year 1998 enacted budget
was $8.8 for methamphetamine funding, of which $1.5 million is for the
Rocky Mountain HIDTA and the remaining $7.3 million is for a national
methamphetamine reduction program.
Decisions regarding the allocation of the discretionary fiscal year
1999 HIDTA funds have not yet been made. However, as in fiscal year
1998, at least half of the resources will go to state and local
participants.
D. Deploying Advanced Technologies to Fight Drugs: $16 Million for the
Counterdrug Technology Assessment Center
The development and deployment of advanced technologies is vital to
the Strategy's primary objective of reducing drug use in America by
half over the next ten years. For example, new nonintrusive detection
technologies are needed along the Southwest Border to ferret out
illicit drugs from the steady and growing exchange of commerce that
greatly benefits both the United States and Mexico. Similarly,
technological advances in understanding the process of addiction offer
the promise of new treatments to free people from the grip of illegal
drugs.
The Counterdrug Technology Assessment Center was created to serve
as the central counterdrug research and development center for the
federal government. The CTAC budget provides minimum, but crucial,
funding for special research not covered by other agencies. This budget
also provides significant support for infrastructure needed to
demonstrate technical feasibility and measure the effectiveness of
proposed innovations of emerging technology in realistic environments.
CTAC funding also supports an outreach program to: assess the
technology available, identify the best research from all sources, and
assist law enforcement and demand reduction agencies in bringing these
advanced technologies into their operations.
The CTAC supply reduction development program consists of: (1)
cargo inspection technology; (2) information technology research; and,
(3) tactical technologies. CTAC will continue outreach to the community
through technology conferences and symposia, benchmark testing, and
technical assessments of competing technologies and systems under
consideration for development or procurement. CTAC has worked with the
Science and Technology Committee to prepare a fiscal year 1999 budget
which conforms with the five-year technology research and development
strategy.
In the non-intrusive cargo inspection initiative, CTAC will work
with Customs, the Federal Aviation Administration, and the Navy to
develop an operational test-bed for testing transportable and fixed
systems for non-intrusive inspection of cargo containers along the
Southwest border. The program will address operational constraints and
cost factors associated with customs inspection.
The CTAC demand reduction initiatives are focused on the crucial
national problems of finding therapeutic drugs to counteract or block
the effects of cocaine abuse, developing more effective treatment
modalities with a special emphasis upon youth between the ages of 15-
17, and developing a national scoreboard to monitor the effectiveness
of all substance abuse treatment. CTAC's demand reduction technology
program has been coordinated with NIDA.
The goals of CTAC's therapeutic cocaine medications development and
facility support program are to have an effective treatment for cocaine
addiction by the year 2000 and to fully develop a family of therapeutic
drugs by 2003. The programs' goals fall within the ten-year time
horizon established by the National Drug Control Strategy to reduce the
harm of drug abuse in America.
E. Expanding Our Understanding of the Problem: $1 Million for ONDCP-
Coordinated Policy Research
ONDCP conducts research to inform the policy process, identify and
detail changing trends in the supply of and demand for illegal drugs,
monitor trends in drug use, identify emerging drug problems, assess
program effectiveness, and improve the sources of data and information
about the drug problem. This $1 million will support the activities,
such as:
Pulse Check.--This is a report on current drug use and emerging
trends, based on qualitative information from the police,
ethnographers, and epidemiologists working in the drug field, and
providers of drug treatment services across the country. This project
is one of the most important sources of current intelligence and data
on drug use.
Retail Value of Drugs Sold in the United States.--This is an annual
project to determine how much Americans spend on illegal drugs. The
report focuses on the retail sales value of cocaine, heroin, marijuana,
and other illegal drugs. It provides ONDCP's estimates of the size of
the hardcore user population.
Drug Market Analysis.--Working with the National Institute on
Justice, ONDCP is using the Drug Use Forecasting system as a research
platform to analyze drug markets. This project will provide information
on drug dealing and the drug/crime connection.
Price of Illicit Drugs.--This yearly project generates quarterly
and annual illicit drug prices and purities for the United States and
selected cities. Results of the project are used to monitor market
trends and support other research projects related to the illicit drug
market. Statistical models based on data from the DEA are used to
estimate typical prices for standardized purchases of heroin, cocaine,
and marijuana. The paper includes price trends for these standardized
purchases over time.
Federal Grant Directory.--The Directory assists state and local
governments, community coalitions, researchers, and others in
identifying and applying for Federal grants by cataloging Federal
programs that award drug-related grants. It also provides information
on how to identify and contact private foundations that also may
provide valuable resources in the field. The third edition of the
Directory is currently being prepared.
iv. a common effort toward real progress
The Office of National Drug Control Policy's budget request of
$449.449 million is a small component of the requested $17.1 billion
federal drug control budget. However, the importance of this funding
cannot be overstated. This support will provide ONDCP the resources
necessary to ensure the successful implementation of the 1998 National
Drug Control Strategy, which will have broad reaching, positive impacts
on this nation and its citizens.
The 1998 Strategy provides this nation with a ten-year plan to
reduce drug use and its consequences in America by half--to the lowest
levels in the past thirty years. The Strategy is: backed by a $17.1
billion budget. This is the largest counter-drug budget ever presented
to ensure that the federal government can do its part in meeting this
goal. The budget is accompanied by a set of well-defined performance
measures to improve efficacy and ensure accountability. The Strategy is
a plan for victory in the fight against drugs.
However, we can only defeat drugs if we are united in our efforts.
The bipartisan support this Committee and Congress has provided to
ONDCP has been vital to our successes over the past decade in reducing
overall drug use, stabilizing use among our young people, and building
at home and abroad the institutions and advancing the policies needed
for progress. Your continued support as we move ahead in implementing
this Strategy is critical. By providing ONDCP the funding necessary to
move ahead, and by uniting our efforts behind this Strategy we can
forge a safer, healthier and more productive nation. America deserves
no less.
Thank you for this opportunity to lay out ONDCP's fiscal year 1999
budget request. We solicit your feedback and guidance in the coming
months.
Statement of Senator Campbell
Senator Campbell. I apologize for being late. I had to be
on the Senate floor, so I do not know what has already
transpired. Had you already asked some questions?
Senator Faircloth. No; we have not asked--we have both had
opening statements.
Prepared Statement
Senator Campbell. I see. I am going to submit mine for the
record and get right to a few questions.
[The statement follows:]
Prepared Statement of Senator Campbell
This morning the Subcommittee on Treasury and General
Government will be reviewing the fiscal year 1999 budget
request for the Office of National Drug Control Policy. I would
like to welcome Mr. Barry McCaffrey, Director of ONDCP.
Mr. McCaffrey, your office has the responsibility of
coordinating anti-drug policies and programs of approximately
50 Federal agencies, assessing the drug situation in this
country, supporting promising anti-drug research and technology
and developing the National Drug Control strategy which is the
Administration's response to the drug problem.
Drugs do not choose a specific race or financial background
and they impact every part of our society, a fact we all too
often overlook. The current estimated number of children, from
ages 12 to 17, that claim to have ever used drugs is almost 5
million.
Our responsibility here, along with Mr. McCaffrey, is to be
able to reach each and every one of these children to
discourage them from using drugs. These are children with a
wide variety of backgrounds and an even wider variety of
values. We have to reach out to them by trying a wide variety
of approaches through television ads, in school programs, in
movies, with parents and peers. When you look at it this way,
attacking the drug problem in this country seems overwhelming.
However, I think that we can and must work to make a
difference. I am a true believer that if we can save one child
from drugs, there should be no question about the need for the
investment. Unfortunately, we have limited resources and I also
think we cannot buy our way out of the problem. What we have to
do is empower our parents, teachers, communities, and most
importantly our children with the skills to make the right
decisions when confronted with drugs.
We have to equip not only children with the right skills,
but anyone who may be faced with the choice of whether or not
to use drugs.
So, Mr. McCaffrey, you are the Subcommittee's means to
determine whether or not what we're doing is working and how
well, not only through your own budget but through the budgets
of the other federal agencies that you certify, including the
recently released drug strategy. You are also our means to
finding out what is or is not working so we can make
improvements.
Within these limitations, we have to find the right mix of
resources, programs and initiatives to enable us to reach out
to each of the user populations and give them an alternative to
drug use.
Mr. McCaffrey, I know you wrestle with these concerns, and
I look forward to your testimony on your Office's efforts in
addressing these problems and the progress we've made.
Media Campaign
Senator Faircloth. Excuse me, Mr. Chairman. I have to go to
a savings and loan meeting. I will look forward to following up
on what we do.
Senator Campbell. Thanks for opening the hearing.
I am personally very encouraged by your charts, General. I
think that you are right, maybe we have turned the corner. I
wanted to ask you a few questions dealing with them. First of
all, do you have those in eight-by-tens so I could have a set
of those?
General McCaffrey. Yes, sir; they should be in your packet.
Senator Campbell. I appreciate that. I believed, as you
have, I am sure, that if we can do such wondrous things in this
Nation as fly to the Moon, certainly we can convince our
youngsters to leave drugs alone. The collective wisdom, the
energy, and the determination that seem to be pulling together
now through ONDCP is welcome, at least from this Senator's
standpoint.
I wanted to ask a couple of questions. First of all, the
media campaign that we funded, there were some concerns on the
part of the committee, as you remember, that if we put that
much paid advertising into a media that perhaps the public
service announcements dealing with the same thing would go down
and they would kind of look at it as a cash cow. Have you
noticed any reduction in voluntary public service announcements
dealing with drugs since you initiated your media campaign?
General McCaffrey. We are really delighted with the way
this has worked out. We have a very skillful group, Zenith. We
borrowed the DOD advertising contract until we put out our own
request for proposal. They are out negotiating in each market.
And part of their guidance, since I am responding to the law,
is that they have to sustain the public service component. We
are at least achieving match, and in some market areas more
than achieving it.
In addition, we are finding some places, Congressman
Latham's district jumps out, and also Boise, ID, where the
money we are paying for the funded component, the news media
are turning it around and using it to buy other public service
or supporting coalitions. So it is a very impressive response
by news media.
Senator Campbell. Your media campaign has been out now
about one-half of a year; is that right?
General McCaffrey. Yes.
Senator Campbell. These are encouraging statistics, do you
think those drops in numbers are directly correlated with the
advent of that campaign?
General McCaffrey. No; I think those numbers were from last
year. That is really 1997 data being seen in 1998. I think that
was a function of increased general news media focus on the
subject and increased coalition activity. A lot of the people
in this room, the CADCA in particular, but also NASADAD and the
civic alliance we put together, 56 million Americans now have
their association, 33 of them have signed up to work the drug
issue with us: Kiwanis, 100 Black Men, YMCA, Rotary, Elks. Elks
has been tremendously involved. There is just a lot of people
that are now working on this issue.
Senator Campbell. That is good. That reaffirms my belief
that you cannot do it all from here. If you do not have local
community help for good willed people in all the towns across
the country those numbers are not going to go down.
Methamphetamine Labs
You talked quite a bit about HIDTA, and I appreciate you
doing that, and a little bit about CTAC too. Let me ask you a
couple of questions. You mentioned a reduction of the
methamphetamine labs. I guess they will always be there. It is
a constant war. What would you think the next step would be in
trying to reduce the number of labs out there, and bring the
people to justice that have them?
General McCaffrey. There is a lot to be learned from both
the DEA and California narcotics officers in particular about
aggressive law enforcement in this area. The labs are not only
a threat to those who are buying methamphetamines--the single,
white male, early twenties, addicted, becomes unemployable,
paranoid, dangerous--but also a lot of these labs have children
involved around the lab. The labs, one out of six, the
California police tell us, in a given year explode or burn. So
they have now passed a State law that essentially says, if we
find children in the lab area, you have endangered them, and
increased the sentencing component.
DEA has been extremely aggressive in going after these
structures. The numbers are so high they are almost beyond
belief. We are up over, for example, 1,200 labs seized in
California last year, a lot of them these mom and pop
operations, a few ounces.
Senator Campbell. 1,200 seized?
General McCaffrey. They are cooking their own meth and
selling it to their friends.
Senator Campbell. We used to have mom and pop grocery
stores. Now we have mom and pop labs.
General McCaffrey. Yes; and it is pretty dangerous.
We have also put $8.8 million, thanks to your 1998 funding,
into methamphetamine add-ons. We went to the DEA and asked them
for density of trafficking and use studies and we have passed
out that money. I think that is going to make a big difference,
too.
CTAC
Senator Campbell. Let me speak a little bit about CTAC. I
attended several of the information meetings, one in Phoenix
which you were at, and one in, I think it was Minneapolis, if I
remember correctly. But I thought that was a very good program.
You did not request that to be funded this year in 1999 I
understand.
General McCaffrey. Which program, Senator?
Senator Campbell. The CTAC transfer to State and locals
some of this wonderful sophisticated equipment that ATF has
now.
General McCaffrey. We've got $13 million in the 1998 budget
for CTAC technology transfer. I asked for $15 million from OMB
in the 1999 budget and did not get it. I appealed and was
denied the appeal.
Senator Campbell. Did they give you a reason why? I thought
it was a pretty effective program.
General McCaffrey. There is certainly a very strong
argument that all over America we have law enforcement officers
who are on the line and who need this kind of equipment, some
of which is----
Senator Campbell. How is it working so far? I hear from
local police departments that are very interested in it in our
State.
General McCaffrey. Of course, I come to this with a belief
that if you want to increase the effectiveness of an
institution you do not necessarily increase manpower, you give
them more effective tools to do their job. This is the kind of
approach I think we need to study very closely. I would look
forward to your own thinking on this.
Senator Campbell. Part of the Counterdrug Technology
Assessment Center [CTAC], there was a provision for this
technology transfer that we are talking about. I know in my own
hometown that they have problems with drugs and all the stuff
related to it. I do not know the disposition of it, but I know
that it is a small, poor town. They do not have video cameras
in the cars. And I know they had made an application to CTAC to
try and help defray the cost of putting some video cameras in
the cars because they feel that if they could have it on film,
they are going to have a much better case when they go to court
with it. So I am a little disappointed that that was not
included in your budget.
GAO Report on CTAC
Can you respond to the GAO's recent comments that CTAC, for
all intents and purposes, does not get any feedback from the
field in determining the need of State and local agencies?
General McCaffrey. Does not get feedback from the field in?
Senator Campbell. Feedback from the field about determining
the needs of local agencies.
General McCaffrey. It is something I ought to take aboard
as a challenge to us to make sure that we are not only
effectively listening to local law enforcement, but they also
believe that that is the case. I think we have a pretty good
tool using the HIDTA organization now, 20 HIDTA's which are all
over the country. In our March meeting we are going to have a
discussion of this pilot program, and before the HIDTA
directors leave--and several of them are in this room--they
will become our spokesmen and our agents to listen to local law
enforcement.
I think your criticism is a good one, Senator. Let me see
if we can improve on this.
HIDTA
Senator Campbell. I am a big supporter of the HIDTA's, as
you know. We have talked about them a number of times. But I
know in our State, a number of communities tell me now that
they are having difficulties getting HIDTA funds and
difficulties getting any requests approved at all.
Some of those are not in the big metropolitan areas, but,
in fact, some of those smaller communities are where the drugs
are moving, the places where there aren't lots of law
enforcement, lots of officials, lots of surveillance on the
highways and so on. You know as well as I do, these guys are
going to go to the backroads and the quiet landing strips, the
places where there is not much enforcement. It would seem to me
that some of those communities should be equally important when
they are applying for help from the HIDTA's.
I know Steamboat Springs, Cortez, CO, and a couple of
counties out in the southeast part of the State have all told
me that they have problems getting any help from HIDTA. So I
would appreciate it if you could kind of pass that message on
to local HIDTA's for me.
General McCaffrey. Senator, the Rocky Mountain HIDTA has
gotten a little over $3 million to date. We will give them an
additional $2.89 million prior to the end of March. Then the
Rocky Mountain HIDTA will also get about $1.5 million of our
national methamphetamine reduction appropriated money. So help
is on the way.
I might also add that the Senate has now confirmed, and
Attorney General Janet Reno has sworn him in, Chief Bob
Warshaw, who is a police chief up in Rochester, NY, and has
been chief in three departments. He is a nationally recognized
law enforcement professional. I think this HIDTA program will
better achieve our purpose in the coming years.
Media Campaign
Senator Campbell. I understand that you are going to have
some feedback on your pilot media program around July; is that
correct?
General McCaffrey. Exactly. We have gotten interim feedback
that is in your packet right now. But we will have an
evaluation component formally done.
Senator Campbell. So you will use that to make decisions on
your next request I assume.
General McCaffrey. We have already factored in the
evaluation component. We had Annenberg School of Journalism put
their own money into it, and we have a pretty decent set of
focus groups and questionnaires, and we are trying to
incorporate that into the next generation of ads, yes.
Senator Campbell. Good. In the fiscal year 1998 bill there
was language that required quarterly reports on the obligations
of funds relating to the media campaign. When do you expect to
give us a complete report on----
General McCaffrey. Actually, I am surprised that the law
said quarterly reports. I thought we did not have that in
there. But one way or the other, we will comply with any
reporting requirements that are involved in it.
We do have a budget. We do know how we are spending the
money. It is, as far as I can see, pretty well controlled.
Senator Campbell. In addition to that, as I remember we
also asked for a monthly accounting of the obligation of funds
to the campaign so we could keep track of that, and I do not
remember getting that either.
General McCaffrey. Let me go find out. We will be, of
course, responsive, not only to the law but to your own
interest. If I could underscore though, that there is a danger
with this tiny group of people we have managing this
operation--five folks--that I do not want to run this program
with four sets of Senate and House staffs. There are four
committees involved and I really need to be held accountable,
but to do the management and the creative work as best we can.
Senator Campbell. They tell us we are going to have to be
over on the Senate floor in about 20 minutes or a little bit
after and I certainly do not want to monopolize all the time,
so let me just ask one more question. I am going to submit
several more questions to you in writing, if you would get back
to us on those.
Director's Security
Does your fiscal year 1999 budget request include anything
about the 1998 appropriated amounts for your own personal
security? I remember reading something in the paper that there
was, when you went to Mexico there was some discussion----
General McCaffrey. Let me give you a piece of paper. There
is probably a substantial increase. There is a one-time
purchase of an armored vehicle. We have added now a chase car.
I am a little reluctant to sketch out the whole security.
I had a series of reasonably credible threats last August.
We are trying to respond to that to ensure I can do my job and
not get whacked.
Senator Campbell. I understand. We would not want that to
happen either. But you travel around so much by plane, how
would you get the--if security requires an armored car and a
chase vehicle, how are you going to get that around?
General McCaffrey. Again, without detailing how we do it,
the biggest protection I have is to be careful on what I
release in public in advance. Fortunately, I am protected by
the Federal Marshal system. I have never met a more
professional group in my life. And they, of course, have
national representatives, so when I go a place it is the local
marshals and the local police force that provides security.
Again, I do not want to detail too much of this. I travel
under an assumed name. I am in hotels under a cover name, et
cetera. So we are trying to ensure that I am----
Senator Campbell. I frankly do not even need to know about
that or do not particularly want it on the record. I was just
concerned in terms of heavy equipment.
General McCaffrey. I do not take armored vehicles. The
armored vehicle in the Washington area is on predictable
travel, home to work, and return.
Senator Campbell. I see.
General McCaffrey. Coming to the Hill.
Senator Campbell. Not if you are out in the field somewhere
when you have to go to San Francisco or something like that.
General McCaffrey. Yes; it has been my experience in the
past--I have been under personal security for three of my
assignments, in NATO, in Latin America, and the single cheapest
thing to do is get an armored vehicle. It then makes it just
about impossible to get you without car bombs or RPG's. So we
have gone that route. We just have to be sensible in what we
are up to.
Senator Campbell. Are you sure you want this job?
General McCaffrey. To be honest, Senator, it is the same
way I started life, carrying a gun.
Senator Campbell. I understand.
Senator Kohl, do you have some questions?
Senator Kohl. Thank you, Senator Campbell.
Performance Measures of Effectiveness
General McCaffrey, the program measures that you developed
to evaluate the media campaign as we understand it will start
in 2002. But by then Congress may well have committed close to
$1 billion to this media campaign. Should we not get a clear
evaluation before 2002 with respect to how this program is
working?
General McCaffrey. Senator, you sure should. I think there
has been a misconception. The performance measures of
effectiveness began with twelve 10-year targets. Then we were
able in the interagency debate to get 5-year targets. I might
add, there were 200 or more outside experts that helped us
articulate those numbers.
What we do owe you is to break it now into annual targets.
We will do that in the year to come, in my view. One of the
things we could do is straightline it. But we absolutely should
be held accountable each year for achieving something.
Now the other ones though, the National Youth Media
Campaign has a series of measures, many of which, fortunately,
exist already. Others exist in a form where if we slightly
modify them we will get measures and some new ones that we will
create. But there will be a rigorous picture, as well as we can
do it, on what impact are we having with this $195 million. And
by the way, we need to draw that evaluation screen wide enough
to not miss things that we did not think of.
That is one of the reasons that I am so pleased to see this
cascade of phone calls to community coalitions. Donna Shalala's
people have had to add all sorts of personnel to respond to
requests for these pamphlets on parents talking to their kids
about marijuana. And in many cases we do not even have the
numbers down there, they are just searching now for
information.
So I can assure you that we are going to give you, not in
2002, but you have the first response already in front of you,
and this summer we will get an even better look at how it is
going. It is going pretty good.
Senator Kohl. All right. General McCaffrey, it is my
understanding that you will use data from the National
Household Survey of Drug Abuse and Monitoring the Future to
evaluate youth drug usage. This is the same data that you have
been using to determine drug use patterns. Do you believe that
these teenage surveys provide realistic information on usage?
Do you not think that teens and their parents may be reluctant
to provide completely truthful responses?
Performance Measures of Effectiveness
General McCaffrey. I think in almost every one of these
cases it is useful to be skeptical of the data, to understand
how they collect it, and what the limitations are. MTF could
have some built-in doubts. On the other hand, it is consistent.
It has been collected since 1968. So when you see a number go
up or go down, you should assume there has been a change. Now
maybe it was actually all along higher or lower. That is one
reason we are pretty confident, for example, last year that
when MTF said drug use rates among eighth-graders went down,
that in fact it did.
But there are other ways to get at that data, and household
survey comes at it from a different population. Then there are
different data, for example, the DAWN and DUF. You can go after
youthful arrest rates, who tested positive for drugs. Then we
have other sources of studies done in the civilian institutions
like Joe Califano's work which he just released.
So there are a whole set of measurements and we ought to
look at all of them. And then we ought to be skeptical of what
we are hearing. I agree with you.
Senator Kohl. These surveys show an increase in the use of
marijuana by children in certain age groups. We are hearing
some members question whether we should continue to fund these
efforts with respect to marijuana use. How do you respond to
people who raise these questions?
General McCaffrey. When I am asked, what is the most
dangerous drug in America, it is tempting to say it is
methamphetamines, it is heroin addiction, it is PCP, it is
MDMA, it is these horrendous drugs that have addicted more than
3.6 million Americans. My normal response is, the most
dangerous drug in America is a 12-year-old to about 16-year-old
regularly smoking pot. Because when we look at the numbers, and
every one of these adolescents who are at risk--and a 12-year-
old using drugs is at risk--is potentially a $2 million tax on
our society, which is the cost of dealing with an addicted
adult.
So hands down, if there is a priority in the National Drug
Strategy it has to be through a series of mechanisms to
persuade young Americans, do not smoke dope or use heroin, LSD,
inhalants, et cetera. Delay the onset of this behavior. If we
can get you to age 19, you are home free. You will never be one
of these 4 million suffering Americans. So Donna Shalala and I
are adamantly opposed to the use of marijuana in general, and
fearful of its consequences on young people.
HIDTA
Senator Kohl. Good. General McCaffrey, let me thank you for
selecting the city of Milwaukee as a new high-intensity drug
trafficking area. Our legislation did not obligate you to
select Milwaukee as one of the new HIDTA cities, although it
certainly did encourage you to give Milwaukee serious
consideration and I appreciate that choice.
The HIDTA in Milwaukee is already paying dividends.
Inspired by this initiative, a task force was convened in
Milwaukee which has expanded the antidrug strategy to the whole
problem of youth violence. The plan that we have developed will
attack drugs and violent crimes with aggressive enforcement,
give children and teens safe places to go to after school and
on weekends, and keep community residents informed and
involved.
We in Milwaukee are committed to an ambitious $7 million a
year program, and the $3 million that the HIDTA provides is a
big part of it. We believe the success of HIDTA and our task
force that we have convened are intertwined.
General, will the duties and responsibilities of the
Milwaukee HIDTA coordinator include taking an active role with
our youth violence and crime task force?
General McCaffrey. I am sure that that executive director
up there will work in support of what I hope is an 18-member
executive committee comprised of local, State, and Federal
officials. He is really their servant. I hire them. I will
approve the budgets. I will provide oversight. But that
strategy ought to come out of those 18 women and men in law
enforcement, prosecution, prevention, and treatment. So the
answer will be, yes, he will be supportive of that effort.
Senator Kohl. All right. What criteria will you use to
determine whether or not the HIDTA is a success?
General McCaffrey. It seems to me we owe you, through these
performance measures of effectiveness, a way of assessing what
they are achieving. We did get all the HIDTA's in the country
now to write a threat assessment. Although we have different
formats to it, we are going to try and get a common threat
assessment. We are using the National Drug Intelligence Center
to help us with that.
We have asked each HIDTA to develop a strategy which
includes what do you say you are trying to achieve, and put a
number on it. I think we ought to learn from this. It is
possible that they will say they are trying to achieve things
that they cannot get to, and they may find that some things are
easier to measure than others.
I am a little uncomfortable. Sometimes I get them saying, I
am going to break apart seven criminal organizations out of 15
in the coming year. Well, six of them may be tiny organizations
and one may be a level II international criminal group. So
sometimes numbers can be deceptive.
But we are going to have them write developmental
standards, and then we are going to hold them accountable for
it. I think one of the things I have to do is not have
Congress--and I would ask for your support on this--instruct me
on where to put this money by category by HIDTA, and let me as
a manager put money where they are achieving successes and take
away money where they are not achieving results.
Drug-Free Prison Zone Demonstration
Senator Kohl. All right. General, last year the committee
provided ONDCP $6 million to fund a drug-free prison zone
demonstration project. Can you tell us what the status of that
project is?
General McCaffrey. We had a wonderful 2-day session with
the prison drug treatment experts of America. I announced that
as one of three initiatives in this field at the end of
yesterday's conference. We are signing an MOU with the National
Institute of Corrections. There is a lot of work going on in
it.
It will have, as I remember, three major components. It
will commence in Federal prisons within 6 months and selected
State prisons by next year. It will have a training component
and a new technology component. We have to get serious about
this. I know this is a program that you have sponsored. It is a
great contribution to what we are trying to do.
How can we possibly lower drug use rates in America if we
cannot keep drugs out of our prison system? So we are
appreciative of your support on this.
Senator Kohl. General, ONDCP and the National Institute of
Justice are developing a memorandum of understanding to start a
break-the-cycle campaign aimed at incarcerated drug users.
Could you explain this program? How will it be implemented and
how will you evaluate its results, General?
General McCaffrey. The second of three initiatives we
announced to the press yesterday included this $6 million
program. But I have to tell you, it is in the context of Janet
Reno having put $85 million into that break-the-cycle program.
So she really stood behind this effort.
As you may be aware, we tested this in Birmingham, AL. It
is now in its second year. It is achieving, we think, superb
results. When we announced the initiative we said we would now
expand it to two additional testing sites, and we will create
three juvenile programs.
That is a second thing we have simply got to do, we have to
get at these kids who are addicted criminals and put them on a
separate track and break them out of this pattern. So we think
there has been tremendous payoff in the test and we are about
to expand it dramatically in the coming year.
Prison Drug Treatment
Senator Kohl. OK. General, do you have other programs that
provide drug treatment in prisons?
General McCaffrey. Yes; there are. I would probably better
serve your interest by providing you an answer for the record.
The last 3 days of sitting there listening to these absolutely
wonderful people in corrections and treatment, both Secretary
Shalala and the Attorney General, but particularly this Mr.
Jeremy Travis, National Institute of Justice, have a series of
initiatives.
And the Federal prison system, we ought to be proud of, it
is the premier effort in the country. Several States are doing
a wonderful job, too. But the Federal system, Kathleen Hawk has
really leaped out in front on it. So I think you are going to--
but let me provide you a response. There are many programs
going on and several of them are probably starting to work.
One of them is drug testing. You have to tell people in
prison, you are going to get drug tested while you are in here.
The Federal prison system has started that, and the President's
initiative on State prison systems, I think, comes on line this
year.
Hardcore Drug Users
Senator Kohl. OK. Last question, General. As we know, it is
very important to estimate as accurately as we can the number
of hardcore drug users in this country. Without an accurate
estimate of the hardcore drug users it is difficult to evaluate
the effectiveness, among other things, of our illegal drug
reduction efforts. Are you satisfied that we have a methodology
that will give us an accurate estimate on the number of
hardcore drug users in this country?
General McCaffrey. I think we are dissatisfied. Trying to
put hard numbers on drug abuse is enormously challenging. The
stigma, the shame, the denial of drug abuse, not among
individuals but among families and communities is simply
staggering. We got some excellent support out of the city of
Chicago, Mayor Rich Daley and his health people and law
enforcement. Dr. John Carnevale and Dr. Al Brandenstein in my
shop have ended up with the first look at it where we revise
the Cook County hardcore users from what we previously would
have said at 117,000 up to 333,000 hardcore users.
We put some money now into trying to go to other regions.
We do not think we can extrapolate from that study, and we are
going to try and get a better handle on what this problem is.
So I think what we are seeing is a serious undercounting of the
chronic, compulsive drug user, and this study will get at it.
Senator Kohl. Yes; I just want to emphasize what you said.
In Cook County, they found that the estimate that we were using
was wildly off; that the real number was vastly more than what
that estimate--what we were using or what we thought the number
was.
General McCaffrey. Yes; that was our study, right.
Senator Kohl. It seems to me that if we are going to
succeed in this project we have to be using numbers in terms of
the people that are accurate, and then work off those numbers.
And the seemingly great inaccuracy of the count that we are now
using I would argue is something that needs to be looked at and
corrected, as soon as we can, General, so that we work off of
numbers in terms of hardcore users of drugs that are accurate
in this country. If we do not work off of those numbers that
are accurate, we are not going to be able to evaluate any kind
of progress, is that not true?
General McCaffrey. I could not agree with you more. Nor can
we sensibly allocate resources or determine successes
correctly. I think you are quite correct.
Senator Kohl. Thank you.
Thank you, Senator Campbell.
Senator Campbell. I have no further questions, General,
except the ones I will submit that I would like you to answer
in writing. But I would remind you, the committee would like to
get some feedback on your pilot program, and some accounting of
the obligated funds that you have obligated so far. If you
could do that for us, I would appreciate it.
Prison Drug Treatment
I would like to just say though that I am particularly
interested in this break-the-cycle program. Having been a
prison counselor myself at one time, or a volunteer counselor,
I was convinced that all the counseling and drug testing and
all that stuff, that is all good, but unless there is some kind
of education and job skills that go along with it, it is pretty
hard to keep them from falling back in.
I know I have worked with gang members after they have
gotten out and that is the single thing they tell me the most,
is when they got out they could not get a job. They did not
know how to do anything. Even though counseling may encourage
them to leave the drugs alone, some of them find it is the only
way they can make some money again. So they fall back into it.
I know that is not really in your bailiwick, but I would
like to pass that on to you. Until we realize there is a real
place for prison industries and getting a convict to get a high
school diploma or some graduate degrees other than street
skills, the counseling by itself, I think, reaches a point
where it does not do any good after they are out. They have to
earn a living. They have to have a job as an alternative to
going back into prison.
Senator Campbell. I know you are aware of that and I know
that is not the primary focus of your mission being the drug
czar. But I just wanted you to know that is a big concern to
me.
General McCaffrey. Senator, I agree. But I think it is a
primary focus. So Attorney General Reno and I both have the
same viewpoint, that we have to do precisely the kinds of
things you are saying. I had Joe Califano brief his Columbia
University CASA data on prisons and drugs 3 days ago to the
opening of our conference. And he makes a powerful point.
We have 1.2 million Americans behind bars with a compulsive
drug use problem. And you have already got them there at
$24,000 or more a year that you spend to lock them up. Why
would you not be willing to spend potentially $3,000 to $6,000
a year to ensure you do not get them back in. And then to have
a follow-on component with indeterminate sentencing where the
judge can lock you back up of your drug test goes hot. We have
to do just that, and part of that is a job.
Senator Campbell. No further questions, Senator?
Senator Kohl. No, thank you, Senator.
Submitted Questions
Senator Campbell. We have additional questions that will be
submitted in writing to be answered for inclusion in the
record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
Question. ONDCP's publication, ``The National Drug Control
Strategy, 1998'', mentions an investigation where the U.S. seized $200
million from a Swiss bank that was the illegal profit made by a cocaine
trafficker.
What amount of assets are normally seized from high level
``source'' drug traffickers, and what happens to the seized legal
proceeds?
Answer. It is difficult to answer the question of normal seizures
as there are no ``normal'' seizures. Each investigation and asset
forfeiture operation is unique in that factors such as amount of
assets, location of assets, cooperation of foreign countries, and
subsequent disposition are all variable.
Major criminals often hide their illicitly generated proceeds
outside the United States. For the last several years, the United
States has placed development of international forfeiture cooperation
among its top priorities. Bilateral and multilateral agreements, which
provide for mutual forfeiture assistance, attest to the emergence of
forfeiture as an international law enforcement sanction. The United
States has operative mutual legal assistance treaties (MLAT's) with a
number of countries, including Switzerland.
Where the United States cooperates with a foreign government in
identifying drug proceeds in a foreign country, it is possible that the
funds will be forfeited under that country's laws and not be
repatriated to the United States. In such cases, the primary goal of
forfeiture is achieved because criminals are deprived of the proceeds
of their crime. In other cases, a foreign government will act on
information provided by the United States, seize the funds, and
repatriate the funds to the United States for forfeiture. Upon
forfeiture, the U.S. may share as much as 50 percent of the net
proceeds with the cooperating government.
When funds are repatriated to the United States, they are placed in
the Seized Asset Deposit Fund (SADF) and held until the forfeiture
proceeding is completed. If monies are already forfeited and a portion
is shared with the United States, they are deposited into the
Department of Justice Assets Forfeiture Fund (AFF) and are subject to
the statutory controls on use of those monies. The Assets Forfeiture
Fund statutory authority is found at 28 U.S.C. SS 524 (c).
The AFF is the repository for the proceeds of forfeiture cases,
both domestic and international, in which an agency Fund member (see
below) participated. The Fund is a self-sustaining working fund with a
revenue and expense side. Funds may be used for six general categories
of expense as enumerated The Attorney General's Guidelines on Seized
and Forfeited Property, dated July 1990. The six expense categories are
(1) asset management expenses, (2) case-related expenses, (3) payment
of qualified third party interests, (4) equitable sharing payments, (5)
program management expenses, and (6) investigative expenses. Funding
for investigative expenses is authorized by Congress in the annual
appropriations act for the Department of Justice. In fiscal year 1999,
$23 million is available for these costs.
To the extent excess funds are available once the fiscal year is
closed, the authorizing statute provides for disposition by the
Attorney General for any federal law enforcement, litigative/
prosecutive, and correctional activities, or any other authorized
purpose of the Department of Justice.
As noted earlier, the United States does not ``seize'' funds held
in foreign banks. The $200 million dollars referenced in the Drug
Strategy represents a combination of funds deposited in several Swiss
bank accounts, interest earned on same, and real estate holdings in
Switzerland. The deposits and real estate holdings were those of Sheila
Miriam Arana de Nasser, a Colombian charged with money laundering.
Arana de Nasser is the ex-spouse of notorious drug trafficker Julio
Nasser-David, who is a fugitive in Colombia. Arana de Nasser pleaded
guilty in 1995 to numerous money laundering offenses. As part of the
plea agreement, Arana de Nasser agreed to forfeit her right, title, and
interest to funds and property. To date, none of these monies have been
repatriated to, or shared with, the United State. Thus, these funds
have not been used.
(Note: Member agencies of the Justice Assets Forfeiture Fund
include the Federal Bureau of Investigation, the Drug Enforcement
Administration, the Immigration and Naturalization Service, the U.S.
Marshals Service, the Justice Department's Criminal Division, the U.S.
Attorney's Office, the U.S. Postal Inspection Service, the U.S. Park
Police, the Food and Drug Administration's Office of Criminal
Investigations, and the U.S. Department of Agriculture Inspector
General.)
The Treasury asset forfeiture program has four primary goals: (1)
to punish and deter criminal activity by depriving criminals of
property used in or acquired through illegal activities, (2) to be
cognizant of the due process rights of all persons, (3) to enhance
cooperation among foreign, Federal, State, and local law enforcement
agencies through the equitable sharing of assets recovered through this
program; and, as a by-product, (4) to produce revenues to enhance
forfeitures and strengthen law enforcement.
Property which has been civilly or criminally forfeited can be
retained or transferred.
Approximately $200 million per year is placed into the Treasury
Forfeiture Fund. Fiscal year 1997 was a banner year with about $240
million entering the fund. This money is from both the seizure and
forfeiture of cash, and the seizure, forfeiture and sale of property
(land, buildings, vehicles, etc.).
Question. According to the fiscal year 1999 budget request ONDCP is
conducting an overarching review of the Federal drug interdiction
efforts along the southwest Border. Is this review providing a
comprehensive review of supply coming across the borders as well as the
success of interdiction efforts: Which agencies are cooperating in this
review and do you have their agreement on the measures you should use
to determine if the Federal efforts are successful? Will the review
include recommendations on interdiction efforts? When will the results
of the review be made public?
Answer. Working with the Departments of Justice and Treasury and
other agencies ONDCP has formed a Southwest Border Interagency Working
Group. Sub-working groups are analyzing the following areas: Improved
management and coordination; technology and infrastructure development
and deployment; and border staffing. The group expects to present a
report to the President by early summer of 1998.
In the intelligence area the White House Task Force on Intelligence
Architecture is presently collecting data worldwide and will present
its plan for an overall counterdrug intelligence architecture in June
of 1998. As a component of this report the group has been asked to
review and analyze the Southwest Border intelligence network.
Current estimates of cocaine coming through Mexico are developed by
the Interagency cocaine movement process. As part of the development of
the Interagency Assessment of Cocaine Movement publication process, the
participants are looking at better ways to assess the amount of all
drugs coming into the U.S. including the Southwest Border.
Question. Special Forfeiture Fund requests $26 million to be
available at your discretion to enhance drug control activities and
address emerging drug threats. What types of projects are you targeting
with this money?
Answer. While events in the upcoming months might require
modification to the list of projects to be funded, the following are
examples of the types of projects we are considering with a
discretionary funding amount of $26 million:
Chronic User Study ($5 million).--We have requested an earmark of
$10 million for a study to build on recent study in Cook County, IL. to
develop a methodology to estimate the size of the hardcore, drug using
population. Additional funding will be required to support the regional
expansion of the study. Our original request to OMB was for $15 million
to fully fund this project, but it was decided that more resources
should be allocated for the Director's discretion.
Domestic Heroin ($10 million).--These resources will supplement
those requested by the Departments of Justice and Treasury to target
heroin trafficking, production, and distribution networks operating in
the United States. The focus will be metropolitan area most affected by
heroin trafficking.
Expand Break the Cycle ($5 million).--These resources will
supplement those requested by the Department of Justice to provide
technical assistance to local jurisdictions, including the development
of information systems to track data on participants in the program.
This will expand the Break the Cycle program to new sites and include a
plan to transition these sites to local support after the initial
Federal funding.
Modeling Drug Trafficking Flows ($1 million).--These resources
would allow continuation of the development of a model to estimate the
flow of illegal drugs into the United States. The plan is to estimate
the flow from production through transit and U.S. ports of entry and on
to final consumption.
Intelligence Architecture ($5 million).--These resources will
support the development of a drug intelligence system for national drug
control agencies that provides timely and comprehensive information at
all levels--foreign and domestic counterdrug strategy development,
operational planning, and tactical execution. Will use results of a
fiscal year 1998 review being conducted of the national drug
intelligence architecture.
Question. The Director's opening statement before this subcommittee
indicates that cocaine production may be down by as much as 100 tons
from last year. What is the level of cocaine production last year? What
is the basis of your estimates that production is down 100 tons?
Answer. Potential cocaine HCL production fell last year to the
lowest level this decade--from an estimated 760 metric tons in 1996 to
an estimated 650 metric tons in 1997. Significant declines in Peru's
production potential coupled with small declines in Bolivia's
production potential were largely responsible.
Peru's potential cocaine HCL production fell sharply in 1997 to a
record low of 325 metric tons--production in 1996 was estimated at 435
metric tons. Production potential has dropped over 40 percent since
1992.
Bolivia's finished cocaine production potential declined for a
third year in a row, dropping some 22 percent from 1994 levels, to an
estimated 200 metric tons in 1997.
Estimates of potential cocaine HCL production are based on three
scientific-based building blocks: US government imagery-based surveys
of Andean coca crop, estimates of coca leaf yields, and leaf-to-cocaine
conversion ratios. The same scientific methodology is repeated every
year, resulting in a reliable trend assessment.
Leaf yields and processing efficiencies have been scientifically
researched and evaluated in Peru and Bolivia. Similar research is now
underway for Colombian coca yields.
statement
The Director's opening statement before this subcommittee indicates
the campaign advertising component is currently estimated at $150
million. The additional $45 million requested is to support the
campaign through corporate sponsorships, interactive media, evaluation
processes and other appropriate efforts.
Question. Why is ONDCP paying for corporate sponsorships?
Answer. ONDCP is not paying for corporate sponsorships. We have
budgeted approximately $1 million for development of a logo, campaign
identity, and other marketing ``equity'' of value to corporations who
would themselves pay for the right to sponsor the campaign. This is
similar to the way in which a company might sponsor the Olympics, pay
for the right to use the logo and to associate with Olympics
activities. Similar arrangements have been made with companies that
have sponsored activities of the Smithsonian Institution and renovation
of the Statue of Liberty. We have engaged the advice of the leading
``cause marketing'' consulting firm in the country to advise on how to
maximize the campaign's ``equity'' and negotiate successful agreements
with major corporations. This takes careful preparation, for which we
expect to develop a detailed strategy, and we anticipate that when we
enter the fully integrated Phase 3 of the campaign, this will generate
substantial return from the private sector.
Question. Originally ONDCP discussed receiving matching funds for
the campaign. What level of ``match'' has ONDCP received for the
campaign?
Answer. ONDCP has established aggressive negotiating standards for
its media buyers to seek a 100 percent match for media purchases. To
date, we have been highly successful in receiving media matches with a
dollar value very near this goal. The negotiation with any single
commercial media vendor is proprietary and should not be disclosed in
order not to compromise the position in negotiation with other vendors,
but overall amount and ``prime time'' placement and other value for pro
bono Public Service Announcements (PSA) has been exceptional and highly
praised by The Ad Council, who have agreed to serve as a clearinghouse
for the PSA match component of the campaign. As the campaign matures in
Phase 3, we expect even greater returns from multi-media conglomerates
who represent a number of different media companies and outlets. In
those cases, simple match of time or space (``bonus weight'') will be
enriched by companies offering in-kind communications, such as event
sponsorship, that will reach our target audiences.
Question. What do you mean by appropriate efforts outside the
advertising campaign and other media events?
Answer. The National Youth Anti-Drug Media Campaign seeks to employ
media tools for one purpose: dramatically reduce the risks of drug use
for America's youth, their families and communities. In order to do
this, we have consulted hundreds of experts in professional media,
health communications and drug prevention. We have studied how other
``social marketing'' efforts have achieved success, and especially
studied how major corporations conduct strategic marketing to national
markets. The result is now published in a series of documents that
present paid advertising as the central component integrated with an
array of related marketing and communications tools. Based on clear
goals cited in our Communication Strategy Overview, we have laid out
the campaign in a Paid Media Plan for paid advertising and the related
Integrated Communication Plan for additional measures involving use of
interactive media, entertainment industry collaboration, news media,
community partnerships and corporate participation. This ensures that
the campaign has depth and follow-up--reaching our target audiences
with messages reinforcing each other in many parts of our culture.
These carefully integrated plans ensure that the campaign goals of
advertising ``reach and frequency'' on the basis of which the initial
advertising budget was estimated are, in fact, achieved. In addition,
they ensure that ONDCP achieves the legislative objectives of not
supplanting current anti-drug community based coalitions, and further,
uses the power of the media to stimulate development of infrastructure
that can translate mass media messages into community action.
Question. What is ONDCP's current staffing level including full
time employees and detailees?
Answer. Of the 154 authorized positions, 138 positions have been
filled, including five detailees and 24 military assignees.
Question. At the fiscal year 1997 hearing before this committee the
Director said ONDCP owes Congress ``results not rhetoric'' and you said
you would demonstrate in concrete ways what ONDCP has achieved with the
money Congress has provided.
Answer. The performance measures detailed in the 1998 Strategy are
the foundation of an ongoing interagency effort to implement the first
ever government-wide performance measures for counter drug efforts. In
the meantime, our yardsticks for measuring progress on are national
surveys such as the Drug Abuse Warning Network, Drug Use Forecasting
system, MTF and NHSDA. The latest surveys suggest that good progress is
being made. The six-year trend of increasing drug use among 12-17 year
olds has been halted. Drug-related emergency room episodes did not
increase in 1996. Methamphetamine use plummeted among arrestees. And
thanks, in part, to bipartisan support of cooperative hemispheric
counterdrug programs, coca cultivation in Peru declined 40 percent in
the past two years.
At present, 51 percent of our 94 performance targets are measurable
from primary data sources or represent milestones that do not require a
data set. As the performance measurement system is implemented, annual
targets formulated, and new data become available later this year, more
information will be available on the results of the Nation's drug
control efforts. We look forward to keeping the Congress informed of
our progress in this area.
Question. The Members need to clearly explain to the taxpayers in
their districts how ONDCP will reduce illegal drug use with the $17
billion requested in fiscal year 1999. This is [sic] to put in writing
ONDCP's efforts in terms of reducing drug use.
Answer. The President's record fiscal year 1999 budget request for
the National Drug Control Strategy will support a ten-year plan to
reduce drug use and its consequences by 50 percent. The following table
demonstrates the progress we will achieve if this Strategy is fully
funded:
----------------------------------------------------------------------------------------------------------------
Measure Current figure 10-year goals 20-year lows/highs
----------------------------------------------------------------------------------------------------------------
Current drug use (all ages)........ 6.1 percent............ 3 percent.............. 5.8 percent (low).
Marijuana initiates................ 2.37 million........... 1.18 million........... 1.37 million (low).
Age of initiation (marijuana)...... 16.7 years............. 20 years............... 20.1 years (high).
Current use of illicit drugs (among 9.0 percent............ 4.5 percent............ 5.3 percent (low).
12-17 year olds).
----------------------------------------------------------------------------------------------------------------
In total, funding recommended for fiscal year 1999 is $17.1
billion, an increase of $1.1 billion (6.8 percent) over the fiscal year
1998 enacted level. Specific requests include:
Defense.--The fiscal year 1999 budget for the Department of Defense
(DOD) would increase by a net of $35.1 million from the fiscal year
1998 enacted level. The total fiscal year 1999 DOD drug budget includes
an increase of $75.4 million to support counterdrug activities in the
Andean Ridge region ($60.8 million), operations in the Caribbean ($8.5
million), training of Mexican counterdrug forces ($4.0 million), and a
transfer of funds for air reconnaissance missions ($2.1 million). The
request also includes an additional $15 million for the National Guard.
Education: School Drug-Prevention Coordinators ($50 million).--This
initiative will fund about 1,300 paid drug-prevention coordinators.
Each coordinator will develop and direct drug-prevention programs in
five middle schools. In total, this initiative will provide prevention
services for 6,500 middle schools.
Health and Human Services:
SAMHSA.--A top priority in this budget is the federal government's
efforts to mobilize resources to increase substance-abuse treatment
services nationwide. SAMHSA's $200 million increase in budget authority
for the Substance Abuse Prevention and Treatment Performance
Partnership Grant will support efforts to close the treatment gap.
FDA & CDC--Youth Tobacco Initiative ($146 million).--In fiscal year
1999, this initiative provides an additional $100 million for the Food
and Drug Administration (FDA) and $46 million for the Centers for
Disease Control and Prevention. This program will target cigarette
smoking by underage youth, which has been identified as a gateway
behavior for drug use. As part of this effort, FDA will expand its
enforcement activities and CDC will conduct further research on the
health risks of nicotine, additives, and other potentially toxic
compounds in tobacco.
NIH--Drug and Underage Alcohol Research ($50 million).--This
initiative will allow NIH (NIDA and NIAAA) to expand research on drug
and underage alcohol use. Research on underage alcohol and drug
addiction among children and adolescents, as well as chronic drug
users, will enhance prevention and treatment program effectiveness.
Justice:
DEA--Methamphetamine Initiative ($24.5 million).--This initiative
provides DEA with 223 positions, including one hundred special agents,
to address the growth of methamphetamine trafficking, production, and
abuse across the United States. New funding for DEA in fiscal year 1999
also includes a Heroin Initiative ($14.9 million). This program combats
heroin trafficking, production, and distribution networks operating in
the United States and increases U.S. investigative presence in
countries involved in the trafficking of drugs from Southeast and
Southwest Asia. This enhancement includes 155 positions, including one
hundred special agents.
Office of Justice Programs (OJP)--Drug Testing and Intervention
Program ($85 million).--This new program seeks to break the cycle of
drug abuse and violence by assisting state and local governments, state
and local courts, and Native American tribal governments to develop and
implement drug testing, treatment, and graduated sanctions for drug
offenders. Because considerable drug use has been documented among
people within the criminal-justice system, this program will provide
guidance and resources to help eligible jurisdictions institute
policies that support testing and treatment for drug offenders.
Border Patrol ($163.2 million, $24.5 million drug-related).--This
enhancement includes one thousand new Border Patrol agents, primarily
for the southwest border. These new resources will continue expansion
of the Border Patrol's strategy of ``prevention through deterrence''
along the southwest border. Also included is funding to continue
deployment of the Integrated Surveillance Intelligence System and
Remote Video Surveillance (ISIS/RVS) equipment. ISIS/RVS will enable
the Border Patrol to allocate agents more efficiently based on current
information regarding illegal alien traffic. Funding is also included
to erect and maintain border barriers and expand infrastructure that
will improve enforcement between ports-of-entry.
ONDCP: Special Forfeiture Fund ($34 million).--The net increase for
fiscal year 1999 includes $10 million for a Chronic User Study, which
will generate national estimates of the size and composition of this
population. A pilot project for this research, conducted in fiscal year
1997 in Cook County, Illinois, concluded that chronic users are
significantly under-counted in current surveys. Fiscal year 1999
funding for the Special Forfeiture Fund includes $20 million for grants
that continue implementation of the Drug-Free Communities Act of 1997.
This figure is an increase of $10 million over fiscal year 1998.
State: International Country Support ($45 million).--Included in
this increase are funds to build on fiscal year 1998 support for Andean
Ridge nations involved in interdiction and counterdrug law-enforcement
operations. This effort will expand crop eradication and alternative-
development programs to reduce illicit coca cultivation.
Transportation: U.S. Coast Guard ($35.7 million).--Most of the
drug-related increase ($32.8 million) requested in fiscal year 1999
will provide for capital improvements to enhance the Coast Guard's
interdiction capabilities, particularly in the Caribbean. The fiscal
year 1999 request includes funding for improved sensors on C-130
aircraft, additional coastal patrol craft, and expansion of the Coast
Guard's deep water assets.
Treasury: U.S. Customs Service ($66.4 million).--Customs' fiscal
year 1999 request includes a total increase of $66.4 million for
counterdrug operations. Of this total, $54.0 million is requested for
non-intrusive inspection technologies. The request supports two seaport
X-ray systems as well as $41.0 million for non-intrusive inspection
systems like mobile and fixed-site X-ray systems for land border ports-
of-entry along the southwest border.
Question. The report on the Cook County hardcore drug user's study
states the study findings should be treated with caution because the
error of estimate has not been determined nor has the sensitivity of
the results been explored. Shouldn't ONDCP document the accuracy of the
Cook County study methodology prior to committing additional funds?
Answer. The caution that is urged in interpreting the findings
applies to the actual point estimates for the number of hardcore users
determined by the three different models, rather than the study
methodology. Because these are estimates based on a sample, there is
always some statistical error associated with them, meaning that they
have a certain + or - factor. At this time, this level of error has not
been calculated. Likewise, we have not explored the sensitivity of the
results to alternative specifications of the models that were used to
estimate event rates (for example arrests, treatment episodes, or
visits to homeless shelters)--it is possible that alternative
specifications might raise or lower the estimates by small amounts.
While the estimates for Cook County are of interest in and of
themselves, the primary purpose of the Cook County study was as a pilot
test of a methodology for estimating the size and characteristics of
the hardcore user population, and not developing precise estimates of
the size of the problem in Cook County. The results, as reported in the
study, indicate that this is a very sound methodology. During
development, the methodology underwent a rigorous peer review by
academic and Federal government experts. The draft report also received
a rigorous review prior to publication.
In order to further refine and develop the methodology, it is
necessary to apply it to a larger geographic area to confirm the
findings achieved in the pilot study.
Question. The household study determined there are 2.7 million
hardcore drug users. This level has been the same since 1987. The Cook
county study indicates the numbers for that region were off by two
thirds. If that is true nationally it would mean there are
approximately 7 million hardcore drug users. So far ONDCP has requested
$12.5 million to determine the correct number. How many hardcore drug
users could receive treatment for $12.5 million and can you explain why
that wouldn't be a better way to spend the money?
Answer. NIDA and SAMHSA acknowledge that the Household Survey does
not do a very good job at estimating the number of hardcore users.
These individuals are difficult to sample with a household survey
because they often do not reside in traditional households and those
few who do are reluctant to participate in such surveys. This problem
was the motivation for conducting the Cook County study, which
attempted to determine whether it was feasible to estimate the size and
characteristics of this population based upon a methodology that
interviewed hardcore users in locations where they are most likely to
be found in substantial numbers--booking facilities, treatment centers,
and homeless shelters.
It is not methodologically appropriate to use the findings from a
single site--Cook County--to estimate the size of the U.S. hardcore
user population. To do so would assume that Cook County is fully
representative of the United States. This is why ONDCP seeks to apply
the proven methodology from the Cook County study to a larger, more
representative region of the country. The bottom lines is that this
nation's drug policy could be refined with better estimates of the size
and characteristics of this population.
According to a 1994 Rand Corporation report, the average cost to
treat an addicted person is $1,740. With the $2.4 million spent on the
pilot study and the $10 million requested for the next phase of the
hard core user study, we could treat a maximum of 7,126 addicted
individuals. This is approximately one-tenth of one percent of the 5.4
million drug users in 1994 who either needed treatment or received it.
Spending the $12.4 million on a study that will provide a more
accurate and reliable estimate of the size and characteristics of the
hardcore user population is, we believe, a supportable and better one-
time use of these funds.
Question. Will ONDCP provide opportunities for members of the
Milwaukee HIDTA to work and communicate with other HIDTA's? For
example, will Milwaukee and Chicago have an opportunity to work
together on Chicago's High Drug Interdiction Project? How can you
facilitate that?
Answer. The Milwaukee HIDTA will have a variety of opportunities to
work and communicate with other HIDTA's through conferences, technical
assistance, joint intelligence sharing and coordination. The HIDTA
program is designed to improve coordination and cooperation between
HIDTA regions like Chicago and Milwaukee. Through intelligence sharing,
connectivity and established linkages, the HIDTA program establishes
improved communication and cooperation. HIDTA's are required to report
outcomes which include activities beyond the HIDTA. Chicago and Lake
County have agreed to share intelligence through their intelligence
centers. It is anticipated that Milwaukee will also participate once it
becomes operational. Chicago Highway Drug Interdiction Project will
offer training and post-interdiction investigation cooperation with
Milwaukee.
Question. The fiscal year 1999 request for $10 million is for a 2-
year study of other hardcore drug users in areas of the United States.
What criteria will ONDCP use to decide where the study should be
conducted? Will we see a request for a National study in the future? If
so, how long will a national study take and how much will it cost?
Answer. We anticipate that a number of criteria will be used in
selecting the areas for the next phase of the Hardcore User Study,
including demographic profile (e.g., age, race/ethnicity), urban vs.
rural concentration, and the willingness of state and local authorities
to participate. Our goal is to select a more representative sample than
was possible with the pilot study, which focussed on just one site.
We may submit a request for a National study upon completion of the
regional phase of the study. From the beginning, our concept for
developing a methodology for estimating the size and characteristics of
the hardcore user population called for a three-phase approach, which
included a single-site feasibility or pilot study, a larger regional
validation study, and finally, a full national study. This was the
process that was peer-reviewed and approved by OMB. We have not yet
done a full costing of the National study nor do we have an estimate of
how long it will take. We are taking each phase one step at a time. The
cost and time estimates for the regional study are based upon lessons
learned from the pilot study. Similarly, we will base cost and time
estimates for the National study upon lessons learned in the regional
study.
Question. President Clinton's directive to ``cut inmate drug use''
proposes that the Justice Department draft legislation that would allow
States to spend the Federal money earmarked for prison construction to
instead provide drug treatment for the prisoners. Has that legislation
been drafted? And, what limits will be placed on using prison
construction funds for testing and treatment? Are there other programs
that provide drug treatment programs in prisons?''
Answer. H.R. 3606, Drug Testing, Intervention, and Trafficking
Reduction Within Prisons Act of 1998, was introduced in the House March
31, 1998. Under this Act, to be eligible for funding under the Violent
Offender Incarceration and Truth in Sentencing Grants Program, States
must: have a program of testing, interventions, and sanctions in place
by September 1, 1998; implement policies that provide for the
recognition of victim's rights, within 18 months of enactment; and have
a system of sanctions and penalties that address drug trafficking
within and into correctional facilities, beginning in fiscal year 2000.
No other limits are placed on the use of funds for testing,
intervention, and the development of a baseline study of the prison
drug abuse problem.
Other programs that can fund prison treatment:
--To a limited extent, the Department of Health and Human Services'
(HHS) Substance Abuse Treatment and Prevention block grant to
the states can be used to provide treatment to drug dependent
offenders in prison. However, treatment of incarcerated
populations is limited by law to the level of such funding in
fiscal year 1991.
--The Department of Justice's (DOJ) Bryne Anti-Drug formula grant to
the states can be used to provide treatment to drug dependent
offenders in prison.
--DOJ's prison Residential Substance Abuse Treatment program is
designed precisely to treat drug-dependent offenders.
Unfortunately, the law does not permit funding for transitional
or post-incarceration treatment services, although the research
strongly suggests that such services are essential to stable
recovery. H.R. 3606 will correct this, allowing states with
established in-prison programs to fund post-incarceration
services.
--DOJ's Bureau of Prisons provides treatment to all eligible Federal
Prisoners.
Question. Mr. McCaffrey, the IRS, with approximately 100,000
employees and daily interaction with the taxpayer, is requesting
$25,000 for official representation expenses. ONDCP with 124 employees
is requesting $20,000. When you do the math, that 150 percent increase
is approximately $161 per employee. Mr. McCaffrey, you know the budget
situation as well as I do, so help me understand. Why should this
account receive such an increase when accounts like HIDTA's, which
directly impact our communities, are not slated for an increase this
year? In other words, can you tell me why this subcommittee should be
paying for parties when we could be using that money for fighting
drugs?
Answer. The $20,000 representational request is essential to ONDCP
to fulfill the inherent responsibility of furthering the mission of the
office through consultative efforts, not parties. Under the provisions
of the ONDCP authorizing statute, specifically 21 U.S.C. 1504(a)(3)(A),
the Director is required to consult with ``heads of National Drug
Control Program Agencies * * * Congress * * * State and local officials
* * * [and] private citizens with experience and expertise in demand
reduction * * * [and] supply reduction'' to help him develop the
National Drug Control Strategy.
Therefore, the Director must host the representational event
therefore, a per person comparison to IRS would not be appropriate. A
true comparable would be the amount of policy development involved, and
the interactions with various communities and stakeholders for any
effort to be a success.
Clearly, the representation monies are an assistance to defining
the scope of the common threat we face and strategies to defeating the
threat worldwide. The work that is involved with the fight against drug
use is a collaborative process through consultations with Congress, the
more than 50 Federal agencies and departments, the law enforcement
agencies, and stakeholders--mayors, doctors, clergy, civic leaders,
parents, and youth--drawn from all segments of our society. Further,
this enhanced cooperation within the hemisphere and worldwide is an
important tool to use to begin to be able to win the fight against
drugs.
Since its inception, ONDCP received $8,000 in representation funds
each year.
Question. Mr. McCaffrey, I would like to state that I firmly
support our efforts to fight against drugs. As a former law enforcement
officer, I have seen first hand how drugs destroy our children and
communities. However, I must state that I believe in many instances
your budget is not necessarily what it appears. Overall, it appears
that you are asking for a modest increase in your bottom line, but upon
further inspection, you are slashing and burning some accounts like the
Counterdrug Technology Assessment Center to make up for the difference,
You are asking for the following increases: 17 percent for travel, 21
percent for transportation, 61 percent for communications and
miscellaneous costs, 50 percent for printing, 75 percent for supplies
and materials , just to name a few. Can you explain, specifically, what
these cost increases are attributed to, remembering that inflation for
fiscal year 1999 for non-pay related costs is 2.2 percent.
Answer. ONDCP, over the past several years, has received permission
by the Committee on numerous occasions to reprogram funds. This
reprogramming was necessary to accomplish the mission of the
organization. A part of the reprogrammings were due to the staggered
personnel growth stage, as well as the fact that ONDCP funds were
improperly categorized by object class. This fiscal year represents a
true picture of the needs of the office. Bar any unusual situations,
based upon this budget, ONDCP will not require a reprogramming action
in the coming fiscal year.
With regard to what appears to be dramatic increases in several
object classes, there are also essentially corresponding dramatic
decreases in several object classes, for a modest total increase of
less than 5 percent. Specifically, the following is a description of
the increases by object class and what the increase is attributed to:
--The increase in travel is a part of the required amount to support
the mission of ONDCP. This is most evident in the fact that
fiscal year 1999 will be the first year ONDCP will be fully
staffed at 154 FTE, to include all political appointees. The
National Drug Control Strategy document is a comprehensive
approach which contemplates involvement of State and local
authorities and non-governmental organizations. Outreach to
these groups is essential to success. As well, international
travel is an important component for cooperation and
coordination in the interdiction effort.
--The increase in Rents, Communication, and Utilities is due to the
requirements for the additional staff with regard to space and
communications.
--The increase in printing and reproduction is due to the increased
visibility of ONDCP creating more demand for all materials,
including the National Drug Control Strategy, the Budget
Summary, and the Performance Measures of Effectiveness.
--The increase in supplies is directly related to the increasing
number of staff.
--The increase in Other Services is primarily connected to the
protective services for the Director of ONDCP, a conference
budget, and the increase of staff creating more demand on
contractor support of ADP maintenance and telecommunications
services.
Question. Mr. McCaffrey, last year you requested that the
subcommittee reprogram funds to provide for your security in a letter
dated September 24, 1997. At the time, the committee staff asked if
there had been a threat assessment conducted to justify the need for 24
hour security and an armored limo, a cost you estimated at $1.66
million a year. Due to the lack of justification of this request, the
committee chose to deny it. What is the status of the threat assessment
and does it differentiate between domestic and international threats?
Who have you contacted to conduct the threat assessment?
Answer. The United States Marshals Service (USMS) provides
protective services for the Director of ONDCP. A threat assessment was
performed by the USMS on behalf of ONDCP. Based upon several documented
threats received against the Director of ONDCP in 1997, the USMS
identified a moderate threat level in the United States and a high
threat level while on foreign travel. (The classifications of this
threat assessment are as follows: No Threat, Low Threat, Moderate
Threat, and High Threat.) In summary, the USMS notes that as always,
specific travel or events should be assessed independently as threat
levels could change dramatically.
Question. You intend to launch Phase II of the campaign before
getting the feedback from Phase I, which is due in July. What is the
justification for moving forward to Phase 2 without feedback from Phase
1?
Answer. ONDCP has received highly encouraging feedback from
community coalitions about Phase 1 and believes it is critical to
continue the momentum of this campaign during the summer months when
youth are out of school, have unsupervised time, and need to hear the
message about the dangers of drug use.
By using the 10-year experience of the Partnership for a Drug-Free
America (PDFA), ONDCP is not creating a completely untested and
speculative campaign, but is relying on PDFA's experience which we have
validated in Phase 1. We are using an approach similar to responsible
commercial firms who rely on real-time market feedback in addition to
longer-term, formal evaluations. While we have budgeted for more than
$10 million in rigorous impact analysis and research, we are also
receiving immediate market feedback through arrangements with the
Community Anti-Drug Coalitions of America (CADCA) and others to be
coordinated through the Substance Abuse and Mental Health Services
Administration (SAMHSA). Commercial media planning and buying experts
have also advised that we must make national purchases during the June
time frame or lose the opportunity to achieve the prices and placements
that ensure achieving our campaign strategy of reaching 90 percent of
our target audiences at least four times per week.
Question. So, if we don't receive the feedback from the pilot until
July, how will we be able to use that feedback to make decisions on
your fiscal year 1999 request?
Answer. ONDCP will immediately provide early process measures and
feedback from the anti-drug community in the pilot markets. Local
coalition and community prevention leaders bring years of experience
and have seen first-hand the effect of the campaign. We will also
provide data from the national drug clearinghouses and others who are
seeing increased public response due to the campaign. ONDCP can also
provide early anecdotal feedback from the Phase 1 contractors
conducting the impact evaluation. This feedback has been positive about
raising community awareness, which is the initial expected goal of the
campaign. The evaluation contractor's extensive qualitative and
quantitative assessments are proceeding and will be available in a
draft report in early September before we begin the fully integrated
Phase 3 of the campaign in October. For reference, the second round of
site visits for the Phase 1 evaluation took place in April. The
contractor is currently preparing the report on these visits; the final
releasable version of this report probably won't be ready until near
the end of June. The contractor is currently collecting the final wave
of data for Phase I. They are surveying students in schools and parents
via telephone, as well as conducting a third wave of site visits. These
data will be presented to us in a draft report by early September as we
have previously reported to the Congress.
Question. Mr. McCaffrey, can you share some of the anecdotal
feedback resulting from the 12 city pilot?
Answer. CSR, Inc., our Phase 1 evaluation contractor polled
community representatives in each of the 12 target markets eight weeks
after the campaign had been initiated. Their preliminary results
include the following:
Almost all of those interviewed (97 percent) reported they were
seeing the ads and they showed high awareness of increased ad
frequency, better placement in ``prime time'' or other matters due to
the campaign. Specific comments included:
--Business leader in Portland: the ads are ``much improved, more
frequent and widely shown.''
--School official in Tucson: ads in newspapers are very powerful,
especially those targeting adults.
--Community organizer in Sioux City: ``frequency of advertising has
been quite impressive * * *''
Eighty percent of community representatives polled reported that
people in their community are talking about the ads, a very encouraging
result given the short time frame of the campaign:
--Police sergeant in Baltimore: kids in D.A.R.E. classes are talking
about the new ads.
--Community coalition leader in Denver: reported that about 90
percent of parents attending PTA meeting had seen ads and
responded favorably.
--Drug prevention worker in Atlanta: witnessed an upswing of requests
for presentations to parent groups as a result of the campaign
and noted that this has brought the problem of inhalants newly
to the attention of many parents.
--Prevention worker in Milwaukee: supported ads featuring mentoring
as this supports the ongoing focus on building resiliency
skills among youth.
Community representatives were asked about other results due to the
campaign:
--Washington, D.C., program coordinator: agency's new hotline number
was included in ad and saw calls go from one or two per day to
about 15 calls per day.
--CADCA representative in San Diego: campaign has supported extension
of a community-based campaign on methamphetamines.
The National Clearinghouse on Alcohol and Drug Information (NCADI)
has experienced marked increases in calls and requests for information.
After ads run, calls have increased more than 25 percent. State
clearinghouses are also reporting increased requests for information--
some more than 300 percent--as well as requests for treatment
referrals.
At a recent conference conducted by the PDFA for national alliance
coordinators, speakers from local anti-drug coalitions, including
Portland, Denver, Sioux City, Milwaukee, and Tucson, spoke in highly
complimentary terms about the campaign. They reported that despite
initial uncertainties about how this would affect their communities,
they are receiving offers of corporate support, increased volunteerism,
offers of local media participation, requests for presentations to
community groups, and increased dialogue between prevention and
treatment groups.
Question. Mr. McCaffrey, can you tell us when we can expect a
change in attitudes and behavior toward drug use resulting from the
Media Campaign?
Answer. We do not expect to see changes in attitudes for 1 to 2
years, and changes in behavior for 2 to 3 years. The authorizing
legislation recognized this when stipulating that ONDCP would report to
Congress on campaign effectiveness within two years.
Experts in social change continue to advise us that we should
expect a sequence of changes: changes in awareness first, followed by
changes in attitudes and behavior. Unlike simple purchase of a consumer
product, youth drug use reflects a complex of influences, and we cannot
reasonably expect to see significant behavior change sooner than that.
Nevertheless, earlier ``social marketing'' campaigns, such as for the
National Cancer Institute and for seat belt use, have given ample
evidence that such campaigns can work. This is reinforced by observing
that the extensive awareness built by PDFA during the drug crisis of
previous decades was then paralleled by dramatic declines in overall
drug use. Conversely, just as diminished risk perception and increasing
acceptance of drug use as ``normal'' behavior among youth was then
followed by marked increases in drug use, we may expect that
reestablishment of truthful understanding about drug harmfulness and
social unacceptability, as well as reengagement of parents and other
adult care givers, will lead to reversals in these trends.
Question. This committee provided a total of $8.8 million for anti-
methamphetamine efforts. Can you tell us how this money was spent?
Answer. The trafficking and abuse of the destructive and addictive
synthetic drug methamphetamine is a growing national problem. A
resurgence in its use can be traced to two developments: (1) more
efficient manufacturing processes for domestically produced
methamphetamine; and (2) the growth of Mexican polydrug organizations
and use of established distribution systems to funnel the drug. The
drug appears to be spreading eastward from the traditional bases in the
U.S. west and southwest to the Midwest. Seizures have been climbing
steadily over the last few years (at the Southwest Border, for example,
seizures have gone from 6.5 kilograms in 1992 to 653 kilograms in 1995)
while the price has remained relatively constant ($50 to $150 per
gram). All indications (e.g. seizures, emergency room treatment,
clandestine laboratories seizures) are that methamphetamine production
and trafficking have grown in the United States and Mexico.
The methamphetamine appropriation was enacted in October. Since
that time the HIDTA's have spent a substantial amount of effort in
developing initiatives that would correspond to the Congress' intent to
address the rising methamphetamine problem. As a result, funding will
be allocated to initiatives in regions of the country that are
seriously affected by the meth problem. A small proportion will also be
used for developing the clandestine lab database at EPIC and for
transfer of ``best practices'' in the field through mobile meth
training teams to affected areas. The primary areas to develop new
initiatives funded by the appropriation are Los Angeles, Midwest HIDTA,
Southwest Border (Arizona and California Border Alliance known as
CBAG), Rocky Mountain, Southwest Border (National Clandestine
Laboratory), and San Francisco. The HIDTA Assistance Center will
provide training and support throughout the nation. A description of
these initiatives will be sent to the committee.
Question. Have you seen an improvement in the meth situation since
Congress appropriated this money?
Answer. Funding for counterdrug activities related to
methamphetamine has already improved coordination of law enforcement
activities. Many HIDTA's have studied the problem in their regions as
part of the process of submitting proposals for new initiatives.
Distribution of funding is pending. Once more information is reported
from the HIDTA's concerning activities, ONDCP will brief staff later
this summer on results.
Question. Can you provide me with an update on the Rocky Mountain
HIDTA's meth efforts as a result of fiscal year 1998 funding?
Answer. A new Rocky Mountain Methamphetamine task force will be
supported by the $1.5 million in additional funding. It will consist of
a total of 61 members collocated in two states (Utah and Colorado).
Their objectives will be to dismantle 120 clandestine labs in Utah and
25 in Colorado. Among other activities, they will target the greater
Casper area for a 50 percent reduction in methamphetamine.
Approximately 160 law enforcement officers will receive meth-related
courses. At least 5 meth trafficking organizations will be disrupted or
dismantled, and at least three sources of precursors and chemicals for
meth will be identified and dismantled.
Question. Can you tell us what the Southwest Border HIDTA and your
agency are doing about the meth problem and interdicting meth
precursors?
Answer. Our strategy includes working with Mexico to target
methamphetamine production and distribution organizations, a national
training program for prosecutors and agents, more concerted
intelligence operations to expose the production and distribution
systems, the targeting and prosecution of rogue chemical companies
supplying precursor chemicals interstate, tougher penalties and
sentencing guidelines for both methamphetamine and precursor
trafficking, and an education and prevention program to alert the
American people as to the serious dangers of methamphetamine abuse.
Battling the diversion of precursor chemicals for the illicit
production of methamphetamine is a difficult and complex task both on
the domestic and international fronts. Our concerted international
effort to curtail the diversion of ephedrine and pseudoephedrine has
impacted the traffickers' activity. But they respond by shifting to
other chemical substitutes, and they have begun using
phenylpropanolamine (PPA) instead of ephedrine and pseudoephedrine
(although the end product is actually amphetamine not meth). Although
PPA is a list 1 chemical under U.S. law, it is not a controlled
chemical internationally (i.e. under the Vienna Convention).
Additionally, wholesale distributors are dealing almost exclusively in
pseudoephedrine tablets to recipients on the West Coast. But in October
1997, we were able to close the last major regulatory loophole that now
makes control of pseudoephedrine commensurate with controls on
ephedrine. DEA now has the ability to target these ``rogue''
distributors who knowingly peddle large amounts to the operators of
clandestine laboratories. Over-the-counter pseudoephedrine products--
sold at the retail level--are currently exempt from the chemical
provisions of the Controlled Substances Act, and these OTC drugs are
turning up in clandestine laboratory seizures. Our current response is
to seek voluntary cooperative efforts with the retail industry to
prevent such diversion.
The Southwest Border (California) will build upon five existing
initiatives by adding one new initiative, the CBAG Methamphetamine
initiative. The Southwest Border HIDTA is composed of five partnerships
covering 41 counties in the states of California, Arizona, New Mexico
and Texas. The Southwest Border is the preferred corridor for cocaine,
marijuana, methamphetamine and heroin. The mission of the Southwest
Border's (California) methamphetamine initiatives is to reduce the
impact of methamphetamine trafficking, manufacturing and use within San
Diego and Imperial Counties. The California Precursor Committee is a
collaborative effort of the DEA, California Bureau of Narcotics
Enforcement (BNE), U.S. Attorney's Office and 20 local agencies to
develop measures to reduce the availability of chemical precursors. The
Clandestine Lab Enforcement Group targets chemical precursor sources
and major meth traffickers. The San Diego Violent Crime Task Force,
North County Gang Task Force, and San Diego Methamphetamine Strike
Force will also counteract meth production and trafficking.
The Southwest Border (Arizona) will strengthen the Maricopa County
HIDTA Methamphetamine Task Force to target methamphetamine trafficking
organizations and clandestine laboratory production statewide. By
combining the available resources of enforcement, prosecution, disposal
and education in an overall comprehensive statewide plan, the task
force addresses a number of problems associated with the spread of
methamphetamine production. The DEA, Arizona Department of Public
Safety and local law enforcement will provide personnel and expertise
to respond to clandestine labs. Since its inception in October 1996,
over 310 clandestine labs have been dismantled statewide and over 472
lab violators have been arrested by various enforcement components of
this initiative.
The Los Angeles HIDTA Methamphetamine Regional Strike Force will
attack the sources of precursor chemicals, develop an information
network concerning suspicious sales of precursor chemicals and enhance
and consolidate current efforts of many agencies that are attacking the
problem. The task force will operate from two sites to target major
methamphetamine organizations, investigate and seize meth labs, and
target companies that sell equipment or precursor chemicals to meth
producers.
One solid example of our success is shown by Operation META, a
joint-task force law enforcement operation centered in the Southern
California Drug Task Force (Los Angeles HIDTA). It is designed to take
down multiple organizations dealing in methamphetamine and cocaine on a
large scale. Charges were filed in Los Angeles, CA; Dallas, TX; and
Greensboro, NC. A Los Angeles-based organization was responsible for
the importation from Mexico of the chemicals needed to manufacture the
drug, the manufacturing and distribution at the wholesale level. Since
the inception of Operation META in May of 1997, more than 80 persons
have been charged with offenses related to the manufacture and
distribution of methamphetamine. 133 pounds of methamphetamine, 90
gallons of methamphetamine solutions, as well as cocaine and marijuana
were seized. Additionally, Operation dismantled three clandestine
laboratories and seized chemical solutions capable of producing more
than 500 pounds of methamphetamine.
Mexican officials reported the arrest and incarceration of Adan
Amezcuas Contreras, the youngest of the three brothers, who are
allegedly the ``world's largest'' suppliers of methamphetamine. The
Amezcuas allegedly supply ``meth'' and the precursor ``ephedrine'', to
Mexico's top drug cartels, and have a network stretching to China and
India.
Chemical diversion control is a straightforward counter narcotics
strategy: regulate trade in the chemicals most necessary for the drug
manufacture to ensure that only legitimate end-use is achieved. It is
complicated by the nature of the chemicals involved and the widespread
international commerce in them. National control systems alone cannot
prevent diversion. The challenge is to develop multilateral mechanisms
for the exchange of information necessary for the implementation of
effective chemical control laws. In 1997, we made considerable progress
to achieve this goal.
The July 7-9, 1997 meeting of the U.N. Commission on Narcotic Drugs
resulted in a draft of a comprehensive paper detailing measures
governments should take to control precursor chemicals. This paper will
be considered by the June 1998 Special Session on Narcotics.
At the operational level, India continues voluntarily to advise DEA
of any proposed export transactions in ephedrine and pseudoephedrine.
Hong Kong has established a sound system of chemical control.
Finally, Mexico is directing increased regulatory and investigative
resources to deal with major chemical smugglers and methamphetamine
traffickers.
In 1997, work began on the Multilateral Chemical Reporting
Initiative (MCRI). This is an informal mechanism to promote the
exchange of information necessary for chemical control. It was launched
in 1997 in two meetings co-hosted by the DEA and European Commission.
In general, countries have been most supportive where chemical control
is considered a law enforcement issue. In countries where its
considered a regulatory issue and administered by trade or commerce
agencies, these countries have been more cautious. This year, DEA will
begin implementing the MCRI by requesting information from participants
and inviting their cooperation.
Other initiatives include chemical diversion training and technical
assistance programs of the U.N. International Drug Control Program
(UNDCP) to aid countries in the establishment of legal and regulatory
structures needed for chemical control; and the Inter-American Drug
Abuse Control Commission (CICAD) of the Organization of American States
has developed a program which measures--through mathematical modeling--
the estimated quantities of these chemicals required for legitimate
domestic industrial use and beyond that, those quantities which may be
diverted to the production of illegal drugs. The system is under
evaluation in one OAS member state (which?) And is likely to be used by
other members in the future.
Question. Does your office currently have a bureau dedicated to
State and local law enforcement? If not, how do you assist Sheriffs and
smaller agencies coming to ONDCP for information or assistance?
Answer. Yes. Functional responsibility for interaction with the
criminal justice community, including State and local law enforcement
agencies, is vested in ONDCP's Bureau of State and Local Affairs
(BSLA). This component is led by Presidential Appointee, Robert S.
Warshaw, our Associate Director, who was unanimously confirmed by the
U.S. Senate on February 11, 1998. Mr. Warshaw is the former Chief of
Police of Rochester, New York and counts three former police officers
among his staff. The full personnel complement now serving in BSLA
resents an aggregate of 150 years of Federal, State and local law
enforcement experience.
Question. It is the Subcommittee's understanding that military
personnel have an integral role in the current Technology Transfer
program, how are they able to uniquely assist in liaison with local
police?
Answer. The current approach to managing the Technology Transfer
program places the lead role for liaison with local police onto
regional experts chosen from state and local law enforcement
organizations to advise CTAC. These experts are the Chief of the
Buffalo Police Department (New York), Chief of Field Operations Los
Angeles County Sheriff's Department (California), a senior member of
the Chesterfield County Police Department (Virginia), Pima County
Sheriff (Arizona), Arapahoe County Sheriff (Colorado), Director of
Michigan State Police, Assistant Administrator Drug Enforcement
Administration, Executive Director of Public Safety (Massachusetts),
Brownsville Chief of Police (Texas), Hillsboro County Sheriff
(Florida), St. Louis Metropolitan Police Chief (Missouri), El Segundo
Police Chief (California), and several former police chiefs located in
Seattle, Washington and Kansas City, Missouri. CTAC relies upon these
experts to use their professional judgment to determine the best match
of technology to specific police organizations.
The role of the U.S. Army Electronic Proving Ground (AEPG) at Ft.
Huachuca, AZ, is to serve as the technical, program management, and
contracting agent for the technology transfer program. AEPG is not
involved with the decision process. AEPG supports the administrative
and logistics functions of the implementation side of the program. The
AEPG program manager is a Captain in the National Guard who is
supported by civilian scientists, engineers and contracting specialists
from AEPG. These personnel have been supporting CTAC since 1993 with
technical, program management and contracting support to the
counterdrug research and development program. The same personnel have
been engaged in the Technology Transfer program to assist in
purchasing, delivering and installing technology systems selected for
transfer under the program.
In preparation for the Technology Transfer program, AEPG has
provided significant administrative support to the CTAC one-day
workshop series. AEPG's first-hand knowledge of the products available
for transfer (gained during its support to the 10 CTAC one-day
workshops held over the past 18 months) combined with its contracting
expertise and ability to rapidly procure and deliver these systems
place AEPG in a unique and valuable role to the Technology Transfer
program:
--AEPG is contracting with the individual vendors to pay for the
purchase, installation and training costs necessary for most of
these systems.
--AEPG's role also includes developing complete budgets for follow-on
logistics and life cycle costs that can be expected with each
transfer.
--The initial set of surveys for the Technology Transfer program were
sent by AEPG to the 330 state and local law enforcement
organizations who attended the CTAC workshops.
--AEPG personnel are collating the responses to the surveys and
providing a summary of requirements to the regional state and
local experts selected from state and local law enforcement
organizations to advise CTAC on the best approach to implement
the Technology Transfer program.
Question. What specific actions have you taken to address the
growing problem of drug gangs, and what assistance has your office
provided to local agencies in this regard?
Answer. ONDCP, through promulgation of the National Drug Control
Strategy, encourages initiatives targeting gangs and violent crime, as
a means of helping localities to reduce drug trafficking. These
initiatives include, but are not limited to, Federal, State and local
task force efforts such as the FBI'S Safe Street Task Forces and ATF's
Achilles Program.
In addition, the Bureau of State and Local Affairs (BSLA), our
agency component focused on domestic drug enforcement policy, interacts
with State and local law enforcement both directly and through entities
such as the National Youth Gang Center and the National Gang
Consortium. Both are led by the Office of Juvenile Justice and
Delinquency Prevention, U.S. Department of Justice.
It is noteworthy that BSLA recently took part in a working group
led by the National Drug Intelligence Center (NDIC), U.S. Department of
Justice, aimed at the establishment of a permanent mechanism that will
ultimately improve NDIC's drug gang intelligence products.
On those occasions when localities contact BSLA for assistance re
gang matters, our response most often takes for form of a referral to
the appropriate body of Federal, State or local government.
Question. ATF operates a well known gang program, GREAT. How has
your office coordinated with the Treasury Department on the gang issue?
Answer. The National Drug Control Strategy acknowledges GREAT as an
example of education as a means to discourage gang proliferation.
ONDCP coordinates with the Treasury Department on the gang issue,
through our administration of the High Intensity Drug Trafficking Area
(HIDTA) program. In fiscal year 1998, for example, we are funding
fourteen ATF anti-gang initiatives in eight HIDTA's with a total of
$4,242,798.
Question. According to the February 1998 GAO report, CTAC has made
virtually no use of the Science and Technology Committee designed to
keep it informed of agency needs and efforts. For example, the report
notes that CTAC did not systematically consider and fund the
counterdrug technology needs of state and local agencies as part of its
process for selecting and funding projects. Can you tell us what
specific actions you are taking to correct these deficiencies in the
GAO report?
Answer. For the past fifteen months, the Science and Technology
(S&T) Committee, under CTAC's leadership, has been concentrating its
efforts on virtually one task, the preparation of the ONDCP Ten-Year
Counterdrug Technology Plan and Development Roadmap. The GAO report
states on page 11, that ``between December 1996 and August 1997,'' the
CTAC Chief Scientist met 10 times, with ``the Technology Coordination
Working Group, which is an S&T Committee working group.'' The S&T
Committee has been intimately involved and the Technology Coordination
Working Group members were the virtual authors of the ten-year
counterdrug technology plan. This plan is based on agency scientific
and technological needs and supports fully the five goals of the
National Drug Control Strategy and the national technology performance
outcome targets. The plan was published in June. Although the GAO
report recognizes the importance of creating, for the first time, a
ten-year technology plan, it overlooks that it constituted a total
commitment by CTAC and the S&T Committee to complete the task of
preparing the plan. The technology plan and development roadmap covers,
in some detail, the test and evaluation and transfer of advanced
technology which could benefit state and local agencies.
As the S&T Committee long range planning effort began to address
the ten year needs and priorities of Federal law enforcement, it became
clear that, if the state and local agencies were to benefit, a direct
outreach through one-day workshops could make the 17,000 police
departments aware of advanced drug technologies which could be
transferred. Since the spring of 1996, CTAC has hosted 10 one-day
regional technology workshops across the country to make state and
local agencies systematically aware of CTAC and DOD sponsored
counterdrug technology projects which could benefit them. The workshop
locations were: Austin Texas (April 1996), St. Louis, Missouri (July
1996), Bloomington, Minnesota (October 1996), Portland, Oregon
(December 1996), Tucson, Arizona (March 1997), Atlanta, Georgia (April
1997), San Diego, California (July 1997), Denver, Colorado (October
1997), Bedford, New Hampshire (November 1997), and Phoenix, Arizona
(January 1998).
The projects of importance to the state and local agencies include
technologies to advance drug crime investigative information
processing, surveillance and tracking, communications interoperability,
and communications. The workshops have been attended by more than one
thousand law enforcement technical operations officers, Chiefs of
Police, state's attorneys and Sheriffs. The attendees took part in
hands-on demonstrations given by other law enforcement officials who
are currently using these technologies. The approach of using law
enforcement officials speaking to other law enforcement officials has
been a very effective way to get realistic assessments of the worth of
the technologies to state and local agencies. Following each one-day
workshop, the attendees evaluated the projects. The one-day workshop
series has led to a systematic approach to deriving the needs of state
and local law enforcement and a pilot program to support the transfer
of advanced drug crime technology directly to state and local law
enforcement.
Question. Although CTAC has developed what it terms a priority
listing of counterdrug R&D needs, there seems to be more items on the
list than can be funded. There is no ranking of needs, relevance, or
usefulness to agencies. CTAC appears to have no way to ensure that
projects it funds reflect the most current and highest priority needs.
What is CTAC's role if it is not setting priorities and keeping
supported agencies informed?
Answer. The federal law enforcement agencies have identified under
CTAC leadership a total of 132 law enforcement scientific and
technological (S&T) needs. These needs were ranked by the following
technology areas or thrusts: tactical technology (80 needs), non-
intrusive inspection (24 needs) and wide area surveillance (28 needs).
The needs then were ranked within technology thrust by priority
operational need versus S&T requirements, and then the S&T requirements
within each technology thrust were ranked by time frame (short, medium
and long-term). CTAC has issued four Counterdrug R&D Blueprint Updates
which provide a complete listing of needs ranking in the appendix to
each issue. The following is a summary of the current ranking:
----------------------------------------------------------------------------------------------------------------
Scientific and technological
Operational requirements--
Technology thrust priority --------------------------------------
needs Short Medium Long-term
----------------------------------------------------------------------------------------------------------------
Tactical Technology......................................... 20 45 9 6
Non-Intrusive Inspection.................................... 3 13 7 1
Wide Area Surveillance...................................... 3 20 4 1
----------------------------------------------------------------------------------------------------------------
It should be noted that the February 1998 GAO report addressed only
CTAC and not the total national counterdrug R&D program. The total
counterdrug R&D expenditure by federal agencies was $676 million in
fiscal year 1998 with a request of $722 million in fiscal year 1999.
CTAC's annual budget of $16 million is 2.3 percent of the total
expenditure.
The list of counterdrug S&T needs are certainly more than CTAC
alone can fund. A CTAC-maintained data base of ongoing federal law
enforcement agency R&D projects was mapped onto the entire set of 132
S&T federal law enforcement needs and all but 11 needs were being
addressed, in part, by at least one R&D project being sponsored by CTAC
or a federal law enforcement agency. Currently, efforts are being taken
to ascertain the priority, relevance and usefulness of the remaining
unaddressed needs.
CTAC's role has been to identify and pursue those highest priority
projects that transcend the needs of any single agency. Consequently,
CTAC has focused only on innovative solutions to technology gaps which
address the highest priority needs of more than one agency.
For example in demand reduction, the highest priority need is to
develop an effective medication for cocaine addiction, and to
understand the status, trends and efficacy of substance abuse
treatment. CTAC responded to these needs by sponsoring a high risk,
innovative project to develop artificial enzymes which offer the
promise of producing cocaine antibodies in the bloodstream which could
effectively immunize addicts in treatment against the effects of
cocaine. A computer-based, real-time treatment effectiveness system was
also developed under CTAC sponsorship which links treatment centers
with research scientists. This national network provides real-time
information to researchers and providers on the most effective drug
treatment modalities.
In supply reduction, advanced technologies and systems for non-
intrusive inspection of cargo and conveyances for hidden drugs are
needed at our ports-of-entry. Special emphasis has been placed on the
U.S. Southwest border. CTAC has sponsored engineering tradeoff studies
to assess the technical feasibility of those advanced technical
approaches available today to inspect cargo for drugs. CTAC also
sponsored the successful development of a gamma-ray system now being
considered by U.S. Customs Service to be deployed operationally along
the Southwest border to inspect tanker trucks, empty containers and
moving trains. Currently, a technology and infrastructure study is
being sponsored by CTAC specifically to address the needs of the
Southwest border for advanced inspection technologies. This technology
study is being done in conjunction with U.S. Customs Service and
Immigration and Naturalization Service.
CTAC is also sponsoring projects to improve communications
interoperability among state and local law enforcement organizations.
Innovative computer algorithms to analyze trends in financial
transactions and identify money laundering activities are being
developed hand-in-hand with several U.S. Attorneys' offices. Systems to
improve digital recording and processing of wiretap information have
been developed under CTAC sponsorship to fill high priority needs of
several sheriffs' offices.
Question. In fiscal year 1998 this committee provided $13 million
for a new program to transfer anti-drug technology to those who need it
the most, state and local law enforcement. Can you give us an update on
this program and how it's working?
Answer. The technology transfer program is being well received and
progressing very well. Requests have been received from over 128 state
and local law enforcement agencies for transfer of technologies and
products totaling $14.6 million. These costs include installation,
training and support needed to fully implement the system or product
with each agency.
The U.S. Army Electronic Proving Ground (AEPG), the CTAC
contracting agent for the pilot program, provides the engineering and
contracting support. AEPG has developed a survey questionnaire and
catalog of products available for transfer. This catalog has been sent
to interested state and local organizations across the country,
including representatives who attended one of our technology symposia
or one-day workshops, organizations involved with one of the High
Intensity Drug Trafficking Areas, or law enforcement personnel who
participated in technology evaluations at one of the CTAC-sponsored
state and local testbeds.
A panel of regional experts from state and local organizations have
agreed to serve as advisors for the implementation of the potential
transfer actions. These experts are the Chief of the Buffalo Police
Department (New York), Chief of Field Operations Los Angeles County
Sheriff's Department (California), a senior member of the Chesterfield
County Police Department (Virginia), Pima County Sheriff (Arizona),
Arapahoe County Sheriff (Colorado), Director of Michigan State Police,
Assistant Administrator Drug Enforcement Administration, Executive
Director of Public Safety (Massachusetts), Brownsville Chief of Police
(Texas), Hillsboro County Sheriff (Florida), St. Louis Metropolitan
Police Chief (Missouri), El Segundo Police Chief (California), and
several former police chiefs located in Seattle, Washington and Kansas
City, Missouri. The success of the pilot program relies upon these
experts and their professional judgment to determine the best match of
technology to specific police organizations.
Question. Part of the Counterdrug Technology Assessment Center, or
CTAC, mission is to help state and local agencies battle drugs through
technology. In fiscal year 1998's bill there was a provision for
technology transfer to state and local entities. Outside of this
effort, do you systematically identify and consider state and local
needs?
Answer. Yes. CTAC sponsors two activities that serve to
systematically identify and consider state and local needs: (1)
testbeds to evaluate new and emerging law enforcement technology, and
(2) an outreach program of regional one-day technology workshops.
CTAC sponsored technology testbeds are performed in conjunction
with state and local law enforcement organizations to evaluate the
impact of inserting new technology into the daily law enforcement
operations. The participating state and local operational personnel
work directly with the testbed scientists and engineers. These projects
serve as pilot programs to develop technology appliques specific to a
unique state and local need. Some examples of technology testbeds
include: a wide-band, high-speed, regional information network in
conjunction with Pinellas County Sheriff's Office (Florida); a digital
recording and processing system for wiretap information in conjunction
with the Pima County Sheriff's Office (Arizona); a digital GPS-based
tracking and surveillance system in conjunction with Yonkers (New York)
Police Department Narcotics Squad; a cellular phone analysis system in
conjunction with the New York State Organized Crime Task Force; and a
GPS-based miniaturized geolocation command and control system which
included an airborne applique with the Fillmore County Sheriff's Office
and the Mayo Clinic (Minnesota).
Many of the products from these testbeds are now available for
transfer to other state and local organizations under the $13 million
pilot program for transferring technology to state and local
organizations.
The outreach program includes regional one-day technology workshops
held across the nation to inform state and local law enforcement
organizations of advancements in technology which are available for use
by their agencies. CTAC has sponsored 10 regional one-day workshops
over the past 18 months: Austin Texas (April 1996), St. Louis, Missouri
(July 1996), Bloomington, Minnesota (October 1996), Portland, Oregon
(December 1996), Tucson, Arizona (March 1997), Atlanta, Georgia (April
1997), San Diego, California (July 1997), Denver, Colorado (October
1997), Bedford, New Hampshire (November 1997), Phoenix, Arizona
(January 1998).
Question. How many total ONDCP staff are former State and local law
enforcement officers?
Answer. A total of four ONDCP staff have former experience as
(only) State or local law enforcement officers. This number does not
include former Federal law enforcement officers, military police, and/
or prosecutors.
Question. Does each account and program activity of ONDCP have
performance measures associated with it?
Answer. Each key activity area has performance measures associated
with it. Areas such as Strategy Budget, Coordination, etc., have
milestones that indicate performance. The four programs, where ONDCP
has direct administration have multiple performance measures.
Question. Does your plan include performance measures for which
reliable data are not likely to be available by March 2000?
Answer. The HIDTA Program falls under Goal 2, Objective 2 of the
NDCS, ``Improve the ability of High Intensity Drug Trafficking Areas
(HIDTA) to counter drug trafficking.'' The HIDTA Program's long-term
effectiveness will be better defined as the PME system is implemented,
the following constitute their fiscal year 1999 targets and sufficient
data exists to ensure the ability to measure this program.
--Each HIDTA will meet at least one additional step of the HIDTA
Developmental Standards in at least one category.
--Each HIDTA will disrupt, dismantle, or render ineffective 5 percent
of the targeted drug trafficking organizations identified in
its threat assessment.
--Each HIDTA will disrupt, dismantle, or render ineffective 5 percent
of targeted money laundering organizations.
--Each HIDTA will achieve a 5 percent reduction in specified crimes
(homicides, robberies, assaults, and crimes against property as
reported by FBI UCR).
CTAC activities fall under the Research Objective addressed in the
last Objective of each NDCS Goal. The CTAC's long-term effectiveness
will be better defined as the PME system is implemented, the following
constitute their fiscal year 1999 targets and sufficient data exists to
ensure the ability to measure this program.
--Conduct three regional workshops and one major technology
symposium.
--Coordinate and support 85 counterdrug research programs with
Customs, DEA, DOD, Coast Guard, FBI, Agriculture, and NIDA.
--Develop and field five technology prototypes to address counterdrug
law enforcement and drug treatment requirements. These
prototypes will support improvements to inspection capabilities
for trucks and rail cars (2), low cost, efficient
communications interoperability (1), surveillance tools (1),
and a means to evaluate and monitor substance abuse treatment
programs in real time (1).
--Increase by 20 percent, the rate at which new systems are acquired
by Federal, state and local agencies.
The Media Campaign falls under Goal 1, Objective 2, ``Pursue a
vigorous advertising and public communications program dealing with the
dangers of drug, alcohol, and tobacco use by youth.'' While the
campaign has recently been authorized and is now fully operational, the
development of meaningful internal process measures is still ongoing.
--Ensure target audience exposure to anti-drug advertisements
averages four times per week reaching 90 percent of the target
audience.
Drug-Free Communities support Goal 1, Objectives 1, 3, and 6;
Objective 1: ``Educate parents or other care givers, teachers, coaches,
clergy, health professionals, and business and community leaders to
help youth reject illegal drugs and underage alcohol and tobacco use,''
Objective 3: ``Promote zero tolerance policies for the use of illegal
drugs, alcohol, and tobacco use by youth within the family, school,
workplace, and community,'' Objective 6: ``Encourage and assist the
development of community coalitions and programs in preventing drug
abuse and underage alcohol and tobacco use.'' This program's long-term
effectiveness will be better defined as the PME system is implemented.
The following constitute fiscal year 1999 targets as process measures.
--Success in granting the $20 million, minus administrative costs, to
qualified coalitions through a system that is user friendly.
--Provide funds to qualified coalitions within three months of the
initial request.
Question. Do you have the technological capability of measuring and
reporting program performance throughout the year on a regular basis,
so that the agency can be properly managed to achieve the desired
results?
Answer. HIDTA's have been in existence for a number of years and
their collection processes are well established. CTAC is also a mature
program with the capability to measure and report performance
throughout the year. The Media Campaign is not yet fully operational to
the extent that there are meaningful internal process procedures, but
these are being developed. The new Drug-Free Communities Program is
developing the capability to measure and report the progress.
Question. Through the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. None. The nature of ONDCP functions and the specific
assignment areas within the offices are individualized and preclude
duplication or overlap in key program areas. For instance, the Bureau
of State and Local Affairs has the lead for Domestic Law Enforcement
and while CTAC provides certain technical and evolutionary support in
this area they do not have the lead.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 request?
Answer. N/A.
Question. What ONDCP programs did you have to eliminate or scale
back as a result of utilizing your performance plan?
Answer. None.
Question. The Grand, Routt and Moffat Narcotics Enforcement Team,
or GRAMNET, have applied for HIDTA recognition have been recommended
for denial by the Regional HIDTA director, Tom Gorman. Although they
appear to have met all of the other statutory requirements for the
inclusion into the Rocky Mountain HIDTA, GRAMNET was told that they
cannot receive designation as part of the Rocky Mountain HIDTA because
of a technical matter of whether a judicial district can be designated
as a HIDTA member. Please provide the Committee an update on this
particular application and any justification for its denial, when in
fact it appears to qualify under the basis of a ``multi-agency
collocated task force.''
Answer. GRAMNET is not located in a designated HIDTA county. This
is a process used since the beginning of the program in 1990. As has
been done in other HIDTA's, additional counties can be considered for
inclusion. In the case of the Rocky Mountain HIDTA, the Executive
Committee makes the decision to seek inclusion based on the threat
level and requests the ONDCP Director to include. ONDCP reviews the
request. The review includes an analysis whether the counties meet
statutory criteria and whether they are recommended through
consultation with the Attorney General, Treasury, Health and Human
Services and the Governor.
______
Questions Submitted by Senator Thomas
Question. ONDCP relies heavily upon DEA statistics and data in
determining the ``most critical areas'' within HIDTA designated project
areas. However, because the vast majority of DEA personnel are assigned
to major metropolitan areas it is only natural that DEA figures reflect
more drug enforcement activity in those areas. What steps might the
ONDCP take to correct this inherent flaw in the process? Shouldn't the
ONDCP diversify its sources of data to eliminate the distortion that
accompanies such a reliance on facts and figures solely from the DEA?
What consideration does the ONDCP currently give to drug enforcement
figures supplied to it by state and local law enforcement entities
which might paint a better picture of the degree of activity that is
occurring in rural areas?
Answer. ONDCP does not rely solely on data from DEA. A major source
of information is the threat assessments from the HIDTA. HIDTA threat
assessments rely on a variety of data sources: state and local,
emergency room reports, FBI, and other Federal statistics.
For example, the transmittal memorandum for the Methamphetamine
Addendum to the Program Guidance, indicates that the most critical
areas were determined by considering:
--Threat assessments, strategies, and initiatives from the HIDTA's
(these include State and local data and actions to address the
methamphetamine problem).
--DEA study of the most significant methamphetamine production/
distribution regions.
--California Bureau of Narcotics Enforcement report dated October
1997 (to provide information on the most critical areas within
California which is the epicenter for methamphetamine).
Question. Concern has been expressed that ONDCP plans call for
wholly independent HIDTA task forces to be created to deal with the
methamphetamine problem rather than complement existing task forces
with an infusion of HIDTA funds. In many rural states it is not
reasonable to create separate HIDTA task forces. Do you agree that in
rural states the HIDTA money would be best spent enhancing existing
operations?
Answer. The addendum to the Program Guidance emphasizes: ``The
Program will intensify and network the efforts of existing HIDTA task
forces focused on methamphetamine reduction.''
The HIDTA program includes extensive rural areas including the
Southwest Border States, Gulf Coast States, and Midwest States.
Experience indicates that even in rural areas, the best return on tax
payer dollars that HIDTA funds are best used for joint Federal, State,
and local initiatives rather than mere add-ons to individual agencies.
HIDTA supports Wyoming initiatives: the Natrona Task Force and the
Wyoming SW Enforcement team. Their objective include dismantling 2 meth
trafficking organizations, to reducing the availability of meth in the
greater Casper area and to interrupt sources of precursors and
chemicals for meth.
Subcommittee Recess
Senator Campbell. I appreciate your appearance, General.
Thank you and this subcommittee is recessed.
General McCaffrey. Thank you, Senator.
[Whereupon, at 10:34 a.m., Thursday, March 26, the
subcommittee was recessed, to reconvene at 10 a.m., Thursday,
April 30.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, APRIL 30, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Faircloth, and Kohl.
DEPARTMENT OF THE TREASURY
U.S. Customs Service
STATEMENT OF SAMUEL H. BANKS, ACTING COMMISSIONER
ACCOMPANIED BY:
GENE WEINSCHENK, HEAD, CYBERSMUGGLING CENTER
JOHN MAC KINNON, SENIOR SPECIAL AGENT
ERNEST E. ALLEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
NATIONAL CENTER FOR MISSING AND EXPLOITED CHILDREN
Opening Remarks
Senator Campbell. The Subcommittee on Treasury will be in
session. Today we will be dealing with the question of
pornography on the Internet. The Internet is a tool which can
deliver a world of information on computer screens at our
fingertips. Many parents are unaware that this also means that
along with the positive side there is a down side. That is what
we are here to discuss today, and that is child pornography on
the Internet.
The purpose of this hearing is to demonstrate to the public
the volume of this activity on the Internet and how simple it
is to get this information into the households of America even
when you are not looking for it, as well as what Government is
doing about the offenders and to protect children. With us
today is the U.S. Customs Service which has the responsibility
for overseeing and regulating international commerce of which
the Internet is a part. Within Customs, there is a division
responsible for tracking and arresting people engaging in child
pornography on the Internet, which is not as simple as it
sounds.
Acting Commissioner of Customs, Sam Banks, is with us
today. I understand you have to leave a little bit early to
testify in another committee. Commissioner Banks, you are here
with Ernie Allen, the director of the National Center for
Missing and Exploited Children. We will hear your statements
and then I understand you will have to leave.
Following your statements there will be a demonstration of
what there is on the Internet. I think many people would be
surprised, as I was, about how easily these things can be
pulled up on the Internet. I am certainly not a computer
expert, but I know my son who is, has demonstrated a couple of
times how easy it is to get literally every kind of information
that you want or would not want your children to see on the
Internet.
I know this is a difficult issue to discuss but I believe
we owe it to our families in America and our children certainly
to talk about the consequences of pornography on the Internet.
With that, I will yield to Senator Kohl for an opening
statement.
Statement of Senator Kohl
Senator Kohl. Thank you, Senator Campbell. Today we are
very interested in hearing from Customs on what can be done to
reduce or eliminate child pornography and sexual exploitation.
It is critical that the Federal Government work harder than
ever before to develop the necessary technology to fight this
growing problem.
Today we are here to listen to Customs explain how the use
of the Internet has resulted in a vast increase in the
distribution of child pornography. We must have the technology
necessary to track down the perpetrators of these crimes
because the Internet now provides child pornographers a safe
place to conduct criminal activity.
The Internet is relatively anonymous, rapid, and
unsupervised. Once the materials are downloaded they can be
retransmitted or reproduced continuously. Ultimately what this
means is that the pornographer is no longer relegated to the
back room of bookstores. Instead he can comfortably acquire the
materials over his or her home computer through numerous sites
for viewing or even engaging in online chat room conversations.
As a result, child pornography via the Internet provides
the purveyors and consumers of this material a society:
something that was not previously available. The validation of
pornographic activity is not the direction in which civilized
society should move.
The Customs Service has been working to prevent the illegal
trafficking and distribution of child pornography both in and
throughout the United States before 1977. With the development
of the International Child Pornography Investigations and
Coordination Center in 1996, Customs has increased its ability
to provide support to international and domestic agents working
on these cases. Hopefully this hearing will give us an
opportunity to understand the complexity of the cases and
Customs' ability to respond to these crimes.
Thank you very much, Senator Campbell.
Senator Campbell. Yes; Sam, if you would like to proceed?
Statement of Samuel H. Banks
Mr. Banks. Yes, sir; thank you very much, Mr. Chairman,
Senator Kohl. I am pleased to appear before the subcommittee.
With me today is Gene Weinschenk, to my right, who is the head
of our CyberSmuggling Center, and John MacKinnon, who is a
senior special agent with Customs.
Customs obviously has the traditional role of protecting
our borders, and historically we have even protected our
borders against pornography of all sorts including child
pornography. Traditionally it has been through the mails and
through videos. The advent of the Internet has radically
changed the dynamics of the child pornography enforcement issue
for us.
It has also changed dynamics in terms of intellectual
property rights. One cannot believe the amount of
counterfeiting that goes on, and the amount of narcotics
information that is on the Internet. Even trafficking weapons
of mass destruction and money laundering are going on on the
Internet.
But today, specifically we want to talk about two of the
most cruel and damaging crimes, and these are child pornography
and child sexual exploitation. Our authority and our
enforcement role came with the Child Protection Act of 1984,
and then in 1988 our enforcement authorities against child
pornography were extended to child pornography transmitted via
computers.
Customs immediately went to work trying to focus our
enforcement efforts on the computer issue and the Internet. In
1989, we were the first Federal law enforcement agency to
initiate investigations into child pornography on computers.
Today we spend thousands of investigative man-hours in order to
focus in on this terrible problem. We work with State, Federal,
and local law enforcement on these issues. We work
internationally. We work with both law enforcement and other
governments in order to try to expand the legal authorities to
deal with this problem internationally as well as domestically.
Last fall we initiated the CyberSmuggling Center which we
call C \3\. It has a core staff of eight people that are really
driving this. With the advent of the Internet--and the
international network is what Internet means--there has been a
tremendous increase in violations. The reason there has been an
increase is because, really, all it takes is a PC. In fact,
today you can even access it through your television screen,
you can hook up. A simple modem and a telephone line give you
immediate access not just to computer files domestically but
computer files worldwide.
Equally important is, you can remain relatively anonymous
when you are dealing through the Internet. The saddest thing of
all is it provides an opportunity for these violators to
actually find other support groups out there that are engaged
in the same sort of activities.
It is really a fairly simple matter. You get an Internet
service provider, AOL, Erol's; there is a whole variety of
them. Some of the service providers actually protect some of
their own chatrooms. But once you are on the Internet, once you
access it, you basically can roam free anywhere through a whole
variety of different chatrooms and discussion points.
The thing that we see the most is that people are accessing
the Internet Relay Chats, and it is really almost like a CB
radio on which people with common interests get together and
share information. There are news groups out there that
actually post articles and post images on the bulletin boards
that people can access. So it really is fairly simple for them
to gain access to this information.
One of the other things that we have seen on the Internet
is violators that are actually arranging international travel
and international meetings in order to actually conduct child
sexual exploitation through the use of the Internet. This is
probably one of the things that recently has frightened us the
most.
Our accomplishments, since fiscal year 1992: we have
arrested 515 people and we have convicted 442. Either they have
been convicted or they have pled guilty. This year so far we
have arrested 65 individuals and we have 57 convictions. The
astounding part of this thing is the type of people involved in
this activity. We have teachers, we have truckdrivers. We have
policemen, we have pediatricians. Some of the situations that
you are going to hear about today and the instances that you
are going to hear about are not only astounding, they are just
terribly depressing.
Part of our enforcement work has been training hundreds of
State and local law enforcement officers in the United States,
in virtually every State in the country. We also have gone out
and trained law enforcement officials in 50 other countries
around the world. We have worked with these other countries in
order to try to build the necessary legislation so that
enforcement can be conducted, so we can take enforcement
actions against these people, and conduct international
investigations.
We have also linked up with the National Center for Missing
and Exploited Children. We have worked with them for the last
12 years. It has been a very productive relationship. They even
provide us with tips on where to search for this.
The real trick is for us to try to stay ahead of the curve.
The technology in this area is changing rapidly, and the
violators are finding new and different ways in order to try
and conceal their trail and their activities. So that is one of
the major challenges that is facing us in the future.
I am very proud of the special agents in the Customs
Service that have launched this effort and that have attacked
this problem. I think that the U.S. Customs Service is
recognized worldwide as one of the leading law enforcement
authorities on child pornography being transmitted by computer.
I appreciate the opportunity to be here, and what I would
like to do is leave you in the hands of our real experts that
will be able to show you a demonstration and just how easy it
is to access this. Thank you very much.
Prepared Statement
Senator Campbell. Thank you, Mr. Banks. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of Samuel H. Banks
introduction and overview
Good morning, Mr. Chairman and Members of the Subcommittee. I am
here this morning to give you an overview of the U.S. Customs Service
CyberSmuggling Center and, in particular, to tell you about Customs
work in investigating two of the most cruel and damaging crimes that
Customs investigates: international child pornography and international
child sexual exploitation. Both of these crimes endanger our nation by
damaging our future, by damaging our children.
Customs has always been the front line of defense against the
illegal trafficking in and distribution of child pornography in and
throughout the United States. Before 1977, Customs seized child
pornography entering the U.S. under obscenity laws. In 1977, Congress
enacted the first anti-child pornography law, and in 1984, Congress
enacted the Child Protection Act of 1984, which gives the Customs
Service the authority to investigate any cases which involve the
receipt, transmission, manufacture or possession of child pornography
which has been shipped internationally. In 1988, Congress passed a law
outlawing the use of a computer to transmit, manufacture or possess
child pornography which has been shipped internationally, thus opening
the door to Customs computer investigations.
In 1989, the U.S. Customs Service became the first federal law
enforcement agency to initiate an investigation into child pornography
on computers, opening an investigation into computer bulletin boards in
Denmark that contained child pornography. One significant result of
this investigation was the drafting of the first federal search warrant
used to search computers that contained child pornography.
Customs investigations into child pornography on computers, and
later on the Internet, set the worldwide standard for both child
pornography and computer investigations. We have trained thousands of
state and local law enforcement officials from every state in the
Union; we have trained hundreds of foreign law enforcement officials in
more than 50 countries around the globe. We work with our law
enforcement and legislative counterparts in foreign countries in
developing investigative procedures and legislative remedies to the
problem of child pornography and computer crimes. We conduct
investigations of individuals worldwide who produce and traffic in
child pornography, pursuing those in this country and turning over
information on those in foreign countries--and the problem is
universal, from Australia to Zimbabwe--to appropriate law enforcement
officials.
In our investigations into child pornography on the Internet, we
have seen evidence of the growth of other criminal activity in
cyberspace as well. From pirated copies of copyright-protected audio
recordings and computer software that threaten the intellectual
property rights of the music and software industries of this country,
to traffic in illegal arms and weapons of mass destruction, criminals
have moved into cyberspace to conduct their business--and the U.S.
Customs Service has pursued them there. We have done so with a staff of
eight people dedicated full-time to pursuit of Internet crime, and a
few other agents who work on these types of cases as part of their
already-full and diverse caseloads.
Response to these international cybersmuggling threats is
coordinated from the Customs CyberSmuggling Center, or C\3\ as it is
more commonly known. We established the C\3\ in August 1997 to begin
Customs foray into combating international Internet crime.
child pornography and exploitation on the internet
This morning I am here to discuss a principal investigative focus
of the C\3\--international child pornography and international child
sexual exploitation. These two problems are pervasive and the lasting
damage caused by them is widespread.
Child pornography is a crime in progress; it does not end with the
click of a camera shutter. Every time someone makes another copy of
that picture or launches it out internationally over the Internet, a
crime is again committed.
Child pornography, however, is not just ``looking at dirty
pictures.'' Child pornography is the permanent record of the abuse of a
child that will not only live forever in the mind of that child but
will be repeated every time someone views that picture.
Unfortunately, I must report to you that the instances of
international child pornography and international child sexual
exploitation are rising dramatically. The quantum increase in the
availability of inexpensive home computers and the ease of accessing
the Internet has opened whole new worlds to people across the globe--
and have opened whole new venues for exploitation of children. Almost
100 million people world-wide can access the Internet, and a number of
them are children. Unfortunately, others are child sexual predators.
All of the child pornography cases we investigate are terrible and
heartwrenching. One particularly gruesome case was of a suspect located
in Colorado who made contact with a Customs undercover agent on the
Internet and asked how to get child pornography. During his
conversation with the agent, the suspect expressed a sado-masochistic
interest in young boys. The suspect later admitted that he was a
channel operator (like a director) of a ``boy torture'' channel on the
Internet. He transmitted to our agent several images of young boys
being tortured. It turned out that he had a record for previous child
pornography violations, and in July 1996 he was arrested. A search of
his computer revealed more child pornography images on his computer,
including a motion picture file of a prepubescent girl having sex with
an adult man.
The Internet is a tool for research, for education, for
entertainment. Sadly, like most tools, its benefits can also be used to
inflict harm. Pedophiles and child molesters use the Internet to
create, transmit, and traffic internationally in child pornography,
child sexual exploitation, and child sex tourism. The relative
anonymity and instantaneous world-wide reach of cyberspace appeal to
these sick individuals who engage in international child sex crimes,
giving them the instant gratification they crave as well as giving them
validation in the company of other sexual predators. The dark side of
the Internet is its use to perpetrate violent and vicious acts that
can, and often do, change the course of someone's life forever.
Frequently, that ``someone'' is a child.
Child sex crimes committed over the Internet are even more
insidious than other Internet crimes. The number of potential victims
who could be lured into dangerous situations via the Internet and the
accessibility to these children is virtually unlimited. Trafficking in
child pornography is a crime that recognizes no boundaries or borders
nor do the traffickers respect the sanctity of the home or the age of
the victims. In fact, the U.S. Customs Service has evidence of the
world-wide trafficking of child pornography in which the victims are
believed to be only a few months old.
The Internet reaches everywhere. Crimes involving international
sexual exploitation of children occur in big cities and small, in good
neighborhoods and bad, everywhere there is the will and desire to
exploit children. All it takes is a computer, a telephone line, and a
person who wants to exploit a child.
And these predators have many faces: faces of teachers and
policemen. Faces of judges and doctors. People who live down the street
or even next door. We in the United States may want to think that
international child pornography and child sexual exploitation are
invasions of our borders by foreign offenders. Sometimes that is true,
but the laws covering these crimes have outbound as well as inbound
provisions. Criminals in the United States are also molesting children
and distributing the graphic evidence of their crimes world-wide via
the Internet.
Just to give you an example of the pervasive nature of these
crimes, one of our investigations involved a town in Texas so small
that it wasn't even shown on our map of the state. That case involved a
member of the town's school board, a school administrator, and a
teacher--all of whom were using the school's computer system to traffic
in international child pornography while they were teaching that town's
children. Horribly, our investigation showed that this child
pornography had also been shown to students in the school system.
These are truly international problems with far-reaching
consequences. Allowing a child unsupervised access to the Internet is
similar to dropping a child off in the middle of a large city without
adult supervision: there are wonderful and educational experiences to
be had, but there is also great potential for great harm--or even
death--for that child.
scope of the problem
Before I go further, I would like to give you a thumbnail sketch of
the cybersmuggling environment. The Internet is a collection of
interconnected computers which serves as a network for the transfer of
data. Commercial online services, like America OnLine (AOL), or
Internet Service Providers, like Erols, only provide access to the
Internet and a familiar, easily understood method to navigate through
this network. These services are NOT the Internet themselves, as many
people believe.
Anyone with a computer, or even a television equipped with the
appropriate computer software, can establish a link to the Internet
using any Internet Service Provider. Many libraries and schools also
have access to the Internet.
When someone connects to the Internet, through whatever means,
access is world-wide. The open nature and direct communication afforded
by the Internet means that anyone, regardless of age, can access just
about anything that is available there.
Although many online services and Internet service providers
provide safe, monitored chat rooms and services, these protections are
not inherent to the Internet itself. Connection to the Internet also
makes available to the user direct and unmediated access to services
such as Internet Relay Chat (IRC) and Newsgroups.
Internet Relay Chat (IRC), another source available on the
Internet, is a lot like channels on a CB radio. Anyone can join in the
real-time conversation on these channels--and there is a shocking
amount of trafficking in child pornography going on in that ``talk.''
In fact, most of the trafficking in child pornography goes on in the
IRC, since the IRC gives people the capability to allow access to their
computers to anyone else in the IRC channel. Child pornographers can
then trade privately, one-to-one, without having to attach those
pornographic files to a potentially traceable e-mail.
Newsgroups are a collection of articles ``posted'' or sent to the
Newsgroup area, much like articles are posted to a bulletin board.
There are hundreds of Newsgroups on every imaginable topic--and there
are numerous Newsgroups dedicated to child pornography and child
exploitation at any given time. These Newsgroups can contain graphic
images of child sexual abuse that anyone may access--even a child.
While many of the Internet service providers and Online service
providers do filter those newsgroups to exclude those obviously
indulging illegal habits such as child pornography, banned Newsgroups
can be accessed through other computers on the Internet.
customs response to the problem
No one alone can control and eliminate international child
pornography trafficking and child exploitation; law enforcement,
legislators, industry, and families must work together in a
concentrated, world-wide effort to protect our children from this
plague.
The U.S. Customs Service has established the C\3\ to coordinate and
focus its activity in the investigation of international child
pornography and child exploitation, as well as other cybersmuggling
crimes.
Over the last two years, the U.S. Customs Service has averaged
close to one arrest every other day for international child sex crime-
related activities.
Though these numbers may be surprising, even more shocking are the
jobs held by some of these violators. I am saddened to report to you
that the persons arrested are from all walks of life. We have arrested
teachers and truck drivers, pastors and choir masters, police officers
and pediatricians.
One recent arrestee is a family physician who was certified as a
forensic pediatrician at an Indian Health Service Hospital in New
Mexico. He was arrested for trafficking internationally in child
pornography and for traveling to Spokane, Washington for the purpose of
having sex with an eight year old girl. It was his intention to record
his sexual molestation of this young girl and to make those images
available world-wide over the Internet. Fortunately, this child sexual
predator's ``prey'' turned out to be a U.S. Customs Service undercover
agent.
Child sex tourism is not a rarity. The numbers of predators using
the Internet to arrange international travel for the purpose of
molesting a child in another country is on the rise. It also is not
unusual for these predators to record these child molestations and to
later make them available over the Internet.
The rise in the number of arrests by the U.S. Customs Service for
international child sexual predator crimes has risen in parallel with
the rise in Internet usage.
As more people became home computer users with the drop in price,
increase in availability and ease of access to the Internet, use of the
Internet rose dramatically after 1995. During the same time frame, U.S.
Customs Service arrests for Internet-related international child sexual
crimes rose 183 percent from 48 in fiscal year 1995 to 136 in fiscal
year 1996. Just this year alone, we have arrested 65 individuals, and
have had 57 convictions. Since fiscal year 1992, the U.S. Customs
Service has arrested 515 individuals for child sexual exploitation-
related offenses, and 442 have been convicted of or pled guilty to
these charges. The U.S. Customs Service has never lost a case that has
gone to the judicial process; all of those individuals have either pled
guilty or have been convicted.
The U.S. Customs Service is recognized by international law
enforcement as the world's leading law enforcement authority on
computer child pornography investigations. I mentioned earlier our
training programs for federal, state, local and foreign law enforcement
officials. We also maintain the world's largest reference collection of
child pornography materials, and are consulted regularly by federal,
state, local and international law enforcement colleagues on child
pornography and child exploitation investigations. We have had a very
close working relationship with the National Center for Missing and
Exploited Children for 12 years. In fact, the National Center has used
Customs as its principal point of referral for the Center's Child
Pornography Tipline. Leads from the TipLine have led to over 50
arrests.
Pursuing international investigations into child sexual
exploitation can be difficult because of the differing laws world-wide
regarding children and also regarding computer communications. As we
have done in the past with other international crimes such as money
laundering, Customs works with foreign governments and law enforcement
entities in addressing the problems of computer and Internet crime, as
well as crimes of child sexual exploitation, through legislative,
investigative, and educational means.
Computer and Internet investigations are new territory for law
enforcement, and require new and innovative solutions, both from the
investigative and legislative standpoints.
Computer criminals are computer-savvy--and are able to invest large
amounts of time and money in remaining a step ahead of law enforcement
in utilizing cutting-edge technology. The technological advances in
computing, such as data encryption, data encoding, computer-booby-
traps, and computer networking put law enforcement at a disadvantage
unless we are able to invest the intensive amounts of time and labor to
keep up. Keeping up with the latest technology is a large, hidden, but
necessary expense if we are to enforce laws in cyberspace as well as in
real space.
Computer crime is also relatively new territory for lawmakers. The
U.S. Customs Service stands ready to work with Congress and all law
enforcement entities to help find solutions to address these burgeoning
crimes.
Mr. Chairman, thank you for the opportunity to appear before the
Subcommittee today. I would be happy to answer any questions and then
demonstrate our cybersmuggling operations.
Occupations of Offenders
Senator Campbell. Sam, I appreciate you being here. I might
say, while you were talking I was looking at your chart over
here. I am absolutely amazed at that list of occupations of the
offenders. Do you have some type of a breakdown of these 515
arrests, 442 convictions? A breakdown that you can give to the
subcommittee about these different occupations of the offenders
and how they fit some of the convictions?
Mr. Banks. Yes, sir.
Senator Campbell. Is there a larger number of a certain
category of offenders than another?
Mr. Banks. No, Mr. Chairman; one of the common threads is,
these people work with children on a regular basis. They have
activities that put them close to children.
Senator Campbell. Yes; pardon the language, but I think the
bastards ought to all be put in jail, frankly.
Mr. Banks. I am with you.
Senator Campbell. I know you have to leave.
Senator Kohl, do you have any questions that you would like
to ask Sam before he has to run?
Limitations
Senator Kohl. Yes; I wanted to ask you, Mr. Banks, what are
the limitations that prevent you from doing a much, much better
job with respect to arresting these people, convicting them,
and putting them in jail? Are there things that we can do to
help you do your job much better than you are able to do it
right now?
Mr. Banks. There is always a staffing issue in terms of the
number of people that you can bring to bear on this issue. One
of the things that we have got to do is we also need very
particular skill sets. We need people that know how to
manipulate computers in a very sophisticated fashion. So that
is a big issue.
One of the things that is always a problem is trying to
stay current with the latest technology in order to be able to
access the Internet and be able to try and trace back, in
investigative fashion, the people who are involved.
Legislation to Extend Existing Authorities
Mr. Weinschenk. We also need some fine-tuning of
legislation to extend our existing authorities to the Internet.
We are working on developing that.
Senator Kohl. I guess how I feel, and I am sure how Senator
Campbell and Senator Faircloth feel is that this is a problem
that we should be using as much of our expertise as is
available and possible to bring this to a minimum in terms of
its perpetration. I have the feeling that we can do a lot
better if we will work together in every way to be sure that we
bring to bear the resources and the technology that we have to
see to it that this kind of activity is kept to an absolute
minimum. It is obviously very serious and it should command all
the attention that we need to give it to bring it down to its
lowest possible activity level.
Mr. Banks. Yes, sir; I totally agree with you. One of the
other things that we need to continue to do is to work
internationally, because you cannot solve this problem just
domestically. We need to make sure that some of these other
countries, in particular, the countries that are the sources
for some of this child pornography, have the necessary
legislation to be able to do their work. We need to make sure
that we are linked with their law enforcement authorities so
that we can take strong action against the people who are
involved in this.
Mr. Weinschenk. To bring that into perspective, Senator,
there are approximately six countries around the world that
have sufficient legislation on the books already to combat
this; 6 out of 190-plus.
Senator Kohl. And we are not one of them?
Mr. Weinschenk. We are.
Senator Kohl. We are one of them.
Mr. Weinschenk. We have the legislation; however, we just
have to fine-tune some of it to where we can begin our work.
Mr. Banks. Last year we arrested 145 people engaged in this
effort. So we have the legal authorities to be able to do this
work.
Senator Kohl. Are there constitutional prohibitions that
keep you from doing this work as effectively as you would like?
Senator Campbell. Like first amendment rights or something
of that nature.
Mr. Weinschenk. There are a lot of contentions of first
amendment right violations, but the Supreme Court has basically
ruled that child pornography is not included within the first
amendment rights.
What we have to do, because this is such an international
problem, is have other countries develop parallel law because
it is going in and out of our country. So we have to be able to
work with them. If they do not have the authority to do this,
we are really at a loss.
Senator Campbell. He has to testify at another hearing,
Senator Faircloth. Do you have anything you want to ask him
before he runs to his next commitment?
Senator Faircloth. Just if I could ask one quick question.
How many people do you have working in Customs specifically on
child pornography?
Mr. Weinschenk. We have eight at the center and we have at
least one in every office. It would be about another 144 at the
moment, but they are working it part time.
Senator Faircloth. So you have----
Mr. Weinschenk. Eight full time.
Senator Faircloth. Eight full time and----
Mr. Weinschenk. And roughly 144 part time, giving any
variation of hours to it.
Senator Faircloth. Thank you.
Mr. Banks. Mr. Chairman, could I introduce someone very
quickly?
Senator Campbell. Yes, please do.
Protection of Children
Mr. Banks. This is tied to the protection of children. We
have a supervisory Customs inspector from San Diego here,
Inspector Al Morales. A week ago Monday there was a high-speed
chase of a suspect from Los Angeles all the way down to the
Mexican border. In that car was a 2-year-old infant. When they
got to the border and we boxed them in, the suspect actually
pulled a knife, grabbed the kid, held the knife to the child's
throat. It ended up being his child as well, although he was
taking him from the mother. But held the knife to the boy's
throat.
Our supervisory inspector basically talked him through this
whole situation, calmed him down. He was surrounded by a
considerable number of police. Walked him out through this
situation, actually walked him over toward the border. And as
the suspect started fleeing for Mexico, our inspector grabbed
the 2-year-old infant. So the infant was unharmed, and has been
returned to his mother. The Mexican authorities returned that
person back to us.
We are involved in protecting children on all sorts of
fronts. So, Al, if you would stand up for a moment I would like
to introduce you to the chairman and the members of the
subcommittee.
Senator Campbell. Thanks for being here.
I am the chairman of the Indian Affairs Committee and we
are getting a lot of information from Interior, Indian Health
Service, and Bureau of Indian Affairs that child pornography,
child molestation and so on, all that is on the rise on Indian
reservations. Do you have anybody that is specifically assigned
to work with the reservations?
Mr. Weinschenk. Senator, the pediatrician listed on that
chart there was the pediatrician for the Indian nations in New
Mexico and he had himself put into a position where he would be
responsible for doing the forensics on any child who had been
molested. We arrested him both for trafficking in international
child pornography and for traveling to Spokane, WA, to molest
what he thought was a 7-year-old child. The agent who conducted
that investigation, Marcus Lawson, is right here.
Basically there is really no way we can focus on something
like that. We have to deal with whatever we come up with on the
net and then work with it.
Senator Campbell. Sure; I understand.
Mr. Weinschenk. But there is a perfect example of it.
Senator Campbell. I thank you. Sam, thank you for
appearing.
Mr. Banks. Thank you, Mr. Chairman.
Senator Campbell. I might tell you that we are going to
have a slide presentation after Mr. Allen's comments and I
understand it is pretty explicit. If anybody in the audience
prefers not to see it, you are welcome to leave the room.
Mr. Weinschenk. Senator, if I might. We are going live
online. It is not going to be a slide presentation. We are
actually going to pull it up as anyone could go in and get it.
Senator Campbell. All right; fine. In any event, if there
is anybody in the room that does not wish to see this, you are
welcome to leave.
Mr. Allen.
STATEMENT OF ERNEST E. ALLEN
Mr. Allen. Thank you, Mr. Chairman. I am Ernie Allen. I am
the president of the National Center for Missing and Exploited
Children which is a nonprofit organization mandated by
Congress. I am here today really for two reasons. One is
because of our long partnership with the U.S. Customs Service
which Commissioner Banks mentioned, to speak in support of
their efforts on child sexual exploitation, child pornography.
Second, to thank you and this subcommittee. This
subcommittee has been a great champion for children. We are
proud of the relationship that we have built with Customs and
with the Postal Inspection Service and with the U.S. Secret
Service. It was this subcommittee that funded our new exploited
child unit which is targeting the sexual exploitation of
children in the same way that we are searching for missing
children. So great progress is being made.
In Senator Kohl's questions and your questions, a couple of
key points came out. I wanted to emphasize to the committee
that we are aggressive supporters of the Internet and the use
of the Internet in many ways. However, about 4 years ago we
began to look at the risks posed by the Internet and we tried
to address those risks through a three-part strategy.
One is through aggressive public education. There are a lot
of parents out there who have a false sense of security. My kid
is at home, he is on his PC, he is doing something good and
positive for his future. And a lot of parents do not really
know what their kids are doing and what they are into. So we
have tried to address that.
We have done publications, including our child safety on
the information highway which has gone into now 3 million
American homes providing positive information, usable
information, and tips. Our data indicates that the kids at
greatest risk on the Internet are teenagers. So we have done a
separate initiative targeting teen safety on the information
highway, trying to reach out to kids in ways that they can
relate to.
Through the leadership of this committee, and in
partnership with the Customs Service and the Postal Inspection
Service and the FBI, we have actually done mouse pads with
safety tips that we are trying to take into America's schools.
Our goal as a nation is to wire every school in America for the
Internet by the year 2000. What we are trying to do is to make
sure that every one of those schools, at every one of those
PC's, has the kind of positive, supportive information that can
keep kids safe.
So working with private sector leaders as well as this
committee and the Congress, we are trying to put a mouse pad at
every one of those PC's in every school in the United States.
So education and prevention has been a goal.
Second, we have worked with leaders in the computer
industry to try to develop technology tools, access controls
that give parents the kinds of ability to limit the access of
their kids to certain areas.
But really the third prong of that strategy, the third key
point and we think the most important is aggressive
enforcement. Mr. Chairman, you made the point that this is not
protected speech. In the 1980's, the Supreme Court of the
United States in a case called Ferber v. New York said that
child pornography is not protected speech. It is child abuse.
So what we have tried, working with the U.S. Customs Service,
is to send the message that there should be zero tolerance for
child pornography, for child sexual exploitation on the
Internet.
The problem has been that, as with many issues, law
enforcement technology has lagged the technology of those who
would misuse it for unlawful purposes. I guess 80 years ago--I
heard this story that when the automobile was first introduced,
law enforcement leaders opposed it saying that only the crooks
will have the cars and we will be chasing them on horseback and
on foot. Well, in many ways, that is where we are today, and we
are trying to catch up.
The leader in this effort of using technology to attack
this problem has been the Customs Service. We are proud at the
National Center, as Commissioner Banks mentioned, for 12 years
we have been the partner of the Customs Service in this effort.
We have operated the National Child Pornography Tip Line
providing leads from the general public about the manufacture
and distribution of child pornography. That has led to many of
the convictions that Commissioner Banks talked about.
But there are some challenges here. One is that there were
some positive effects of that Supreme Court decision in the
1980's. The primary effect was to eradicate, by and large,
commercially produced child pornography from the shelves of
adult bookstores. Law enforcement, it was clear, there was no
longer a debate about whether this is obscenity or not. It was
not protected speech. And the result was that it disappeared
from adult bookstores.
Through the aggressive efforts of the Postal Inspection
Service we have made great progress on cracking down on the use
of the mails for the distribution of child pornography.
However, with the advent of cyberspace, with the advent of the
Internet, what has happened is that a virtual sanctuary was
created: a place where pedophiles and others trading in child
pornography could achieve virtual anonymity. So what was
necessary was an aggressive law enforcement assault on that
effort.
As the Commissioner mentioned, now for more than 4 years
the Customs Service has been out front on that. We work very
closely with Customs, with the FBI, with the Postal Inspection
Service, and as this subcommittee may be aware, only last month
we just launched our new CyberTipline, which provides a vehicle
to report child pornography, child enticement, various sexual
crimes against children online in addition to via our telephone
hotline.
So to show you that there is a huge potential for reaching
out to the public to get the kind of information that we need
for law enforcement purposes, in barely 1 month we have already
received 732 leads over that CyberTipline, which are being
worked by Customs and the FBI and the Postal Service. Of those
leads, 472 of them relate to child pornography; 168 of them
relate to the enticement or luring of children online through
chatrooms for illegal purposes; 62 of them relate to direct
reports of child molestation.
So our belief is that by and large this is still a problem
of hidden victims. We need to do a great deal more. I am not an
employee of the Federal Government or the U.S. Customs Service.
I know the Commissioner probably could not answer Senator
Kohl's question as directly as I would like to. But in my
judgment as a child advocate and a citizen, they need more
resources. They need more people. They need more tools.
The impact that they have had with eight people, and eight
people really working on multiple issues, not just on this
issue but that whole range of cyber crimes, I think is
extraordinary and is really one of the great success stories of
the Federal Government. But our view is, the law enforcement
needs, the law enforcement challenges that we face in this
issue require greater attention, greater resources, and it
would be my plea to this committee that you look for ways to do
more.
I guess the final point I would like to make, Mr. Chairman,
to sort of illustrate the breadth of this problem and how in
the words of one police official, the only way not to find it
is simply not to look. In our judgment, America has begun to
look. Law enforcement is becoming more sensitive, more
sophisticated, more effective in this area, but we need a lot
more to do. We looked at just the last month in terms of the
States of the members of this committee. In every State there
has been a significant arrest or prosecution related to this
issue within the last 30 days.
For example, Mr. Chairman, in your State on April 15, the
Boulder County sheriff arrested a 44-year-old man on charges of
sexual exploitation of children involving the Internet. Senator
Kohl, in Milwaukee on March 22 there was a child pornography
related arrest by the sheriff's department. Senator Faircloth,
in Charlotte on April 9 in Catawba County, actually related to
a murder in Catawba County, the Catawba County officials found
child pornography and have related it to that offense.
This is a problem that is happening in every community in
every State, and in our judgment, while we have made great
progress there is a lot more to do. Thank you, Mr. Chairman.
Prepared Statement
Senator Campbell. Thank you, Mr. Allen. We have your
complete statement and it will be made part of the record.
[The statement follows:]
Prepared Statement of Ernest E. Allen
Mr. Chairman and members of the Committee, as President of the
National Center for Missing and Exploited Children (NCMEC), I am
honored to have the opportunity to submit testimony on behalf of the
United States Customs Service's International Child Pornography
Investigation and Coordination Center (ICPICC).
I would like to first take a brief moment to thank this committee
in a broader way for your long-standing leadership and support for the
National Center for Missing and Exploited Children, specifically your
support for our new Exploited Child Unit (ECU).
This special division at NCMEC provides information and technical
assistance specifically in cases of sexual exploitation, providing the
same kind of assistance to families and law enforcement in sexual
exploitation that NCMEC provides in missing child cases. The ECU is
developing technology and other resources to assist law enforcement in
all areas of child sexual exploitation, including emerging issues such
as international child sex tourism, Internet-related child sexual
exploitation and sex offenders. It serves as a primary point of contact
on these issues and provides informational support to local, state, and
federal investigators, as well as to victims and other concerned
citizens.
On March 9, we launched our new CyberTipline, www.missingkids.com/
cybertip. The tipline was created for parents to report incidents of
suspicious or illegal Internet activity, including the distribution of
child pornography online or situations involving the online enticement
of children for sexual exploitation. Since its unveiling less than two
months ago, the CyberTipline has received 732 ``leads'' pertaining to
child pornography, child prostitution, child sex tourism and online
enticement of children for sexual acts. ECU staff is available seven
days per week, 24 hours per day, to handle these leads, and then
distribute them to the appropriate law enforcement agencies, including
U.S. Customs. The CyberTipline is our newest and brightest star, and we
are excited and enthusiastic about improving our services in this vital
area.
Long before the launch of the CyberTipline, the National Center for
Missing and Exploited Children and the U.S. Customs Service have been
working together in the fight against child pornography and child
sexual exploitation on the Internet. In 1987, Customs was the first
federal law enforcement agency to agree to be the contact point for
tips and leads from NCMEC's toll-free Child Pornography Tipline. Since
then, Customs has established a strong working relationship with NCMEC.
For the past four years, Customs has provided more than $215,000 to
the toll-free Child Pornography Tipline and other NCMEC operations.
This funding has been used for promotional brochures, public service
announcements, and a current campaign designed to educate teenage girls
about the risks they may encounter and ways to stay safer from crime,
called ``Know the Rules.''
On many occasions, NCMEC has asked Customs Agents to provide
training around the country to state and local law enforcement on
investigative methods and techniques to combat child pornography
violations. Locally, Customs Agents have trained NCMEC Hotline
Operators to become familiar with the types of leads that we are now
receiving via the CyberTipline. This includes child pornography and
exploitation methodologies, terms and nomenclature. NCMEC and U.S.
Customs have had a successful ten-plus years combating child
pornography, but unfortunately, much, much more needs to be done.
Child pornography, all but eradicated from adult bookstores and
aggressively targeted in connection with the use of the mails in the
1980's, has resurfaced with a vengeance, thanks to computer technology.
Although, sexually oriented materials are still available and
prevalent, this illegal activity has flourished on the Internet--with
child pornography being traded freely in chat rooms, news groups and
private e-mail. Pedophiles, child molesters and other purveyors of
child pornography now have instant access to explicit photographs in
the privacy of their own homes and offices. Hidden behind their PC's,
they brazenly trade pictures and videos, using technology to transmit
an unprecedented number of images around the world, broadening the
audience for child pornography and victimizing a new generation of
children. And they taunt law enforcement that does not have the
manpower or resources to hunt them down. The risks to children,
particularly teenagers, in cyberspace include:
1. Use by predatory adults to entice children to leave home for
purposes of child sexual exploitation; and
2. Exposure to child pornography and other unlawful sexual content
on the Internet.
These two types of cases are now being reported and investigated
almost everywhere. It is a problem in virtually every community. For
example, in the past few months, there have been major cases reported
in every state represented on your committee:
--April 15 in Boulder, CO: Sheriff's detectives are looking for
victims of a man they say had pornographic pictures of children
stored on his computer files. Teddy Mark Long, 44, was arrested
March 25 on charges of sexual exploitation of children.
--March 22 in Milwaukee, WI: William Harry Kucharek was accused in
the complaint of having ``numerous boxes of child pornography,
including pictures, videotapes, dolls and other sexual
devices'' among his belongings when Sheriff's Department
deputies and movers arrived to evict him.
--March 29 in Gunterville, AL: A Marshall County Sheriff's Department
jailer was arrested and charged with possession of child
pornography. Authorities confiscated about 98 computer disks
containing pornographic images of children from various sites.
--April 25 in New York City: An aerospace engineer with ties to the
U.S. Department of Defense pleaded guilty yesterday to using
the Internet to induce two 16-year-old girls in Maryland to
engage in sexual acts with him, federal prosecutors in New York
said.
--April 9 in Charlotte, NC: On the same day the sexually tortured
body of a Maryland woman was found in a shallow grave in
Catawba County, the man accused of killing her possessed child
pornography, federal prosecutors say.
It is clear that this is not an isolated problem, it is widespread
and growing. An encouraging development is the growing number of
specialized units at the federal, state and local level targeting these
offenses. One of the most successful is the Customs Service's ICPICC
unit.
The U.S. Customs Service established the International Child
Pornography Investigation and Coordination Center (ICPICC) in April
1996. Part of Customs' new CyberSmuggling Center, and staffed by
Special Agents with expertise in both child pornography cases and
computers, the primary objectives of the ICPICC are to:
--more effectively assist the field in the investigation of the
increasing number of child pornography cases;
--provide guidance and support to the field in the investigation of
complex cases involving child pornography violations; and
--spearhead the U.S. Customs Service international effort to combat
child pornography.
Since being established in April 1996, ICPICC has overseen seven
operations, recording 247 arrests, 238 indictments, 240 convictions and
653 seizures. And just since Oct. 1997, Customs Special Agents arrested
65 individuals in the United States for trafficking in or possessing
child pornography--of those, 57 persons were convicted. But clearly,
one of Customs' biggest success stories is the ``Tholian Web''
operation.
A joint state-federal operation, ``Tholian Web,'' has been credited
by law enforcement as the most successful sting of its kind in the
nation. The 18-month dragnet uncovered child pornography traffickers
throughout the United States, and as far away as Germany, Switzerland
and Great Britain. The sting has so far resulted in over 120
prosecution referrals and at least 32 convictions nationwide.
As a result of the probe, investigators have amassed over 200,000
child porn images--possibly the largest collection of child porn in the
world--and seized over $137,000 in home computer equipment. Although
Customs' vigor in targeting child pornography traffickers has been
successful and yielded tremendous dividends, much more needs to be
done.
The National Center for Missing and Exploited Children believes
that Congress should adequately direct federal resources toward
attacking the problem of child exploitation over the Internet. The U.S.
Customs Service has long been recognized by law enforcement and the
international community for its knowledge and skill in investigating
cases of child pornography and child exploitation. And the close
relationship we have fostered with the Customs Service has allowed the
National Center for Missing and Exploited Children to maintain our
aggressive posture in this important child protection area.
The best way to protect the positive, unfettered uses of the
Internet is to ensure that it not be allowed to become a sanctuary for
pedophiles, child pornographers and others who prey upon children. The
United States Customs Service has long shared that commitment, and it
deserves this committee's full support. Thank you.
Online Demonstration
Senator Campbell. Should we go ahead with the
demonstration?
Mr. Weinschenk. What we would like to do, Senator, if you
would like, is to actually go online and show you how quickly
we can get into these areas, as anyone can, any child, and also
to show you what is going on out there.
Senator Campbell. All right.
Did you have an opening statement that you wanted to make
before we see this demonstration?
Senator Faircloth. I do have an opening statement, if I
may.
Senator Campbell. Go ahead, Senator.
Statement of Senator Faircloth
Senator Faircloth. Thank you, Mr. Chairman. I just want to
thank you for holding this important meeting. I have just
recently--being older, maybe I have just become aware of the
problems that are out there. But as most any parent can tell
you, children seem to have a better ability to use computers
than their parents or grandparents do and can get into the
computer system.
In just a few years the Internet has gone from being a
novelty known only to computer experts to a part of everyday
life. More and more computers are in our homes, they are in our
classrooms, and children are among the most frequent and
sophisticated users.
This is a tremendous tool for education, but as has been
well said here today, it opens a doorway through which the most
deviate of child molesters can have direct access to children
and grandchildren. And this is an international problem, not a
national problem, as has been well said here. Child molesters
from virtually any country in the world can come in contact
with vulnerable children in this country as easily as they
could if they were across the street. And this is more of the
problem.
I introduced legislation last October to prohibit Internet
service providers from providing accounts to sexually violent
predators because of my concern that the Internet is becoming
an open market for the most twisted kinds of child pornography.
I want to talk with the chairman to increase resources for the
cybersmuggling program and what we can do to stop it.
Thank you, Mr. Chairman.
Senator Campbell. OK, if you would like to proceed.
Mr. Weinschenk. This is John MacKinnon, special agent with
U.S. Customs assigned to the C\3\ center. We will show you what
we bump into on a daily basis.
Statement of John Mac Kinnon
Mr. MacKinnon. Thank you. Good morning, Mr. Chairman,
Senator Faircloth, Senator Kohl. My name is John MacKinnon. I
have been a Customs agent for 10 years and the past 6 years I
have been involved in and conducted child pornography
investigations, most of which involve the Internet. I have also
been fortunate to have been involved in the training of 3,000
law enforcement officers, not only here in the United States,
but in numerous countries abroad.
One of the things I have found useful in instructing not
only law enforcement officers but law enforcement officers who
were parents and teachers themselves, is the use of analogies
in understanding the basic but crucial concepts of the
Internet.
There are several different areas of the ether of the
Internet. The terms are bandied about, semantics are
interchanged. You have commercial online services. This is an
example of one of the online services, America Online.
Microsoft Network, Prodigy, AT&T Worldnet. A citizen will pay a
monthly fee to have access to this nationwide computer club.
I put this up here for several reasons because--I know the
purpose and the scope of this hearing is to discuss the
downside of the Internet and the evil that exploits the net.
But an example here on the things that we can see that are
offered by all the online services and other services in other
parts of the Internet, are the good parts that are available,
the good things that are available on the Internet. Sports,
news, games, health, lifestyles, shopping. You can make airline
reservations, you can check the weather, so on and so forth.
You pay your monthly fee. You are given a telephone number
locally that you can dial up with your computer and your modem
to connect. You connect inside this nationwide computer club
and you can do many or all of these things. You can also
exchange things on the commercial online service. You can
exchange files. You can exchange thoughts. You can exchange
pictures. You can do that through electronic mail.
I know you are familiar with the mail service that you use
here in the Capitol. Within the commercial online service you
can send electronic mail in real time, or you can send it to be
read at a later time. The mail can be a message containing any
thoughts. It can be egregious. It can be seductive to a child.
Or the mail message could contain pictures. For our purposes,
child pornography pictures. Or from within this closed
nationwide, or actually international computer service, you can
reach out to other people in other parts of the Internet.
What I am going to do now is just get right to it and we
will connect. Can you see that?
Senator Campbell. We only have two options, and that is
this light or no light at all, turning the whole thing off. We
cannot just dim them, so we will just have to go with this. But
we can see the large print.
Online Demonstration
Mr. MacKinnon. To reiterate our disclaimer here, I am not
going to display child pornography. There may be a small amount
of offensive language, and that is the risk we take by going
live.
Senator Campbell. OK.
Mr. MacKinnon. This is the World Wide Web, another section
of the Internet, separate and distinct from our online
services. The service, the access to the World Wide Web you get
from an Internet service provider. America Online or Microsoft
also provide service to the Internet in addition to their
closed club. An Internet service provider like IBM or AT&T, and
up to 4,000 other Internet service providers in the United
States, will collect from the user $20, $25 a month, give you a
phone number to access their big computers which interconnect
with the Internet.
The World Wide Web became very user friendly, very
appetitive for the nontechie, the noncomputer person just in
the past few years. Why? Point and click. Instead of using
arcane computer commands and having to learn them, it is very
graphical. You take your arrow, you point on something, like
this enforcement activities in the U.S. Customs Service, and
you go to another section of this World Wide Web site. The
majority of the World Wide Web sites are legitimate. There is a
small minority, an unscientific estimate of 1, 2, 3, 4, 5
percent of World Wide Web sites that are illegal, unlawful.
We conduct our investigations in several different ways. We
conduct reactive investigations. We receive tips from Mr.
Allen's National Center for Missing and Exploited Children
CyberTipline, an online World Wide Web realtime forum to
receive information to forward to law enforcement. We have our
World Wide Web page ourselves, and a computer citizen will
click on. If they come and visit our site and they have
information that they want to report, they can simply send us
an e-mail and a complaint.
We receive tips from our 24-hour-a-day, 7-days-a-week,
every-day-of-the-year telephone hotline, tips and information.
We collect this information from computer citizens and we try
to do something with it. We try to validate it through other
investigative techniques.
We also conduct investigations in a proactive sense.
Mr. Weinschenk. If I may, Mr. Chairman. We receive anywhere
between 200 and 400 tips a week from our own tipline on the
page.
Senator Campbell. 400 tips a week and you only have eight
full-time people to deal with them?
Mr. Weinschenk. Yes, sir; 200 to 400.
Mr. MacKinnon. And that is just from our own tipline. We
receive information from other avenues which compounds it.
Online Demonstration
Now the World Wide Web offers preferential child molesters
and traffickers of child pornography a global forum to meet
other violators. It is unsophisticated to create web pages. The
problem for law enforcement is that the use of the Internet is
becoming easier and easier for a greater amount of people.
This is an example of a web site put up by somebody, we
believe maybe overseas. There are the initials, NL, which is
Internet parlance for the Netherlands. On this web site--and I
was showing the majority staff director this the other day, and
also the minority clerk--is a compendium of places on the net
to learn about pedophilia, child pornography. I use this to
instruct law enforcement officers as well, and here is a pretty
good place to start to learn about the milieu that we have to
deal with.
Each phrase in blue is what we call a hyperlink. That just
means--I am sorry for the technical terms. You put your arrow
on it, your cursor, you click on that and you are going to go
somewhere else on the Internet. Now FreeSpirits site,
FreeSpirits is this pedophile organization that has concocted
this web site, and they have on this web site several different
subsections, as you will see by subtopic. Message boards
related to boy love, other major resources for boy lovers,
sites hosted by individual boy lovers.
Message boards, think of the bulletin boards that you would
see in the squadroom of a police station or in the anteroom of
your office. You could post notes. You can pull down notes. It
can be realtime or it can be looked at and viewed later. It is
a place to exchange thoughts.
Boys viewpoints, community involvement, the written word,
news groups. Another section, in addition to our online
services in the World Wide Web, of which this is, are the news
groups which have upward of 40,000 separate titles. Each title
of each group is a unique topic area. Motorcycles, basketball,
pedophilia. This will list the news groups that are focusing on
pedophilia.
Free speech and censorship issues, privacy and security
Internet. Mr. Chairman, these two areas here, especially the
last one, when posted to these pedophilia sites give me and my
colleagues concern. Because what the offenders are doing is
trying to educate other offenders on how to evade detection. In
this particular law enforcement arena where technology is
paramount to either avoiding detection or being detected, is
one of our challenges. It is not only just staying up with the
technology, but trying to keep up with the techniques that are
circulated.
Mr. Weinschenk. Mr. Chairman, if I may, we made copies this
morning--John was perusing the net while we were waiting for
you. We found a web site which instructs the pedophile how to
undo what parents are doing. What parents are telling their
children to be aware of, that site tells them, here is how you
get around that. Here is how you can bring down the child's
defenses. It is available on a site just like that.
Mr. MacKinnon. Mr. Chairman, Senator Kohl, further down in
this section are other major resources, including one that Mr.
Weinschenk just alluded to. This also shows the international
aspects of what we are dealing with. Danish Pedophile
Association, European Boy Lover home page, Montreal Ganymede
Collective, NAMBLA, which is an acronym for North American Man
Boy Love Association, Pedophile Liberation Front, which we will
click on and visit. This is another World Wide Web site that is
interconnected with the previous one.
Mr. Weinschenk. If you look at their heading, ``Do
something on the 25th.'' They want to celebrate. You can
imagine what they want you to do.
Mr. MacKinnon. Which is Pedophile Pride Day. Now what is
listed here on the top and on the side are other options, other
links, other connections for this subject area. It lists
members' home specific web sites. Let us go to Reconsidering
Pedophilia.
Mr. Weinschenk. One of the questions that is always asked
of us is, do we know how many pedophiles or molesters? We are
not sure because we do not know how many pedophiles are out
there. But we do have an educated guess that as many as 70 or
80 percent of the molesters are pedophiles.
Senator Campbell. Is it also gender skewed, more men than
women? That would be my guess.
Mr. Weinschenk. I would say probably more men than women,
but there are sites, mother-daughter sites.
Senator Campbell. Let me ask you a couple things, moving
along here. You talked about the ability to evade detection. I
noticed one up there that you said was at the top of the list
and it said Free Spirit. Do you have a way of tracking just who
that is, where they are coming from, where they live?
Mr. MacKinnon. Yes.
Senator Campbell. If you make phone calls, there are ways
of tracking where the phone call came from. Do you have a way
of tracking who actually is putting it up on the web?
Mr. MacKinnon. Yes; with all due respect, given that this
is a public hearing, we have numerous investigative techniques
that we employ. Given that there are commonly available
Internet tools that anyone can use to initially identify what
computer this person who is using the name, TheSlurp, or the
other person, Free Spirits, are using to connect to the
Internet.
Online Demonstration
Senator Campbell. Is there some type of fingerprint or
signature or something on these different--I am speaking from a
total layman's standpoint. Is there a print that can be tracked
to determine where that computer or where the access was made?
I am not quite sure even how to phrase that question.
Mr. MacKinnon. You are in the right ballpark. On top of
someone's user name, like [email protected], that is up here. You
can change that. But what is sitting underneath it are other
things that are more difficult to change. Think about VIN
number on an automobile, or DNA in a human body. That DNA
stays.
Senator Campbell. So that is like a fingerprint for that--
--
Mr. MacKinnon. Now the corresponding analogy is a thing
called the Internet protocol address, or an IP address. That is
a number that sits--that is similar to the DNA or the VIN
number. That stays with your Internet account wherever you
traverse the Internet. Now there are ways of faking that but it
is real, real difficult. So there are easy ways to determine,
any citizen, computer user can identify realtime, possibly,
that IP number. And then for us the tracking begins.
Mr. Weinschenk. Also what happens on here, Senator, is
different than phones. As you mentioned earlier, if someone
makes a phone call, you can track-back on the phone. They have
what is called anonymous remailers where my computer goes
through your computer, goes through your computer, changing
names and identifiers as it goes, and you can send it through
any number of these different computers. Ultimately, we can
find out who it is, but it is a process of going back through
remailer, through remailer, through remailer.
Senator Campbell. Do I understand that these groups, like
Slurp or these other things, subscribe--to be on, for instance,
on America Online, do they pay some type of fee to be on there
or can they just log on?
Mr. MacKinnon. There is a difference with--what we are
looking at here is the World Wide Web, and that is largely
unregulated. America Online is a closed commercial business
like Microsoft and Prodigy. There is interaction but it is
informal.
Mr. Weinschenk. Most of these folks opt to not go through
the America Onlines because they are filtered, they are
monitored. They go other avenues which are unregulated and they
can do whatever they want totally without restriction.
Senator Campbell. Do these groups like America Online, try
to limit these things or do they have any responsibility in
this action to reduce it?
Mr. Weinschenk. America Online has been very, very
conscientious in what they do. We have worked with them on a
number of occasions. We have identified sites where we found
that pictures of preteens were being circulated, and we went to
America Online and they went right to it and put filters in
which knocked those rooms out. They have been very, very good.
The problem that we have here in the United States is that
we seem to think of the Internet as the America Onlines or the
Erol's. That is only a very small piece of the total picture.
Roughly there are 100 million people accessing the Internet, of
which America Online has 20 million. You can see the
percentage, the difference.
The people that we are talking about here stay away from
the America Onlines. They may go in there to identify, if they
are looking to identify a child or someone they want to target,
and they can draw them from America Online over to--you know, I
will contact you through e-mail or go through a different
direction. They will go in there to hunt for targets and prey,
but they will do their trading in other than the AOL's of the
world.
Senator Campbell. Mr. Allen, you said you thought Customs
needed more resources. I think so too, frankly, when I hear
that they only have eight full-time people working on this. I
think most of the members of the committee would be more than
willing to try to work some stronger legislation or put
additional resources into it. We need some direction on what we
can do to help.
What would you suggest that we do from the standpoint of
additional legislation?
Mr. Allen. I think the Commissioner made the point earlier
that I think there is pretty good law. I think the primary
challenge is enforcing it. Clearly there are some things that
are unique about the Internet. For example, I think Senator
Hatch in the last Congress introduced legislation that dealt
with the whole question of what an image is. Can you manipulate
an image so it is not a real child but that there is still a
sexual act conveyed?
Clearly, pedophiles are using this content in a lot of
ways. They use it to access other kids. They use it to break
down a child's inhibitions. They use it for commercial
purposes. So I think laws that enhance penalties, laws that--
Gene mentioned making the law more uniform so that there is
greater consistency in the law State to State and nation to
nation would be very key.
But in our judgment, the single most important thing we
need is just more law enforcement, more officers, more agents
working on this.
Senator Campbell. Which requires additional resources in
terms of money, obviously.
Mr. Allen. Exactly. And probably improved technology. Mr.
MacKinnon talked about the fact that we have evolving tools to
track these people down. But the whole nature of the Internet
is, these communications bounce off servers and go through
multiple avenues. It is not as simple as tracking down a
telephone call. So law enforcement technology has to improve,
law enforcement technology has to catch up in many instances
with what the bad guys are doing. And the Customs Service has
really been at the forefront of that.
Senator Campbell. My computer skills are pretty limited,
but how difficult is it for a youngster to find this
information? Is it kind of rudimentary skills to be able to
find this information?
Mr. Allen. It is not difficult at all. One of the reasons
is that these guys are clever. You notice in some of the
descriptors on the screen some very generic terms like boy and
girl. And things like that lead you, when you search those
terms, to a whole host of options, some of which are legitimate
and useful and some of which are not. So our experience has
been particularly computer-savvy kids, whether intentionally or
otherwise, do not have any problem finding the darker sides of
the Internet.
Senator Campbell. Apparently they use a lot of code things
that would appeal to people looking at this information. I
mean, everyone wants friends, and children all tend to like to
keep secrets and things of that nature, and they play on that,
do they not?
Mr. Allen. They do. The other thing is, there seems to be
an emerging category of people on the net who are purposefully
using very attractive sounding web sites to bring people
unwittingly. For example, whitehouse.com is a porn site.
Senator Campbell. White House?
Mr. Allen. Whitehouse, one word. Now obviously, the whole
intent of that--to the best of our knowledge it is not a child
porn site, but it is a pornographic site. So if you enter
whitehouse.com what you get, other than information about art
and history and the U.S. Government, is you get pornography.
And there are a host of those where people, kids, and
otherwise, are being attracted unknowingly and unwittingly to
sites in order to try to exploit for commercial reasons or
other reasons.
Mr. Weinschenk. Those sites can then trap that child's
screen name and feed back info to them unsolicited.
In answer to another part of your question, Senator, we are
not realizing the problem now, but we will very shortly. We
know that with pedophiles, they have an urge that they want to
see this stuff now. So they do not encrypt because it takes too
long for a file to decrypt. It takes a very long time to do
that, and their urges are such that they do not want to wait.
Internet II which the Vice President announced a few weeks
ago, is going to speed up the speed of the net by 100 times.
That means that they can now encrypt and decrypt and still get
them in a very, very rapid time period, which is going to
change the face of what we are doing radically. Because we as
law enforcement will get an encrypted file and we will not even
know what we have. So we have a problem. It is going to be
very, very shortly--a problem with encryption.
Senator Campbell. Senator Kohl, we are moving along here,
do you have some comments or questions?
Resources
Senator Kohl. Thank you, yes. Is there a dimension to the
kinds of resources that you need to bring this activity down to
its absolute minimum? We say, if we have more resources we can
do a much better job. Could you put that into some kind of a
perspective that we could understand what you are saying?
Mr. Weinschenk. In general numbers, I could easily use--I
have eight. I could use 80.
Senator Kohl. If you had 80, what would happen?
Mr. Weinschenk. We are barely scratching the surface of
what is out there, because this is 24 hours a day, 7 days a
week. One, we can identify more. We are at the present time
running approximately six undercover operations, strictly on
the net, strictly doing child pornography on the net. We would
be able to expand those. We would be able to put more time in.
Senator Kohl. I know. But if you had 800 would you do an
even better job? If you had 8,000? Do you know about--could you
tell us, if you had x, you could accomplish x?
Mr. Weinschenk. I can probably figure that out for you,
Senator. I do not know if I could give you a precise answer at
the moment, but I can get back to you with that answer.
Senator Kohl. Do you have some comment on that, Mr. Allen?
Mr. Allen. By way of contrast, we aggressively supported
the FBI's request in the last appropriation to dramatically
expand the Innocent Images Task Force, which is 2 years old,
also doing great work. The Innocent Images effort at the FBI
and the work at the Customs Service really meshes. There are
differences in terms of the approach. The FBI is probably
targeting more the online enticement, the chatroom issue, while
the Customs Service probably plays a more dominant role in
traditional child pornography and the use of the Internet for
child pornography.
In the last Congress your Appropriations Committee, CJS,
gave the Innocent Images an additional $10 million. So they
have expanded--I do not know what the number of agents is, but
they too are playing catchup. I do not know what the magnitude
of the increase ought to be, but in my judgment, having eight
people trying to deal with an issue of this magnitude is just
woefully inadequate. I think it certainly needs to be
substantially greater.
Computer Forensics
Mr. Weinschenk. There is another facet to this too that you
have to realize, and that is what we call computer forensics.
Obviously, the people that we are dealing with are dealing with
computers. We have to develop the expertise, which we have. We
have schools constantly going. When we go in and we execute a
search warrant and make an arrest, there are computers there.
These people are cognizant enough to know how to boobytrap them
so that if we turn them off the wrong way or we do the wrong
thing, it erases everything.
So we have to develop a second arm that goes out and--to be
able to recover the evidence, to make sure we have it all, we
preserve it and we are able to use it for trial. That is a
parallel expense to us and a parallel cost, which we are now
doing, training people.
Child Sex Tourism
Senator Kohl. What is child sex tourism? Could you explain
that phrase to us?
Mr. Weinschenk. Sure. Child sex tourism is unfortunately a
growing international problem. There are individuals around the
world who are contacting, for lack of a better term, a travel
agent type Internet site. And they are telling that site, I am
interested in traveling to country x and I am looking to find a
5-year-old girl and I intend to have anal, vaginal, straight,
whatever, sex. I want to film it. And these people make the
arrangements.
That person then travels to that country. They are met at
the airport with the child, and are on their way. They do what
they intend to do.
Senator Kohl. Is this prevalent in the United States?
Mr. Weinschenk. Yes; it is. Yes; we have--one of our
undercover operations is targeting it in the United States at
the moment, and we are very successful with it.
Mr. Allen. It is our sense, Senator, that probably
historically, probably the best known examples of this have
been literally travel tours to Thailand and to the Philippines,
places like that, where it is literally marketed for pedophiles
as part of tour packages, that a key element of the tour
package is you get to have sex with children.
Mr. Weinschenk. We are hearing from the Department of the
Interior that there is also a problem over in Saipan and Tinian
where young children are being brought out of mainland China,
allegedly to work in the factories there, but, in fact, they
are being brought over as part of the sex tourism operations.
Senator Kohl. Thank you, Mr. Chairman.
Senator Campbell. Senator Faircloth.
Senator Faircloth. Just a couple of brief questions. Did
you say this same activity takes place in the United States?
Mr. Weinschenk. Yes, sir; the arrangements are being made
in the United States. They are contacting sites here in the
United States to make the arrangements.
Senator Faircloth. With children in this country?
Mr. Weinschenk. I do not have clear evidence of that, but
we understand that is happening. It is more prevalent in a
developing country where--I hate to use this term, Senator,
believe me--but there are throwaway children. Where there are
children who are orphaned, who are on the streets, 3, 4, 5, 7
years old. They have no papers. No one even knows they are
there. Those children are more readily available for these type
of predators. But they want everything set up so that when they
come in they can just go and do what they want to do.
Senator Faircloth. And, of course, if the children were
killed I guess nobody would know the difference.
Mr. Weinschenk. We understand that is even a request at
times. They refer to it as ``snuff.'' That when they are done
with the sex act they do kill the child.
Convictions
Senator Faircloth. I see the arrest, indictments, and
convictions. What does a conviction amount to in terms of time
or penalty normally?
Mr. Weinschenk. That all depends, Senator.
Senator Faircloth. I understand that.
Mr. Weinschenk. As an example, we have one now that is
being negotiated, and 78 months would be--6 years, 6 months.
Senator Faircloth. In a Federal prison?
Mr. Weinschenk. Federal.
Senator Faircloth. They would see that as the maximum?
Mr. Weinschenk. Yes; I would think so, sir.
Mr. Allen. Let me say, Senator, that that is substantially
greater than prior history. Our experience has been, it is very
difficult to get significant time for a child molester, a
sexual offender against children, for a variety of reasons. One
is that prosecutors oftentimes are reluctant to use the child
as a witness, to put the child through the process. The
experience has been in child sexual abuse cases that probably
one-half do no time at all and that the normal sentence, actual
time served is probably a year or less.
I do think penalties are improving and I think penalties,
obviously, need to be a significant focus of what we are
talking about here.
Mr. Weinschenk. I have just been informed that the average
is between 15 and 20 months.
Senator Faircloth. Fifteen and twenty months. You could
almost get that for a speeding ticket.
Mr. Weinschenk. Yes, sir.
Senator Faircloth. But a more diabolical crime I cannot
think of.
Mr. Weinschenk. I agree.
Senator Faircloth. Thank you, Mr. Chairman.
Senator Campbell. When these people get time for this, my
view is that they are pretty sick. I mean, they are emotionally
sick people that would do this in the first place. Do those
sentences usually include some kind of medical help or do they
just put them away for a few months and let them back out on
the streets?
Mr. Weinschenk. At the Federal level there is one prison in
the United States where they are sent to, and there is a
treatment program in there. But the experts tell us that the
odds are pretty good when they get out they will----
Senator Campbell. What about the incidence of repeat
offenders that you mentioned, the 515,432 figure. Have some of
them been repeats?
Mr. Weinschenk. Yes, sir; in fact, some of the cases that
we were going to tell you about, one of the individuals we just
arrested in Washington State within the last month, had been
arrested as a child molester and also as a child murderer. He
had strangled a 6-year-old boy who he was molesting. Back out
on the street and we got him again.
Senator Campbell. We do have a 15-minute call to vote and I
have no further questions. Do you, Senator Kohl?
Senator Kohl. Thank you, it has been very informative--I
have to say this, Senator Chairman, I hope that we can follow
this through----
Senator Campbell. Yes; me, too. We will.
Senator Kohl. We will try to provide some additional
resources, as much as we can. What you are saying, I believe,
very clearly is that you can do a much better job if we can
provide you with additional resources.
Mr. Weinschenk. Absolutely, sir.
Senator Kohl. This will not be simply a case of throwing
money at a problem and not getting very much by way of results.
That is not the case here, and we are relying on what, I
believe, we are hearing from you. Is that right, Senator
Campbell?
Senator Campbell. Yes; and I think, considering the limited
resources you have, I think you are doing a terrific job. I
want to add my voice to Senator Kohl's and tell you that we are
going to help you all we can, whether it is strengthening of
legislation or additional money going to additional manpower.
Mr. Weinschenk. Mr. Chairman, Senator Kohl, I want to
assure you, I have been a Customs agent for 29 years. The
people who are doing this work and doing these jobs, I have
never seen anyone more dedicated to, more intense at what they
are doing. I think we are doing the best we can with what we
have.
Senator Campbell. I think they, like us, have the
additional incentive that they are parents in many cases and it
could be their children.
Latest Technology
Mr. Weinschenk. Absolutely. One more thing before you go,
Senator. I want to show you both something that is kind of
really diabolical. This is what they call a see-you-see-me cue
ball. What it is is a camera, the latest technology, what the
sexual predators are doing.
You set this on top of your computer, you plug it in,
anybody that is out there in the same room with you, as John
has demonstrated, the latest thing what they are doing is they
are bringing in a child, filming the molestation. And the other
people in the chatroom, what they are doing is saying, OK, we
want you to do A, B, C to the child. The person with this on
their computer does it. That image is sent out to the rest of
the people in the room. So they are molesting on demand.
Something as small as this.
People who we arrested in, and who traveled into, the
United States from Switzerland, had 90,000 child pornographic
images on one of these; 90,000. That is the size of what we are
talking about. The technology is there to do things like----
Senator Campbell. The problem is a lot larger magnitude
than I had ever understood.
Mr. Weinschenk. Very much so. The cost of this is under
$300.
Senator Campbell. I thank you for being here, and we
certainly appreciate your testimony.
Mr. Weinschenk. Thank you, Mr. Chairman, Senator.
Submitted Questions
Senator Campbell. We have additional questions that will be
submitted in writing to be answered for inclusion in the
record.
[The following questions were not asked at the hearing, but
were submitted to the agency for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
U.S. Customs Service
child pornography on the internet
Question. What was your fiscal year 1999 request for
cybersmuggling, as child pornography on the Internet is commonly known?
Answer. The President's fiscal year 1999 budget request for the
U.S. Customs Service did not include specific funds for cybersmuggling
activities. Customs currently assigns eight positions to the Customs
CyberSmuggling Center, funded out of base appropriations for smuggling
activities.
Question. Can you explain the difference between your jurisdiction
and FBI's in the area of child pornography?
Answer. The U.S. Customs Service has jurisdiction over the
investigation of the smuggling of prohibited articles into the United
States. This includes the use of the Internet to transmit child
pornography materials from foreign locations to points within the U.S.
In fact, Customs had been investigating the smuggling of child
pornography even before the first child pornography legislation was
enacted in 1977.
Following the enactment of the computer-related child pornography
statute in 1988, Customs broke new ground by becoming the first Federal
agency to conduct those Internet-based investigations. Customs conducts
proactive investigations on every major facet of the Internet, which
includes the World Wide Web (WWW), the Internet Relay Chat (IRC)
channels, and the News Groups.
The Internet is an international medium, a medium used extensively
throughout the world for international trafficking. It is also a medium
that recognizes neither sovereignty nor borders.
Since most of the materials used in the production and distribution
of child pornography as well as the child pornography itself have
traveled in foreign commerce, Customs has primary jurisdiction in these
investigations.
Customs is also mandated by the Violent Crime and Law Enforcement
Control Act of 1994, 18 U.S.C. 2423, to investigate foreign travel by
U.S. citizens and/or resident aliens for the purpose of having sex with
a minor.
The FBI's jurisdiction lies principally in the domestic, interstate
transportation of child pornography, including the use of the Internet
to transmit child pornography materials between domestic locations; and
domestic, interstate travel for the purpose of putting children at risk
through sexual exploitation.
Question. What is Customs currently doing to inform parents and
children about child pornography on the Internet?
Answer. The U.S. Customs Service works very closely with the
National Center for Missing and Exploited Children (NCMEC) to inform
both parents and children of the dangers lurking on the Internet.
Together, Customs and NCMEC have published and distributed
literature and computer accessories that alert both parents and
children to the many traps and methods used by sexual predators.
Customs is working with State and local agencies such as Education
and Library Associations in an outreach program dedicated to informing
parents as to the areas of concern on the Internet.
To date, Customs has provided training to thousands of Federal,
State, local, and international law enforcement officers as well as to
countless members of non-law enforcement persons, most of whom are
themselves parents.
Customs has also been invited by members of Congress to participate
in State-wide informational meetings set up to inform their
constituents on issues related to the Internet.
Question. Can you tell some of your recent successes in your
efforts against child pornography on the Internet?
Answer. Since October 1, 1995, the U.S. Customs Service has
successfully conducted several undercover and special operations
targeting individuals and businesses that use computers to transmit and
receive international child pornography. These investigations have
resulted in the arrest of more than 500 persons for such pornography-
related violations in the United States. This is an average of an
arrest every other day since fiscal year 1996.
Case No. 1
Customs recently arrested a pediatrician from New Mexico for
trafficking internationally in child pornography via the Internet and
for soliciting an undercover Customs agent to have sex with a seven-
year-old girl, whom the pediatrician believed was the undercover
agent's daughter.
The pediatrician was, at the time of his arrest, the designated
pediatrician for the Native American Nations in the New Mexico area.
The pediatrician recently had himself appointed as the forensics
physician designated to investigate child sexual molestations.
At the time of his arrest, the pediatrician had in his possession
some of his medical tools, including a speculum, and a digital camera
capable of taking 99 digital images. It was his stated intention to
molest the seven-year-old girl and to take digital images of the
molestation, which he then intended to post on the Internet.
Case No. 2
In another matter, Customs arrested a Swiss husband and wife who
were international commercial distributors of child pornography.
The couple had traveled to the U.S. from Switzerland, along with
their two-year-old daughter, with over 90,000 child pornography images
contained on one computer drive. The couple had negotiated with an
undercover Customs agent to make and distribute CD-ROM's of the images
throughout North America. It is believed that the Swiss couple made
over $2,000 per day from child pornography distribution.
Case No. 3
In a Customs undercover operation being run out of Salt Lake City,
a Canadian citizen and resident of Bridal Falls, British Columbia
(Canada), offered to sell the undercover Customs agent images of child
pornography which he claimed to be producing himself in his home town.
The violator advised that he produced the pornography while
babysitting children under 10 years of age. The violator indicated that
he would be babysitting next week and would be molesting more children
and, as before, filming the molestation as he did it.
Because of the nature of the violator's comments, the Customs agent
immediately contacted the Coordinated Law Enforcement Unit (CLEU) in
Vancouver, Canada. As a result, the CLEU arrested the violator the next
morning and conducted a search of his residence. The search resulted in
the seizure of a substantial amount of child pornography, including
over 300 videos, 60 rolls of undeveloped film, and digitized child
pornography images.
The violator had previously been convicted for the sexual
exploitation of a two-year-old girl and is the prime suspect in a
number of other sexual assaults involving children and animals.
On December 19, 1997, the violator was convicted of having sexual
contact with three separate children, bestiality, and possession and
distribution of child pornography. More importantly, another child was
saved from molestation by a sexual predator.
Case No. 4
In July 1997, a subject made contact with an undercover Customs
agent and requested information pertaining to child pornography. In
January 1998, the subject placed an order through a certified Customs
undercover operation requesting video tapes containing child
pornography.
Subsequent investigation disclosed the subject had a 1975
conviction for second-degree murder which involved the strangulation of
a six-year-old boy. A review of that case revealed that the subject had
molested several children, including the murder victim. The subject had
been paroled in 1980.
In 1985, the subject had been rearrested and charged with having
sexual contact with a minor and returned to prison.
A controlled delivery of the requested child pornography video
tapes was executed by Customs agents to the subject at his residence. A
search warrant was also served and the subject was subsequently
arrested for violations of child pornography laws.
Case No. 5
Information from Canada Customs indicated that an individual using
the screen name ``Joker'' was distributing child pornography over the
Internet, through a file transfer protocol (FTP) site, to individuals
in Canada, the United Kingdom, Germany, Japan and the U.S.
During undercover meetings on the Internet, the subject--who was a
computer engineer with a secret clearance--transmitted over 100 child
pornography images electronically, and sent computer diskettes
containing over 800 images to the undercover Customs agent.
The subject was subsequently arrested by Customs agents at his home
in Aurora, Colorado.
Case No. 6
In April 1998, an undercover Customs agent was contacted by an
individual who wanted to trade child pornography via the Internet. The
subsequent investigation identified the violator as a U.S. Army Green
Beret Master Sergeant assigned in a key military intelligence position
in Germany.
Working in cooperation with the Department of Defense, the violator
was arrested while on duty at his intelligence post in Germany as he
was trafficking child pornography with the undercover Customs agent.
Subcommittee Recess
Senator Campbell. With that, this hearing is recessed and
the subcommittee will recess until 9:30 a.m., Thursday, May 7.
[Whereupon, at 11:04 a.m., Thursday, April 30, the
subcommittee was recessed, to reconvene at 9:31 a.m., Thursday,
May 7.]
MATERIAL SUBMITTED SUBSEQUENT TO CONCLUSION OF HEARING
[Clerk's note.--The following statement was not presented
at the hearing, but was submitted to the subcommittee for
inclusion in the record subsequent to the hearing:]
Prepared Statement of Congressman Nick Lampson
Mr. Chairman. Members of the Subcommittee. As Chairman of the
Congressional Missing and Exploited Children's Caucus, I appreciate the
opportunity to testify on what has become an issue that I unfortunately
know too much about--the exploitation of children.
Child pornography was a worldwide industry that was all but
eradicated in the 1980's. Unfortunately, it has resurfaced with a
vengeance, thanks to computer technology. Although the smutty magazines
and photographs ordered from back page ads in adult magazines are still
prevalent, this illegal activity has flourished on the Internet--with
child pornography being traded freely in chat rooms, news groups and
private e-mail. Pedophiles, child molesters and other purveyors of
child pornography now have instant access to explicit photographs in
the privacy of their own homes and offices. Hidden behind their PC's,
they brazenly trade pictures and videos, using technology to transmit
an unprecedented number of images around the world, broadening the
audience for child pornography and victimizing a new generation of
children. And they taunt law enforcement that does not have the
manpower or resources to hunt them down.
I represent part of Houston. During one week in March 1998, the
Houston Chronicle reported that U.S. Customs agents--who are charged
with investigating Internet crimes against children--seized computers
from a home and church, saying the equipment was used to send and
receive child pornography through the Internet. Apparently this was not
the only seizure of child porn that week. A man was accused of
possessing and distributing pornographic images of children on the
Internet. A subsequent search of his home revealed thousands of
pornographic images on his computers, including at least 150 illegal
pornographic images of children as young as 6.
Allow me to tell you a true and chilling story. In February, a
South Houston teenager ran away from home to Baytown to see someone she
had never met. That night, the 22-year-old man sexually assaulted her.
Why did she leave home to meet a stranger? They met each other on the
Internet.
I will be introducing legislation in the next few days that will
authorize funds for the U.S. Customs Service Child Pornography
Enforcement program--the International Child Pornography Investigation
and Coordination Center (ICPICC).
To help combat the problem of child pornography through computer
technology, the U.S. Customs Service established the International
Child Pornography Investigation and Coordination Center (ICPICC) in
April 1996. Staffed by Special Agents with expertise in both child
pornography cases and computers, the primary objectives of the ICPICC
are to:
--more effectively assist the field in the investigation of the
increasing number of child pornography cases;
--provide guidance and support to the field in the investigation of
complex cases involving child pornography violations; and
--spearhead the U.S. Customs Service international effort to combat
child pornography.
There is a need to adequately direct federal resources toward
attacking the problem of child exploitation over the Internet. The U.S.
Customs Service has long been recognized by law enforcement and the
international community for its knowledge and skill in investigating
cases of child pornography and child exploitation. The establishment of
the ICPICC has enhanced the ability of the Customs Service to maintain
its aggressive posture in this investigative arena. Since fiscal year
1995, ICPICC's investigations have resulted in 329 arrests.
Properly funding the ICPICC will allow the Customs Service to
continue its worldwide leadership in the prevention of the sexual
exploitation and abuse of children in the United States and abroad.
My concern with the lack of funding provided for the U.S. Customs
Service Child Pornography Enforcement program is obvious. Ever mindful
of the widespread benefits which the Customs Service provides, I am
greatly discouraged that the fiscal year 1999 budget request does not
provide adequate funding for this program.
I have led a number of my colleagues in writing to Chairman Kolbe
and Ranking Member Hoyer (both members of the Congressional Missing and
Exploited Children's Caucus) to request proper funding.
I urge my colleagues to take this issue seriously and fund the $2
million necessary to help protect our children from victimization. Mr.
Chairman, I am sure you'll agree that this is a small price to pay to
reduce the exploitation of our children.
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, MAY 7, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:31 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell and Kohl.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of Administration
STATEMENT OF ADA LOUISE POSEY, DIRECTOR
ACCOMPANIED BY:
MARK LINDSAY, CHIEF OF STAFF AND GENERAL COUNSEL
LAURA CRABTREE, SENIOR TECHNICAL ADVISOR, INFORMATION
TECHNOLOGY MANAGEMENT TEAM
Opening Remarks
Senator Campbell. Good morning. The hearing on the Treasury
Subcommittee will be in session.
I would like to welcome Ada Posey this morning, the
Director of the Office of Administration, and thank you for
appearing today. I see you are joined by Ms. Crabtree and Mr.
Lindsay.
Finally, I would ask that any responses that we submit to
you in writing, you could get the answers back to us by the
21st of May, I would appreciate that.
I convened this hearing this morning for basically two
reasons. The first is to discuss the fiscal year 1999 budget
request of the Executive Office of the President, which
includes approximately 12 smaller agencies, including the
Office of Administration. The Executive Office of the
President's fiscal year 1999 request primarily focuses on
funding to maintain current levels, except for an increase
relating to the Office of Administration's computer technology
program.
The second reason I called this hearing is to provide the
members and the taxpayers with an opportunity to gain a better
understanding of the duties of the Executive Office of the
President and the work the White House attorneys are paid for
with appropriated funds. I know that you testified in the House
regarding this issue but I have had some questions from my own
colleagues here in the Senate and I, therefore, wanted to
provide the members with the opportunity to hear your testimony
again.
Throughout the course of this hearing, I want to address
the public concerns, part of them brought about by news-related
articles, about the issues of the President's legal defense,
both public and private. Many would agree that there needs to
be a bright line between the advice the legal staff must
provide as part of their responsibilities relating to the
office of the Presidency as an institution, and the personal
legal matters of a sitting President.
I believe that by working with the Executive Office of the
President we can address these concerns. I fully understand the
White House's needs for attorneys to provide legal assistance
to the President on all matters relating to legislation,
regulations, nominations, and inquiries of Congress. Yet still,
I believe that the public deserves some accountability and some
answers to questions of where that bright defining line is.
I hope today, Ms. Posey, you can shed some light on this
issue and provide a better understanding to the members of the
subcommittee.
As an example, I understand the current Department of
Justice rules, taxpayer funded attorneys cannot be used to
defend a President in personal civil lawsuits, but clearly if
these lawsuits prompt inquiries from Congress then those same
attorneys are obligated to respond to those inquiries. That is
the point I want to get to, where that defining line is, and
where the gray areas are.
With that, Senator Kohl, if you have an opening statement,
I would yield to you.
Statement of Senator Kohl
Senator Kohl. I will be brief, Mr. Chairman.
This hearing has been scheduled to explore the Executive
Office of the President's fiscal year 1999 budget request. One
outstanding issue is whether Federal funds provided by
taxpayers, are being used by the White House for official or
for private legal purposes.
The role of the White House Counsel's Office is to provide
legal representation to the White House employees in their
official capacity. The President, in his official role as
President, is their chief client.
However, the President must acquire private legal counsel
to deal with personal legal issues. I think everyone agrees
that the President cannot seek the advice of Federal employees
being paid Federal funds when responding to private and
personal legal issues.
Thank you, Mr. Chairman.
Senator Campbell. Ms. Posey, I understand you wanted to
testify, answer some questions, and then leave; is that
correct?
Ms. Posey. Yes.
Senator Campbell. Why don't you go ahead and proceed.
Statement of Ada Louise Posey
Ms. Posey. I do have an opening statement that is about 12
pages, but I will abbreviate that.
Senator Campbell. That will be fine. Without objection, we
will include your complete testimony in the record.
Ms. Posey. Thank you.
Good morning, Mr. Chairman, and Senator Kohl. It is an
honor to appear before you to present the fiscal year 1999
budget request for the nine Executive Office of the President
accounts. Joining me today is Mark Lindsay, our Chief of Staff
and General Counsel for the Office of Administration, and also
Laura Crabtree, who is our Senior Technical Advisor for the
Information Technology Management Team.
I am thankful that I have the opportunity to serve in the
EOP and to enable the EOP to face the challenge and seize the
opportunities presented to us by these ever-changing times
caused by daily advances in technology associated with the
information age. Such challenges remind me of my grandmother,
Mrs. Ada Berryman, who was recently recognized by this Congress
in the Congressional Record when the Honorable Louis Stokes
acknowledged her as the first African-American to be appointed
to the Ohio State Housing Board.
She was born in 1910 in Troy, AL. When she was young, her
family fled to Ohio to escape the segregation of the South.
Throughout her life she was faced with the dynamics of this
changing country and she sought to make a difference. She
challenged segregation. She challenged the political system.
And she challenged our society. As my grandmother led my family
into the industrial age, I now find myself in a position to
help lead the EOP into this dynamic information age.
Executive Office of the President Information Technology Infrastructure
The EOP must adapt to this radically changing world and
economy. The explosion in computer technology, especially the
rise of the Internet and e-mail, are transferring Government
and the way it responds to the American people. At the same
time, the new information technology poses new challenges from
the year 2000 problem, to the shear inundation of the Executive
Office of the President system, the EOP.
Frankly, our information technology infrastructure has not
been able to keep up with the ever-increasing demands of
change. As a result, our infrastructure has been unable to
support all of the information technology needs of the
President and his staff. While we maintain service in an
environment of ever-increasing needs, we must also meet the
challenge of the year 2000 problem and of fixing our
information technology so that the EOP survives and thrives in
the millennium.
Allegations of Improper Use of Legal Counsel by the EOP
Let me move on to the other question at hand. Before we
turn to questions about the rest of the budget, I would like to
briefly address the recent allegations that appropriated funds
are being used for the private legal defense of the President.
I can assure you that appropriated funds are not being used
for this or any other nonofficial purpose. As Charles Ruff,
Counsel to the President, made clear in his letters to this
subcommittee on March 19 and April 30, the White House
Counsel's Office represents the President in his official
capacity, and the Office of the President as an institution.
There is no personal work being performed by the lawyers in the
White House Counsel's Office or any office within the Executive
Office of the President.
EOP Budget Submission
Beyond that question and with regard to all of our budget
submissions today, the EOP will continue to maximize its
resources and implement cost savings and measures. Yet it is
also imperative that the EOP be adequately funded to provide
the quality of support required as we move into the next
millennium and necessary to support the increasing information
demands of the American people.
It is crucial that the EOP maintain and improve upon its
existing infrastructure and plan for future investments in
personnel and information technology now and into the future.
I thank you very much, Mr. Chairman, for allowing me to
share those opening statements.
Prepared Statement
Senator Campbell. Thank you, Ms. Posey. We have your
complete statement and it will be included in the hearing
record.
[The statement follows:]
Prepared Statement of Ada L. Posey
Good morning Mr. Chairman and members of the Subcommittee. It is an
honor to appear before you to present the fiscal year 1999 budget
request for the following nine Executive Office of the President (EOP)
accounts: Compensation of the President, the White House Office,
Special Assistance to the President, the Official Residence of the Vice
President, the Office of Administration, the Office of Policy
Development, the National Security Council, the Council of Economic
Advisers, and Unanticipated Needs.
I want to start by telling you why I am so thankful that I have the
opportunity to serve in the EOP, and to enable the EOP to face the
challenges and seize the opportunities presented to us by these ever
changing times caused by daily advances in technology associated with
the Information Age. Such challenges remind me of my grandmother, Mrs.
Ada Berryman, who was recently recognized by this Congress in the
Congressional Record when the Honorable Louis Stokes acknowledged her
as the first African-American to be appointed to the Ohio State Housing
Board in the 1940's. She was born in 1910 in Troy, Alabama. When she
was young, her family fled to Ohio to escape the segregation of the
South. She resided in Warren, Ohio for 45 years and is credited with
founding the Warren Chapter of the NAACP, as well as serving as
president of the Warren Urban League Board, and as member of the
Trumbull County Welfare Board. Throughout her life, she was faced by
the dynamics of this changing country and she sought to make a
difference. She challenged segregation, she challenged the political
system, and she challenged our society.
And as my grandmother led my family into the Industrial Age, I now
find myself in a position to help lead the EOP into this dynamic
Information Age. The EOP must adapt to this radically changing world
and economy. The explosion in computer technology--especially the rise
of the Internet and e-mail--are transforming government and the way it
responds to the American people. As the seat of executive authority,
the White House is in a position to use the new information technology
to involve the American people in their government, in real time, in a
way that was never possible before. At the same time, the new
information technology poses new challenges--from the ``Year 2000''
problem to the sheer inundation of the EOP system.
In all of 1993, the President received 68,784 e-mail messages--this
January alone, he received nearly 100,000 (99,256). The number of hits
to our website is increasing exponentially. Before June 1996, we
received an average of 1,500 hits per day--we are now up to an average
of 8,787 hits per day. In 1994, the number of records captured by our
Automatic Records Management System (ARMS) was 1.7 million--in 1997, it
was 4.1 million, and we estimate that by the year 2000, we can expect
to be managing 30 million records in ARMS, consuming 210 GB of storage
space.
And while we have witnessed these exponential increases, our
information technology infrastructure has not been able to keep up with
the ever increasing demands of change. As a result, our infrastructure
has been unable to support all of the information technology needs of
the President and his staff. Already, we are experiencing systems
failures and crashes due to the dramatic increases in e-mail traffic.
While we maintain services in an environment of ever increasing needs,
we must also meet the challenge of the Year 2000 (Y2K) problem, and of
fixing our information technology so that the EOP survives and thrives
in the Millennium.
In order to provide the EOP with the tools necessary to most
effectively represent the American public, I now present you with the
EOP's budget for fiscal year 1999. The total for the nine accounts is
$112.494 million. Since the most significant increase is related to the
EOP's $12.2 million Capital Investment Plan, which is critical toward
taking the EOP into the next century, I will address this first. In
order to understand where we are going, however, it is necessary to
understand where we are, and where we have been.
The Office of Administration has engaged in a methodical plan to
revitalize its information technology, a plan begun by my predecessor,
Frank Reeder, when he formed the EOP's Information Technology Advisory
Board (ITAB) in 1995, and began immediately to develop a five-year
plan--internally and without the benefit of outside consultants or
additional resources. Mr. Reeder then submitted the Office of
Administration's first ever Five Year Information Technology Plan to
Congress in September of 1996.
In fiscal year 1997, however, we endured a level of hardship
imposed through the fencing of our funds from which we are still
recovering. In hindsight, we appreciate the concern and oversight of
the Chairman and this Subcommittee, which led us to create a more
detailed EOP Information Technology Architecture (ITA) and to form an
Information Technology Management Team (ITMT). Prior to the events of
fiscal year 1997, each EOP agency acted independently in procuring
information technology with not enough regard to redundancy,
interchangeability or support requirements--and an inadequate overall,
common, EOP vision. We now understand the importance of working
together, and the ramifications to our infrastructure when we do not.
With the rapid advancement of information technology in the past
twenty (20) years spanning several administrations, EOP agencies were
independently constructing custom, redundant, inconsistent,
incompatible, and inaccessible systems. The result is the EOP's current
infrastructure--heterogeneous, diverse and difficult to maintain. For
example, applications have been developed to run under six different
operating systems on a dozen hardware platforms using few Computer
Aided Software Engineering tools or automated configuration management
tools. The current set of applications software is difficult to
maintain, and requires technology skills that are often difficult to
keep on staff. More importantly, in an effort to sustain these diverse
applications, we have devoted most of our resources to maintaining the
status quo rather than infusing new technologies.
I am pleased to report, however, that on July 18, 1997, the Office
of Administration submitted to Congress the Logicon Information
Technology Architecture Plan, a document that built upon the Five Year
Information Technology Plan of September 1996. The Logicon Plan set
forth a vision and framework to guide the EOP's information technology
investments for the next five years. In its plan, Logicon observed that
``[w]e believe that the EOP is caught in a double bind--it has too many
legacy systems that cannot be shut down without a functional
replacement; and it does not have the budget to maintain the status quo
in the face of escalating maintenance support costs while attempting to
accomplish strategic improvements.''
In an effort to keep up with technological changes, improve the
quality of services and ensure cooperation concerning information
technology management within the EOP, we also established the EOP
Information Technology Management Team (ITMT), as the successor to the
Information Technology Management Board (ITAB).
The ITMT is comprised of representatives from each of the EOP
agencies. Members of the ITMT include an executive board comprised of
EOP agency heads and their representatives in addition to several
advisors. This management structure was established with the goals of:
--Identifying the functional requirements for information systems
throughout the EOP;
--Ensuring that adequate integrated computer systems are in place
throughout the EOP to meet ongoing and future workload
requirements;
--Ensuring appropriate exchange of information technology among EOP
agencies so that experiences and standards can be effectively
shared;
--Reviewing and recommending funding for information technology
initiatives that are common to all EOP agencies; and
--Ensuring a strong customer service focus for information technology
delivery.
The ITMT's mandate is to advise the Director of the Office of
Administration and other EOP agency heads on common information
technology matters.
Over the course of the last twelve months, I believe we have made
significant progress. While we have been performing necessary repairs
and sustaining outdated, and obsolete systems, we no longer simply seek
to maintain the status quo.
Recognizing the past lack of vision with regard to information
technology and in order to stabilize our IS&T Division, we have added
to our leadership a new Deputy Director for IS&T and a new Associate
Director for IS&T, both of whom bring to the EOP significant experience
from the private sector in implementing systems architectures. In
addition, we have awarded a contract to Northrop Grumman as our new
facilities contractor for information technology management and
services, replacing the incumbent of over twenty years. We are
confident that, with their Software Engineering Institute (SEI) level-
three certification and business processes reengineering methodology,
Northrop Grumman will be an invaluable asset to the EOP.
With our new information technology leadership, we have built upon
the EOP's Y2K strategy identified in the Logicon report, and have
selected the highly-respected Northrop Grumman/James Martin team to
complete the assessment of our Y2K exposure so that we can renovate and
test all of the EOP's custom applications and legacy systems. We have
developed an EOP-wide Y2K Newsletter in order to educate our customers
on the Y2K problem, and have engaged the ITMT to actively participate
in developing and implementing the EOP's Y2K strategy. Already, they
have identified their critical systems, and have agreed on the criteria
to be used in prioritizing EOP systems for renovations. As such, the
ITMT will continue to play a pivotal role in determining what systems
will be renovated/replaced and in what sequence based on priority.
On February 20, 1998, with the full concurrence of the ITMT, we
delivered a refined ITA to Congress that represents a continuation of
the information technology dialogue that we have had with the
Subcommittee since 1996. We have been encouraged by the active interest
the Subcommittee has shown in the evolution of this matter. In
combination with our budget, this ITA contains a milestone schedule for
the development and implementation of all projects included in the
systems architecture plan, an estimate of the funds required to support
the fiscal year 1999 capital investments associated with the plan, and
describes an overall strategy and priority setting system for
activities. Furthermore, the initiatives outlined in the plan identify
the functional requirements for information systems throughout the EOP,
and ensure that adequate integrated computer systems will be in place
throughout the EOP to meet ongoing and future workload requirements.
OA's fiscal year 1999 $12.2 million dollar Capital Investment Plan
(CIP) represents a significant step in our efforts to address the
perils of the Year 2000 problem and update our information technology
infrastructure. It is essential that the EOP continue to develop
improved strategies to address our information technology needs. Our
architecture supports our plan to spend about $1.2 million in fiscal
year 1998 to continue to resolve our Year 2000 problems. In addition,
of the $12.2 million requested for fiscal year 1999 in the CIP, over 90
percent is earmarked for the Year 2000 effort. Despite the fact that
the majority of the CIP will be consumed by resolving Year 2000
problems, our ITA promotes significant performance upgrades to our
systems. Our ``two for one'' strategy is an efficient means of
transforming the Year 2000 problem into our Year 2000 opportunity.
Therefore, our ITA design for the future not only addresses the Year
2000 problem, but also uses this situation as the opportunity to
upgrade our system in such a way as to make the EOP more responsive to
the growing technological demands of the American people.
The improvements that will result with the infusion of the fiscal
year 1999 CIP represent a major step forward in bringing the EOP closer
to current government standards. This is not ``Whiz-Bang'' stuff. What
we are doing, we must do in order to maintain basic services and cost
effective operations. Examples of how this change will manifest itself
can be found in the following examples:
Improved Information Access.--System upgrades contemplated in this
new architecture would significantly stabilize and enhance the EOP's
ability to readily disseminate and store vast amounts of information.
Enhancements in Internet access, in addition to significant
improvements in Intranet technology, will allow EOP computer users to
conduct research, communicate with colleagues, or present information
to the world.
Help Desk: Virtual Desktop.--With advances in technology there will
always be a need to enhance our help capabilities. With virtual desktop
access to users' computers, our skilled technicians will be able to
investigate, evaluate and repair user problems remotely. This will
increase the efficiency of our technicians and provide our users with
the immediate attention they deserve.
Stabilized Network Integrity.--Our overall network integrity would
be stabilized and enhanced by the implementation of a new network
tracking system. This system would allow us to maintain higher levels
of EOP network activity and permit us to upgrade our systems less
expensively and with less disruption to our end users. This would
result in fewer network failures, and the maintenance of a more stable
system design.
Strengthened Continuity.--In addition, the new information
technology architecture contemplated in the CIP would allow the EOP to
maintain a more homogeneous array of computer systems. This acquisition
of more similar equipment diminishes maintenance costs, improves system
compatibility and helps improve the overall vitality of the EOP
computer network.
A More Secure Computer Network.--With the acquisition of upgraded
Year 2000 compliant computer security systems we will be able to
greatly enhance the security integrity of our EOP network. Not only
will the new systems make our network less susceptible to external
intruders, and internal intruders, it will also help automate our
efforts and the United States Secret Service's efforts to track down
anyone who may attempt to violate our systems.
I believe that it is incumbent on us to seize the opportunity the
Year 2000 problem presents by ensuring that we continue to improve the
quality of information technology services we provide the entire EOP.
Before I turn to the remaining EOP budgets for fiscal year 1999, I
would briefly like to address recent allegations that appropriated
funds are being used for the private legal defense of the President. I
can assure you that appropriated funds are not being used for this or
any other non-official purpose. As Charles Ruff, Counsel to the
President, made clear in his letters to this Subcommittee on March 19,
1998 and April 30, 1998, the White House Counsel's Office represents
the President in his official capacity and the Office of the President
as an institution. There is no personal work being performed by the
lawyers in the White House Counsel's Office or any office within the
Executive Office of the President.
With regard to the remaining budgets, we are requesting an average
increase of only 3.17 percent. In developing these budgets, we adhered
to the following parameters. First, to align our budget submission with
actual expense history and demonstrated need. Second, to include an
estimated 3.1 percent increase to cover locality and pay adjustments
for the EOP's many General Schedule employees effective 1/1/99. Third,
to include a 3 percent increase to cover increases in GSA rents
anticipated in fiscal year 1999. Fourth, to cover the EOP's balloon
payment required by our telephone switch contract in fiscal year 1999.
And fifth, and finally, to request funding for overtime and
compensatory time mandated by the Fair Labor Standards Act, and
applicable to the EOP effective October 1, 1998 pursuant to the
Presidential Executive Office Accountability Act (PEOAA).
Operating within austere budgets over the years has been
challenging. During the past five years, the EOP has met this challenge
by identifying cost saving measures, shifting resources, and deferring
or delaying purchases. Inflationary cost increases and mandated pay
raises for the EOP's many General Schedule employees were absorbed in
the past. Agencies whose staffs are mostly or entirely in
administratively determined positions, such as the White House Office,
Vice President's Office, and Office of Policy Development, held salary
levels nearly static, delayed implementing hiring decisions, and
brought in new hires at lower levels.
The EOP will continue to maximize its resources and implement cost
saving measures. Yet, it is also imperative that the EOP be adequately
funded to provide the quality of support required as we move into the
next millennium, and necessary to support the increasing information
demands of the American people. It is crucial that the EOP maintain and
improve upon its existing infrastructure, and plan for future
investments in personnel and information technology, now and into the
millennium.
Office of Administration Capital Investments
Senator Campbell. Let us start with the technology part,
first.
Your fiscal year 1999 budget request includes $12.2 million
for a capital investment program. Can you provide some
nontechnical layman's description, please, of that request and
the problems you are hoping to address with that increase in
money?
Ms. Posey. I certainly can. Again, I have brought along
Laura Crabtree, who is a technical person but has a wonderful
way of breaking down technical things into layman's terms for
me and everybody else.
But first, let me say, Mr. Chairman, that the $12.2 million
request, 90 percent of that is going to be utilized for fixing
our year 2000 difficulties within the EOP. The rest of the
moneys we hope to utilize to infuse new technologies within the
Executive Office of the President.
We are woefully behind the eight ball when it comes to our
infrastructure. We are operating with six software operating
systems, 10 hardware platforms, and it is very difficult for us
to use the technologies of today to have a stable environment
and a stable network. And this has happened over a period of 20
years. We have never had an information technology architecture
that allows us to have the type of discipline to infuse new
technologies within the EOP.
This $12.2 million means that we are getting our act in
order and we are setting the Executive Office of the President
straight in terms of preparing for the future. These are basic,
basic things that we are doing, and Laura might want to speak
to some of the types of projects that we are working on.
Senator Campbell. Does this increase include basically
hardware, or is this also a manpower increase?
Ms. Posey. This is hardware, this is software, and this is
manpower in terms of contract support to do the renovation and
the testing and the validation of our year 2K difficulties.
Senator Campbell. Did you want to add something to that,
Ms. Crabtree?
Ms. Crabtree. Certainly. Thank you.
To add some level of specificity to what is included in the
$12.2 million, there are significant projects that we are
embarking on in order to meet a twofold objective that we have
set out for ourselves. The first, and most important, is the
fact that we must meet our Y2K initiatives and resolve the
problems that are associated with the year 2000 issue.
In addition to that, as Ms. Posey mentioned, we are
focusing as well on those projects that not only will benefit
our Y2K initiative, but will also bring us the basic
foundational improvements within our infrastructure that are
necessary to be able to start to build the house upon which we
will add additional technologies of the future.
Specific projects within that $12.2 million include, as Ms.
Posey mentioned, hardware and software. Specifically, there are
funds set aside for software in particular because current
software applications that are running across our heterogeneous
network environment, our environment that has multiple
different platforms talking multiple different protocols. And
in that environment, those software items are not Y2K
compliant. Nor are they current products that are supported by
industry.
So as a result, items such as our word processing software
need to be replaced because it is not Y2K compliant, nor does
the vendor of the product anticipate future support of the item
itself. So that is included as part of the software upgrade, to
give you some sense of what those items are.
In addition to that, we have a help desk renovation project
included within those funds. The reason being is because our
current help desk system which is essentially the lifeblood of
how we get our customer focus into our IT environment. In other
words if someone has a problem, they need help, they call our
help desk and we dispatch and/or repair the problem over the
phone with the user.
The system that we use to accomplish this, not only the
interactions with the user, the recording of the problem, the
resolution of the problem, that software is not Y2K compliant.
In addition to it not being Y2K compliant, it is a legacy
application that was developed in-house back around circa 1983,
using the mainframe technology of the time which is no longer
being supported by industry.
So we are faced with not only the challenge to become Y2K
compliant, but also placing into order the necessary projects
that will provide us the foundation to start to add additional
technology improvements over the next 5 years within the EOP.
EOP Information Technology Planning and Coordination
Senator Campbell. You know, I am not a real high-technology
person, but I have to tell you, your testimony sounds quite
similar to the IRS testimony and problems they are having with
their technology. Something escapes me on this, when we
purchase all this equipment that apparently does not talk to
each other very well. I will not get into that, because I will
get lost.
There are approximately 12 different smaller agencies under
the White House. How do you manage that wide variety of
computer needs while trying to streamline it functionally and
keep up with the workload?
Ms. Posey. That is a good question. Now what we have done,
Senator Campbell, is we have formulated the information
technology management team. This actually was formally
formulated in September 1997. This structure, this management
structure is the first in the history of the Executive Office
of the President, where we have representatives of each of the
agencies, heads of the agencies, who formulate an executive
board. This executive board is responsible for making decisions
based on business functions, information technology needs for
the entirety of the EOP.
That, frankly Senator Campbell, was a problem in years past
in the EOP because we had independent decisions being made in
all of the different agencies about the types of technologies
that they would be using. So we have ended up with the kind of
system and infrastructure that we have today that we need to
fix and put together.
Senator Campbell. So then you had some overlapping
functions or duplications with different systems?
Ms. Posey. Actually, not anymore. What we have always had,
Senator Campbell, is an e-mail system where everybody was
connected to that particular system and there was common
support provided by the Office of Administration for common
software, like word processing, like spread sheets. But in
terms of unique applications, that say, for example, OMB might
use, or the Council of Economic Advisors might use, they have
their own unique applications and work, of course.
But we did not necessarily make sure that the software and
the hardware that they were bringing onto the campus linked
smoothly with the entire network and the infrastructure. That
is what makes things so difficult. And of course, we are not
the only Federal agency that has experienced this problem. But
it makes it actually more dynamic when you have separate
functions that are so unique in each of the particular
agencies.
Senator Campbell. In some of your programs you are dealing
with, are they receiving funding in your 1999 request?
Ms. Posey. Excuse me?
Senator Campbell. Some of the functions that seem to be
duplicated, and I am not sure that is the right word or not,
are they receiving funding in your 1999 request?
Ms. Posey. There are information technology requests in
other budgets, but those are specifically for the replacement
of their own software and hardware that is unique to them
within their agencies. There is a replacement program for
computers, PC's and other peripherals that the agencies are
responsible for themselves. So that is what those dollars are
dedicated to in their own particular budgets.
Activities of EOP Legal Counsel
Senator Campbell. Let us get into some questions about
these attorneys. I have read all kinds of different numbers, as
you probably have, in local newspapers, from 49 or 89 or
something, counting their support staff. I have heard some
numbers going up to 100. But I have never found any absolute
proof of that, but that is what I read in the paper, for
whatever that is worth.
Of the 20 detailed attorneys, are they provided to the
Executive Office of the White House Counsel's Office? Is this
done on a reimbursable basis? These are the 20 that I am
referring to, who are outlined in Mr. Ruff's letter sent to me
on March 19.
Ms. Posey. Let me share with you the numbers. There are 34
regular staff within the White House Counsel's Office at this
point. There are 15 detailees as of the date, Mr. Chairman,
that Mr. Ruff provided you with that information.
The 15 detailees do two things. First, to help with the
judicial nominations, vetting of those judicial nominations,
and also vetting and review of Presidential appointees. That is
what they do. They usually are there for a 3- to 6-month period
and they are not reimbursable at the time. Their agency is
providing that assistance to the White House Office, but they
do go back to their agencies after their assignment is
finished.
Senator Campbell. We have had requests for additional money
for different agencies for attorneys. Let me ask you this, if
agency attorneys are hired to perform a mission in the
Department of the Interior, Department of Agriculture, or
whatever, they are hired to perform a duty. I do not suppose
they hire them to sit around and stare at the wall.
They are hired to perform some kind of a mission and then
they are detailed somewhere else like to the White House. Who
is doing the job that they were hired to do?
Ms. Posey. That is a very good question, Mr. Chairman. We
have found, as other administrations have found, and it has
been traditional, that detailees come from other offices, other
agencies, to the White House for the specific role of vetting
and reviewing nominations and appointments because it is in the
agency's best interest to be involved with the process.
In fact, it is their appointees, in fact, that are being
reviewed and vetted through this process at the White House
Office. We find that the way we do this is effective and
efficient and it provides a value added, not only for the White
House but is a value added for the rest of the agencies.
These terms of their assignments, again, are 3 to 6 months.
Senator Campbell. When they are originally hired, is there
anything in the job description determining that they may be on
loan to other agencies and that they might not be performing
whatever it is they are hired for?
Ms. Posey. Again, Mr. Chairman, I would say to you that
this is a practice that happens throughout the Federal
Government frequently. Again, it is important that we utilize
the skill, the expertise of other Federal agencies, that we
might want to have in vetting and reviewing these nominees for
appointments.
Senator Campbell. Who pays their salaries when they come
from Justice or another agency? Are they kept on the budget of
Justice or is there some offset compensation by the White House
budget?
Ms. Posey. No; if they are there for less than 180 days,
their salaries are paid by their home agencies. If they are
there for longer than 180 days, then they become a reimbursable
employee and the White House is responsible for paying their
salaries.
Senator Campbell. How do you handle it, if they are
assigned to the White House, when they are doing some screening
as you said, perhaps for nominees or something, how do you
handle a potential conflict of interest?
Ms. Posey. What we do is we do not have specifically, say
for the Department of the Interior, we do not have Department
of the Interior detailees working on appointments and
nominations for the Department of the Interior. We would have
another detailee working on the Department of the Interior.
Just to make sure that the process is fair and equitable and
that we, again, bring in the expertise of a wide variety of
detailees.
Senator Campbell. Maybe I used the wrong, maybe the nominee
is not the example I would have used. Do they work on anything,
when they are detailed to the White House, do they work on
anything that could be construed as a conflict of interest with
the agency they came from?
Ms. Posey. No, certainly the counsel, the White House
Counsel and the Deputy Counsel would make sure that that did
not happen.
Senator Campbell. You said that there are 15 there now?
Ms. Posey. There are 15 there now, as of April 20.
Senator Campbell. Their salaries are in what range?
Ms. Posey. Their salaries are in the ranges, I believe that
that is a question that might have come up and been provided in
our questions for the record to the House. I would not want to
yell out the specifics, Mr. Chairman, but I can find those for
you.
Senator Campbell. If you could provide that, but they must
be in the $80,000 range or something. Attorneys do not come
free.
Ms. Posey. Thereabouts.
Senator Campbell. So we are talking about well over $1
million a year for just their salaries that their agencies have
to pick up while they are detailed to the White House.
Ms. Posey. There are also cost figures in here, with regard
to the cost of detailees from year to year for White House
Counsel's Office, and we can point that out and provide
specific information on that.
Senator Campbell. When they are detailed to the White
House, are they supervised in any way at all from their agency,
or are they just totally separate from the agency and
supervised totally by the White House?
Ms. Posey. No; there is permanent regular staff that
supervises the process of judicial nominations and Presidential
appointments. We have approximately three or four people on
staff who are regular staff people who actually supervise that
process with the detailees.
Senator Campbell. How do you pick them? How do you choose
them?
Ms. Posey. I do not know the answer to that question, Mr.
Chairman, but I certainly can----
Senator Campbell. When the White House wants the attorneys
transferred, do they ask for a certain type or a person with
certain skills? Or do they just get whoever they happen to send
over from the agencies?
Ms. Posey. I would be sure that they would ask for people
who have a specific expertise and skill and experience in
looking at potential nominees and appointees. I am sure that
that is what Charles Ruff looks for, because we do not want to
reinvent the process. We want the process to be, again,
efficient. So that is why we bring on these people who have
that kind of expertise previously.
Senator Campbell. While they are gone, you may not be able
to answer it, but who is doing their job? Who picks up their
responsibilities in the 6 months they are at the White House?
Ms. Posey. I would not be able to answer that question, but
certainly if--again, this is a benefit, Mr. Ruff believes, both
to the agency and to the White House. There is experience that
is garnered from that particular detailee joining the White
House for that 3- to 6-month period. And I think, just as I
would send my staff to training and development type of
exercise or experience, there is a benefit to the agency when
they get back.
Senator Campbell. Let us say the President gets sued in a
civil lawsuit and you have all these detailees over there
working. And because of the civil lawsuit the Congress asks
questions that they would like some answers for. How and who
determines what those detailees will be able to do, where the
fine line is about what they can provide in working with
private attorneys that would be working on a civil lawsuit for
the President?
Ms. Posey. Well, detailees do not work on any investigative
matter at all, Mr. Chairman.
Senator Campbell. Then how do they know if somebody from
the Hill here asks some questions? How do they know what to
answer?
Ms. Posey. Again, the detailees would not be working on any
investigative matters. They are aside from----
Senator Campbell. They would not work on investigative
matters so they would not have any knowledge of it. How do they
answer any questions that would come from the Senate or the
House relating to it?
Ms. Posey. They would not be asking or answering any of
those questions. It would be the regular staff of the White
House Counsel.
Senator Campbell. That would still, even if it is the
regular staff of the White House, those are still taxpayer paid
jobs.
Ms. Posey. Yes.
Senator Campbell. Where is the defining line between the
regular staff attorneys, of what they can get involved in with
answering legitimate questions from Congress, and yet not cross
over the line in coordinating or working with the lawyers who
are dealing with a civil lawsuit?
Ms. Posey. Certainly the question came up in the House and
has been a question that has come up before. I would refer to
our questions for the record, our responses, that we provided
to the Subcommittee for Treasury and Postal Service for the
House.
There is an official nexus between the Independent Counsel
investigations, the congressional investigations, because
congressional inquiries, subpoenas, are asking for records of
the White House Office, and it is the responsibility of the
White House Counsel not only to coordinate that particular
process of gathering those documents but it is their strong
role to make sure that all of the documents are responsive,
that they review the documents, and that is basically their
role.
Senator Campbell. In that role of coordinating, does that
mean that they are then working with the private attorneys who
would be involved in the civil suit?
Ms. Posey. It is clear, again, let me read from the
questions for the record because I think that Mr. Ruff actually
responded quite succinctly and quite deliberately to that
particular question.
There have been, as we well know, allegations where a
matter focused on the alleged conduct of the President during
his tenure in office with respect to a White House employee.
The Independent Counsel has served the White House with
subpoenas calling for the production of documents, has made
informal requests for information, and has interviewed or
acquired the testimony of some 40 current and former White
House employees.
The Counsel's Office is responsible for responding on
behalf of the White House to these demands, for assisting the
White House personnel in responding to the OIC, and for
determining whether or not the testimony sought from these
personnel may implicate confidentiality concerns.
Beyond those duties, the Counsel's Office is responsible
for responding and assisting other senior White House staff to
respond to the avalanche of press inquiries that flow from the
OIC's investigations every day, including determining whether a
response is appropriate and, if so, in what form and collecting
the information necessary to respond.
So bottomline, there is an official nexus connection or
link between the Independent Counsel's investigation and the
constitutional, statutory, and ceremonial responsibilities of
the President and the Office of the President. It is obvious
and undeniable.
Senator Campbell. I just want you to know that I am not
trying to focus on conduct of anybody, including the President.
I am trying to focus on the cost to the taxpayers.
Ms. Posey. I understand that.
Senator Campbell. From my own perspective, I am sick to
death of reading the newspapers every morning about conduct.
Let me just ask you one last question and I will turn it
over to Senator Kohl.
Since the Justice Department now has a rule that you cannot
use taxpayer-funded money for attorneys for private suits, I
have to paraphrase that because I do not have it right in front
of me, would you have a problem with putting that in statute
since it is already in rule? And I guess then complied with,
hopefully?
Ms. Posey. I think that that would be a question that I
would refer to White House Counsel staff to respond to that,
Senator Campbell. Basically, that is something that they should
respond to I would be glad to take that back.
Senator Campbell. Thank you. Senator Kohl.
Senator Kohl. Thank you, Senator Campbell.
Senator Campbell. I apologize, too. I am just told that we
will have a vote pretty soon, so you should get in as much as
you can.
GSA Fire, Life, and Safety Repairs and Renovations of the Old Executive
Office Building
Senator Kohl. I will be brief.
Ms. Posey, your office manages the Executive Office of the
President's office space and you act as the principal liaison
with the GSA on facility repairs and restoration. We understand
that the GSA is requesting over $25 million in fiscal year 1999
budget for repairs to the Old Executive Office Building. Can
you tell us what will be done with these funds?
Ms. Posey. These funds are to be used for fire/life/safety
projects within the Old Executive Office Building. When I talk
about fire/life/safety, we are talking about basically the
elevators being accessible, the stairs being accessible, and
also the restrooms being accessible, too. It is the
responsibility of GSA to make sure whenever they undergo any
kind of renovation or modification of a building, upkeep, that
they make sure that ADA and OSHA requirements are taken care of
as they move along, as you well know.
We feel very strongly that the Executive Office of the
President, particularly the Old Executive Office Building,
needs to be a model, an example, of keeping up with ADA and
OSHA requirements. We have a responsibility, through the
Presidential Executive Office Accountability Act, to make sure
that those things are done within the White House complex.
Senator Kohl. Is a full systems modernization plan being
designed by the GSA for this building?
Ms. Posey. Actually, the modernization plan for the Old
Executive Office Building is probably going to be, as I
understand from GSA folks, a step-by-step process because the
entirety of the modernization for the Old Executive Office
Building, of course, which was built in 1870-something, needs a
lot of work. There are tens of millions of dollars that need to
be done to that building.
I am sure Senator Kohl, if you have an opportunity, or Mr.
Chairman, if you have an opportunity to come over to the Old
Executive Office Building, you will see some wiring and cabling
that might be a little bit disturbing. It is a beautiful
building but, of course, it does not have the type of
accommodations that we need to have today for ADA or even
wiring or cabling.
That is something that GSA has decided to bite off segment
by segment. Otherwise, we would be looking at actually
replacing quite a few people in the Old Executive Office
Building for several years.
Senator Kohl. Will this $25 million request result in the
building being in full compliance with health and safety codes?
Ms. Posey. It is getting closer to full compliance but not
complete full compliance.
Senator Kohl. Will this be, when you finish with this
modernization program, this $25 million program, will the
building then be in full compliance with health and safety
codes?
Ms. Posey. Again, I would say it would be closer. It would
not be in complete compliance. There are other things that need
to be done, Senator Kohl, throughout the Old Executive Office
Building, but it is a matter of taking care of fire/life and
safety, ADA, and OSHA issues first, the primary priority
projects first.
White House Communications Agency Agreement With the White House
Senator Kohl. Ms. Posey, can you explain the services
provided under the memorandum of understanding between the
White House Communications Agency and the White House Office?
Ms. Posey. Yes, Senator; the White House Communications
Agency provides audiovisual services for the President
principally, and for the Vice President when they have an
opportunity. Those are things like lighting and microphones at
official events. They provide stenographic services and they
also provide all kinds of things, even the podium that they
call the Blue Goose, for the President when he goes to official
events and speaks at official events.
Senator Kohl. What are the costs associated with these
services?
Ms. Posey. In the White House budget for fiscal year 1999
we are looking at $10.1 million for those particular services.
Of course, this is when the President travels, not only in this
country but outside of this country. The Africa trip was very,
very interesting in that I understand in Uganda the White House
Communications Agency was required to actually build an
infrastructure for communication there.
Now that is communication costs, which is something that is
picked up by DOD. But the complexity of providing these types
of equipment, audiovisual equipment for historical purposes,
gets pretty harried sometimes when you go to countries that do
not have the type of infrastructure and sophistication that
other countries do.
Senator Kohl. Last question. What is the bill payment
procedure between the White House and the White House
Communications Agency?
Ms. Posey. On a monthly basis, the White House
Communications Agency provides to the White House Office a
specific bill that lists expenses category by category from
audiovisual equipment, film, tape, whatever that is used. The
White House goes over those to verify and validate the bills,
and then it is prepared for reimbursement to WHCA, as we call
it.
In other situations, billings are presented to the White
House Office and other EOP agencies on a quarterly basis.
Because this is the first time that WHCA has--we are providing
for these audiovisual services within the White House budget,
as opposed to DOD, it was very important for us to place very
strong management controls, in terms of billing and costs,
within what we did. We need to make sure that all the
procedures are followed with regard to billing and
reimbursement. One of those things is to make sure that we have
a monthly billing process, a monthly review process.
Senator Kohl. Good. Thank you. Thank you, Mr. Chairman.
Submitted Questions
Senator Campbell. I thank you, Ms. Posey, and your
colleagues for appearing this morning. We will submit
additional questions to be answered for the record. We have a
vote on now so, with that, we will recess for 10 minutes and
then take Mr. Gray's testimony. Thank you.
[A brief recess was taken.]
[The following questions were not asked at the hearing, but
were submitted to the Office for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
logistics of private versus public legal activity
Question. Does the White House have any role in determining whether
or not a legal issue is private or public in nature?
Answer. The vast majority of matters coming to the Office of White
House Counsel are, on their face, purely official--e.g., legislation,
ethics, legal policy, pardons, etc. As particular matters arise on
which the advice of the White House Counsel's office is sought and
which may relate to private, rather than official, responsibilities,
Counsel to the President and the Deputy Counsels are responsible for
determining whether the advice relates to the official functions of the
person requesting it and can, therefore, appropriately be provided by
the Counsel's Office. If the matter is personal, in whole or in part,
Counsel's Office will so advise the person making the request and
suggest that he or she retain private counsel to deal with any personal
issues.
Question. Can you tell us what the specific legal nexus is for the
White House lawyers to be handling anything related to Ken Starr's
investigation, which is private in nature?
Answer. The allegations in the Lewinsky matter focused on the
alleged conduct of the President during his tenure in office with
respect to a White House employee. The Independent Counsel served the
White House with subpoenas for the production of documents, made
informal requests for information, and interviewed or required the
testimony of more than 40 current and former White House employees. The
Counsel's Office has been responsible for responding, on behalf of the
White House, to these demands, for assisting White House personnel in
responding to the OIC, and for determining whether the testimony sought
from these personnel may implicate confidentiality concerns.
The Counsel's Office has also been responsible for responding, and
assisting other senior White House staff to respond to the many press
inquiries that flowed from the OIC's investigation every day, including
determining whether a response is appropriate and, if so, in what form,
and collecting the information necessary to respond. Similarly,
Counsel's Office has been responsible for advising and assisting the
President in his dealings with the press on these issues. In these
settings, and others relating to the operation of the Office of the
President, it is the responsibility of the Counsel's Office to advise
both the senior staff and the President, concerning the status of the
investigation and any expected developments, and to help ensure that
the President continues to be able to perform his duties effectively.
Further, as is evident from the recent judicial decisions and
pleadings, Counsel's Office must advise the President concerning issues
relating to potential claims of governmental attorney-client and
executive privileges, including litigation arising out of those claims.
Question. It is my understanding that, according to the Counsel's
office, there is only a small part of the staff devoted to issues
relating to investigations, therefore, can you tell me their specific
tasks and will you provide the subcommittee the supporting
documentation?
Answer. During 1997 and most of 1998, the Counsel's Office staff
has been devoted to issues relating to investigations is headed by
Special Counsel Lanny Breuer and has consisted of six (6) other lawyers
and three (3) paralegals. The lawyers are generally responsible for
responding to subpoenas and requests for documents and information from
congressional committees, various independent counsels, and the
Department of Justice, as well as from private parties who are in
litigation against the White House. The paralegals assist the lawyers
by conducting the necessary document searches, organizing and numbering
the documents and preparing them for production, and otherwise
gathering information for use in responding to requests.
Typically, each lawyer is responsible for a particular matter or
set of matters, encompassing dealings with particular investigating
entities or, in the case of a more broad-ranging congressional
investigation, particular subjects covered by that investigation. There
are, however, frequently situations in which lawyers are assigned to
other matters as the need for additional resources arises--e.g., new
document searches that require expedited response. Under the
supervision of Mr. Breuer, the lawyer generally has responsibility for
communicating with the staff of the investigating entity, organizing
the search for documents or the compilation of information requested by
that entity, and producing the documents. The lawyer is also
responsible for identifying issues of privilege or other legal issues
that arise out of a request for information and for consulting with Mr.
Breuer and with Mr. Ruff or Ms. Mills to determine whether a claim of
privilege or some other legal action is appropriate.
There is no formal documentation assigning these tasks to
individual lawyers other than the routine correspondence between the
investigating entity and a particular lawyer on the subject of the
assignment or internal memoranda to and from lawyers reflecting
substantive discussion of, and advice concerning, issues related to the
assignment.
Question. Is there a specific procedure in place, which all
affected parties are fully aware of, which takes you through a step-by-
step procedure for relaying a private legal matter to the President's
private attorneys outside the White House?
Answer. As indicated in the response to the first question,
responsibility for identifying matters that are personal in nature and
should be referred to private counsel rests with the Counsel and Deputy
Counsels. No formal procedure is required for such referrals beyond
informing the individual seeking advice, or his or her private counsel,
that the Counsel's Office will not be able to provide assistance in the
matter.
education of staff
Question. Is there an employee handbook, which explains to staff
the Office of Government Ethics' and other government regulations which
spell out the ethical standards of official time and that official work
only, not personal or non-official work, may be conducted on the clock?
Answer. Human Resources provides the Executive Office of the
President employees with a copy of the Standards of Ethical Conduct for
Executive Branch Employees when they arrive. In addition, the White
House has a staff manual which also addresses the ethical obligations
of federal employees.
Question. If there is a handbook, does it provide specific
guidelines for how an employee is to handle the incoming information or
inquiry if it is personal in nature?
Answer. The Standards of Conduct provide guidance regarding
employees' obligations regarding the performance of official, as
opposed to non-official, activities.
Question. Is there additional training or seminars that the
Executive Office of the President and White House Counsel's office
conduct in order to educate the staff on these matters?
Answer. Yes. The Counsel's office conducts annual ethics training
for White House employees as well as providing additional ethics
briefings in response to requests from the various White House offices.
year 2000
Question. How far along is the White House with making its
computers Year 2000 compliant?
Answer. The status of our Year 2000 effort is as follows:
A. An agency-wide status of the total number of mission-critical
systems.
Total number of mission-critical.................................. 86
Number compliant.................................................. 1
Number to be replaced............................................. 25
Number to be repaired............................................. 30
Number to be retired.............................................. 30
Note.--Of the mission critical systems, 39 percent are mainframe-based
and the remaining 61 percent are desk-top based.
B. The status of the mission-critical systems being repaired.
----------------------------------------------------------------------------------------------------------------
Milestones Percent completed
----------------------------------------------------------------------------------------------------------------
Assessment............................... April 1998............................ 100 percent.
Renovation............................... December 1998......................... .....................
Validation............................... March 1999............................ .....................
Implementation........................... March 1999............................ .....................
----------------------------------------------------------------------------------------------------------------
There are two systems that are excluded from these milestones:
--FAMIS: Federal Accounting Management Information System.
--Document/Correspondence Management Systems used by:
--Office of Presidential Correspondence
--Office of Presidential Records
--Office of Presidential Personnel
C. Description of Progress.
(1) Status of Mission Critical System.--On April 28, 1998, the EOP
received the final assessment document from our Year 2000 assessment
contractor. This document provided not only an enterprise assessment
data base, but an identification of EOP wide mission critical systems.
Per an ITMT meeting which occurred in March, a decision was made to
concentrate in fiscal year 1998 on mainframe based infrastructure
systems. This decision occurred because of two major concerns, severe
budget constraints and the criticality of the mainframe systems to the
continued operation of the EOP.
Fiscal year 1998 budgets available for the replacement/renovation
of systems are severely limited and few dollars remain to effect a
complete renovation solution of these systems. We also have several
mission critical systems such as payroll/personnel, financial
management, security tracking etc. that reside on the mainframe and are
written in legacy code such as Model 204, COBOL, etc. The remaining
dollars in 1998 will be focused on the renovation of those systems.
These mainframe systems have been identified and assessed in terms
of their respective Year 2000 issues. Some of these mainframe systems,
such as payroll and personnel, are being renovated in terms of their
ranked priority and we will continue to do this, system by system,
subject to funding.
(2) Status of Non-Mission Critical Systems.--Non-mission critical
systems have been identified and assessed. Due to budget constraints,
non-mission critical systems will not be renovated prior to the receipt
of the fiscal year 1999 budget. From a priority perspective, non-
missions critical system renovations are scheduled to begin in mid to
late fiscal year 1999, after the renovation of mission critical
systems.
(3) Data Exchanges.--Within the EOP, data exchanges have been
identified as part of our Year 2000 assessment. Some of these data
exchanges are in our payroll and personnel system, financial
management, cabinet affairs network, and in MAX or the President's
Budget system. We have identified two mechanisms to assure Year 2000
compliance; these are: (1) Interagency Agreements; and (2) Year 2000
check software. For payroll and personnel, etc., we have signed or are
signing IAG's to ensure Year 2000 compliance. With respect to some
other systems such as MAX, the Year 2000 assessment contractor has
recommended the insertion of certain software code which will check
external data for Year 2000 compliance. We are investigating the proper
placement of this software at either the application level or as part
of an enhanced firewall.
(4) Contingency Planning.--In general, we are putting in place an
interagency agreement (IAG) with an alternate facility to provide a
backup or contingency to our test environment strategy. We are
currently undergoing a mainframe vs. Enterprise server cost/benefit/
risk analysis, and this activity will be completed in September. At
this point, we will understand the target platform for our mission
critical mainframe applications. Through the IAG, we will contract with
this facility to provide a shadow configuration to our chosen platform,
with appropriate communications.
In addition, each application will have contingency plans
identified at the system level. We have begun to meet with mission
critical system owners to determine the main strategies and to
formulate appropriate contingency plans. Such plans are tracked and
driven by published schedules, enhanced by meetings, to gain consensus
and understanding as events change or the schedule unfolds. For
example, with the payroll/personnel system, we have weekly meetings to
discuss key events. A contingency plan was in place throughout that
implementation.
Question. Are you focusing on the non-technology aspects of your
Year 2000 problems, like elevators, etc?
Answer. Yes. The General Services Administration (GSA) is the
landlord for our building complex and is responsible for the
maintenance and update of the buildings. They have assessed what is
needed for the HVAC, utilities, elevators, etc., and are taking the
steps necessary to implement any changes that might be needed.
Although these systems are not our direct responsibility, we
nonetheless monitor the progress of GSA in this matter. At the May 1998
ITMT meeting, a representative from GSA reported that its Y2K efforts
are progressing in a satisfactory and timely manner.
Question. Do you anticipate that your fiscal year 1999 request will
be sufficient to cover your Year 2000 costs?
Answer. With proper and timely funding, we anticipate the fiscal
year 1999 budget request to be sufficient to cover Year 2000 costs.
computer architecture
Question. Last year, the conference report included language about
your computer architecture and the need for its development, which your
office submitted in late February. Can you provide us with an update on
the architecture and how it is assisting in your computer management?
Answer. The recently completed assessment of our software and
hardware for Year 2000 compliance is now permitting further refinement
of the ITA as a technology baseline. EOP has adopted a three-phase
integrated strategic management approach. The first phase was the
Strategic Analysis of EOP's environment, expectations, objectives,
culture, and resources. This lead to the Strategic Choice phase, which
generated options, evaluation of the options, and selection of a
strategy--the Strategic Plan. The EOP Year 2000 Strategic Plan document
was subsequently finalized by the ITMT in July 1998. The third, and
current phase, is Strategy Implementation, which produces tactical
plans for improving processes, upgrading or replacing technology, and
developing the people resources required to move EOP ahead. The ITMT
will assure that all system changes proposed in the EOP Strategic Plan
and Budget submission truly support the strategic objectives of the
EOP. The Team will also continue to provide oversight of the
implementation of the new technologies to assure that they deliver the
promised business improvements. The ITA is assisting us and is the
guideline for these efforts.
government performance and results act
Question. With respect to GPRA, or the Performance Act, do you have
the technological capability of measuring and reporting program
performance throughout the year on a regular basis, so each agency
within EXOP can benchmark their performance against their goals?
Answer. In its role as the provider of EOP administrative services,
the Office of Administration since 1996 has compiled and distributed
monthly performance statistics covering a range of OA services.
Although OA is not covered by GPRA, our intention is to comply fully
with the spirit of GPRA by continually refining and updating the
performance measures. OA does not manage a GPRA effort for other
agencies within the EOP.
Our intention is to use performance measures as a management tool
to aid agency staff in the allocation of agency resources, to ensure
that OA services are responsive to customer concerns, and to focus
management attention on the agency's effectiveness in achieving its
objectives. We are working now to improve those measures, with our
primary focus on measures regarding the effectiveness of the
Information Systems and Technology division.
Statistics currently collected include:
Facilities: processing of alterations/repairs/moves; distribution
of space allocation/rent bills.
Financial Management: processing of travel vouchers, imprest fund
claims, requisitions, and accounting transactions delivery of monthly
accounting reports.
General Services: delivery of interoffice mail, high-priority and
courier, and certified mail, air express, and small packages; cost of
print jobs; timeliness of composition/design graphics; office supply
order fulfillment; timeliness procurement order timeliness.
Human Resources: timeliness and accuracy of personnel transactions;
timeliness of vacancy announcements, certificates.
Information Systems and Technology: timeliness of help desk calls.
Library/Research Svcs: timeliness of research services; timeliness
of periodical processing; timeliness of book/CD-ROM processing
interlibrary; loan request timeliness acquisitions of books,
subscription renewals, dissemination of publications.
Question. Does your office oversee the compliance to GPRA of all
agencies within EXOP?
Answer. OA does not manage a GPRA effort for other agencies within
the EOP.
Question. Through the development of the fiscal year 1999
performance plan, what overlapping functions or program duplications
were identified?
Answer. We have not completed a plan for fiscal year 1999.
Nevertheless, we are studying areas such as the costs of information
management services from both the data center and the libraries to
identify potential duplicative or superfluous funding. Teams of staff
have also identified work process improvement projects to reduce costs
or maximize the efficiencies in the print shops and the mailrooms.
Question. Did those duplicative programs receive funding in the
fiscal year 1999 request?
Answer. The savings which have been identified (or are under study)
are not separate line items in the fiscal year 1999 budget proposal,
but rather small portions of the overall cost categories identified in
the budget. Nevertheless, the cost for discontinued duplicative
programs would not be incorporated into future budget requests.
travel
Question. The President's budget request anticipates a more
demanding travel schedule in fiscal year 1999 and, therefore, requests
an increase in funding for travel. Please detail the amount of travel
costs/expenses incurred by the offices of the President and Vice
President, respectively, over the past ten years. If information is not
readily available on previous Administrations' travel, please provide
only those travel costs incurred by the Office of the President and
Vice President over the past six years.
Answer.
----------------------------------------------------------------------------------------------------------------
Fiscal year--
----------------------------------------------------------------
1993 1994 1995 1996 1997
----------------------------------------------------------------------------------------------------------------
White House Office............................. $857,491 $910,541 $838,627 $826,684 $892,345
Office of Vice President....................... 289,522 252,292 253,914 285,647 326,363
----------------------------------------------------------------------------------------------------------------
Question. Please identify, for both the Office of the President and
the Office of the Vice President, the various accounts used for
official and campaign related travel (e.g. 21.0, 99.0). Please also
provide the Subcommittee with a break down of those expenses related to
official business from those related to campaign-related travel for the
past ten or six years.
Answer. The account used for official travel expenses is 21.0. ALL
travel costs from this account are Official in nature. The WHO cannot
and does not pay for any political-related expenditures with regard to
travel costs.
Question. How are travel expenses related to campaign activity
reimbursed by the office of President and Vice President, respectively?
Answer. The account used for official travel expenses is 21.0. ALL
travel costs from this account are Official in nature. The WHO cannot
and does not pay for any political-related expenditures with regard to
travel costs.
Question. How do requirements for travel differ for the President
and the Vice President?
Answer. We are not aware of differences with respect to the
requirements governing Presidential and Vice Presidential travel.
Question. What are the reimbursement requirements for campaign
related travel? Are there written requirements with regard to how costs
associated with campaign-related travel are paid? If so, please provide
them with your response.
Answer. The reimbursement requirements for campaign-related travel
by a Presidential candidate are set forth in 11 C.F.R. Sec. 9004.7.
Question. If a trip is both official business and campaign-related,
how are costs allocated between official and campaign related
activities?
Answer. The requirements for allocating costs between campaign and
non-campaign-related travel are set forth in 11 C.F.R. Sec.
9004.7(b)(2).
NONDEPARTMENTAL WITNESS
STATEMENT OF C. BOYDEN GRAY, WILMER, CUTLER &
PICKERING, AND FORMER WHITE HOUSE COUNSEL
TO PRESIDENT BUSH
Introduction of Witness
Senator Campbell. The subcommittee will be back in order. I
would like to welcome Mr. C. Boyden Gray, the former White
House Counsel to President Bush. I have asked him here today to
provide some perspective and insight into the general
operations of the counsel's office, based on his past
experience.
Mr. Gray, thank you very much for coming. Did you have a
statement?
Opening Statement of C. Boyden Gray
Mr. Gray. I have a prepared statement, which you have,
which I hope will be in the record.
Senator Campbell. It will.
Mr. Gray. I will just summarize it for a few minutes and
then hopefully answer any questions you have.
Sitting behind me is my former deputy, John Schmitz, so if
you have any really truly difficult questions, I will be able
to answer them with his help.
Senator Campbell. Sitting behind me is my staff, who will
also answer the difficult questions.
White House Counsel Responsibilities
Mr. Gray. The job of White House Counsel is an absolutely
terrific opportunity for any lawyer. One of my predecessors,
Fred Fielding, said it is the best little law firm in town. I
think that is a very accurate description.
As for its obligations, I have set out in my statement, the
five areas that we operated in. The first was the vetting of
nominees, which you heard about a little bit this morning, both
for cabinet level appointments and the second category for
judicial nominations.
In connection with the second category, working on judicial
nominations, the Department of Justice, especially the Office
of Legal Counsel in the Bush administration, provided most of
the legwork for that. That is, most of the detail investigatory
work. It was more of a management job from our perspective, and
very, very important help came from the Department in that
regard.
The third category dealt with war powers. We had problems
in the Philippines, obviously. We had Panama. And then of
course, the gulf war. There were many other little operations
that required our attention. I was chairman of a thing called
the War Powers Group, which included officials from State,
Defense, Treasury, and the Justice Department again, of course.
This was quite, as you can well imagine, quite an active
obligation during the 4 years.
The fourth category had to do with separation of powers
issues regarding the independent counsel statute, which is a
well-known statute by now. Also, executive privilege, another
very important area of topical concern. And issues involving
vetoes, as well as the appointments power.
The fifth category was just legal policy, legal issues that
came up in the context of other disciplines, environment, labor
law, regulatory policy, which was one of my personal interests
when I worked for Vice President Bush in the Reagan
administration. Those issues frequently involved questions of
Presidential power and executive privilege, and so we did get
involved from time to time in those areas. But most of these
issues were organized or led out of different departments or
different agencies within the White House Executive Office of
the President.
Commonsense View of Public and Private Activities of the Bush White
House Counsel's Office
As my statement details, we had a fairly commonsensical
view about the difference between representing the office and
representing the person. We did not have detailed guidelines
about it. It was fairly straightforward. We did not do taxwork.
We did not do blind trust work for the first family.
When investigations came along, which we did, we had our
share to be sure--we do not like to talk about it, but we did--
we tried to distinguish between representing the President in
his official capacity, representing the Oval Office, and staff
members in their individual capacity. When an investigation
looked like it was steering away from looking at a staff member
in his or her capacity as a potential witness into that
person's potential liability as a target, we would tell them--
with obviously great difficulty--we think you need to get your
own attorney.
Those were not always easy decisions to make, and they were
even more difficult to convey to the individual involved, but
of course we had to do it, both to meet our obligations to the
President and to protect the individual involved. Our
obligations were to the President and to the Government and we
did not want, for example, to endanger any attorney-client
privilege that the staff member might be entitled to.
White House Counsel Staff Size
As for the size of our staff, it was fairly small. We had
eight core staff and about six or seven detailees, which
included ethics specialists who helped with the nominations
especially in the first year of the Bush term. Listening to the
testimony this morning, it appears that we had 8 compared to
their 20, if you will, 8 core compared to their 20 core. And we
had about 6 or 7 detailees compared to their 15.
That is the way I can sort of understand the numbers. We
were very reliant on the Office of Legal Counsel, as I said
earlier, for both research work and for advice. I cannot
imagine doing that job without the help of the Office of Legal
Counsel. They were absolutely superb. They frequently said no,
which is what a lawyer has to do sometimes. A no which we then
conveyed to our client, our clients. But they were an
absolutely indispensable part of the operation of our White
House and the White House Counsel's Office that belonged to my
predecessors.
I do not know about the relationship between OLC and the
current White House Counsel's Office, but it was indispensable
to that office in years past.
That ends what I would say, Mr. Chairman. I would be happy
to answer any questions you might have.
Prepared Statement
Senator Campbell. Thank you. We appreciate that. We will
insert your complete statement in the hearing record.
[The statement follows:]
Prepared Statement of C. Boyden Gray
Mr. Chairman, I appreciate the opportunity to testify about
the operations of the White House Counsel's office during the
Bush Administration when I served as Counsel to President Bush.
Before providing information about staffing levels, I would
like to take a couple of minutes to give an overview of the
duties of the office.
During my tenure, we viewed the White House Counsel as
having duties in five main areas. The first category was ethics
and nomination clearances. With the assistance of the Office of
Government Ethics (``OGE'') and the designated ethics officers
(``DEO's'') of the Departments, we had the responsibility for
coordinating compliance with the ethics obligations of the
Executive Branch and for clearing nominations for Presidential
appointments and senior White House Staff. This included
processing both financial disclosure and FBI clearances, and we
had responsibility for dealing with the FBI field
investigations and the reports summarizing them. As you can
probably imagine, this occupied most of my time and that of my
staff in the first year of the Bush Administration.
The second category was the related one of clearing
nominees for the federal judiciary, including the Supreme
Court. I served as Chairman of the Judicial Selection
Committee, which consisted of representatives from the
Department of Justice, which did most of the research, and the
officers of the Chief of Staff, Legislative Affairs, and
Intergovernmental Affairs (the small White House office that
dealt with the governors and mayors). Unlike the Cabinet
clearance process, judicial selection was an ongoing duty that
never diminished in intensity over the four-year period.
The third category encompassed issues relating the use of
military force and the War Powers Resolution. I was Chairman of
the so-called War Powers Group, which included representatives
from the office of the Secretary of Defense, the Joint Chiefs,
the State Department, the Justice Department and also the
Treasury Department on occasion. This group was fairly active
over the four years.
The fourth category was a catchall designed to watch out
for the prerogatives of the Executive Branch generally and the
Oval Office specifically in the context of the Separation of
Powers. This category included dealing with Executive
Privilege, the Independent Counsel statute, and various
legislative matters involving the interrelationship between
Congress and the White House, such as enforcement of the Chadha
decision, reviewing budget rescission issues, and addressing
questions relating to vetoes and appointments.
The fifth category included legal policy decisions where
the lead was often taken by other offices within the Executive
Branch or the White House itself, such as civil rights (usually
lead by the Department of Justice or the EEOC), the
environment, labor law (such as enforcement of the Beck
decision regarding use of union dues for political purposes),
and regulatory and administrative law generally (where the lead
usually rested with OMB).
There was, obviously, a great deal of interplay between the
various categories. Regulatory issues, for example, frequently
involved questions of Presidential authority, and on occasion
also raised Executive Privilege issues, although President Bush
actually invoked the Privilege only once in a procurement
matter. Our backup at all times was the Office of Legal Counsel
(``OLC'') in the Department of Justice, an extraordinary group
of nonpartisan professionals who both provided the leg work for
our efforts and gave us unfailingly independent advice. With
our small staff, we simply could not have discharged our
obligations to the President without the extensive backup, and
institutional memory, of OLC. There were times when I wanted to
strangle numerous OLC officials when they said no to something
we wanted to do, but in retrospect I could not have done
without their staffing or their good judgment.
Now, what about the size of our lean staff? Beside myself
and my Deputy, John Schmitz, we had five so-called commissioned
officers, who automatically carried the title Associate
Counsel, and one slot for a more junior assistant counsel. In
addition, we had up to four detailees, that is, lawyers who
worked full time for me but who were paid by other Departments.
In other words, I had a maximum standing staff of twelve
professional lawyers, including myself. In addition, of course,
there were secretaries and clerical help for us and Jane
Dannenhauer, who was the keeper of the FBI files and clearance
process. Finally, especially during the very intensive initial
1989 vetting of Presidential appointees, I had one or two
highly dedicated agency ethics lawyers who would stay for three
to six months to help with nominations.
Questions have been raised over the years and especially
recently about the dividing line between representing the
Office and the President in his private capacity. We did not
think twice about not doing private legal work for the first
family. Their blind trust and tax returns, for example, were
done by private counsel who occasionally consulted with us but
never relied on us for any heavy lifting. Similarly, one of the
son's issues with the S&L regulators was handled privately, as
were a couple of ethical questions raised about private
business matters.
More difficult, of course, were issues arising out of
investigations of official conduct, such as Iran Contra or
Iraqgate. Our general rule was that investigations of
institutional conduct of the Presidency could be addressed by
us using taxpayer funds, but that if the investigation began to
focus on an individual as a potential target rather than as a
mere witness, we would advise the individual to get his or her
own counsel. Where an investigation involved only a staff
member without implicating the Presidency, we would recommend
that the staff member seek private assistance. Decisions here
were not always easy to make and were never easy to convey, but
we felt we had to be careful both for the protection of the
individual as well as for the limits of our staffing. For
example, providing legal advice to a potential target could
both compromise the target's attorney-client privilege as well
as constitute an abuse of taxpayer funding.
Also difficult was dealing with issues where our advice was
not sought, or even, in some circumstances, was studiously
avoided. There is an old saying that the only meetings the
White House counsel has to attend are the ones he is not
invited to. Accordingly, we always had to maintain enough
flexibility to bird dog the end runs (to mix a couple of
metaphors). My general advice to everyone was, ``If you are
really having fun, then you'd better stop what you are doing.''
I would like to think, for example, that we would have early on
learned about and shut down the coffee fundraisers in the White
House. The White House Counsel cannot spy on everything,
obviously, but something as pervasive as the coffee program
should not have gone unnoticed.
It has recently come to my attention that the current White
House Counsel's office has about three times the number of
attorneys we had. Naturally I am curious about what they have
been doing, given the fact that the First Family also has two
very large and capable law firms on retention, that there do
not appear to be any burning issues of legal policy pending in
the agencies or in Congress, and that the investigation of
White House fundraising was shut down. As someone who is
interested in regulatory reform, I would take some comfort if
some of these forty lawyers were assisting OMB in trying to
achieve EPA compliance with the White House Executive Order on
regulation. But it is not clear they are doing that, and I
think the public is entitled to know generally what they are
doing.
Public Versus Private Activities in the Bush White House Counsel's
Office
Senator Campbell. While you were the White House Counsel
for President Bush, was it possible to draw that fine line
between the public versus private legal aspects, or was that
somewhat realistic?
Mr. Gray. No; I think we were able to draw it. I hope we
did. I mean, someone could be critical, someone could question
some of the judgments we made. But I never thought at the time
that they were especially difficult to make, and I do not think
we were criticized at any time for the decisions that we did
make.
Senator Campbell. During your tenure, were there any times
in which there were civil lawsuits ongoing that had a tail over
here in Congress, where you would have to respond to some
congressional inquiries about those civil lawsuits?
Mr. Gray. No; nothing like the Paula Jones case. The
closest I think that you would come, that we came to this, was
the litigation, some of it private and some of it of course
governmental, involving one of the sons involved in the S&L
crisis. That was something we had virtually nothing to do with.
I was aware of it more from reading the papers than from any
information from the family.
It was something that was painful for me to have to avoid
because one always wants to help, but it was something that I
had to resist. And of course, I did not have the staff anyway,
so it was not all that difficult.
Senator Campbell. You said that you had, as you remember,
about eight detailees from the agencies?
Mr. Gray. Well, we had, as I understand it, about four
permanent detailees that were reimbursable and then two to
three that came on a 3- to 6-month basis that were not
reimbursable. So six to seven.
Senator Campbell. So the four there, their salaries were
reimbursed by the White House to the agencies and the rest were
not?
Mr. Gray. That is correct.
Internal Controls for Distinguishing Between Public and Private
Activities
Senator Campbell. In your opinion, what kind of internal
controls or procedures should the White House have in place to
more clearly define the private versus the public interest in
the President's life or a President's tenure in office?
Mr. Gray. Well, I do not know how you have controls if you
do not know what, in fact, is happening or has happened. I am
not aware of all of the details so it would be hard for me to
give an opinion.
Senator Campbell. We do not know and may never, but I was
concerned a little bit that the Justice Department has tried to
find in their rules that you cannot use taxpayers' money for
attorneys' fees to defend in private lawsuits. I asked the
former panel if they thought that would be objected to if we
put that in statute. How would you view that? Do you think that
ought to be statutory or just a rule?
Skeptical of Statutory Attempt to Establish Internal Controls for
Counsel's Office
Mr. Gray. As someone who has obviously worked in the White
House, I am skeptical of trying to put too much in statutory
language to micromanage what happens within the White House. I
think that is a separation of powers problem potentially and I
think you should be careful about that, in my humble opinion,
even though of course I am from a different party.
But sooner or later Republicans will get back in the White
House and might perhaps regret that kind of micromanagement.
I do, on the other hand however, think it is perfectly
appropriate for you to ask questions about how the money is
being spent. There may be objections to providing answers, but
I was just struck listening here and thinking about it, 15
detailees to do vetting. Maybe they are doing work that we had
done by the Office of Legal Counsel for us, but I do not know
what I would have done with 15 people. I would have spent most
of my time managing them and not doing substantive work.
So I am curious as to what all those 15 detailees were
doing. We are way past the first year crunch of any
administration when you have an avalanche of nominees to clear.
The problem never goes away because people are constantly
turning over, but the big crunch comes in the first year and it
diminishes quite significantly thereafter.
Senator Campbell. Do you remember if you had any procedures
in place or any printed guidelines in your office to make sure
those attorneys, whether they were detailees or not, were not
handling private legal matters internally?
Mr. Gray. Well, we had pretty good controls on what they
were doing. We were constrained as to staff. There were things
that everybody wanted to do that we could not do because we
were so constrained, and I was--either I or John Schmitz--was
pretty acutely aware of almost everything they were doing. They
were not doing private legal work.
We could not afford, given the time constraints.
Senator Campbell. Did they report pretty much directly to
Mr. Schmitz or to you?
Mr. Gray. Yes; either. John did most of the managing of the
core staff on judicial nominations. Lee Lieberman Otis, who is
now a staffer here in the Senate, managed the judicial
nomination process for me, not as a deputy but that was her
responsibility.
Senator Campbell. They reported to you and it was a smaller
crowd, that is for sure. Did you make them aware of the need
that they should not be involved in any private legal matters?
Or was that just sort of accepted and everybody knew that.
Mr. Gray. I think that was accepted. The only time I think
the questions called for tricky legal judgment involved the
first lady. She had a literacy project, as some of you are
aware. She was very keen on that aspect of her charitable work.
And we encouraged the hiring of a private lawyer to handle the
legal affairs of those operations. I suppose that required some
thought, but it was not like a big issue.
Executive Privilege
Senator Campbell. During your tenure, did you ever get
involved in the extent that we have now of using executive
privilege for Secret Service, staff, or family members, or all
of the other things that we are hearing about?
Mr. Gray. Well, this has been in the press. A question of
Secret Service privilege did come up in the context of the
October Surprise investigation, which posited--the theory
behind it was that somehow Candidate Bush, Vice President-Elect
Bush, had flown to Paris to help complicate the hostage
release. It was a very fanciful theory. To this day I still
cannot believe so much money and time was spent tracking it
down.
At one point they even had him flying a Blackbird, CIA
Blackbird back from Paris, since there were no----
Senator Campbell. Himself?
Mr. Gray. Himself, yes. He was a pilot, after all.
Senator Campbell. President Bush was a pilot.
Mr. Gray. He was a pilot. This was something he could do.
They wanted to show that he had attended a meeting in Paris. We
were able to show that, through the use of Secret Service logs
which they did not want to release and we argued that they
should be released, to prove that he was, in fact, having lunch
with Justice Stewart's widow which, in fact, he was, and Dick
Moore and some other people on that particular Sunday.
We were able to convince the investigators that he could
not have come back from Paris on the Concorde because it does
not fly on Sunday. That was when the Blackbird entered into the
debate. But we did release those records.
The question of Secret Service privilege is a very tricky
one. You certainly do not want the Secret Service protected
from testifying about criminal activity. On the other hand, the
President does need to have the confidence that they are not
going to gossip about his family life or his private political
views.
Bush and Clinton Counsel's Offices Compared
Senator Campbell. Given your tenure in the White House, do
you see any major differences of how the attorneys functioned
during the Bush administration and how they are functioning
now? I know you are not involved in the inner workings of it,
but just from general observations of things you have read and
seen?
Mr. Gray. Well, I have two sort of general observations.
One is they have a staff that appears to be nearly three times
the size of ours, and they do not appear to be doing any of
what I would call the fun things of the office, the fun legal
policy issues that all of my staff loved to do, it is how I
enticed them to come work for me, vetting judicial nominees or
vetting cabinet nominees. Reading FBI files is not what anyone
considers to be especially fun. That was the meat-and-potatoes
work of the office.
And if you got that done right, and you did not make
mistakes and get embroiled in subsequent controversies, then
you were able to work on civil rights or the environment or
trade or other issues that involved legal issues that were more
fun.
I do not see this White House Counsel's staff's
fingerprints on any of those fun legal policy issues. I think
it is too bad for their own benefit. But it does raise the
question well, if they are not doing that, what are they doing?
For example, and this is a personal interest of mine, as I
said earlier, regulatory reform. We did come in on a number of
occasions to assist OMB and the Council of Economic Advisors to
try to put the reins on some of the agency's more
expansionistic tendencies, especially the Environmental
Protection Agency.
I see very little evidence of that today, and I do think
the White House has a constitutional obligation to try to
constrain the agencies from exceeding their authority. That is
not something just the Senate does or something the House does
or something the judiciary does. The White House has the same
obligation.
That was something that we enjoyed doing and I do not see
the current White House Counsel's Office engaging in that
activity.
The Size of the Counsel's Office During the Bush and Reagan
Administrations
Senator Campbell. You alluded to one of my questions, which
was who is doing the work that they were originally hired to do
in the agencies if they are not there? That has been a concern
of mine and I do not think I ever got a definitive answer of
who covers it while they are gone.
But let me ask you one last question. You might not be
qualified to answer this, but I was interested in the
comparative number that the Reagan administration might have,
the number of attorneys. Do you happen to know that?
Mr. Gray. I do not but I think it is comparable to ours.
There was a period, of course, during the peak of the Iran
contra document discovery phase when the staff ballooned in
size, maybe doubled in size, to deal with the document
production which involved many, many agencies and a great deal
of declassification work. It was a very difficult period.
But the staff slimmed down after the brunt of that was
done, maybe 6 or 8 months later. And when I came in, the
transition, my predecessor, A.D. Colehouse, had a staff that
was basically the size that I had, or I inherited from him
basically the same size staff.
Senator Campbell. I see. OK, thank you for appearing, Mr.
Gray. I have no further questions, but, if I could submit them
in writing. Some of the other members of the committee, who are
not here this morning, may also have questions.
Mr. Gray. I will be glad to answer any questions.
Subcommittee Recess
Senator Campbell. We will keep the record open for 2 weeks,
if there is anybody else that has any input that they would
like to have inserted in the record.
With that, I thank you very much for your appearance. This
subcommittee is recessed.
[Whereupon, at 10:45 a.m., Thursday, May 7, the
subcommittee was recessed, to reconvene at 9:40 a.m., Thursday,
May 14.]
MATERIAL SUBMITTED SUBSEQUENT TO THE CONCLUSION OF THE HEARING
[Clerk's note.--The following questions and answers were
submitted to the House Appropriations Subcommittee on Treasury,
Postal Service, and General Government to accompany the
transcript from the March 12, 1998, hearing before that
subcommittee. This information is included in the hearing
record at the request of Senator Campbell.]
Questions Submitted for the Record by Congressman Jim Kolbe
use of general counsel for private defense of the president
Question 1. Recent press articles have indicated that staff within
the Executive Office of the President are being used in the defense of
the President as it relates to the Independent Counsel's investigation.
In testimony before this Subcommittee in fiscal year 1995, your
predecessor indicated that ``no White House staff--specifically
attorney's as it related to the Whitewater Investigation--were acting
as lawyers for the President and First Lady where there is no official
nexus.'' Is there an official nexus between Ken Starr's current
investigation of the President in the matter of Monica Lewinsky as it
relates to the President's constitutional, ceremonial or statutory
responsibilities? Specifically define that nexus.
Answer. Before responding to the Committee's specific questions, we
want to make it clear that the lawyers in the Counsel's Office
represent the President in his official capacity and the Office of the
President. Any suggestion that the Counsel's Office represents the
President in his personal capacity is false, and reliance on ``reports
in the press'' to the contrary gives unwarranted credence to baseless
speculation.
First, the allegations in the Lewinsky matter focus on the alleged
conduct of the President during his tenure in office with respect to a
White House employee. The Independent Counsel has served the White
House with subpoenas calling for the production of documents, has made
informal requests for information, and has interviewed or required the
testimony of some 40 current and former White House employees. The
Counsel's Office is responsible for responding, on behalf of the White
House, to these demands, for assisting White House personnel in
responding to the OIC, and for determining whether the testimony sought
from these personnel may implicate confidentiality concerns. Beyond
these duties, the Counsel's Office is responsible for responding, and
assisting other senior White House staff to respond, to the avalanche
of press inquiries that flow from the OIC's investigation every day,
including determining whether a response is appropriate and, if so, in
what form, and collecting the information necessary to respond. Thus,
the ``official nexus'' between the Independent Counsel's investigation
and the constitutional, statutory and ceremonial responsibilities of
the President and the Office of the President is obvious and
undeniable.
More importantly, investigations like this consume an extraordinary
amount of public, press and political attention and, therefore, place a
significant burden on the President's ability to perform his
constitutional and statutory duties. To allow him to strike the
appropriate balance in these circumstances, the President is entitled
to the most knowledgeable, candid and expert advice attainable. His
senior advisors, including the staff of the Counsel's Office, must
address how the President can best meet all his official obligations
while also dealing with the demands on his time that flow from the
investigation. They must prepare him for the press questions that come
with virtually every public appearance and formal press conference,
including, for example, the inquiries during press conferences with
foreign leaders. One need only look to the period immediately following
the disclosure of the investigation to see the extent to which the
press made such inquiries during the President's press conferences with
Prime Minister Netanyahu, Prime Minister Blair, and Secretary General
Annan.
On the domestic front, less than one week after the disclosure of
the investigation, it was the President's constitutional obligation to
deliver the State of the Union Address, and his senior advisors,
including the Counsel's Office, were required to advise him how, if at
all, to deal with the issue in that setting. More broadly, in the
legislative area, there have been any number of comments by leaders of
both Houses, complaining about the adverse effect that the
investigation is allegedly having on the business of the Congress--
comments that highlight the interplay between the Lewinsky matter and
the President's official duties. The senior staff of the White House
must advise the President on how best to manage the legislative process
in these, and other, circumstances.
In all of these settings, and others, it is the responsibility of
the Counsel's Office to advise both the senior staff and the President
concerning the status of the investigation, its expected course, the
demands it can be expected to place on him, and the legal implications
of any staff proposals or presidential decisions. More specifically,
with respect to the ongoing investigation, the Counsel's Office must
advise the President concerning issues relating to potential
governmental attorney-client and executive privileges.
Question 2. Current law provides that funds may only be used for
the ``official'' expenses of the White House Office. Are there
procedures in place to enforce this requirement? Specifically, what are
those procedures?
Answer. The Counsel's Office devotes its resources to performing
official functions, including the representation of the President in
his official capacity and of the Office of the President. Thus, as is
the case with other professional offices in the executive,
congressional and judicial branches of government, no special
procedures are necessary to ensure that funds are used for ``official''
expenses.
Question 3. When work comes in to the Counsel's office, is this
work reviewed to determine whether it is official or personal? How is
that determination made? Who makes it?
Answer. Work assignments, apart from routine matters for which a
particular lawyer is generally responsible--e.g., pardons, travel,
nominations, ethics--are generally made by the Counsel or the Deputy
Counsels, as those determinations are necessary.
Question 4. How many current staff are within the office ``Counsel
to the President''? How many of these staff are ``Counsel''? Within the
White House Office, are there detailees from the Department of Justice?
How many? How many serve as ``Counsel''? What are the specific
responsibilities of the DOJ detailees?
Answer. See Answer 2, Questions of Chairman Istook. See also,
Exhibit 1.
Question 5. In fiscal year 1994, the operating budget for the
Office of General Counsel was $1,913,092. What is the fiscal year 1998
operating budget for this office? What is the request for fiscal year
1999? For the record, provide total obligations, expenditures and FTE
for the White House Office for fiscal years 1995-1999. Request by
department (e.g. Chief of Staff, Legislative Affairs, Counsel's Office,
Public Liaison, etc.). Include a separate line for detailees
(reimbursable and nonreimbursable) for each year.
Answer. See Answer 2, Questions of Chairman Istook. With respect to
the White House Counsel's Office, the anticipated number of employees
and anticipated expenditures for fiscal year 1999 are not likely to
change significantly from the two previous fiscal years.
Question 6. How are workloads tracked within the Office of Counsel
to the President'? Do the attorneys use something comparable to what is
used in the private sector such as ``billable hours?''
Answer. The White House Counsel and the Deputy Counsels assign work
as the need arises and supervise the conduct of that work, either
directly or, in the case of investigative matters and nominations,
through intermediate supervisors. Since there are fewer than 20 lawyers
on the regular staff of the Office, supervision is accomplished through
regular personal contact with the lawyer involved, often daily or even
more frequently. There is no need for staff to track the hours devoted
to the tasks they perform as part of their official duties.
information technology architecture (ita)
Question 7. Although the EOP has submitted an Information
Technology Architecture (ITA) for the modernization of EOP's
information resources, the ITA is still missing a great deal of detail.
For instance, it is not clear if there are standard procedures in place
to define each of the 11 EOP organization's technology requirements.
Are there any such procedures in place? What are they? How have they
been implemented? Who is responsible for implementing them?
Answer. The EOP is currently employing procedures called for by
Clinger-Cohen, OMB, and GAO in the conduct of our work. See Exhibit 10
for an illustration of these procedures. We have begun work on the
standards process and standards repository. We are collecting best
practices for this process, looking at work done in other Federal
agencies and researching materials we have gathered from the internet,
GAO, GSA, and NIST. The final procedures/standards is targeted for
adoption by July, 1998. Volume 2 on the figure will be an ITA
Management and Implementation Plan. The procedures for updating the ITA
will be spelled out in that companion document. Work has begun on
developing the procedures, using small project teams. A description of
the current teams can be found on page 1-7 of the ITA. The ITMT will
have responsibility for overseeing the implementation of the new
procedures.
Question 8. How were the information requirements of the individual
organizations within EOP determined and validated?
Answer. The initial information requirements described in the ITA
were determined through a comprehensive assessment completed in July,
1997. They were documented in the Executive Office of the President
Information Processing Requirements Document and related documents and
inventories.
We are currently in the process of completing an assessment of all
of our software and hardware for Year 2000 compliance. The information
gathered will permit a further refinement of the ITA ``as is''
technology baseline. A comprehensive inventory of hardware, COTS, GOTS,
and custom applications is part of the Y2K assessment. The Y2K team
used the Requirements Document as the jumping off point for their
inventory, hence, the inventory of requirements is being validated. The
Information Technology Management Team will validate the final,
combined inventory and will determine when and what systems can be
added to the inventory, that is, the ITMT will fill the role of
prioritizing the future application portfolio.
Question 9. What process is in place to ensure that information
requirements are being driven by EOP's overall strategic plan?
Answer. EOP has adopted an integrated strategic management approach
which is composed of three thrusts. The first is Strategic Analysis of
EOP's environment, expectations, objectives, culture, and resources.
This leads to Strategic Choice, which generates options, evaluation of
the options, and selection of a strategy--the Strategic Plan. The third
phase is Strategy Implementation, which produces tactical plans for
improving processes, upgrading or replacing technology, and developing
the people resources required to move EOP ahead. The ITMT will assure
that all system changes proposed for the EOP Strategic Plan and Budget
submission truly support the strategic objectives of the EOP. The Team
will also provide oversight of the implementation of the new
technologies to assure that they deliver the promised business
improvements.
Question 10. Are there specific procedures in place to prioritize
individual projects? What are they?
Answer. As mentioned above, the ITMT will prioritize projects
across the EOP. Small efforts unique to a single agency will continue
to be funded and managed by that agency. The ITA Management and
Implementation Plan will contain procedures for submission of the
agency-specific technology descriptions for inclusion in the overall
EOP inventory database. The prioritization procedures mentioned in the
previous questions are being documented and will be available shortly.
information technology architecture--annual and total costs
Question 11. In a letter to the Committee last year, you stated
that the architecture would identify budgetary baselines. I am
concerned because there is a noticeable lack of cost data included in
the ITA submitted to the Committee on February 20th. I note that you
provided a 5 year table on February 28th. The price tag of this
modernization effort over the next 5 years is $39.3 million. Is this
the total cost? How were these costs developed? Have they been
validated?
Answer. The estimated costs reflect the total investment portfolio
needed to move the EOP from the current heterogeneous infrastructure
with its myriad of systems to the planned architecture and
infrastructure cited in the ITA with one exception. The costs that are
excluded are those funds needed to upgrade the EOP's physical cable
plant and communications infrastructure. This upgrade is required in
order to support the future voice and data communications needs of the
EOP. The reason for this particular exclusion is due to the fact that
the buildings are owned by GSA. GSA is expected to forward a request
for the communications and physical cable plant upgrade under a
separate budget request.
The costs were developed using historical procurement data,
published contractor labor rates for the Washington, D.C. metropolitan
area, informational vendor quotes, and industry standards for
formulating Basis For Estimates (e.g. average cost per line of code).
The costs for 1999 were validated first by establishing the initial
baseline estimate, and second, by conducting an independent review of
those data to verify the accuracy of the baseline. The data needed to
begin the validation process for the Years 2000-2003 will become
available upon conclusion of the Year 2000 assessment phase. The first
step will be to validate the baseline estimate, then a second review
will be performed to verify the baseline. The completion of the Year
2000 assessment phase is targeted for the end of April, 1998.
Question 12. It appears that the $12.2 million being requested for
fiscal year 1999 is a compilation of projects recommended in the
Logicon report. That report, by its own admission, was unable to
validate the direct and indirect costs of individual systems. Does the
ITMT act as an investment review board? Has the Information Technology
Management Team reviewed and approved the individual projects proposed
in the 1999 Capital Investment Plan? Did they validate the costs of the
individual systems? For the record, provide any documentation on the
review, approval and validation of individual systems and their costs.
Answer. Yes. As required by its Charter, the ITMT approves new
information technology investments and evaluates existing projects and
operational systems to create an IT investment portfolio that best
supports the EOP agencies' missions and program delivery processes.
The ITMT discussed and reached a consensus on the ITA projects
considered to be high priority, that is, those projects specified in
the 1999 Capital Investment Plan. The reason for the identification of
those specific projects is because they are considered to have the most
significant impact on both the infrastructure and the Year 2000
problem. The priority projects were agreed upon by the ITMT as being
the critical efforts the EOP should focus its efforts on during fiscal
year 1999 on December 18, 1997.
Two cost validation efforts, one to establish the initial baseline
estimate and one to validate the baseline, were conducted for the
projects cited in the 1999 Capital Investment Plan.
The first effort was conducted by the Office of Administration to
establish the baseline estimate. Historical procurement data, published
contractor labor rates for the Washington, D.C. metropolitan area,
informational vendor quotes, and industry standards for formulating
Basis For Estimates (e.g. average cost per line of code) were used to
establish the initial baseline estimate for the 1999 Capital Investment
Plan projects.
The second cost validation effort was conducted by an independent
contractor, James Martin Government Consulting. The results of the
second cost validation cited a project total of $14.8 million (which
included $1.8 million funded from the fiscal year 1998 Capital
Investment Plan and $500K funded from the 1998 sustaining budget). The
cost difference between the initial baseline and second validation
effort was $300K, or 2.4 percent of the total amount estimated for 1999
Capital Investment Plan. Therefore, the EOP anticipates a 97.6 percent
accuracy rate in the costing data for the funds requested in the 1999
Capital Investment Plan.
fiscal year 1999 capital investment plan
Question 13. Your fiscal year 1999 request includes $6,986,000 for
generic ``EOP Information Technology''. This is further defined as
critical tasks necessary to assess, renovate or replace, and test
mission critical applications. What are the specific projects
associated with this request?
Answer. The projects to be renovated consist of 85 Mission Critical
Custom Applications and their associated hardware and software utilized
by the Executive Office of the President agencies in performance of
their daily mission and activities. Thirty-nine percent (39 percent) of
these systems are mainframe based applications and consist of legacy
applications written in COBOL, MODEL 204, etc. The remainder of the
systems are more modern and desktop based.
Question 14. Of this amount, $4.4 million is being requested for
``ADP Contract Labor''. This seems fairly high. How was this contractor
selected and hired? Is it only one contractor? Are these costs fair and
reasonable?
Answer. Final contractor selection for the renovation and testing
phases of the Y2K effort has not occurred. However, in September 1997,
Northrop Grumman (NG) was competitively awarded a contract to act as
the EOP's facilities management contractor with the responsibility for
providing information technology support to the EOP. The competition
was conducted under the Department of Transportation's ITOP Contract,
and Northrop Grumman was selected as the offeror which provided the
best value to the Government giving appropriate consideration to the
factors of Technical, Past Performance and Price.
As the EOP's facilities management contractor, Northrop Grumman
(``NG'') has the responsibility for providing maintenance support for
all hardware and software resident on the EOP computer systems. Should
the EOP decide to fund NG to provide renovation services, it would be
with the recognition that the software and hardware renovated by them
would also be supported by them for the next three years. This should
further incentivize them to ensure that the software and hardware were
correctly modified given that the support of these systems would be
their responsibility.
We are also in the process of selecting an Independent Validation
and Verification (IV&V) contractor to ensure that the renovated
software works properly and testing results are in accordance with
testing plans.
Government estimates for the labor are based on rates in place for
current information technology support contractors which are
representative of labor expense in the Washington DC area. In addition,
industry estimates for lines of code conversion/renovation were used to
develop the labor hours required to support the renovation/conversion.
Some of the EOP legacy systems utilize languages, such as Model 204 and
Easytrieve that historically are more expensive to renovate or convert.
In addition, the skill mix required for personnel are more difficult to
procure; hence, higher rates.
Question 15. The justification materials state that these projects
are ``high priority''. What criteria are used to define a project as
high or low priority?
Answer. For the fiscal year 1999 Capital Investment Program,
Critical Priority projects are those projects that have a Y2K
implication. For example, these projects include the replacement of
either hardware or software that is not Y2K compliant and cannot be
made Y2K compliant. Custom applications, such as the Electronic
Requisition System utilize non-Y2K compliant software, and the cost to
bring the existing system to compliance would be more than acquiring a
new Commercial Off the Shelf (COTS) package.
Question 16. The Administration is also requesting $862,000 for
``information support tools for on the road/trip requirements''--
basically portable computers and software used by the White House
Communications Agency while on travel with the President. Why is this a
priority replacement this year? If this equipment is not replaced this
year, what are the impacts on WHCA? Would communications be hampered in
fiscal year 1999?
Answer. The computers and software that are currently being used
were purchased 5 to 8 years ago. They are not Y2K compliant and cannot
be economically upgraded to be Y2K compliant (286 generation
technology). Cannibalization of parts to keep the equipment running
began 2 years ago, and the original manufacturer (GRID Computers) has
since ceased manufacturing replacement parts. As a result of the
cannibalization, the inventory is decreasing and unless new equipment
is purchased, the equipment will cease to function. We need 6-8 months
to integrate new hardware and software into the trip packages and train
personnel. The EOP will not be able to meet the OMB mandate for
conversion of mission critical applications by 3/99 unless the funding
for the On the Road/Trip Requirements is funded in fiscal year 1999. In
addition, the software running on this equipment is not Y2K compliant.
As we work to evolve to a Y2K compliant, common software environment,
the software required for this project should be a subset of, and
purchased with, the Common Software we are developing for deployment
EOP-wide.
five year strategic plan
Question 17. The ITA states that a 5 year ADP Strategic Plan is
necessary to support the Capital Investment Plan yet this strategic
plan is still in the development stage. What is the status of EOP's 5
Year ADP Strategic Plan? Will this Strategic Plan identify, by fiscal
year, the component pieces of the architecture?
Answer. The EOP's Five Year Strategic Plan is under development.
This strategic plan will in turn be incorporated as part of the ITA,
and will tie to the levels identified in the initial submittal of the
architecture. See also Answer 7.
Question 18. Is there a five year ADP strategic plan that supports
the request of $12.2 million for the fiscal year 1999 phase of EOP's
modernization effort? What assurances do we have that the request to
fund these specific projects fits in to the 5 Year Strategic Plan if
that plan has not been developed?
Answer. Detailed analysis has gone into the budget request for the
$12.2 million for fiscal year 1999. The base document was the Roadmap
document submitted to Congress in July of 1997. The base criteria for
selection was either a project directly in support of our Y2K effort or
critical to the support of our infrastructure. The projects included in
the fiscal year 1999 request are not technologically complex; rather
they are basic, simple projects such as Common Software which are
critical to support an organization undergoing transition. These
projects will be cornerstones of the five year strategic plan.
Question 19. Absent a strategic plan, what factors went in to the
sequencing of projects? In other words, how was it determined that some
projects would be funded in fiscal year 1999 and that others would be
delayed to the outyears?
Answer. As discussed above, the base criteria for selection was
either a project directly in support of our Y2K initiative or critical
to the support of our infrastructure. By this criteria, only those
projects that were the most critical such as Common Software, Help
Desk, or Electronic Document Management strategy were selected. These
are very basic projects, and not complex from a technology standpoint,
but need to be in place as the building blocks for mission survival and
the cornerstones for the next fiscal year's activities.
architectural compliance across eop agencies
Question 20. In addition to the $12.2 million being requested
through the Office of Administration, other EOP agencies are requesting
funds for computer software and hardware--both upgrades and
maintenance. In total, other agencies are requesting $1.5 million for
these efforts in fiscal year 1999. Are these maintenance activities and
upgrades consistent with the architectural blueprint?
Answer. Yes.
Question 21. Who ensures compliance with the architecture across
the EOP?
Answer. The Information Technology Management Team (ITMT).
Question 22. Have these proposed equipment purchases--both upgrades
and maintenance--been reviewed by the ITMT?
Answer. Yes. On December 18, 1997, the ITMT discussed and reached a
consensus on the ITA projects considered to be high priority. The
reason for the identification of those specific high priority projects
(which comprise the $12.2 million being requested) is because they are
considered to have the highest impact on both the infrastructure and
the Year 2000 problem. Since completion of the priority projects is
essential to establish the foundation needed to implement Year 2000
solutions while affecting critical infrastructure changes needed to
stabilize the processing environment, the priority projects cited in
the 1999 Capital Investment Plan were agreed upon by the ITMT as being
the critical efforts the EOP should focus its efforts on during fiscal
year 1999.
Question 23. Why is the Vice President's office requesting funds
for ``the next generation of technology'' outside of the appropriation
for the Capital Investment Plan?
Answer. The estimated cost under object class 31, equipment, allows
for the 25 percent life-cycle replacement of old ADP equipment The 25
percent replacement cycle per year is in keeping with the EOP's overall
strategy to ensure the timely replacement of equipment that is not Year
2000 compliant. The Office of the Vice President has over 100 Personal
Computers (PCS). A 25 percent replacement cycle of 25 PCS per year is
expected with an average acquisition cost of $2,800.00 per unit. The
Office of the Vice President also has peripheral equipment that cannot
support the TCP/IP standard protocol suite cited in ITA, Technical
Reference Model (Appendix C, Section 1.10 Network Services). Therefore,
replacement of the antiquated devices is essential to maintain network
printing services for the OVP while the EOP implements the 1999 Capital
Investment Plan projects.
year 2000--management oversight and cost
Question 24. Even though the Y2K problem is one based on
technology, making sure the computers get fixed in time is a management
issue. As it specifically relates to the position ``Director, Office of
Administration:'' What is your role in resolving Y2K problems in the
EOP?
Answer. The Program Manager for the EOP Year 2000 effort is the
Deputy Director for Information Management. The program team, which
consists of dedicated government personnel and contractors, has daily
meetings and provides the Deputy Director with daily status reports
which contain information on activities completed and activity planned
for the following day. As the ultimate responsibility for Year 2000
activities reside within the Office of Administration, the Director is
kept informed, and provides direction in cross agency issues or
problems. In addition, as the Chair of the Information Technology
Management Team (ITMT), the Director provides the high level business
strategy for the prioritization of OA systems, and holds the budget for
the Year 2000 renovation and assessment.
Question 25. How often, and with whom, do you review status
reports?
Answer. In addition to the above daily activities, weekly status
reports are provided to the Director. The Director is also briefed
prior to any major deliverable in the assessment schedule. Briefing
parties may consist of the Deputy Director or the Y2K team itself.
Question 26. Do these status reports provide you insight into which
of your core business functions may be in jeopardy?
Answer. Yes; the EOP is currently completing the assessment phase
of its custom application programs. These reports have been valuable in
providing information to the EOP about its enterprise, and have served
to identify not only the physical inventory, but system owners and
other critical system data. As the renovation efforts begin, we will
continue to highlight areas of concern and success.
Question 27. How confident are you that the EOP will be ready by
OMB's date of March 1999 or by the time it is critical to EOP's
operations -which may be before January 1, 2000?
Answer. With proper funding levels, we are confident that the EOP
mission critical systems will be operational by March of 1999.
Question 28. Have you prioritized the systems supporting the EOP's
mission and core business functions? Have you reviewed the renovation
and/or replacement schedules to see if they are reasonable? Has the
ITMT approved your priority list?
Answer. The EOP prioritized the systems that support mission
critical and core business functions at the March 31st meeting of the
ITMT. Based on that prioritization, renovation/replacement schedules
are being developed and will be reviewed with the ITMT for validation
and reasonableness of schedule. The ITMT has approved the priority
list.
The EOP is currently completing the assessment phase of its custom
application programs. These reports have been valuable in providing
information to the EOP about its enterprise, and have served to
identify not only the physical inventory, but system owners and other
critical system data. As the renovation efforts begin, we will continue
to highlight areas of concern and success.
Question 29. What is the total estimate for Y2K for the EOP?
Answer.
Fiscal year Cost
1996.................................................... $100,000
1997.................................................... 500,000
1998.................................................... 2,500,000
1999.................................................... 12,800,000
2000.................................................... 500,000
--------------------------------------------------------
____________________________________________________
Total............................................. 16,400,000
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Capital Salary/
Fiscal year Contractor investment Deducated benefits Total
studies plan FTE \1\ cost cost
----------------------------------------------------------------------------------------------------------------
1996................................................... .......... N/A 0.8 $0.1 $0.1
1997................................................... $0.4 N/A 1.5 .1 .5
1998................................................... .......... $2.0 6.0 .5 2.5
1999................................................... .......... 12.2 8.3 .6 12.8
2000................................................... .......... 0.3 4.0 .2 .5
--------------------------------------------------------
Totals........................................... .4 14.5 N/A 1.5 16.4
----------------------------------------------------------------------------------------------------------------
\1\ ``FTE'' refers to the number of full-time-equivalent staff working on the Y2K issue during that fiscal year.
Contractor studies refers to consulting contracts for Y2K-related
studies funded from the Office of Administration current-services-level
appropriation (instead of being funded through the Capital Investment
Plan; it is anticipated that most, if not all, fiscal year 1998-fiscal
year 2000 Y2K contract funding will emanate from the CIP). During
fiscal year 1997, OA funded two studies from its current-services-level
appropriation: (1) a $319,337 study to develop a proposed architectural
blueprint--the first stepping-stone from which we have launched
subsequent Y2K efforts; and (2) a $44,016 Y2K-related inventory of the
EOP's commercial off-the-shelf software.
Capital investment plan refers to the funds appropriated which
provide ``for the modernization of the information technology
architecture.'' The CIP exists for the first time in fiscal year 1998,
with a funding level of $2.0 million; the EOP's request for fiscal year
1999 is $12.2 million. Our plan is that all of these funds will be
targeted directly to Y2K issues during fiscal year 1998 and fiscal year
1999. Although we have not yet formulated our fiscal year 2000 budget
request, our current expectation is for approximately $0.3 million
during fiscal year 2000 for Y2K wrap-up of non-mission-critical
systems. We do anticipate other fiscal year 2000 CIP needs unrelated to
the Y2K issue.
Dedicated FTE refers to the number of work-years from Information
Systems and Technology and other OA staff who are working on Y2K
issues.
Estimated salary/benefits costs is an approximation of the cost to
the government of staff time dedicated to the Y2K effort. The current
funding allocated for IST staff is $3,171,902; with full staffing of 44
persons, assuming a 4 percent vacancy rate gives an anticipated FTE of
42.2. Thus, the average salaries/benefits cost is $75,164. Assuming the
following numbers of staff dedicated to Y2K efforts per year, here are
the specific cost estimates multiplying the dedicated FTE times the
average salary/benefits of $75,164:
Fiscal year 1996, 3 staff at 25 percent of their time (0.8 FTE);
$60,131.
Fiscal year 1997, 3 staff at 60 percent of their time (1.8 FTE);
$135,295.
Fiscal year 1998, 8 staff at 75 percent of their time (6.0 FTE);
$450,984.
Fiscal year 1999, 11 staff at 75 percent of their time (8.3 FTE);
$623,861.
Fiscal year 2000, 4 staff at 75 percent of their time (3.0 FTE);
$225,492.
Total cost is a summation of all known cost categories related to
the Y2K effort.
Note.--Section 43 of OMB Circular A-11 addresses ``Cost of the year
2000 activities;'' it states, in part, ``Do not include obligations for
upgrades or replacements that would otherwise occur as part of the
normal system life cycle.''
Question 30. What do you expect from the recently announced
President's Council on the Year 2000? To date, what has your
interaction with the Council been?
Answer. The President's Council provides government-wide guidance
to our Y2K initiative in much the same manner as the Council provides
guidance other federal agencies. Since its inception in March, the
Director and the Deputy Director have met with the head of the
President's Council, and expect to continue our cooperative
relationship and dialogue on a bi-monthly basis.
year 2000--``exchange partners''
Question 31. Even if the EOP completes the renovation of
application systems in its portfolio, the systems may not be operable
because agreements on sharing data with processing partners both within
and outside the Federal government may not be in place. If agencies
cannot process each others data, then the business operations stop. Has
the EOP identified its critical processing partners with whom it will
exchange data information? Has the EOP signed any agreements with these
partners regarding the exchange of data?
Answer. The EOP is in the process of completing its custom
application assessment, and as part of that process all critical
processing partners and external interfaces will be identified.
However, as part of this ongoing initiative, some critical partners
have already been identified. One is the DOD Financial Accounting
Center located in Pensacola, Florida; this is the entity which will
process our payroll and personnel system. An interagency agreement
(IAG) has already been signed.
The second critical interface requirement already identified
resides in the President's Budget System or MAX. While MAX has many
components, the data entry piece or the A11 System has external
interfaces to all Federal agencies, as this is the system which
provides the mechanism to input budget data. As part of the renovation
phase of MAX, language for an IAG will be included for dissemination to
all user agencies.
As the assessment phase within the EOP completes, part of the
discovery will include the identification of all critical processing
partners and external interfaces. Recommendations and/or remedies will
be suggested for all identified.
Question 32. How will the EOP ensure that erroneous data from
outside systems do not contaminate your files?
Answer. With respect to external interfaces, we are developing a
solution which ties an enhanced firewall with Y2K software which will
check for non-Y2K compliant data.
white house communications agency
Question 33. The White House Communications Agency has been
criticized for its lack of accountability and management problems. In
order to establish some measure of accountability for the operations of
this group, the Committee directed the White House to develop a system
for verifying and tracking all reimbursements made to WHCA. Has the
interagency agreement between the White House and WHCA allowing for
reimbursable services been signed? Please provide a copy for the
record.
Answer. Yes. See Exhibit 8.
Question 34. Have you signed a Memorandum of Understanding (MOU)
outlining the categories of services to be provided by WHCA? Please
provide a copy for the record.
Answer. Yes. See Exhibit 9.
Question 35. The budget justification materials include an estimate
of $642,000 for capital improvements in fiscal year 1998 and a request
of $785,000 for capital improvements in fiscal year 1999. Specifically,
what are these capital improvements?
Answer. Capital Improvements totaling $642,000, included in fiscal
year 1998 budget submission: Audio/Video Equipment, $542,000; Photo
Equipment, $100,000.
Capital Improvements totaling $785,000, included in fiscal year
1999 budget submission: Audio/Video Equipment, $731,000; Staging
Equipment, $54,000.
Question 36. For the record, describe the specific audio-visual
services by category: Presidential Travel, Mission Support, and Photo
Lab.
Answer. Audio-Visual services by category:
Presidential Travel (Presidential Audiovisual Events (PAE) Production)
--Provides a PAE coordinator to oversee quality, planning and
execution;
--Audio/video recording of events for archiving/historical purposes;
--Teleprompter;
--Video recording/playback of news and other programs;
--Audio feeds to White House Press Office and Press Filing Center;
--Public Address support;
--Lighting for Presidential events; and
--Cable television distribution.
Mission Support
--Personnel training;
--Facility leases;
--Utilities; and
--Facility maintenance.
Photo Lab
--Provides film processing of prints and mounts still black and white
and color photographs.
______
Questions Submitted for the Record by Congressman Robert L. Livingston
office of the counsel to the president
Question 1. Could you provide a list of names and titles of all
personnel employed by, or detailed or in any other manner attached to,
the Executive Office of the President who are working on any matter
involving an investigation by any component of the Department of
Justice, or any Independent Counsel? For each employee, could you
please state their salary and indicate whether such salaries are paid
out of appropriations to the Executive Office of the President or other
Department or Agency accounts.
Answer. The following members of the Counsel's Office staff, all of
whom are paid from EOP appropriations, currently spend some portion of
their time on matters involving investigations by the Department of
Justice or one or more Independent Counsel. In addition, the Counsel
and Deputy Counsels are responsible for supervising this work, as they
do all the work of the Office. Pursuant to the July 1, 1998 Report on
White House Office Personnel, pursuant to Section 6, Public Law 103-
270, the information is as follows:
Special Counsel Lanny Breuer.................................. $107,500
Associate Counsel Dimitri Nionakis............................ 92,000
Special Associate Counsel Sally Paxton........................ 92,000
Associate Counsel Michelle Peterson........................... 92,000
Associate Counsel Karl Racine................................. 92,000
Associate Counsel Michael Imbroscio........................... 75,000
Paralegal Dimitra Doufekias................................... 33,000
Paralegal Deborah Falk........................................ 33,000
Paralegal Erin Green.......................................... 33,000
Assistant/Paralegal Brian Smith............................... 33,000
Question 2. Is any attorney in private practice retained by the
President or the First Lady receiving any compensation from any
component of the Federal government? If yes, could you please provide a
listing of those receiving the compensation, the amount, and the
services being compensated. Are any of the attorneys participating in a
joint defense agreement?
Answer. No.
Question 3. Have persons employed by, or detailed or in any other
manner attached to the Executive Office of the President consulted with
the private attorneys retained by the President or the First Lady or
their respective law firms? If yes, could you please list such
consultations, including the date, time, duration and subject matter.
Did the consultation take place on Federal property?
Answer. See Answer 7, Questions for the Record, The Honorable
Ernest Istook.
Question 4. Are the salaries of volunteers in the Executive Office
of the President, in whole or part, being paid by the law firm of any
attorney retained by the President or the First Lady?
Answer. No.
______
Questions Submitted for the Record by Congressman Steny Hoyer
Question 1. Can you provide for the Committee information on the
following: number of personnel in the Legal Counsels' office; breakdown
of lawyers and staff in the Legal Counsels' office; and, overall
staffing of the Executive Office of the President broken down by
office.
Answer. See Exhibits 1 and 7.
Question 2. What was the fiscal year 1996, fiscal year 1997, and
fiscal year 1998 operating budget for the Counsels' office?
Answer. See Answer 2, Questions for the Record, The Honorable
Ernest Istook.
______
Questions Submitted for the Record by Congressman Ernest Istook
office of the white house counsel
Question 1. Please provide an organizational chart of the office of
the White House Counsel. This chart should include: the names of all
staff in the office of the White House Counsel; titles; job
responsibilities; supervisors; where they are stationed; and lines of
authority.
Answer. See Exhibit 1.
Question 2. Please provide a history of the staffing and expenses
for the office of the White House Counsel, by fiscal year, since
January 20, 1993, to the present, including the names of all people who
have worked in the office of the White House Counsel; titles; job
responsibilities; dates when working for the office of the White House
Counsel; where they were stationed; and the total amount spent by the
office of the White House Counsel for salaries and expenses. For
expenses, please itemize the list.
Answer. Most White House Office obligations and expenditures are
made through a central account for the common support costs of WHO
operations (e.g., telephone service; copier costs, etc.). Only those
costs directly attributed to a particular office--such as salaries and
travel costs--are generally allocated to specific offices within the
White House Office.
For the White House Counsel's Office, the current number of
employees and the current expenditures for fiscal year 1998 are not
significantly different from those of the two previous fiscal years.
The following is a summary of the major categories of obligations and/
or expenditures that are attributable to the Counsel's Office, by
fiscal year:
----------------------------------------------------------------------------------------------------------------
Detailee Travel
Fiscal year Number of Personnel Benefit obligations/ obligations/
employees \1\ expenditures expenditures expenditures expenditures
----------------------------------------------------------------------------------------------------------------
1994................................... 28 $1,464,706 $328,789 $85,213 $7,878
1995................................... 29 1,829,950 423,500 38,274 11,259
1996................................... 33 2,232,343 503,314 ( \3\ ) 9,758
1997................................... 32 2,193,468 497,844 ( \3\ ) 14,553
1998 \2\............................... 34 1,262,741 283,415 ( \3\ ) 10,776
----------------------------------------------------------------------------------------------------------------
\1\ Data calculated as of April 20th or thereabouts of each fiscal year.
\2\ The fiscal year 1998 costs are those actual costs that have been incurred as of April 20, 1998. Note: The
above costs have not been adjusted for inflation.
\3\ Detailee obligations/expenditures are now made through a central account, and are no longer attributed to
specific offices.
For the individuals or positions in which individuals have served
in the White House Counsel's Office, see Exhibits 2 & 3.
Question 3. Please provide any opinions which have been written by
or for the office of the White House Counsel which outline what is an
acceptable activity when determining whether legal work is of an
official or private nature.
Answer. In 1994, at the time of the appointment of an independent
counsel to investigate matters related to the President that preceded
his term of office, the Counsel's Office reviewed the nature of its
role in relation to such an investigation, though it did not prepare or
publish a formal opinion. As is the case for every government legal
office with respect to its agency and agency head, the role of the
White House Counsel's Office is to provide legal representation to the
White House and its many officers and employees in their official
capacity. Consistent with the District of Columbia Rules of
Professional Conduct, the Counsel's Office represents the White House
acting through its ``duly authorized constituents''--its officers and
employees. As the officer who directs the official activities of all
White House officers and employees, the President is the ultimate
``client'' of the Counsel's Office. The President is ``client'',
however, only in his official capacity as President. Thus, for matters
that are entirely personal to the President for which he requires legal
advice, he must retain private counsel, as would be the case for any
other federal employee. Many matters, including independent counsel
investigations, have both official and personal aspects that require
the attention of both official and private lawyers. The Counsel's
Office examines each issue as it arises to ensure that it addresses
only those that relate to the performance of official duties of the
President, White House officers and White House employees--that is,
issues that have an official nexus.
Question 4. What mechanism is in place for tracking the work of
staff of the White House Counsel. Please describe how this mechanism
works. Please provide a sample copy of the mechanism. Are there
periodic work reports while tasks are underway? When tasks are
finished? Please describe the periodic reports. Please provide a sample
copy of a work report.
Answer. See Answer, Question 4, Questions for the Record.
Question 5. For the period beginning January 20, 1993, through the
present, identify all individuals and/or witnesses whom your office has
been involved in debriefing or interviewing regarding their actual or
pending testimony before any Arkansas grand jury; Washington, DC, grand
jury; or any California grand jury. For each individual and/or witness,
please provide the following information: the date of the debriefing or
interview; the location where the debriefing or inter-view took place;
the person(s) present at the debriefing or interview; the general
subject matter of the debriefing or interview.
Answer. This question is identical to one put to the Office of
White House Counsel by Chairman Burton of the Committee on Government
Reform and Oversight. This question constitutes an inappropriate
inquiry into the work of the Counsel's Office. It is entirely proper
for lawyers--in the public or private sector--to speak with witnesses,
or their counsel, both before and after their testimony, whether before
a congressional committee or any other investigative body. Indeed, that
practice is universally recognized to be a necessary part of any
lawyer's effective representation of his client, and has been followed
by Counsel to Republican and Democratic Presidents. Moreover, the
Independent Counsel, the Justice Department, and, indeed, the
investigating committees of the Congress have been fully apprised of
the fact that Counsel's Office speaks with witnesses and their lawyers.
To begin with, as a rule, all government employees look first to
agency counsel for representation in matters related to their official
duties. Where such representation is not available, either because a
congressional committee has decided that it will not permit White House
Counsel to represent the employee, or because preliminary discussion
with the employee suggests that there may be some ethical or legal
impediment to the representation, or because the employee chooses not
to be represented by the Counsel's Office, it is the duty of White
House Counsel to assist the employee to secure personal counsel if the
employee wishes that assistance.
Discussion with a witness or a witness's counsel may then occur in
any number of different settings, all of which are typically treated as
confidential. Of course, where the Counsel's Office represents an
employee-witness, we have the same discussions that would occur in any
attorney-client relationship. Where an employee or former employee is
represented by private counsel, Counsel's Office typically begins by
determining whether the witness's testimony may give rise to special
confidentiality or privilege concerns and whether the witness has, or
knows of the existence of, documents that have been subpoenaed.
Counsel's Office must then communicate to the witness's counsel,
especially when a representative of the Office is not permitted to be
present for the testimony, whatever guidance may be necessary on issues
of privilege. In addition, counsel for a witness, particularly if the
witness is a current or former employee, often will speak with us in
order to obtain information to ensure his client is fully prepared.
Finally, we often speak with either the witness or counsel, or both,
after the witness has testified for the purpose of gathering the
information necessary to represent our client, the Office of the
President.
Beyond the aforementioned concerns, it would be virtually
impossible to respond to the Committee's request. There are no records
that would reflect all contacts with witnesses or their counsel during
the five-plus years and in the multiple forums covered by the request.
Moreover, a search for any records that did exist would be
extraordinarily difficult and time consuming. Nonetheless, to the
extent that it may be relevant to the Committee's concerns to have on
the record a formal statement that Counsel's Office has spoken, and
continues to speak, with witnesses or their lawyers during the period
January 1993 to the present, this will serve as our acknowledgment of
that practice, as described above.
Question 6. For the period beginning January 20, 1993, through the
present, identify all individuals with whom the White House has a joint
defense agreement. For each such individual, please provide the
following information: the date of the agreement; the parties to the
agreement; the general subject matter covered by the agreement; the
reason necessitating that the White House enter into this agreement.
Answer. We know of no such agreements.
Question 7. For the period January 1, 1994, through the present,
please provide the Committee with a log of all attorney work product,
including, but not limited to, letter and memoranda, produced by any
White House attorney and shared with David Kendall, Robert Bennett, or
any other personal attorney representing the President or First Lady.
Regarding any such document, please provide the following information:
the author(s) of the document; the date the document was created; the
recipient(s) of the document; a description of the general subject
matter discussed in the document; the reason necessitating that the
White House share this work product with non-governmental attorneys.
Answer. Again, this question is identical to one put to the Office
of White House Counsel by Chairman Burton.
This inquiry appears to seek information unrelated to the
appropriations process. Moreover, it would be extremely difficult and
unreasonably burdensome to identify and collect the materials outlined
in the question.
To carry out its duties, Counsel's Office is in regular contact
with the President's personal counsel to discuss matters in which the
President's official responsibilities intersect with his
responsibilities to address any private litigation in which he may be
involved. Any listing of the sort the Committee seeks would, of
necessity, implicate confidential communications among lawyers who
represent the private and official interests of the very same client.
For example, in the midst of civil litigation like Jones v.
Clinton, it would be of considerable interest to plaintiff's counsel to
learn when Mr. Bennett and White House Counsel communicated and on what
subjects. Putting aside the confidentiality interests the Counsel's
Office must protect, such a disclosure would impinge directly on the
President's personal attorney-client privilege and on his attorney's
work product.
So that the record is clear, though, let us state again that the
Counsel's Office does not represent the President in his personal
capacity. The work product that the Office creates is in fulfillment of
our responsibility to advise the President in his official capacity.
The Office's communications with the President's private counsel,
including the transmission of any work product, are for the purpose of
addressing the common interests that underlie the representation of a
unique client--one whose constitutionally assigned duties are daily
affected by the burdens of personal litigation.
Question 8. Please list all non-governmental attorneys hired since
January 1, 1994, for the purpose of assisting your office with issues
regarding assertions of executive, attorney-client, attorney work
product, spousal, or other privilege the White House has asserted or
may assert. For each such individual, please provide the following
information: the name of the attorney's law firm; the date the
attorney(s) were hired; the compensation rate of the attorney; the
amount paid to date to outside attorneys assisting in such matters.
Answer. This question is also identical to one put to the Office of
White House Counsel by Chairman Burton. The information is as follows:
a. W. Neil Eggleston, Howrey & Simon, was appointed a special
government employee in August, 1995, and more recently on February 18,
1998. Because counsel is retained by the Department of Justice on
behalf of the White House, all matters regarding compensation are
handled by the Department.
b. Andrew Frey, Mayer, Brown & Platt, was appointed a special
government employee in September, 1996. Because counsel is retained by
the Department of Justice on behalf of the White House, all matters
regarding compensation are handled by the Department.
Question 9. Please provide the names of any nongovernmental
attorney hired to assist your office responding to any matter under
investigation by the Department of Justice or Independent Counsel. For
each such individual, please provide the following information: the
name of the attorney's law firm; the date the attorney(s) were hired;
the compensation rate of the attorney; the amount paid to date to
outside attorneys assisting in such matters; the general subject matter
upon which any such attorney worked.
Answer. This question is also identical to one put to the Office of
White House Counsel by Chairman Burton.
There are no attorneys responsive to this question other than those
listed in response to the preceding question.
Question 10. Please provide a copy of talking points, memos,
minutes of meetings, and E-mail used to prepare Ms. Posey for questions
about the use of the White House Counsel.
Answer. See Exhibit 4.
previous information compiled by the white house
Question 11. A December 13, 1994 ``Task List'' memo created by Jane
Sherburne lists several items which could be questionable expenditures
of federal funds. To be fully informed as to why the White House
expended taxpayer funds to create these documents, I request the
``binder with summary and key documents'' for the following items from
the December 13, 1994 memo: Cisneros, Brown, Hubbell, Ickes,
Stephanopoulos, State Department (passport file), Archives (abuse of
personnel systems), SBA (improper electioneering), GSA (Roger Johnson),
FEC Audit, PIC surplus, Mena Airport, ADFA, Use by Governor Clinton of
loans to further legislative initiatives, Commodities, Paula Jones,
Troopers.
Answer. During the course of various congressional and other
investigations regarding the entities, individuals, and topics
described above, the Counsel's Office undoubtedly has had occasion to
create, receive and produce materials related to some of these areas.
We are not aware, however, that Ms. Sherburne, or any other member of
the Counsel's Office, created any ``binder'' or ``key documents'' for
her task list. Rather, it is our understanding that Ms. Sherburne's
task list was generated based upon newspaper and other media accounts.
Question 12. For the above question, please include the following
information: who created the documents; when they were created; has the
White House shared this information with anyone? If so, who? When? The
reason necessitating that the White House compile this information?
Answer. See Answer to Question 11, immediately above.
Question 13. The same December 13, 1994 memo lists, under item No.
21, ``interview Kendall/review Kendall documents.'' Please provide a
copy of this interview and related documents.
Answer. See Answer to Question 11, above.
administration of the executive office of the president
Question 14. Please provide a breakdown of the funding, since
January 20, 1993, for the White House Office (WHO) for salaries and
expenses by fiscal year. This list should breakout each of the WHO
offices (White House Counsel, Legislative Affairs, etc.) including the
number of FTE, volunteers, and detailees in each of the WHO offices.
Answer. See Exhibit 5.
Question 15. Please provide a breakdown of the number of detailees,
since January 20, 1993, within the White House Office by fiscal year.
This list should include the following information: the supplying
agency; where the detailees were stationed; their title; the length of
time they were detailed to the WHO; who they worked for in the WHO
(White House Counsel, Legislative Affairs, etc.).
Answer. See Exhibit 3.
Question 16. What contracts in excess of $100,000 has the Executive
Office of the President entered into since January 20, 1993? This list
should include the following information: the name of the contracting
individual/company; the purpose of the contract; the duration of the
contract; the size, in dollars, of the contract.
Answer. See Exhibit 6.
Question 17. The White House IS&T office has the task of keeping
all electronic records within the White House due to the Armstrong
case. Please describe the situation created by the Armstrong case in
the White House IS&T office. Since the Armstrong case began, what has
the White House expended on this electronic record keeping? How many
electronic storage tapes has the White House accumulated since the
Armstrong case began? How many storage tapes does the White House fill
up per day? What is the cost per storage tape? It is my understanding
that in the future the cost of storage tapes will increase. If so, to
what amount? It is my understanding that the White House has reached an
agreement to begin transferring these storage tapes to the National
Archives. Please describe this agreement. At what rate is the White
House able to convert data to be able to transfer it to the National
Archives? At this rate, when will the White House totally convert the
backlog of tapes stored within the IS&T office?
Answer. The Armstrong Court mandated that the Executive Office of
the President (EOP) establish an automated records management system to
preserve all electronic mail records and electronic communications
(such as Internet mail). IS&T initially spent approximately 18 months
developing the Automated Records Management System (ARMS) to perform
this function.
Subsequently, IS&T expended another 6 months developing an
interface between ARMS and the EOP's new E-mail platform, Lotus NOTES.
The EOP generates approximately 250,000 electronic records each month.
All of these records are collected and managed by the ARMS system and
have been kept on-line since July 14, 1994.
White House Expenditures for Electronic Record-Keeping Since Armstrong
Since July 1994, the EOP has expended $8,108,956 in equipment,
contractor services, space, communications, utilities and supplies to
implement the Armstrong mandate. Salaries for government personnel
supporting this effort exceed $1,400,000, and have been paid for by the
EOP's sustaining budget. In addition, the EOP anticipates having to
procure new computer hardware before the end of the Administration. The
current hardware configurations used to support this effort were
purchased between 1990 and 1993, and failures of the older equipment or
the equipment's monthly maintenance will become so excessive that the
EOP will be forced to purchase new hardware to replace these aging and
much-used systems.
Number of Stored Electronic Tapes Since Armstrong
The EOP IS&T office has 25,850 tapes stored either at the IS&T Data
Center or at an off-site facility. These tapes have an average shelf
life between 4 and 7 years. To ensure that the tapes remain useable,
the EOP conducts an annual sample survey of 384 tapes.
Storage Tapes Usage
The ARMS system is currently generating approximately 130 tapes per
week, averaging 20 per day. Historically, since 1994 the EOP has seen a
700 percent increase in the number of tapes created each week.
Weekly Tapes Created for ARMS: 1994, 18 per week; 1995, 25 per
week; 1996, 46 per week; 1997, 81 per week; and 1998, 130 per week--
Estimate EOP will purchase 6,760 tapes for 1998.
Projections based on current growth factors: 1999--180 per week,
9,360 for the year; and 2000--249 per week, 12,948 tapes for the year.
Current storage costs
Current storage costs are estimated at $20,280. In addition,
storage of these tapes will require more tape racks which will require
additional floor space (at $55/sq. ft.) for an additional expense of
approximately $5,000/year. As the tape volume increases, additional
manpower will be required to handle the creation of storage of these
tapes (estimated to be an additional FTE at an expense of $50-60,000
per year).
Future storage costs
With the growth in the volume of electronic mail and the quantity
of servers required to support the E-mail and electronic correspondence
systems, the EOP anticipates having to use faster and larger tapes to
handle the increase in volume. The new tapes will hold 9 gigabytes of
data each, and cost $80-90 each depending on the quantity purchased. If
we migrate to the new tape drives are purchased at an anticipated cost
of $15,000, it will still cost the EOP $18,720 for tapes at $90.00
each.
National Archives Agreement
The EOP has an agreement with NARA for the reconstruction of
electronic records from November 1991 to July 1994. Reconstruction of
these records, which are stored on 15,500 tapes, has recently been
initiated, and the EOP will proceed with reconstructing the records and
producing tapes for NARA for electronic mail for the older E-mail
system (All-in-One) that was used during this time frame. This project
is expected to be completed in early 1999.
The EOP does not have an agreement in place with NARA for the
transfer of ARMS tapes representing the period July 14, 1994 to the
present. The ARMS system produces tapes that conform to the letter of
the NARA regulations, and NARA can both read and understand them.
However, negotiations continue with NARA over technical aspects of the
contents of these tapes and until such time as NARA and the EOP can
agree, the EOP continues to produce tapes daily. The inventory of tapes
is in excess of 10,000 for the ARMS electronic records. At the end of
the Administration, we expect to deliver tapes to NARA. However, if
NARA delays or changes the tape formats, the EOP will not be able to
deliver the approximately 40,000 tapes we expect to produce.
Conversion Rate of Data for National Archives
The EOP can only transfer data to the National Archives at the end
of an Administration in the case of a single term, or at the end of the
second term. For example, NARA will not accept any Clinton
Administration material at this time.
As stated previously the EOP is reconstructing electronic mail
records for the period 11/91 to 7/94 and will deliver tapes covering
the period 11/91 to 1/93.
Anticipated Completion of Conversion of Backlog Tapes
If NARA requires the EOP to reformat the ARMS tapes, another
significant reconstruction project will have to be implemented. To
convert the existing 10,000 tapes and produce new tapes will require
new software and operations staff to conduct the reformatting and
production of new tapes. EOP estimates that it will take approximately
18 months to reconstruct and generate the tapes for the period 7/94 to
1/98. The longer NARA delays in establishing a new acceptable format,
the larger the reconstruction process will be. Since the EOP's
historical data shows a 38 percent increase between 1997 and 1998, if
one were to project the same 38 percent growth, by the year 2000 we
will produce almost 13,000 tapes.
white house counsel office
Question 18. Do any of the following people have workstations,
office space, or administrative support, within the Executive Office of
the President, including the White House: Robert Bennett, Mickey
Kantor, David Kendall, Harry Thomason, James Carvell, Harold Ickes. If
so, what federal government interest is served by this?
Answer. No.
ira magaziner/health care task force lawsuit
Question 19. During the Health Care Task Force, (HCTF) White House
lawyers engaged in deceptive and misleading characterizations of the
people staffing the HTCF. Please provide the following information: a
list of all White House attorneys who prepared the briefs filed in the
HCTF case, by brief filed. If these lawyers are still employed within
the EOP, where are they employed?
Answer. The Department of Justice represented the White House
Office in this litigation; hence, attorneys from the Department, and
not the White House, filed all of the briefs in this matter.
______
Questions Submitted for the Record by Congresswoman Anne M. Northup
white house interns
Question 1. How many interns are accepted on staff at any one time?
How many are paid? How many are volunteers?
Answer. The White House Intern Program typically has more than 200
interns each session. All interns are volunteers and thus are not
compensated for their service.
Question 2. During the past 4 years, how many interns have
investigated full time positions at the White House?
Answer. We do not know the number of interns who have sought full-
time positions at the White House because the Intern Office does not
track that type of information.
Question 3. During the past 4 years, how many of these interns were
successful in acquiring full time positions in the White House?
Answer. Informal surveys show that it is not uncommon for support
staff positions to be filled by former White House interns. The White
House does not systematically track information on the number of
interns who gain full-time employment at the White House; thus, we do
not know the number of current White House staff members who have also
served as interns.
white house protocol
Question 4. Does the White House have an employee handbook?
Answer. Yes.
Question 5. Is there a section on employee fraternization, dating
and/or sexual harassment? If not, are there regular federal employee
procedures in effect?
Answer. The White House Office Staff Manual, most recently re-
issued in 1997, includes information about the White House Office's
policy on discrimination and sexual harassment. This information
summarizes the EOP's ``Sexual Harassment Prevention Policy'' that was
published by the Assistant to the President for Management and
Administration in October of 1995. Additionally, the EOP's Office of
Administration's Human Resources Management Division distributes a
booklet entitled ``Preventing and Addressing Sexual harassment.''
Finally, periodic training sessions on this topic have been held for
EOP employees.
Question 6. Is there a regular employee evaluation for paid staff.
After joining the staff, when does first evaluation take place?
Answer. While many managers and supervisors elect to provide
regular evaluations for their staff, under Title 3 of the United States
Code, the White House Office is not required to perform regularly
scheduled evaluations for staff members.
Question 7. The President of NOW has called on all elected federal
officials to sign a form committing to personally restraining
themselves and all employees from having a sexual relationship with
interns. Do you expect the White House to sign that form?
Answer. We have not yet had occasion to review or consider the
aforementioned proposal.
year 2000
Question 8. Now that the EOP has an information technology
architecture, what is the projected time frame for when the EOP
computer systems will be prepared for the year 2000?
Answer. All mission critical systems are expected to be operational
by March 31, 1999.
information technology architecture
Question 9. Prior to 1997 each EOP agency acted independently in
procuring information technology without considering redundancy,
interchange ability or support requirements. Funding has been fenced
until an architectural blueprint was submitted. The blueprint was
submitted in February 1998. What type of information is included in
this new system?
Answer. The initial EOP architecture, or roadmap document, was
first submitted in July of 1997. The EOP Information Technology
Architecture model refined and submitted in February of 1998, provides
a comprehensive description of the current technical infrastructure
that supports information processing of the EOP. In addition, it
provides a future technical infrastructure that reflects current and
emerging user requirements, as well as provides a recommended path or
``roadmap'' for getting from the current technical infrastructure to
the future technical architecture.
Question 10. Is all of the information available on the system
available to all personnel?
Answer. A copy of all architecture information is available to all
EOP personnel.
government performance and result act (gpra)
Question 11. What measures has the EOP taken to ensure that the EOP
is operating efficiency and effectively?
Answer. In its role as the provider of EOP administrative services,
the Office of Administration (OA) has compiled and distributed monthly
performance statistics covering a range of its services since 1996.
Although OA is not covered by GPRA, our intent is to comply fully with
the spirit of GPRA by continually refining and updating the performance
measures. We intend to use performance measures as a management tool to
aid agency staff in the allocation of agency resources, to ensure that
OA services are responsive to customer concerns, and to focus
management attention on the agency's effectiveness in achieving its
objectives.
Statistics currently collected include:
Facilities: processing of alterations/repairs/moves; distribution
of space allocation/rent bills.
Financial Management: processing of travel vouchers, imprest fund
claims, requisitions, and accounting transactions; delivery of monthly
accounting reports and financial analyses.
General Services: delivery of interoffice mail; delivery of high-
priority ``red tag'' and courier mail; delivery of certified mail, air
express, and small packages delivery/cost of print jobs; timeliness of
composition/design graphics work; office supply order fulfillment and
timeliness; procurement order timeliness (small purchases, contracts,
federal supply schedules).
Human Resources: timeliness and accuracy of personnel transactions;
timeliness of vacancy announcements, certificates.
Information Systems and Technology: timeliness of help desk calls.
Library and Research Services: timeliness of research services;
timeliness of periodical processing; timeliness of book/CD-ROM
processing; interlibrary loan request timeliness; acquisitions of
books; subscription renewals; dissemination of publications.
______
[exhibit 1]
Office of Counsel to the President As of April 20, 1998
Counsel to the President, Charles F.C. Ruff
Deputy Counsel to the President, Bruce R. Lindsey
Deputy Counsel to the President, Cheryl D. Mills
General Matters
Associate Counsel--Meredith Cabe
Associate Counsel--Dawn Chirwa
Special Counsel--Edward Correia
Associate Counsel--Lisa Hertzer * \1\
---------------------------------------------------------------------------
\1\ The persons designated with an asterisk (*) are Justice
Department detailees who assist in providing general legal advice (1
attorney) and in reviewing potential judicial nominees (currently 1
attorney, 1 paralegal).
---------------------------------------------------------------------------
Associate Counsel--William Marshall
Special Counsel--Michael Waitzkin
Senior Counsel--Robert Weiner
Nominations
Senior Counsel--Mark Childress
Attorney-Advisor--Michael O'Connor * (Judicial Nominations)
Staff Attorney--Stacy Reynolds
Financial Review and Ethics
Associate Counsel--Virginia Canter
Investigations and Litigation
Special Counsel--Lanny Breuer
Associate Counsel--Michael Imbroscio
Associate Counsel--Dimitri Nionakis
Special Associate Counsel--Sally Paxton
Associate Counsel--Michelle Peterson
Associate Counsel--Karen Popp
Associate Counsel--Karl Racine
Press and Public Inquiries
Special Advisor--James Kennedy
Special Associate Counsel--Adam Goldberg
Support Staff
Executive Assistant to the Counsel--Ora Theard
Executive Assistant to the Deputy Counsel--Melissa Prober
Executive Assistant to the Deputy Counsel--Melissa Murray
Executive Assistant--Edward Hughes
Staff Assistant--Douglas Band
Paralegal--Jonathan Becker *
Staff Assistant--Alissa Brown
Paralegal--Dimitra Doufekias
Paralegal--Deborah Falk
Paralegal--Erin Green
Paralegal--Rochester Johnson
Staff Assistant--Tanya Miller
Paralegal--Suzanne Moreno
Assistant/Paralegal--Brian Smith
Job Responsibilities.--As of April 20, 1998, the number of regular
staff was 34, including 19 attorneys performing legal work, 13
assistants or paralegals, and 2 staff (one of whom is a lawyer by
training) responsible for responding to press and other public
inquiries that come to our Office. The White House Counsel and the two
Deputy Counsels are responsible for the overall management of the
Office. Of the remaining 16 regular attorneys, 7 were assigned on an
ongoing basis (together with 4 paralegals) to congressional,
Independent Counsel, and Justice Department investigative matters, and
to litigation in which the Executive Office of the President (``EOP'')
or EOP officials are parties. Six staff lawyers (and one detailee from
the Justice Department) were responsible for providing general legal
advice to White House staff on a wide range of matters, including
legislation, pardons, ethics, privilege, misuse of the President's name
and image, appropriations, travel, political activity, and other areas
related to the Office of the President.
The Senior Counsel for Nominations supervises the background
clearance process for presidential nominations and appointments,
including both judicial and nonjudicial nominees; one staff attorney
assists the Senior Counsel; and, one Associate Counsel supervises the
financial and conflicts of interest clearance process for presidential
nominees.
To assist in the clearance of presidential nominees, agencies have
historically detailed attorneys to work in the Counsel's Office for
terms typically ranging from 3 to 6 months; the number of detailees
varies based upon the volume of candidates to be processed. As of April
20, 1998, there were six (6) detailees performing the review of the
background and financial information on potential presidential
appointees to assist in making recommendations regarding their
suitability for service. None of these detailees works on any
investigative matter. These detailees were from the following agencies:
Department of Health and Human Services, Department of Labor (1),
Department of Navy (1), Department of Transportation (1), Department of
Veterans' Affairs (1), and the National Labor Relations Board (1).
Lastly, it has been the practice in this Administration for the
Justice Department to detail lawyers and paralegals to the Office to
assist in the review of potential judicial nominees. One lawyer and one
paralegal were assigned for this purpose as of April 20, 1998.
Stations.--Counsel's Office staff are located in the White House or
the Old Executive Office Building.
Lines of Authority.--Lawyers listed under the heading
``Investigations and Litigation'' report through Special Counsel Breuer
to the Front Office. Staff responsible for nominations and financial
review reports to the Front Office through the Senior Counsel for
Nominations and through the Associate Counsel handling the financial
and conflicts of interest clearance process. Finally, the lawyers
listed under the heading ``Other Matters'' report directly to the Front
Office.
Summary.--As of April 20, 1998, the staff of the Counsel's Office
consisted of the following:
Regular Staff:
Attorneys..................................................... 19
Press/public inquiry staff.................................... 2
Assistants/paralegals......................................... 13
Detailees:
Attorney (detailed from Justice Department--general legal
advice)..................................................... 1
Attorney (detailed from Justice Department--judicial
nominations)................................................ 1
Attorneys (detailed from various agencies--nominations
clearance).................................................. 6
Paralegal (detailed from Justice Department--judicial
nominations)................................................ 1
-----------------------------------------------------------------
________________________________________________
Total....................................................... 43
______
EXHIBIT 2.--EMPLOYEES OF THE WHITE HOUSE COUNSEL'S OFFICE FROM 1/20/93
THROUGH THE PRESENT
[As of 4/20/98]
------------------------------------------------------------------------
Name/title Start date End date
------------------------------------------------------------------------
Allen, Susan, Paralegal....................... 7/28/97 3/20/98
Band, Doug, Staff Assistant................... 5/20/96 ...........
Bohn, Catherine, Staff Assistant.............. 9/26/96 3/01/97
Breuer, Lanny, Special Counsel to the
President.................................... 2/18/97 ...........
Brown, Alissa, Staff Assistant................ 8/18/97 ...........
Bueno, Edgar, Paralegal....................... 2/05/93 8/04/94
Burke, Elayne, Staff Assistant................ 4/15/93 5/21/93
Cabe, Meredith, Associate Counsel to the
President.................................... 10/06/97 ...........
Canter, Virginia, Associate Counsel to the
President.................................... 5/12/97 ...........
Castello, James, Deputy Counsel to the
President.................................... 3/13/95 3/18/96
Castleton, Thomas, Special Assistant to the
Counsel and Document Manager................. 6/16/93 9/19/94
Cerda, Clarissa, Assistant Counsel to the
President.................................... 1/20/93 7/15/95
Cerf, Christopher, Associate Counsel to the
President.................................... 12/07/94 4/26/96
Champagne, Florence, Legal Secretary.......... 2/05/93 2/17/95
Childress, Mark, Senior Counsel for
Nominations.................................. 3/17/98 ...........
Childs, Mary, Security Assistant.............. 10/02/84 2/13/93
Chirwa, Dawn, Associate Counsel to the
President.................................... 9/05/95 ...........
Connaughton, Jeffrey, Special Assistant....... 10/03/94 11/14/95
Correia, Edward, Special Counsel to the
President for Civil Rights................... 2/03/98 ...........
Cutler, Lloyd, Special Counsel to the
President.................................... 3/27/94 9/30/94
Dannenhauer, Jane, Assistant to the Counsel... 1/21/81 3/01/93
Davis, Lanny, Special Counsel to the President 12/10/96 1/30/98
Demille Wagman, Deborah, Assistant Counsel to
the President................................ 10/01/94 12/16/94
Denbo, Jonathan, Security Assistant........... 9/19/95 7/30/96
Doufekias, Dimitra, Paralegal................. 3/25/97 ...........
Dudley, Jennifer, Executive Assistant to the
Deputy Counsel to the President.............. 7/17/95 11/08/97
Eggleston, W. Neil, Associate Counsel to the
President.................................... 9/27/93 9/08/94
Erichsen, Peter, Associate Counsel to the
President.................................... 3/16/97 11/07/97
Fabiani, Mark, Special Associate Counsel to
the President................................ 4/03/95 12/09/96
Falk, Deborah, Paralegal...................... 3/10/97 ...........
Fein, David, Associate Counsel to the
President.................................... 2/13/95 12/21/96
Fielder, J. David, Special Assistant Counsel
to the President............................. 10/29/95 3/15/96
Special Assistant Counsel................. 4/14/96 7/12/96
Foster Jr., Vincent, Deputy Assistant to the
President and Deputy Counsel................. 1/20/93 7/20/93
Goldberg, Adam, Special Associate Counsel..... 12/11/96 ...........
Gorham, Deborah, Staff Assistant to the Deputy
Counsel...................................... 3/08/93 11/19/93
Green, Erin, Paralegal........................ 3/31/97 ...........
Holliday, Kimberly, Secretary to the Special
Counsel to the President..................... 1/04/95 3/29/96
Hughes, Edward, Executive Assistant........... 4/12/94 ...........
Imbroscio, Michael, Associate Counsel to the
President.................................... 3/03/97 ...........
Johnson, Kari, Staff Assistant, Security
Office....................................... 7/30/90 2/16/93
Johnson, Rochester, Paralegal................. 3/20/95 ...........
Kagan, Elana, Associate Counsel to the
President.................................... 7/10/95 1/05/97
Kaplan, Eloise, Researcher.................... 11/17/93 8/13/94
Kelly, Erin, Legal Assistant.................. 1/04/96 7/26/96
Kennedy, James, Special Advisor to the Counsel 2/01/98 ...........
Kennedy, William, Associate Counsel to the
President.................................... 2/10/93 11/21/94
Klain, Ronald, Associate Counsel to the
President.................................... 1/20/93 2/12/94
Klein, Joel, Deputy Counsel to the President.. 12/01/93 4/01/95
Kopp, Jonathan, Law Clerk..................... 10/18/93 12/10/93
Krislov, Marvin, Assistant Counsel to the
President and Special Counsel for Information
Policy....................................... 2/27/94 3/30/96
Lehane, Christopher, Special Assistant to the
Special Counsel to the Presi- dent.......... 7/17/95 1/09/97
Lindsey, Bruce, Assistant to the President and
Deputy Counsel to the Presi- dent........... 10/03/94 ...........
Lister, Susan, Staff Assistant to the Counsel. 1/20/93 2/26/93
Livingstone, D. Craig, Assistant to the
Counsel to the President (Security).......... 2/08/93 6/26/96
Luna, David, Special Assistant................ 9/11/96 3/15/97
Madsen, Marna, Staff Assistant................ 3/27/95 9/14/96
Markman, Natalie, Staff Attorney.............. 10/18/93 2/26/94
Marshall, William, Associate Counsel to the
President.................................... 1/15/97 ...........
Massey, Michael, Paralegal/Legal Assistant.... 2/27/96 3/21/97
Mauton Jr., Clifford, Paralegal............... 10/27/93 8/02/97
Mikva, Abner, Counsel to the President........ 10/01/94 11/01/95
Miller, Jennifer, Assistant to the Associate
Counsel...................................... 1/28/93 4/25/94
Miller, Tanya, Staff Assistant................ 3/02/97 ...........
Mills, Cheryl, Deputy Assistant to the
President and Deputy Counsel................. 1/20/93 ...........
Mixell, Julie, Assistant to the Deputy Counsel 12/01/93 4/01/95
Moreno, Suzanne, Paralegal.................... 3/25/98 ...........
Murray, Melissa, Staff Assistant.............. 5/01/95 3/03/97
Executive Assistant to the Deputy Counsel. 11/05/97 ...........
Nemetz, Miriam, Associate Counsel to the
President.................................... 1/04/95 3/14/97
Neuwirth, Stephen, Associate Counsel to the
President.................................... 1/20/93 7/22/96
Nionakis, Dimitri, Associate Counsel to the
President.................................... 3/04/97 ...........
Nolan, Beth, Associate Counsel to the
President.................................... 2/02/93 7/25/95
Nussbaum, Bernard, Assistant to the President
and Counsel.................................. 1/20/93 4/05/94
O'leary, Ann, Executive Assistant to the
Deputy Counsel............................... 11/14/94 7/15/95
Pappas, Peter, Assistant Counsel.............. 1/20/93 1/15/94
Pascale, Joseph, Researcher................... 3/01/94 2/10/95
Paxton, Sally, Special Associate Counsel...... 3/07/96 ...........
Peterson, Michelle, Associate Counsel to the
President.................................... 2/09/97 ...........
Pond, Betsy, Staff Assistant.................. 3/22/93 9/04/95
Poole, Cheryl, Executive Assistant to the
Special Counsel to the President............. 3/27/94 10/01/94
Popp, Karen, Associate Counsel to the
President.................................... 12/22/96 ...........
Prober, Melissa, Executive Assistant to the
Deputy Counsel............................... 10/06/97 ...........
Quinn, John, Counsel to the President......... 10/25/95 2/17/97
Racine, Karl, Associate Counsel to the
President.................................... 5/27/97 ...........
Radd, Victoria, Associate Counsel to the
President.................................... 12/01/93 2/09/98
Rapp, Jason, Assistant to the Associate
Counsel...................................... 4/25/94 3/10/95
Reynolds, Stacy, Researcher................... 4/06/94 ...........
Rosenberg, David, Researcher/Writer........... 7/06/93 10/29/93
Ruff, Charles, Counsel to the President....... 2/09/97 ...........
Schroeder, Robert, Associate Counsel to the
President.................................... 10/01/95 8/08/97
Sherburne, Jane, Special Associate Counsel to
the President................................ 4/25/94 10/15/94
Special Counsel to the President.......... 1/04/95 1/11/97
Sloan, Clifford, Associate Counsel to the
President.................................... 6/14/93 3/10/95
Smith, Brian, Assistant/Paralegal............. 3/10/97 ...........
Stucke, Dorothy, Staff Assistant.............. 2/15/93 9/20/93
Sweitzer, Cheryl, Executive Assistant to the
Counsel to the President..................... 12/19/94 2/11/97
Theard, Ora, Executive Assistant to the
Counsel to the President..................... 2/23/97 ...........
Tripp, Linda, Executive Assistant to the
Counsel to the President..................... 1/30/94 8/21/94
Waitzkin, Michael, Special Counsel to the
President.................................... 4/14/97 ...........
Walker, Odetta, Executive Assistant to the
Deputy Counsel to the President.............. 3/20/95 7/26/97
Wallman, Kathleen, Deputy Counsel to the
President.................................... 11/13/95 11/14/97
Warren, Renee, Assistant to the Associate
Counsel...................................... 4/03/95 5/28/96
Weider, Sara, Assistant to the Special Counsel 6/24/96 7/05/97
Weiner, Robert, Senior Counsel................ 2/18/97 ...........
Wetzl, Lisa, Executive Assistant.............. 8/15/93 9/13/95
Whalen, Kathleen, Associate Counsel to the
President.................................... 2/27/94 4/30/97
White, Wendy, Associate Counsel to the
President.................................... 2/14/96 3/31/97
Willey, Kathleen, Staff Assistant............. 4/20/94 10/22/94
Williams, Natalie, Associate Counsel to the
President.................................... 6/19/95 2/28/96
Yarowsky, Jonathan, Special Associate Counsel
to the President............................. 4/03/95 3/31/98
------------------------------------------------------------------------
______
EXHIBIT 3.--WHITE HOUSE OFFICE DETAILEES, BY FISCAL YEAR
----------------------------------------------------------------------------------------------------------------
Title Home agency Office assignment Start date End date
----------------------------------------------------------------------------------------------------------------
FISCAL YEAR 1993
Assistant Counsel to the Justice................... General Counsel........... 3/1/93 4/15/93
President.
No title........................ Labor..................... Political Affairs......... 3/9/93 9/4/93
No title........................ Transportation............ Presidential Personnel.... 3/1/93 4/23/93
No title........................ General Accounting Of- Presidential Personnel.... 2/23/93 9/30/93
fice.
Director of Correspondence...... Veterans Affairs.......... Correspondence............ 2/24/93 3/26/93
Special Counsel................. Justice................... General Counsel........... 8/23/93 2/26/94
Search Manager.................. No agency................. Presidential Personnel.... 2/19/93 9/30/93
Security Assistant.............. Defense................... General Counsel........... 8/18/93 2/18/94
Assistant to the Special Labor..................... Political Affairs......... 3/9/93 9/25/93
Assistant.
Search Manager.................. Merit Systems Protection Presidential Personnel.... 8/16/93 2/16/94
Board.
No title........................ U.S. Senate............... Presidential Personnel.... 2/19/93 9/30/93
Personal Assistant to the Chief Commerce.................. Chief of Staff............ 5/27/93 9/30/94
of Staff.
Executive Assistant............. Justice................... General Counsel........... 1/27/93 7/27/93
Director, White House Photo Defense Information Agen- Management and Operations. 2/1/93 12/31/93
Office. cy.
No title........................ Federal Labor Relations Presidential Personnel.... 1/2/93 9/30/93
Board.
Assistant to the Deputy Director Office of Personnel Presidential Personnel.... 9/14/93 1/7/94
Management.
Staff Assistant................. Office of Government General Counsel........... 9/27/93 12/13/93
Ethics.
Associate Director.............. Equal Employment Presidential Personnel.... 7/12/93 3/30/94
Opportunity Commission.
No title........................ General Services Travel and Telegraph 5/24/93 11/22/93
Administration. Service.
Attorney........................ Education................. General Counsel........... 10/5/92 3/31 /93
Staff Assistant to the Associate Merit Systems Protection General Counsel........... 2/24/92 3/31/93
Counsel to the President. Board.
Attorney........................ Housing and Urban General Counsel........... 4/13/92 3/31/93
Development.
Special Counsel................. Labor..................... General Counsel........... 4/26/93 10/22/93
Asian Outreach.................. Justice................... Presidential Personnel.... 6/14/93 9/30/93
No title........................ National Science Administrative Office..... 2/24/93 4/1/93
Foundation.
Special Counsel to the President U.S. Information Agency... General Counsel........... 3/1/93 9/5/93
Special Counsel to the President Commerce.................. General Counsel........... 7/6/93 1/14/94
Special Counsel to the President Justice................... Scheduling and Advance.... 2/1/93 4/2/93
Special Counsel to the President Environmental Protection General Counsel........... 3/30/92 9/1/93
Agency.
Director of Correspondence...... Internal Revenue Service.. Correspondence............ 2/24/93 3/26/93
No title........................ Health and Human Services. Presidential Personnel.... 1/21/93 7/21/93
No title........................ Commerce.................. Environmental Policy...... 3/1/93 3/1/95
Assistant Counsel to the Justice................... General Counsel........... 2/1/93 9/30/93
President.
No title........................ General Services Presidential Personnel.... 8/2/93 9/30/93
Administration.
No title........................ Defense................... Presidential Personnel.... 2/18/93 9/30/93
Counsel to the President........ Justice................... General Counsel........... 3/1/93 4/15/93
No title........................ General Services Travel and Telegraph 5/24/93 11/22/93
Administration. Service.
No title........................ General Services Travel and Telegraph 5/24/93 11/22/93
Administration. Service.
Staff Assistant................. Justice................... General Counsel........... 6/14/93 9/30/94
FISCAL YEAR 1994
Attorney Advisor................ Transportation............ General Counsel........... 7/11/94 10/11/94
Special Counsel to the President Defense................... General Counsel........... 1/19/94 4/19/94
Security Assistant.............. Defense................... General Counsel........... 8/18/93 2/18/94
Search Manager.................. Merit Systems Protection Presidential Personnel.... 8/16/93 2/16/94
Board.
Health Care Spokesperson........ Labor..................... Communications............ 1/31/94 11/30/94
Personal Assistant to the Chief Commerce.................. Chief of Staff............ 5/27/93 9/30/94
of Staff.
Correspondence Review/Edit...... State..................... Correspondence............ 2/28/94 12/31/94
Special Counsel to the President Defense................... General Counsel........... 2/1/94 6/1/94
Special Counsel................. Defense................... General Counsel........... 6/1/94 9/30/94
Attorney Advisor................ Justice................... General Counsel........... 7/25/94 9/30/94
Special Counsel................. Justice................... General Counsel........... 11/10/93 9/30/94
Assistant to the Deputy Director Office of Personnel Presidential Personnel.... 9/14/93 1/7/94
Management.
Special Counsel................. Defense................... General Counsel........... 10/20/93 3/24/94
Staff Assistant................. Office of Government General Counsel........... 9/27/93 12/13/93
Ethics.
Attorney Advisor................ Federal Trade Commis- General Counsel........... 3/11/94 9/2/94
sion.
Associate Director.............. Equal Employment Presidential Personnel.... 7/12/93 3/30/94
Opportunity Commission.
Staff Assistant................. Energy.................... Intergovernmental Affairs. 8/8/94 9/30/94
No title........................ General Services Travel and Telegraph 5/24/93 11/22/93
Administration. Service.
Search Manager.................. Defense................... Presidential Personnel.... 4/18/94 3/30/95
Assistant to the Deputy Director Office of Personnel Presidential Personnel.... 1/10/94 4/29/94
Management.
Staff Assistant................. Office of Personnel Presidential Personnel.... 1/18/94 6/18/94
Management.
Presidential Advance............ Commerce.................. Scheduling and Advance.... 4/25/94 8/8/94
Special Counsel................. Commerce.................. General Counsel........... 11/2/93 12/10/93
Assistant to the Chief of Staff. Office of Management and Chief of Staff............ 7/18/94 9/6/94
Budget.
Assistant to the Chief of Staff. Office of Management and Chief of Staff............ 7/18/94 8/31/94
Budget.
Special Counsel to the President Defense................... General Counsel........... 3/14/94 6/10/94
Correspondence Specialist....... Federal Trade Commis- Correspondence............ 7/25/94 12/31/94
sion.
Financial Manager Analyst....... Housing and Urban Travel Office............. 9/1/94 3/1/95
Development.
Special Counsel................. Labor..................... General Counsel........... 4/26/93 10/22/93
Staff Assistant................. General Services General Counsel........... 1/18/94 3/31/95
Administration.
Special Counsel to the President Commerce.................. General Counsel........... 7/6/93 1/14/94
Attorney-Advisor................ Interstate Commerce General Counsel........... 4/25/94 10/4/94
Commission.
Staff Assistant................. Justice................... General Counsel........... 12/1/93 9/30/94
Personnel Specialist............ Commerce.................. Presidential Personnel.... 7/13/94 10/13/94
Assistant to the Chief of Staff. Office of Management and Chief of Staff............ 7/18/94 9/6/94
Budget.
Attorney Advisor................ Justice................... General Counsel........... 7/18/94 10/18/94
Attorney Advisor................ Agriculture............... General Counsel........... 6/20/94 12/20/94
Assistant Counsel to the Securities Exchange General Counsel........... 1/3/94 4/1/94
President. Commission.
Staff Assistant................. Office of Personnel Presidential Personnel.... 9/30/93 3/30/94
Management.
Advisor to Director............. Energy.................... Legislative Affairs....... 8/17/94 10/31/94
Special Counsel................. Defense................... General Counsel........... 10/25/93 2/24/94
Special Counsel................. Defense................... General Counsel........... 4/20/94 10/15/94
Special Counsel................. Defense................... General Counsel........... 11/15/93 1/10/94
Special Assistant Counsel to the State..................... General Counsel........... 6/17/94 9/30/94
President.
Paralegal Specialist............ Securities Exchange General Counsel........... 8/1/94 2/1/95
Commission.
Senior Program Analyst.......... Agriculture............... Travel.................... 10/1/93 9/9/94
Special Counsel to the President Justice................... General Counsel........... 1/12/94 7/8/94
Search Manager.................. Equal Employment Presidential Personnel.... 6/27/94 12/27/94
Opportunity Commission.
Search Manager.................. Agriculture............... Presidential Personnel.... 6/13/94 3/30/95
Office Manager.................. Energy.................... Political Affairs......... 8/24/94 12/31/94
Interim National AIDS Policy Health and Human Services. Domestic Policy Council... 8/3/94 11/12/94
Coordinator.
Assistant to the Chief of Staff. Office of Management and Chief of Staff............ 7/18/94 9/15/94
Budget.
Deputy Director of Scheduling... Energy.................... Scheduling and Advance.... 2/22/94 12/31/94
No title........................ General Services Travel.................... 5/24/93 11/22/93
Administration.
No title........................ General Services Travel.................... 5/24/93 11/22/93
Administration.
Search Advisor.................. Agriculture............... Presidential Personnel.... 11/8/93 3/30/95
Staff Assistant................. Justice................... General Counsel........... 6/14/93 9/30/94
Special Counsel to the President Defense................... General Counsel........... 5/9/94 8/9/94
Search Manager.................. Merit Systems Protection Presidential Personnel.... 4/8/94 10/7/94
Board.
Special Counsel................. Justice................... General Counsel........... 8/23/93 2/26/94
Special Counsel................. Defense................... General Counsel........... 3/14/94 6/11/94
FISCAL YEAR 1995
Staff Assistant................. Justice................... General Counsel........... 12/01/93 11/30/94
Special Assistant to the Interior.................. Legislative Affairs....... 6/14/95 3/30/96
President.
Attorney-Advisor................ ICC....................... General Counsel........... 4/25/94 6/30/95
Staff Assistant................. General Services General Counsel........... 1/18/94 2/10/95
Administration.
Scheduling the First Lady....... Education................. Scheduling and Advance.... 2/13/95 8/13/95
Financial Manager Analyst....... Housing and Urban Travel Office............. 9/1/94 4/5/95
Development.
Staff Assistant (Scheduler)..... Agriculture............... Scheduling and Advance.... 8/15/95 2/15/96
Attorney Advisor................ Justice................... General Counsel........... 7/26/95 1/24/96
Executive Assistant............. Labor..................... Cabinet Affairs........... 3/8/95 3/8/96
Correspondence Specialist....... Federal Trade Commis- Correspondence............ 7/25/94 10/2/94
sion.
Attorney-Advisor................ Nuclear Regulatory General Counsel........... 11/1/94 1/27/95
Commission.
Attorney-Advisor................ Justice................... General Counsel........... 3/22/95 9/15/95
Staff Assistant................. Labor..................... Chief of Staff............ 10/17/94 1/7/95
Special Assistant to the Education................. Scheduling and Advance.... 8/2/95 10/7/95
President and Presidential
Scheduler/Coordinator.
Attorney-Advisor................ Interstate Commerce General Counsel........... 10/14/94 12/20/94
Commission.
No Title (Press Scheduler)...... Interior.................. Press Secretary........... 1/9/95 1/5/96
Search Manager.................. Defense................... Presidential Personnel.... 4/18/94 12/11/94
Attorney-Advisor................ Labor..................... General Counsel........... 6/12/95 9/9/95
Special Counsel................. Justice................... General Counsel........... 11/10/93 10/5/94
Attorney-Advisor................ Justice................... General Counsel........... 7/25/94 10/14/94
Executive Assistant............. Interior.................. General Counsel........... 5/8/95 10/14/94
Attorney........................ U.S. Attorney's Office.... General Counsel........... 2/6/95 8/4/95
Search Manager.................. Office of Personnel Presidential Personnel.... 9/5/95 3/1/96
Management.
Correspondence Review/Edit...... State Dept................ Correspondence............ 2/28/94 12/31/94
7/27/95 3/29/96
Secretary/Office Manager........ Surface Mining............ General Counsel........... 4/12/95 11/10/95
Attorney-Advisor................ Treasury.................. General Counsel........... 4/17/95 9/1/95
Confidential Assistant to the Commerce.................. Counselor to the Presi- 5/27/93 12/20/95
Counselor. dent.
Health Care Spokesperson........ Labor..................... Communications............ 1/31/94 7/30/94
Attorney-Advisor................ Transportation............ General Counsel........... 7/11/94 3/31/95
Associate Counsel to the Justice................... General Counsel........... 12/12/94 6/9/95
President.
Attorney........................ FCA....................... General Counsel........... 2/6/95 5/5/95
Scheduler for the First Lady.... Interior.................. Scheduling and Advance.... 10/15/94 2/1/95
Gift Analyst.................... State..................... Gift Unit................. 6/19/95 10/6/95
Search Manager.................. Merit Systems Protection Presidential Personnel.... 4/8/94 10/21/94
Board.
Staff Assistant................. Justice................... General Counsel........... 6/14/93 10/1/94
Search Manager.................. Office of Personnel Presidential Personnel.... 7/25/95 12/29/95
Management.
Search Manager.................. Agriculture............... Presidential Personnel.... 11/8/93 11/23/94
Executive Assistant............. Education................. Scheduling and Advance.... 10/27/94 1/10/95
Search Manager.................. Commission on Civil Presidential Personnel.... 10/24/94 4/24/95
Rights.
Attorney-Advisor................ Housing and Urban General Counsel........... 3/6/95 6/4/95
Development.
Attorney Advisor................ Justice................... General Counsel........... 10/5/94 12/31/94
Deputy Director of Scheduling... Energy.................... Scheduling and Advance.... 2/22/94 3/31/94
Press Office Assistant.......... Bank of the US............ Chief of Staff............ 12/1/94 12/16/94
Interim National AIDS Policy Health and Human Services. Domestic Policy Council... 8/3/94 11/12/94
Coordinator.
Attorney-Advisor................ Justice................... General Counsel........... 1/17/95 7/14/95
Staff Assistant................. Justice................... General Counsel........... 12/12/94 6/9/95
Special Assistant to the Small Business Scheduling and Advance.... 4/24/95 7/30/95
President and Scheduler/Events Administration.
Coordinator.
Office Manager.................. Energy.................... Political Affairs......... 6/13/94 9/30/95
Special Assistant to the Agriculture............... Presidential Personnel.... 6/13/94 9/30/95
President and Associate
Director.
Spokesperson, Summit of Ameri- Bank of U.S............... Chief of Staff............ 12/1/94 12/16/94
cas.
Legal Secretary................. Federal Trade Commission.. General Counsel........... 10/3/94 3/31/95
Search Manager.................. Equal Employment Presidential Personnel.... 6/27/94 11/4/94
Opportunity Commission.
Paralegal Specialist............ Securities and Exchange General Counsel........... 8/1/94 3/31/95
Commission.
Accountant...................... Housing and Urban Travel Office............. 11/4/94 3/31/95
Development.
Special Counsel................. Defense................... General Counsel........... 4/20/94 10/15/94
Search Manager.................. Agriculture............... Presidential Personnel.... 6/12/95 3/30/96
Advisor to Director............. Education................. Legislative Affairs....... 8/17/94 10/31/94
Attorney........................ Securities and Exchange General Counsel........... 5/15/95 11/30/95
Commission.
Attorney-Advisor................ Agriculture............... General Counsel........... 8/7/95 2/7/96
Attorney-Advisor................ Agriculture............... General Counsel........... 6/2/94 12/20/94
Event Coordinator (Presidential Interior.................. Scheduling and Advance.... 10/13/94 1/14/95
Schedules).
Attorney-Advisor................ Justice................... General Counsel........... 7/18/94 1/18/95
Special Assistant to the Labor..................... Cabinet Affairs........... 6/22/95 9/30/95
President.
Attorney........................ Merit Systems Protection General Counsel........... 10/3/94 12/31/94
Board.
Personnel Specialist............ Commerce.................. Presidential Personnel.... 7/13/94 10/13/94
Attorney-Advisor................ Justice................... General Counsel........... 7/10/95 10/13/95
Deputy Director................. Health and Human Services. Intergovernmental Affairs. 6/5/95 12/23/95
FISCAL YEAR 1996
Assistant Deputy Director....... U.S. Agency for Presidential Personnel.... 5/13/96 9/30/96
International Development.
Special Assistant to the Interior.................. Legislative Affairs....... 6/14/95 9/30/96
President.
Attorney-Advisor................ Education................. General Counsel........... 2/4/96 5/3/96
Attorney-Advisor................ Commerce.................. General Counsel........... 5/13/96 5/24/96
Staff Assistant (Scheduler)..... Agriculture............... Scheduling and Advance.... 8/15/95 1/26/96
Attorney-Advisor................ Justice................... General Counsel........... 7/26/95 2/26/96
Executive Assistant............. Labor..................... Cabinet Affairs........... 3/8/95 4/14/96
Presidential Scheduler.......... Agriculture............... Scheduling and Advance.... 10/30/95 12/8/95
Detailee to the Office of Education................. Scheduling and Advance.... 8/5/96 3/8/97
Schedul- ing.
Special Assistant to the Education................. Scheduling and Advance.... 8/2/95 10/7/95
President and Presidential
Scheduler/Coordinator.
Special Assistant to the Deputy Labor..................... Deputy Chief of Staff for 6/27/96 9/23/96
Chief of Staff. Policy.
Senior Press Advance............ Interior.................. Press Secretary........... 1/9/95 1/5/96
Special Assistant to the Deputy U.S. Information Agency... Deputy Chief of Staff for 4/22/96 9/30/96
Chief of Staff. Policy.
Attorney-Advisor................ Justice................... General Counsel........... 9/3/96 11/15/96
Attorney-Advisor................ Labor..................... General Counsel........... 5/13/96 8/23/96
Search Manager.................. Occupational Safety and Presidential Personnel.... 4/9/96 9/5/96
Health Administration.
Staff Assistant................. Agency for International Scheduling and Advance.... 1/18/96 7/31/96
Development.
Search Manager.................. Office of Personnel Presidential Personnel.... 10/2/96 11/8/96
Management.
Attorney-Advisor................ Treasury.................. General Counsel........... 3/4/96 8/2/96
Correspondence Review/Edit...... State..................... Correspondence............ 7/27/95 3/25/96
Attorney-Advisor................ Federal Trade Commis- General Counsel........... 10/23/95 4/19/96
sion.
Secretary/Office Manager........ Surface Mining............ General Counsel........... 4/12/95 11/3/95
Special Assistant to the Deputy Agriculture............... Presidential Personnel.... 4/1/96 9/30/96
Director.
Confidential Assistant to the Commerce.................. Counselor to the Presi- 10/2/95 9/30/96
Counselor. dent.
Director........................ U.S. Information Agency... Public Liaison............ 11/29/95 12/15/95
Attorney-Advisor................ Justice................... General Counsel........... 2/26/96 6/6/96
Search Manager.................. Office of Personnel Presidential Personnel.... 3/28/97 5/30/97
Management.
Attorney-Advisor................ Transportation............ General Counsel........... 11/6/96 5/3/96
Staff Assistant................. State..................... Gift Unit................. 7/16/96 3/28/97
Special Assistant............... Commerce.................. Cabinet Affairs........... 2/1/96 9/30/96
Gift Analyst.................... State..................... Gift Unit................. 6/19/95 3/31/96
Attorney-Advisor................ Federal Trade Commis- General Counsel........... 2/12/96 4/19/96
sion.
Special Assistant to the Treasury.................. Legislative Affairs....... 2/28/96 5/31/96
President.
Logistical Management Specialist State..................... Administrative Office..... 2/28/96 4/28/96
Staff Assistant................. Justice................... General Counsel........... 6/3/96 9/30/96
Staff Assistant................. Transportation............ General Counsel........... 10/30/95 4/19/96
Search Manager.................. U.S. Arms Control......... Presidential Personnel.... 8/28/96 3/28/97
Associate Counsel to the Justice................... General Counsel........... 1/16/96 3/15/97
President.
Special Assistant to the Agriculture............... Presidential Personnel.... 10/1/95 10/1/96
President and Associate
Director.
Attorney-Advisor................ Justice................... General Counsel........... 6/12/96 12/31/96
Search Manager.................. Agriculture............... Presidential Personnel.... 6/12/95 11/26/95
Attorney-Advisor................ Federal Highway General Counsel........... 5/13/96 9/20/96
Administration.
Attorney-Advisor................ Defense Information General Counsel........... 6/10/96 9/30/96
Systems Agency.
Attorney........................ Securities and Exchange General Counsel........... 5/15/95 12/1/95
Commission.
Attorney-Advisor................ Energy.................... General Counsel........... 11/1/95 3/8/96
Search Manager.................. Agriculture............... Presidential Personnel.... 12/11/96 6/9/97
Search Manager.................. Agriculture............... Presidential Personnel.... 3/8/96 9/30/96
Deputy Director................. Health and Human Services. Intergovernmental Affairs. 10/1/95 12/23/95
Attorney-Advisor................ Agriculture............... General Counsel........... 8/7/95 3/22/96
Scheduler, First Lady........... Housing and Urban Scheduling and Advance.... 2/5/96 9/27/96
Development.
Attorney-Advisor................ Agriculture............... General Counsel........... 6/20/94 3/29/96
Special Assistant to the Labor..................... Cabinet Affairs........... 6/22/95 12/20/95
President.
Attorney-Advisor................ Justice................... General Counsel........... 7/10/95 12/29/95
FISCAL YEAR 1997
Assistant Deputy Director....... U.S. Agency for Presidential Personnel.... 5/13/96 3/28/97
International Development.
Special Assistant to the Interior.................. Legislative Affairs....... 6/14/95 3/31/98
President.
Correspondence Director......... Veterans Affairs.......... Presidential Personnel.... 2/4/97 7/30/97
Staff Assistant, Correspondence. Labor..................... Presidential Personnel.... 12/9/96 4/21/97
Transition Search Manager....... U.S. Information Agency... Presidential Personnel.... 12/9/96 6/6/97
Staff Assistant................. Treasury.................. Chief of Staff............ 1/14/97 9/30/98
Detailee to the Office of Education................. Scheduling and Advance.... 8/5/96 3/14/97
Schedul- ing.
Attorney-Advisor................ Veterans Affairs.......... General Counsel........... 11/21/96 5/16/97
Special Assistant............... Labor..................... Public Liaison............ 2/13/97 9/30/98
Search Manager.................. Agriculture............... Presidential Personnel.... 1/6/97 7/3/97
Deputy National Security Advisor State..................... National Security Affairs. 12/23/96 4/19/97
and Deputy Assistant to the
President for National Security
Affairs.
Special Assistant to the Deputy Labor..................... Deputy Chief of Staff for 6/27/96 9/23/96
Chief of Staff. Policy.
NSC Assistant................... U.S. Agency for National Security Affairs. 3/2/97 3/14/97
International Development.
Special Assistant to the Deputy U.S. Information Agency... Deputy Chief of Staff for 4/22/96 1/20/97
Chief of Staff. Policy.
Transition Search Manager....... Justice................... Presidential Personnel.... 12/9/96 5/9/97
Search Manager.................. State..................... Presidential Personnel.... 5/7/97 11/30/97
Staff Assistant................. Agriculture............... Presidential Personnel.... 8/22/97 3/27/98
Staff Assistant for Special Labor..................... Presidential Personnel.... 9/17/97 9/30/97
Projects.
Scheduler....................... Justice................... Scheduling and Advance.... 6/30/97 7/12/97
Search Manager.................. Federal Highway Presidential Personnel.... 10/3/96 3/28/97
Administration.
Attorney-Advisor................ Justice................... General Counsel........... 9/3/96 11/15/96
Attorney-Advisor................ Treasury.................. General Counsel........... 11/27/96 5/23/97
Attorney-Advisor................ Housing and Urban General Counsel........... 10/15/96 4/15/97
Development.
Search Manager.................. Office of Personnel Presidential Personnel.... 10/2/96 11/8/96
Management.
Office Manager.................. Equal Employment Presidential Personnel.... 12/6/96 5/16/97
Opportunity Commission.
Assistant for APA Outreach...... Education................. Presidential Personnel.... 1/3/97 7/1/97
Staff Assistant................. Agriculture............... Presidential Personnel.... 12/9/96 5/30/97
Transition Search Manager....... Commerce.................. Presidential Personnel.... 12/16/96 5/30/97
Special Assistant for Labor..................... Presidential Personnel.... 3/12/97 9/5/97
Correspondence.
Attorney-Advisor................ Justice................... General Counsel........... 2/18/97 9/19/97
Lead Search Manager............. Small Business Presidential Personnel.... 2/27/97 8/22/97
Administration.
Attorney-Advisor................ Federal Trade Commis- General Counsel........... 11/25/96 5/23/97
sion.
Attorney-Advisor................ National Archives......... General Counsel........... 11/18/96 3/14/97
Attorney-Advisor................ Navy...................... General Counsel........... 11/15/96 12/13/96
Attorney-Advisor................ Agriculture............... General Counsel........... 11/18/96 5/23/97
Special Assistant to the Chief Environmental Protection Chief of Staff............ 9/8/97 9/8/98
of Staff. Agency.
Attorney-Advisor................ Labor..................... General Counsel........... 9/8/97 11/26/97
Staff Assistant................. Education................. Presidential Personnel.... 6/23/97 1/9/98
Special Assistant to the Deputy Housing and Urban Presidential Personnel.... 8/4/97 3/27/98
Director. Development.
Attorney-Advisor................ Agriculture............... General Counsel........... 6/4/97 8/22/97
Senior Advisor.................. Office of Science and Chief of Staff............ 6/2/97 9/12/97
Technology Policy.
Attorney-Advisor................ Navy...................... General Counsel........... 11/20/96 4/22/97
Search Manager.................. Agriculture............... Presidential Personnel.... 2/4/97 6/2/97
Special Assistant to the Deputy Agriculture............... Presidential Personnel.... 4/1/96 3/28/97
Director.
Transition Search Manager....... Commerce.................. Presidential Personnel.... 12/16/96 6/9/97
Search Manager.................. Office of Personnel Presidential Personnel.... 3/28/97 5/30/97
Management.
Attorney-Advisor................ Labor..................... General Counsel........... 11/21/96 5/14/97
Attorney-Advisor................ Commerce.................. General Counsel........... 3/24/97 3/27/98
Attorney-Advisor................ Justice................... General Counsel........... 1/5/97 2/13/97
Staff Assistant................. State..................... Gift Unit................. 7/16/96 3/28/97
Search Manager.................. U.S. Agency for Presidential Personnel.... 12/23/96 5/12/97
International Development.
Staff Assistant................. Justice................... General Counsel........... 2/18/97 8/15/97
Attorney-Advisor................ Treasury.................. General Counsel........... 11/19/96 3/31/97
Director of Special Proj- ects. Labor..................... Cabinet Affairs........... 10/17/96 9/30/97
Assistant for Information Merit Systems Protection Presidential Personnel.... 5/27/97 11/19/97
Systems. Board.
Staff Assistant for Special Health and Human Services. Presidential Personnel.... 9/23/97 9/30/97
Projects.
Executive Assistant............. Labor..................... Public Liaison............ 4/23/97 10/31/97
Staff Assistant................. Veterans Affairs.......... Presidential Personnel.... 6/17/97 3/27/98
Scheduler....................... Treasury.................. Scheduling and Advance.... 7/2/97 3/25/98
Attorney-Advisor................ Social Security General Counsel........... 5/28/97 12/31/97
Administration.
Attorney-Advisor................ National Archives and General Counsel........... 9/8/97 9/8/98
Records Administration.
Attorney-Advisor................ Justice................... General Counsel........... 9/4/97 3/27/98
Attorney-Advisor................ Justice................... General Counsel........... 7/25/97 3/27/98
Transition Search Manager....... Federal Labor Relations Presidential Personnel.... 12/9/96 4/25/97
Board.
Staff Assistant................. Justice................... General Counsel........... 6/3/96 1/17/97
Transition Search Manager....... Defense................... Presidential Personnel.... 12/9/96 5/30/97
Search Manager.................. Federal Emergency Presidential Personnel.... 1/13/97 5/21/97
Management Agency.
Search Manager.................. Office of Personnel Presidential Personnel.... 1/15/97 7/1/97
Management.
Scheduler for the President..... Interior.................. Scheduling and Advance.... 3/25/97 4/18/97
Scheduling Desk, Office of First Education................. Scheduling and Advance.... 11/12/96 6/13/97
Lady.
Search Manager.................. U.S. Arms Control......... Presidential Personnel.... 8/28/96 3/28/97
Assistant for African-American Agriculture............... Presidential Personnel.... 12/23/96 3/14/97
Outreach.
Associate Counsel to the Justice................... General Counsel........... 1/16/96 3/15/97
President.
Special Assistant to the Agriculture............... Presidential Personnel.... 11/18/96 5/19/97
President and Associate
Director.
Staff Assistant................. Energy.................... Presidential Personnel.... 11/18/96 5/19/97
Search Manager.................. National Transportation Presidential Personnel.... 12/18/96 4/12/97
Safety Board.
Staff Assistant................. Labor..................... Presidential Personnel.... 1/24/97 4/13/97
Attorney-Advisor................ Justice................... General Counsel........... 11/25/96 3/21/97
Search Manager.................. U.S. Information Agency... Presidential Personnel.... 2/12/97 8/1/97
Staff Assistant................. Office of Personnel Presidential Personnel.... 5/12/97 1/9/98
Management.
Search Manager.................. Justice................... Presidential Personnel.... 5/13/97 12/31/97
Search Manager.................. Defense................... Presidential Personnel.... 8/4/97 2/6/98
Associate Counsel to the Justice................... General Counsel........... 7/7/97 5/1/98
President.
Attorney-Advisor................ Transportation............ General Counsel........... 6/2/97 12/31/97
Staff Assistant for Special Agriculture............... Presidential Personnel.... 9/23/97 9/30/97
Projects.
Attorney-Advisor................ Veterans Affairs.......... General Counsel........... 4/21/97 10/24/97
Senior Advisor for AIDS Policy.. Health and Human Services. Domestic Policy Council... 2/19/97 7/1/97
Attorney-Advisor................ Energy.................... General Counsel........... 6/10/97 3/27/98
Search Manager.................. National Transportation Presidential Personnel.... 6/16/97 9/12/97
Safety Board.
Staff Assistant for Special U.S. Agency for Presidential Personnel.... 9/19/97 12/5/97
Projects. International Development.
Search Manager.................. U.S. Agency for Presidential Personnel.... 6/5/97 8/1/97
International Development.
Staff Assistant................. Education................. Scheduling and Advance.... 10/1/96 11/21/96
Attorney-Advisor................ Justice................... General Counsel........... 6/12/96 2/3/97
Attorney-Advisor................ Labor..................... General Counsel........... 11/20/96 5/14/97
Search Manager.................. National Endowment for the Presidential Personnel.... 1/6/97 6/2/97
Arts.
Assistant for Asian Pacific Out- Justice................... Presidential Personnel.... 12/9/96 5/16/97
reach.
Attorney-Advisor................ Defense Information General Counsel........... 6/10/96 3/28/97
Systems Administration.
Attorney-Advisor................ Securities and Exchange General Counsel........... 11/14/96 5/11/97
Commission.
Attorney-Advisor................ Energy.................... General Counsel........... 11/18/96 2/1/97
Transition Search Manager....... Agriculture............... Presidential Personnel.... 12/11/96 6/9/97
Attorney-Advisor................ Justice................... General Counsel........... 11/25/96 5/23/97
Attorney-Advisor................ Treasury.................. General Counsel........... 11/19/96 5/23/97
Office Manager.................. Housing and Urban Presidential Personnel.... 12/9/96 5/30/97
Development.
Special Assistant to the Labor..................... Cabinet Affairs........... 6/22/95 9/30/97
President.
Transition Search Manager....... Defense................... Presidential Personnel.... 12/9/96 3/31/97
Attorney-Advisor................ Navy...................... General Counsel........... 3/12/97 6/16/97
Attorney-Advisor................ U.S. Customs.............. General Counsel........... 6/23/97 12/31/97
Staff Assistant for Special Proj- Commerce.................. Presidential Personnel.... 9/24/97 9/30/97
ects.
Placement Assistant............. Labor..................... Presidential Personnel.... 8/14/97 9/30/98
Assistant for Correspondence.... Housing and Urban Presidential Personnel.... 5/13/97 12/31/97
Development.
Attorney-Advisor................ Housing and Urban General Counsel........... 6/2/97 3/27/98
Development.
Attorney-Advisor................ Justice................... General Counsel........... 6/2/97 3/27/98
Attorney-Advisor................ Health and Human Services. General Counsel........... 5/14/97 9/30/97
FISCAL YEAR 1998
Special Assistant to the Interior.................. Legislative Affairs....... 6/14/95 3/31/98
President for Legislative
Affairs.
Attorney-Advisor................ National Labor Relations General Counsel........... 2/9/98 6/12/98
Board.
Search Manager.................. State..................... Presidential Personnel.... 5/7/97 11/30/97
Staff Assistant................. Treasury.................. Chief of Staff............ 1/14/97 9/30/98
Executive Assistant to the Labor..................... Public Liaison............ 2/13/97 9/30/98
Director.
Staff Assistant................. Agriculture............... Presidential Personnel.... 9/3/97 3/27/98
Attorney-Advisor................ Justice................... General Counsel........... 12/22/97 3/27/98
Associate Director for Education Education................. Domestic Policy Council... 3/9/98 7/18/98
Policy.
Attorney-Advisor................ Justice................... General Counsel........... 6/2/97 11/17/97
Attorney-Advisor................ Labor..................... General Counsel........... 9/8/97 11/26/97
Special Assistant to the Chief Environmental Protection Chief of Staff............ 9/8/97 9/30/98
of Staff. Agency.
Attorney-Advisor................ Veterans Affairs.......... General Counsel........... 1/20/98 5/22/98
Attorney-Advisor................ Transportation............ General Counsel........... 1/16/98 5/8/98
Scheduling Desk................. Education................. Scheduling and Advance.... 2/9/98 5/9/98
Staff Assistant................. Education................. Scheduling and Advance.... 6/23/97 1/9/98
Special Assistant to the Deputy Housing and Urban Presidential Personnel.... 8/4/97 3/27/98
Director. Development.
Assistant for Information Merit Systems Protection Presidential Personnel.... 5/27/97 11/19/97
Systems. Board.
Attorney-Advisor................ Social Security General Counsel........... 5/28/97 12/10/97
Administration.
Attorney-Advisor................ Justice................... General Counsel........... 6/2/97 3/27/98
Staff Assistant................. Education................. Scheduling and Advance.... 2/17/98 5/19/98
Attorney-Advisor................ Commerce.................. General Counsel........... 3/24/97 3/27/98
Attorney-Advisor................ National Archives and General Counsel........... 9/8/97 11/6/97
Records Administration.
Staff Assistant for Special Proj- Justice................... Presidential Personnel.... 10/29/97 11/13/97
ects.
Staff Assistant................. Veterans Affairs.......... Presidential Personnel.... 6/17/97 3/27/98
Attorney-Advisor................ Justice................... General Counsel........... 9/4/97 3/27/98
Executive Assistant to the Labor..................... Public Liaison............ 4/23/97 10/31/97
Director.
Staff Assistant................. Office of Personnel Presidential Personnel.... 5/12/97 1/9/98
Management.
Scheduler....................... Treasury.................. Scheduling and Advance.... 7/2/97 3/25/98
Director of Special Projects.... Labor..................... Cabinet Affairs........... 10/17/96 4/3/98
Search Manager.................. Justice................... Presidential Personnel.... 5/13/97 12/31/97
Attorney-Advisor................ Justice................... General Counsel........... 7/25/97 3/27/98
Associate Counsel to the Justice................... General Counsel........... 7/7/97 5/1/98
President.
Attorney-Advisor................ Transportation............ General Counsel........... 6/2/97 10/31/97
Search Manager.................. Defense................... Presidential Personnel.... 8/4/97 2/6/98
Attorney-Advisor................ Veterans Affairs.......... General Counsel........... 4/21/97 10/24/97
Search Manager.................. Justice................... Presidential Personnel.... 12/29/97 6/26/98
Attorney-Advisor................ Energy.................... General Counsel........... 6/10/97 3/27/98
Special Assistant to the Agriculture............... Presidential Personnel.... 10/1/95 9/30/98
President and Associate
Director.
Staff Assistant for Special Proj- U.S. Agency for Presidential Personnel.... 9/19/97 12/5/97
ects. International Development.
Attorney-Advisor................ U.S. Customs.............. General Counsel........... 6/23/97 10/31/97
Attorney-Advisor................ Navy...................... General Counsel........... 1/15/98 7/10/98
Placement Assistant............. Labor..................... Presidential Personnel.... 8/14/97 9/30/98
Scheduler....................... Energy.................... Scheduling and Advance.... 3/9/98 3/9/99
Assistant for Correspondence.... Housing and Urban Presidential Personnel.... 5/13/97 1/9/98
Development.
Attorney-Advisor................ Labor..................... General Counsel........... 10/28/97 4/24/98
Staff Assistant................. Justice................... General Counsel........... 12/15/97 6/12/98
Attorney-Advisor................ Housing and Urban General Counsel........... 6/2/97 3/27/98
Development.
Special Assistant to the Labor..................... Cabinet Affairs........... 6/22/95 5/9/98
President.
Attorney-Advisor................ Justice................... General Counsel........... 6/2/97 3/27/98
Search Manager.................. Commerce.................. Presidential Personnel.... 3/30/98 9/30/98
Attorney-Advisor................ Health and Human Services. General Counsel........... 4/6/98 4/9/99
Attorney-Advisor................ Justice................... General Counsel........... 4/8/98 9/30/98
----------------------------------------------------------------------------------------------------------------
[exhibit 4]
Talking Points
Staff in the Counsel's Office devote their time to addressing the
legislative, constitutional, and policy agenda of the President, in
addition to the daily counseling responsibilities for the White House.
The Counsel's Office is obligated to ensure compliance with
numerous requests for documents and information from various
investigative entities, including congressional committees, independent
counsel offices, the Justice Department, private litigants, etc. Since
1995, the Counsel's Office has had a team of up to 6 attorneys and 3
paralegals devoted to responding to requests from investigative
entities. The other attorneys and staff in the office handle the
routine matters of the Counsel's Office.
Investigating Entities
The House and Senate earmarked more than 16M to investigate the
President in 1997,\1\ while OIC (Starr) has spent more than 40M looking
into Whitewater and recent allegations.\2\ Five congressional
committees, a federal grand jury and the Justice Department have
investigated, and in some instances continue to investigate, campaign
finance matters.\3\
---------------------------------------------------------------------------
\1\ The Commercial Appeal, June 10, 1997.
\2\ Newsday, February 7, 1998.
\3\ St. Petersburg Times, March 7, 1997.
---------------------------------------------------------------------------
Budgets of some of the investigative bodies:
Burton: 3.8M budget exclusively for campaign finance investigation
(1997); 7.9M reserve fund for investigation (1997); and 11.7M regular
budget for Committee operations.\4\
---------------------------------------------------------------------------
\4\ The New York Times, April 7, 1997.
---------------------------------------------------------------------------
Thompson: 4.5M budget exclusive for campaign finance investigation
(1997).\5\
---------------------------------------------------------------------------
\5\ The Commercial Appeal, June 10, 1997.
---------------------------------------------------------------------------
Justice Dept.: Unlimited budget (annually).\6\
---------------------------------------------------------------------------
\6\ Arkansas Democrat-Gazette, November 1, 1997.
---------------------------------------------------------------------------
OIC (Starr): 40M already spent \7\ and an unlimited budget.\8\
---------------------------------------------------------------------------
\7\ Newsday, February 7, 1998.
\8\ USA Today, November 14, 1997.
---------------------------------------------------------------------------
Facts Regarding Congressional Investigations and the White House
Counsel's Office
In 1997 alone, the White House responded to nearly 600 requests for
documents and other information made by the Thompson and Burton
committees.
In fulfilling those requests, the White House turned over close to
a quarter-million pages of material to the two committees.
Nearly 60 current and former White House employees were made
available for interview and deposition testimony before the Thompson
Committee. Nearly 60 such employees were available to the Burton
Committee.
Other congressional investigations involving the White House have
included those headed up by:
--Congressman Leach;
--Congressman McIntosh (where 40,000 documents were turned over, and
20 current and former White House employees were made available
to the committee); and
--Senator D'Amato (49 subpoenas issued, 60 days of hearings over 14
months).
In this 105th Congress, no fewer than 26 congressional
investigations into Democratic activities have been completed, are
underway, or are planned. Only one investigation examined Republican
abuses.
All of these inquiries were presaged in 1994 when, according to the
Washington Post (9/20/96), ``a month before the 1994 elections that
made him House speaker, Newt Gingrich summed up in one word the time-
tested power that he and his Republican oversight committees would
bring to bear on the Clinton Administration: subpoena. And subpoena
they did, hauling hundreds of government officials before investigative
panels . . . .'' And an April 1996 memorandum to Republican committee
chairmen urged them to compile information on ``examples of dishonesty
or ethical lapses in the Clinton administration.'' In that same year,
Newt Gingrich's press secretary said the presidency could be ``severely
crippled'' by such inquiries and by Ken Starr (Washington Post, 9/20/
96).
Meanwhile, most staff members of one of the committees
investigating the President--the House Government Reform and Oversight
Committee--saw their pay increase during 1997 by at least 50 percent.
By year's end, the Committee was spending money at a rate of $1 million
a month, compared to $400,000 a month at the beginning of 1997 (yet,
only eight hearings were held during the year).
The House Government Reform and Oversight Committee has access to
$11.7 million ($3.8 million budget, $7.9 million reserve fund). It has
a staff of more than 50 Republican investigators. The Senate
Governmental Affairs Committee has a budget of $4.3 million for its
campaign finance investigation, and they spent $3.5 million. It has a
staff of 60 Republican investigators.
GAO Audit
GAO Audit.--Apart from the personal records of the President
relating to guests, GAO has had complete access to all records and
materials, including all overtime records. The audit is proceeding and
GAO has indicated to us that it hopes to complete traditional audit of
the Executive Residence this month.
Overnights.--GAO has indicated that, despite its inability to
discern any costs associated with overnight guests, the Chairman's
specifically requested GAO to verify the names of guests who spent the
night at the White House. GAO requested to interview people to
determine if there were records apart from personal records that could
be used. GAO learned through these interviews that none of the
Executive Residence staff had such non-personal records.
Interviews.--The White House committed to providing GAO with the
opportunity to interview staff to inquire regarding overnight guests
and has fulfilled that commitment: Pursuant to GAO's request, the White
House arranged interviews with, and GAO interviewed: Chief Usher,
Administrative Officer, Maitre'd, Social Secretary, and Head
Housekeeper.
USSS.--Pursuant to GAO's requests, we checked with the USSS
regarding their records and they indicated they did not retain any
records reflecting overnight guests and we conveyed this information to
GAO in January.
Personal Records--GAO indicated that it was not seeking the
personal materials of the First Family. We informed GAO that we would
review the personal records to determine how to assist in the
Chairman's request for GAO to verify the individuals who spent the
night at the White House as guests of the First Family.
As recently as one week ago, we informed GAO that we were making
progress and expected to be able to address their needs by next week.
26 CONGRESSIONAL INVESTIGATIONS INTO DEMOCRATIC ACTIVITIES
[Only one examined GOP abuses]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Member Body Committee Subcommittee, if any Subject of investigation
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Thompson, Fred \1\.............. Senate........... Governmental Affairs................... ........................................... General investigation.
Hatch, Orrin.................... Senate........... Judiciary.............................. ........................................... DOJ's investigation.
McCain, John.................... Senate........... Commerce............................... ........................................... Commerce Department, Franklin Haney & Portals Bldg
(Wash. Post, 2/27/98).
Shelby, Richard................. Senate........... Intelligence........................... ........................................... CIA involvement, FBI overlooking Chinese intelligence
reports.
Collins, Susan \1\.............. Senate........... Governmental Affairs................... Investigations............................. General investigation.
Burton, Dan \1\................. House............ Government Reform and Oversight........ ........................................... General investigation.
Hyde, Henry..................... House............ Judiciary Committee.................... ........................................... Impeachment proceedings.
McIntosh, David \1\............. House............ Government Reform and Oversight........ National Economic Growth, Natural Resources WHODB.
and Regulatory Affairs.
Hoekstra, Peter \1\............. House............ Education and the Workforce............ Oversight and Investigations............... Teamsters scandal.
Barton, Joe \1\................. House............ Commerce............................... Oversight and Investigations............... Molten Metal.
Kolbe, Jim \1\.................. House............ Appropriations......................... Treasury, Postal Service and General Use of White House for political events.
Government.
Solomon, Gerald................. House............ Rules.................................. ........................................... Investigating Clinton's meetings with a Russian arms
dealer, whether Huang leaked documents, whether a
special committee should be formed.
Livingston, Robert.............. House............ Appropriations......................... ........................................... Investigating WH spending on scandal press, legal
office (Wash. Times, 3/9/98).
Livingston, Robert.............. House............ Appropriations......................... ........................................... Investigating if the INS was used for political
purposes.
Mica, John...................... House............ Government Reform and Oversight........ Civil Service.............................. Possible violations of Hatch Act involving Ickes and
Gore.
Gilman, Ben..................... House............ International Relations................ ........................................... Role of China and Indonesia.
Goss, Porter.................... House............ Intelligence........................... ........................................... Whether intelligence information was compromised by
Huang and whether foreign governments have tried to
influence U.S. elections.
Leach, Jim...................... House............ Banking and Financial Services......... ........................................... WH coffee involving banking regulators and bankers.
Bliley, Thomas.................. House............ Commerce............................... ........................................... Commerce Department trade missions.
Talent, James................... House............ Small Business......................... ........................................... Controversies at Commerce.
Hansen, James \1\............... House............ Resources.............................. National Parks and Public Lands............ Grand Staircase--Escalante, Hudson dog track (Mnpls.
Star-Trib., 1/6/98).
Specter, Arlen.................. Senate........... ....................................... ........................................... Chairman Burton said Specter would examine
allegations FBI agent Wickham resigned rather than
turn over his confidential sources on China (Hrgs.,
12/10/97).
Murkowski, Frank................ Senate........... Energy................................. ........................................... Politicization of Interior Department (USA Today, 12/
11/97).
Stook, Ernest................... House............ Appropriations......................... Treasury and Postal Service................ Political activities of DNG's White House
``volunteers.''
Everett, Terry \1\.............. House............ Appropriations......................... Veterans Affairs........................... Arlington Cemetery.
Faircloth, Lauch................ Senate........... Appropriations......................... Foreign Operations......................... Travoltagate--whether President pushed actor John
Travolta's pet project on Scientology in exchange
for favorable portrayal in ``Primary Colors'' (NY
Post, 3/2-6/98).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Investigation or hearings in progress or completed.
[Clerk's note.--The article from The Hill titled ``Burton Hikes
Salaries of Staff'' could not be printed in the hearing record.]
______
[exhibit 5]
Two attachments are included as part of Exhibit 5:
(1) A copy of the already transmitted report on fiscal years 1993
and 1994 expenditures--as of January 31, 1995; and
(2) A report on fiscal years 1995, 1996, 1997, 1998 expenditures
and fiscal year 1999 request--as of March 31, 1998.
White House Office Obligations and Expenditures--December 31, 1994
Fiscal year 1993
Security Office......................................... $4,025,171.82
Immediate Office of the President....................... 599,969.86
Chief of Staff.......................................... 764,891.51
Domestic Policy......................................... 1,150,263.41
National Security Affairs............................... 356,415.64
Communications.......................................... 2,412,984.38
Intergovernmental Affairs............................... 651,003.36
Cabinet Affairs......................................... 248,409.21
Legislative Affairs..................................... 1,564,153.05
Press Secretary......................................... 311,404.34
Staff Secretary......................................... 3,429,216.08
Scheduling.............................................. 1,553,858.20
Counsel's Office........................................ 1,317,406.81
Special Activities & Initiatives........................ 1,085,034.89
Management & Administration............................. 15,912,186.88
Office of the First Lady................................ 990,485.13
Presidential Personnel.................................. 4,389,918.69
Issue Analysis.......................................... 25,000.00
National Economic Council............................... 374,223.12
Public Liaison.......................................... 762,540.92
Political Affairs....................................... 394,710.71
National Service........................................ 439,192.50
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 42,758,440.51
Fiscal year 1993 total includes one-time supplemental funding for
Presidential transition.
---------------------------------------------------------------------------
Fiscal year 1994
Immediate Office of the President....................... $1,083,546.55
Chief of Staff.......................................... 1,126,570.56
Domestic Policy......................................... 746,554.10
National Security Affairs............................... 408,130.59
Communications.......................................... 3,704,508.62
Intergovernmental Affairs............................... 746,359.54
Cabinet Affairs......................................... 473,578.63
Legislative Affairs..................................... 1,588,985.31
Staff Secretary......................................... 1,864,270.35
Scheduling & Advance.................................... 2,088,170.81
Counsel's Office........................................ 1,913,092.41
Management & Administration............................. 13,578,250.99
Office of the First Lady................................ 946,239.30
Presidential Personnel.................................. 1,666,247.03
National Economic Council............................... 569,004.35
Public Liaison.......................................... 1,229,465.48
Political Affairs....................................... 605,348.83
National Service........................................ 4,046.38
Correspondence.......................................... 4,271,642.39
The President........................................... 25,025.00
--------------------------------------------------------
____________________________________________________
Grant Total....................................... 38,639,037.22
Please note: Functions and organizations change throughout the year as
needs arise.
---------------------------------------------------------------------------
White House Office Obligations and Expenditures--as of March 31, 1998
Fiscal year 1995
Immediate Office of the President....................... $765,336
Detailees........................................... 34,470
--------------------------------------------------------
____________________________________________________
Subtotal, Immediate Office of the President....... 799,806
========================================================
____________________________________________________
Chief of Staff.......................................... 1,853,178
Communications.......................................... 1,733,486
Cabinet Secretary....................................... 387,816
Detailees........................................... 3,640
--------------------------------------------------------
____________________________________________________
Subtotal, Cabinet Secretary....................... 391,456
========================================================
____________________________________________________
Scheduling and Advance.................................. 1,980,248
General Counsel......................................... 2,265,332
Detailees........................................... 38,274
--------------------------------------------------------
____________________________________________________
Subtotal, General Counsel......................... 2,303,606
========================================================
____________________________________________________
Management and Administration........................... 15,809,025
Presidential Personnel.................................. 1,246,500
Detailees........................................... 61,576
--------------------------------------------------------
____________________________________________________
Subtotal, Presidential Personnel.................. 1,308,076
========================================================
____________________________________________________
Correspondence.......................................... 3,077,869
National Security Affairs............................... 414,145
National Economic Council............................... 581,161
Legislative Affairs..................................... 1,660,029
Staff Secretary......................................... 1,778,045
Public Liaison.......................................... 1,308,522
Intergovernmental Affairs............................... 721,211
Political Affairs....................................... 702,394
Office of the First Lady................................ 1,024,394
Domestic Policy......................................... 994,752
Office of the Press Secretary........................... 986,287
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 39,427,690
Fiscal year 1996
Chief of Staff.......................................... $1,971,306
Communications.......................................... 1,316,184
Scheduling and Advance.................................. 1,901,728
General Counsel......................................... 2,757,239
Management and Administration........................... 13,971,693
Detailees........................................... 322,292
--------------------------------------------------------
____________________________________________________
Subtotal, Management and Administration........... 14,293,985
========================================================
____________________________________________________
Presidential Personnel.................................. 1,124,130
Correspondence.......................................... 2,944,959
Oval Office Operations.................................. 887,489
National Security Affairs............................... 433,152
National Economic Council............................... 672,501
Cabinet Affairs......................................... 418,291
Legislative Affairs..................................... 1,759,033
Staff Secretary......................................... 2,009,699
Public Liaison.......................................... 1,445,450
Intergovernmental Affairs............................... 716,869
Political Affairs....................................... 865,869
Office of the First Lady................................ 1,106,543
Domestic Policy......................................... 1,096,171
Office of the Press Secretary........................... 1,539,757
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 39,260,355
Fiscal year 1997
Chief of Staff.......................................... $1,765,532
Scheduling and Advance.................................. 1,980,039
General Counsel......................................... 2,706,055
Management and Administration........................... 14,667,705
Detailees........................................... 338,815
--------------------------------------------------------
____________________________________________________
Subtotal, Management and Administration........... 15,006,520
========================================================
____________________________________________________
Presidential Personnel.................................. 1,201,564
Correspondence.......................................... 2,958,161
Oval Office Operations.................................. 803,824
National Security Affairs............................... 544,408
Strategic Planning and Communications................... 1,451,109
National Economic Council............................... 651,414
Cabinet Affairs......................................... 457,772
Legislative Affairs..................................... 1,846,511
Staff Secretary......................................... 2,014,497
Public Liaison.......................................... 1,419,835
Intergovernmental Affairs............................... 684,515
Political Affairs....................................... 681,409
Office of the First Lady................................ 1,217,974
Domestic Policy......................................... 1,059,595
Office of the Press Secretary........................... 1,544,144
Office of the Special Envoy............................. 180,942
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 40,175,820
Fiscal year 1998 \1\
Chief of Staff.......................................... $902,346
Scheduling and Advance.................................. 1,226,115
General Counsel......................................... 1,458,291
Management and Administration........................... 10,219,222
Detailees........................................... 459,031
--------------------------------------------------------
____________________________________________________
Subtotal, Management and Administration........... 10,678,253
========================================================
____________________________________________________
Presidential Personnel.................................. 591,557
Correspondence.......................................... 1,451,588
Oval Office Operations.................................. 344,835
National Security Affairs............................... 235,896
Strategic Planning and Communications................... 779,696
National Economic Council............................... 257,065
Cabinet Affairs......................................... 222,352
Legislative Affairs..................................... 846,575
Staff Secretary......................................... 988,760
Public Liaison.......................................... 659,743
Intergovernmental Affairs............................... 350,549
Political Affairs....................................... 382,198
Office of the First Lady................................ 574,804
Domestic Policy......................................... 577,389
Office of the Press Secretary........................... 733,763
Office of the Special Envoy............................. 186,458
Special Activities and Initiatives...................... 13,315
WHCA Non-Telecommunication Support...................... 9,494,000
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 32,955,548
\1\ Fiscal year 1998 reflects data through 3/31/98.
---------------------------------------------------------------------------
Fiscal year 1999 \2\
Management and Administration........................... $42,244,000
WHCA Non-Telecommunication Support...................... 10,100,000
--------------------------------------------------------
____________________________________________________
Grand Total....................................... 52,344,000
\2\ Consistent with prior years, fiscal year 1999 was prepared as a
single budget. Costs are allocated to respective departments as they
arise in connection with assigned activities and projects.
---------------------------------------------------------------------------
______
[exhibit 6]
----------------------------------------------------------------------------------------------------------------
Total
Contracts listed by agency/vendor Purpose Period of estimated
performance cost
----------------------------------------------------------------------------------------------------------------
Office of National Drug Control Policy
(ONDCP):
Gallup............................ Survey Data.......................... 09/11/95-11/11/95 $118,000
Evidence Based Research........... Statistical Research................. 07/03/95-09/03/95 150,000
Heritage.......................... Guard Service........................ 10/01/95-09/30/00 2,900,000
Porter-Novelli.................... Consulting Service................... 09/16/97-09/16/99 929,000
National Academy of Sciences...... Research............................. 04/22/97-12/31/98 897,000
TWD............................... ADP Support Services................. 01/01/97-12/30/98 3,000,000
Carrpark.......................... Parking Spaces....................... 01/01/98-12/31/00 167,000
National Academy of Sciences...... Research............................. 02/04/98-06/01/00 1,400,000
Office of Management and Budget (OMB):
Computech......................... ADP Support Services................. 09/20/96-09/21/01 6,000,000
IMC............................... ADP Support Services................. 11/01/95-11/02/00 3,000,000
Kinetic Technology................ ADP Support Services................. 07/03/97-07/03/02 1,000,000
Office of Administration (OA):
Sand Creek........................ Employee Assistance Program.......... 03/31/95-09/30/98 125,000
Chrysler.......................... Vehicle Lease........................ 01/01/95-09/30/97 265,000
SAS............................... Software License..................... 10/01/94-09/30/97 154,000
IMC............................... ADP Services......................... 02/26/96-02/25/01 3,000,000
Desktop Data...................... Wire Service......................... 10/01/96-09/30/98 188,000
Northrop-Grumman.................. ADP Facility Operations.............. 10/01/97-09/30/02 50,000,000
Chrysler.......................... Vehicle Lease........................ 10/01/97-09/30/02 ............
Digital Equipment................. Lease of ADP Facility................ 01/24/96-05/28/97 937,000
Pulsar Data Systems............... ADP Hardware......................... 02/09/93-09/30/96 6,500,000
IBM............................... ADP Hardware......................... 01/21/93-02/21/93 173,000
Anderson & Assc................... Telephone Consultant................. 05/01/93-05/01/94 117,500
AT&T.............................. Telephone System..................... 07/01/93-06/30/03 6,400,000
Bell Atlantic..................... Telephone Service.................... 07/01/93-06/30/03 6,800,000
Innovative Interfaces............. Library Automation................... 09/30/93-03/31/99 332,000
Advanced Integrated Tech.......... ADP Maintenance...................... 03/01/94-09/30/95 371,000
Subsystem Tech.................... Help Desk Support.................... 03/29/94-09/30/98 2,300,000
United States Trade Representative
(USTR):
Computer Dynamics................. ADP Support Services................. 10/01/94-04/15/95 255,000
TWD............................... ADP Support Services................. 06/01/96-05/30/01 3,000,000
Deloitte & Touche................. Trade Consultant..................... 09/09/93-02/28/94 483,000
Desktop Data...................... Wire Service......................... 10/01/96-09/30/98 131,000
White House (WH):
US Newswire....................... Wire Service......................... 04/01/95-05/01/98 566,000
ISI............................... Software Maintenance................. 02/01/96-09/30/98 327,000
Resumix........................... Automated Personnel System........... 02/04/93-09/30/95 349,500
ABR Assoc......................... Mailing Services..................... 08/12/93-02/11/94 326,000
----------------------------------------------------------------------------------------------------------------
EXHIBIT 7.--EXECUTIVE OFFICE OF THE PRESIDENT 1997 AND 1998 STAFFING LEVELS
[Target versus onboard]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year 1997 target/auth. September 30, 1997, onboard Fiscal year 1998 target/auth. April 21, 1998, onboard
---------------------------------------------------------------------------------------------------------------------------------------
Agency/account Other Other Other Other
Onboard government Total Onboard government Total Onboard government Total Onboard government Total
personnel employees onboard personnel employees onboard personnel employees onboard personnel employees onboard
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
White House Office...................................... 400 30 430 391 63 454 400 30 430 396 38 434
Office of Administration................................ 192 .......... 192 174 .......... 174 192 .......... 192 174 2 176
Special Assistant to the President...................... 21 11 32 20 5 25 21 11 32 21 8 29
Special Residence of the Vice President................. 1 .......... 1 1 .......... 1 1 .......... 1 1 .......... 1
Office of Policy Development............................ 31 8 39 29 6 35 31 8 39 29 6 35
Council of Economic Advisers............................ 35 .......... 35 29 4 33 35 .......... 35 32 3 35
National Security Council............................... 60 88 148 41 115 156 60 88 148 43 111 154
---------------------------------------------------------------------------------------------------------------------------------------
Subtotal.......................................... 740 137 877 685 193 878 740 137 877 696 168 864
Council on Environmental Quality........................ 19 3 22 18 1 19 23 3 26 19 .......... 19
Executive Residence at the White House.................. 89 .......... 89 88 .......... 88 89 .......... 89 88 .......... 88
Office of National Drug Control Policy.................. 124 30 154 102 30 132 124 30 154 114 30 144
Office of Science and Technology Policy................. 39 .......... 39 31 4 35 39 .......... 39 33 2 35
---------------------------------------------------------------------------------------------------------------------------------------
Total, Cumulative................................. 1,011 170 \1\ 1,181 924 228 1,152 1,015 170 \2\ 1,185 950 200 1,150
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 1997 target, 1,181; fiscal year 1997 average, 1,118.
\2\ Fiscal year 1998 target, 1,185; fiscal year 1998 average (as of 4/21/98), 1,151.
______
[exhibit 8]
White House Office Interagency Agreement Fiscal Year 1998
Agreement No.: I8BWCAB01A0
Agreement between White House Communications Agency (hereinafter
Servicing Agency) and White House Office (hereinafter Customer
Agency):
Authority.--This agreement is entered into under the authority of
the National Defense Authorization Act for fiscal year 1997, Public Law
104-201, Section 912, 110 Stat. 2422, 2623 (codified at 10 U.S.C.
section 111 nt); 31 U.S.C. section 1346(b); 601 of the Economy Act of
1932, as amended, 31 U.S.C. SS 135-36; and the authorizing legislation
of these two agencies.
Services to be Performed.--The Servicing Agency agrees to provide
services as reflected herein, as requested by the Customer Agency.
Services performed are in accordance with the Memorandum of
Understanding between the White House Communications Agency and the
White House Office. The initial estimated amount of this agreement is
as follows.
Stenographic Services Support........................... $306,000
Newswire Services Support............................... 635,000
Audiovisual Services Support............................ 3,553,000
--------------------------------------------------------
____________________________________________________
Total............................................. 4,494,000
Period of Agreement.--This agreement will commence on October 1,
1997 and will remain in effect until terminated by both parties. The
paragraphs delineate the understanding and terms of this agreement. The
agreement will remain in effect as long as the availability of funds is
provided to the Servicing Agency. This agreement may be modified with
the consent of all participating units.
Financial Provisions.--The Customer Agency has established an
estimated amount of $4,494,000 for services provided under this
agreement. The Office of Administration, Financial Management Division,
has assigned a document control number to this agreement. Payment for
services will be made on a monthly basis, or as agreed upon by the
parties herein.
Termination.--If termination of services is desired prior to the
expiration of this agreement the Customer Agency will request, in
writing, deactivation of the account, citing the appropriate account
numbers and date of termination.
Delegation of Authority.--The Customer Agency hereby authorizes the
Servicing Agency to provide services on a reimbursable basis. The
Servicing Agency will provide the services and be reimbursed by the
Customer Agency. The Customer Agency will reimburse the Servicing
Agency for any non-telecommunications support provided to the White
House by the Servicing Agency that results in additional cost to the
Servicing Agency. Costs associated with common use infrastructure are
non-reimbursable, except for support provided solely for the benefit of
the White House.
Billing Instruction.--Cost transfers are done transferring charges
from WHCA's Direct to Reimbursement accounts. A voucher for Transfer
between Appropriations and/or Funds (SF 1080 billing) is prepared based
on the cost transfers by the Defense Finance and Accounting Services
(DFAS) and forwarded to the White House for information only. Costs
will automatically be charged to the accounting classification provided
by WHO thru DFAS.
Accounting Classification.--The accounting classification is to be
provided by the Customer Agency to the servicing Agency at the
beginning of each fiscal year.
Accounting Classification to charge is as follows:
Agency Location Code: 11010001
Appropriations No.: 1180110
Index Code: B115A
Object Class: 251103
Fiscal year 1998 Interagency Agreement between: the White House Office
(hereinafter Customer Agency) and the White House Communication
Agency (hereinafter Servicing Agency)
To: Reimburse the Department of Defense for Military Personnel
Authority.--This agreement is entered into under the authority of
the National Defense Authorization Act for fiscal year 1997, Public Law
104-201, Section 912, 110 Stat. 2422, 2623 (codified at 10 U.S.C.
section 111 nt); 601 of the Economy Act of 1932, as amended, 31 U.S.C.
SS 1535-36; and the authorizing legislation of these two agencies.
Services to be Performed.--This agreement establishes the financial
arrangements between the White House Office (WHO) and the White House
Communication Agency (WHCA) to reimburse the Department of Defense for
the military personnel costs associated with providing non-
telecommunications services to WHO through the WHCA.
Services performed are in accordance with the Memorandum of
Agreement between the Department of Defense and the White House Office.
The initial estimated amount of this agreement is as follows:
Military Personnel, Army................................ $2,100,000
Military Personnel, Navy................................ 1,700,000
Military Personnel, Marine Corps........................ 100,000
Military Personnel, Air Force........................... 1,100,000
--------------------------------------------------------
____________________________________________________
Total............................................. 5,000,000
Period of Agreement.--This agreement will commence on October 1,
1997, and will remain in effect until September 30, 1998. The
paragraphs of this agreement delineate the understandings and terms of
this agreement. This agreement may be modified with the consent of all
participating parties to this agreement.
Financial Provisions.--The Customer Agency has established an
estimated amount of $5,000,000 for services provided under this
agreement. The Office of Administration, Financial Management Division,
has assigned a document control number to this agreement. Payment for
services will be made on a monthly basis, or as agreed upon by the
parties herein.
Termination.--If termination of services is desired prior to the
expiration of this agreement the Customer Agency will request, in
writing, deactivation of the account, citing the appropriate account
numbers and date of termination.
Billing Instructions.--This document grants Defense Finance and
Accounting Services Operating Location Pensacola (DFAS-PE) authority to
charge the White House Office (WHO) accounting classification below
monthly for non-telecommunications military personnel assigned to White
House Communications Agency (WHCA). At the end of the month, the White
House Communications Agency will provide DFAS-PE and the White House
Office with a monthly report listing all personnel assigned to
reimbursable positions. DFAS-PE will bill WHO monthly based upon
monthly actual non-telecommunications-related personnel strength
reports generated from WHCA.
DFAS-PE will prepare vouchers for Transfer Between Appropriations
(SF1080 billing) based on monthly detailed reports of non-
telecommunication personnel assigned to WHCA at the end of each month.
The SF1080 forms should be forwarded to the White House Office for
information only. DFAS-PE may automatically charge the accounting
classification below without prior approval from WHO. Upon review of
either party, payments may be adjusted to correct errors.
Accounting Classification.--The accounting classification is to be
provided by the Customer Agency to the Servicing Agency at the
beginning of each fiscal year.
Accounting Classification to charge is as follows:
Agency Location Code: 11-01-0001
Appropriations Code: 1180110
Index Code: B125A
Object Classification: 253200
______
[exhibit 9]
Memorandum of Understanding Between the White House Office (WHO) and
the Department of Defense (DOD)
1. Authority: This Memorandum of Understanding (MOU) is entered
into under the authority of the National Defense Authorization Act for
fiscal year 1997, Public Law 104-201, Section 912, 110 Stat. 2422, 2633
(codified at 10 U.S.C., section 111 nt); Section 601 of the Economy Act
of 1932, as amended, 31 U.S.C. Sec. Sec. 1535-1536; and the
authorizing legislation of these two agencies.
2. Purpose: This MOU outlines the agreement involving non-
telecommunications support services to be provided by the White House
Communications Agency (WHCA) to the White House Office (WHO)for which
WHO will reimburse WHCA and military personnel appropriations.
3. Compliance Oversight: WHCA will execute WHO funds and maintain
Government property in accordance with governing DOD policies,
instructions, standards, and any applicable statutes.
4. Reimbursable Costs:
a. WHCA will provide non-telecommunications support services to WHO
on a reimbursable basis. The WHO will reimburse WHCA for all actual
costs incurred by WHCA for non-telecommunications support services
provided to WHO. The mechanism for identifying these costs is covered
in Paragraph 8a and 8b of this MOU.
b. Military personnel costs incurred by the DOD in providing non-
telecommunications support services will be charged using the annual
military standard composite pay rates determined by the Military
Departments. The military composite standard pay rates will be computed
in accordance with Chapter 6, Appendix I, ``Military Composite Standard
Pay'' of the DOD Financial Management Regulation, Volume 11A. Military
fringe benefits (that is, other personnel support costs) will be
charged on the basis of a percentage of military pay costs and billed
as part of direct costs. The applicable percentage will be in
accordance with Chapter 6, Appendix I, ``Military Composite Standard
Pay'' of the DOD Financial Management Regulation, Volume 11A.
5. Categories of Support Provided: WHCA will provide the following
categories of support:
a. Presidential Audiovisual Events (PAE) Production Support;
b. Photographic Lab and Services Support;
c. Stenographic Services: WHCA will provide service through March
31, 1998, when the stenographic contract expires. On April 1, 1998, the
WHO will issue the stenographic contract directly;
d. Newswire Services: WHCA will provide service through September
30, 1998, when the Newswire contracts expire. On October 1, 1998, the
WHO will issue the newswire contracts directly;
e. Other Non-telecommunications Support: Other similar non-
telecommunications support services appropriate to further the
statutory, constitutional, and ceremonial duties of the President and
Vice President.
6. Requests for Services: For all routine non-telecommunications
tasks performed by WHCA, WHO may provide WHCA with verbal requests. For
other similar non-telecommunications support (paragraph 5e, above), the
WHO will provide WHCA with advance notice, additional information, and/
or written confirmation of the request to enable WHCA to adequately
plan for those tasks and to track both services and funds expended in
accomplishing those tasks.
7. Period of MOU: This MOU will commence on October 1, 1997, and
will remain in effect until either party provides the other a 1-year
termination of services notification. The paragraphs of this MOU
delineate the understandings and terms of this MOU and may be modified
with the consent of both parties. Each party to the MOU will review the
terms and conditions annually in concert with the interagency
agreements (IAG) referenced below.
8. Financial Provisions: The financial provision of the MOU will
address the following two categories:
a. Budget: The WHO will request non-telecommunications support
services and approve annual funding levels to the WHCA for non-
telecommunications support services during the normal DOD and WHCA
budget cycle. The WHO will provide WHCA with projections of future non-
telecommunications support requirements so that WHCA can develop
reimbursable estimates. Each year before July 31, WHCA must provide a
budget estimate for the cost of these non-telecommunications support
services for the upcoming President's Budget. Included in this estimate
will be any new initiatives, system upgrades, and major projects.
b. Funding: At the beginning of each fiscal year, WHO will
establish IAG's with WHCA and/or DOD to cover the actual costs of
procurement, operations, and personnel related to non-
telecommunications support services for that fiscal year. If additional
funds are needed, the IAG's can be amended to provide the additional
funding. WHCA and DOD will notify WHO of projected unused funds by
August 1 of the fiscal year and will return the funds before the end of
the fiscal year.
c. The IAG's will define billing and payment procedures.
9. Property Accountability: WHCA will retain accountability and
responsibility for the inventory of all equipment, supplies, and
materials purchased to support WHO. WHCA will maintain property in
accordance with DOD property management and accountability policies and
instructions.
10. Documentation: WHCA will maintain a complete file of all cost
and service reports, all written requests for services, and detailed
cost support data.
11. Reporting Requirements: Each month WHCA will provide a report
to WHO detailing monthly costs and services by each category of
support.
12. Management Controls: Both WHCA and WHO will implement internal
management control procedures to ensure resources are executed in full
compliance with governing public laws and DOD policies and with a
minimum of risk of fraud, waste, and abuse of these resources.
13. Approvals: David J. Kelley, Lieutenant General, Director,
Defense Information Systems Agency; John R. Dankowski, White House
Office.
[GRAPHIC] [TIFF OMITTED] T13MY07.012
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, MAY 14, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:40 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Faircloth, and Kohl.
DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
STATEMENTS OF:
JOHN W. MAGAW, DIRECTOR
GALE ROSSIDES, ASSISTANT DIRECTOR, TRAINING AND PROFESSIONAL
DEVELOPMENT
NONDEPARTMENTAL WITNESSES
STATEMENTS OF:
EDWARD N. KONDRACKI, CHIEF, LA CROSSE POLICE DEPARTMENT, LA
CROSSE, WI
CHIEF DEPUTY SHERIFF CUYLER WINDHAM, CUMBERLAND COUNTY
SHERIFF'S OFFICE, FAYETTEVILLE, NC
Opening Remarks
Senator Campbell. Good morning. The Treasury Subcommittee
will be in session. I apologize for being a little late. We
have a bunch of conflicts today, the usual set of circumstances
here, as my Senator colleagues know.
Today we will learn more about a program sponsored by the
Bureau of Alcohol, Tobacco and Firearms [ATF] to help States
and local communities educate our youngsters about alternatives
to gangs. Unfortunately, gang activity has increased in our
country in recent years. The ATF has developed a program to
give our children the tools they need to be able to resist the
temptation to belong to a gang.
The Gang Resistance Education and Training [GREAT] Program
is only 6 years old, but has already grown from a pilot program
in Arizona to classrooms all over the United States. There are
GREAT programs now in Puerto Rico, Canada, and overseas
military bases.
I certainly want to thank the ATF for responding to this
subcommittee's recommendation that they expand the GREAT
Program into Indian country where there's been an increase
steadily in gang activity over the past 10 years.
The ATF estimates that about 1 million children are
receiving GREAT training. According to the National Institute
of Justice, the GREAT Program is having a positive effect on
student activities and behaviors and is deterring them from
involvement in gangs. As a side benefit of that program, of
course, the graduates seem to be doing a better job in
communicating with their parents, their teachers, and getting
better grades.
Last year, Congress appropriated $13 million for the GREAT
Program, $2 million more than the President requested. Of that,
$10 million goes to State and local agencies in the form of
grants to assist them in providing the offices and the officers
to conduct this training in local classrooms.
With us this morning are John Magaw--nice to see you, Mr.
Magaw--Director of the ATF, along with Gale Rossides, the ATF
Assistant Director for Training and Professional Development.
They will tell us more about the GREAT Program and how local
communities can participate.
We will also hear from Edward Kondracki, the Chief of the
La Crosse, Wisconsin Police Department. The chief has been
involved in the GREAT Program for a number of years and can
speak from firsthand experience on how well the program works.
In addition, Chief Deputy Sheriff Cuyler Windham of the
Cumberland County, NC, Sheriff's Office will express his
interest and desire that the GREAT Program be expanded into his
area.
And last, but most certainly not least, we will have an
opportunity to listen to youngsters who have graduated from the
GREAT programs and some of their instructors, too. I will
introduce them as they come to the second panel. I also would
like to acknowledge that we have many visitors, including
parents and supporters of these youngsters, in our audience
today and we certainly welcome them here, too, and thank them
for the support they have given to our law enforcement agencies
and certainly the youngsters themselves.
We will also, although they will not be a panel, I
understand we have a GREAT class here from the city of
Baltimore with four of their instructors and we welcome you to
this hearing, too.
With that, I yield to Senator Kohl for an opening
statement.
Statement of Senator Kohl
Senator Kohl. Thank you, Mr. Chairman, for your continued
appreciation for and commitment to crime prevention programs.
We have worked hard in the past to preserve these programs and
to educate our colleagues about the value of a balanced
anticrime strategy. I look forward to working closely with you
again this year to give prevention the investment it deserves,
both through the GREAT Program and the Commerce, Justice,
State, and judiciary bill.
I would like to take this opportunity to welcome our guests
from La Crosse, WI, who have come to share their GREAT
experiences with us today. I especially want to thank La Crosse
Police Chief Ed Kondracki for joining us today. Chief Kondracki
is to be commended for his work to combat youth violence in the
La Crosse area.
Chief Kondracki is a strong supporter of boys' and girls'
clubs, and 2 years ago, we created a new community police
center. It is unique because the building that now houses
community policing programs is a former warehouse that was used
for various criminal activities in the past.
There is no better example of how you can turn a
neighborhood around and make a difference in the community. We
know La Crosse is a potential candidate for consideration as a
future Midwest training facility. Given the success of their
efforts, I urge members of the decisionmaking committee to
reward La Crosse for their work.
Just a few brief points about GREAT. First, it sends the
right message: Stop gang violence. It is the type of violence
that intentionally separates children from their parents at a
time in their lives which demands the closeness and patience of
parental guidance. It is the type of violence that creates gun-
toting 10-year-old children, quick on the draw, and showing no
remorse when they kill.
It is the type of violence that has spread beyond our big
cities to smaller areas like La Crosse and Green Bay, WI, and
the Menomonee Indian Reservation in northeastern Wisconsin.
Second, GREAT uses the right messenger, law enforcement
officers themselves who often tell us, ``We need more
prevention.'' Through their enthusiastic participation in
GREAT, they put their words into action.
And third, GREAT works. Preliminary studies show that it
reduces delinquency, gang membership, and drug use. These
ongoing evaluations provide a good model for further
investments in prevention that are both responsible and
worthwhile. Mr. Chairman, programs like GREAT add balance to
ATF's mission.
I look forward to hearing about GREAT's accomplishments and
what we can do to support it in the future. Thank you, Mr.
Chairman.
Senator Campbell. Thank you. Senator Faircloth.
Statement of Senator Faircloth
Senator Faircloth. Thank you, Mr. Chairman, for holding
this hearing. I think it is necessary to hold it because the
GREAT Program is a wonderful proactive program designed to
discourage our young people from becoming involved in gangs.
Surveys show that violence in our schools is the No. 1
education-related concern, and we have shown that we have been
losing the war on school violence. Just last month, the
Washington Post reported that nearly twice as many teenagers
reported gangs in their schools in 1995 as they did in 1989, a
50-percent increase, when no increase is acceptable.
School administrators from my home State have found that
gangs and violence go hand-in-hand. When the young couple gangs
and violence with drug use and weapons, we have a total formula
for disaster. An example of this was the shooting in Jonesboro,
AR. A 13-year-old who was accused of shooting down four
students and a teacher was said to have belonged to a so-called
blood gang, which clearly indicates this is not a problem
confined to the major cities. You cannot get much rural than
Jonesboro, AR. So it is all over.
Fortunately, programs like the GREAT Program have educated
our children about the perils of gangs and offer alternative
ways to resolve conflicts rather than through violence. Four
communities in North Carolina, my home State, have participated
in GREAT so far, Asheville, Winston-Salem, Wilmington, and
Salisbury. I commend them for their leadership in the area.
Some may say that small involvement in the GREAT Program
means there is little gang activity in their State. I believe
we should not wait until there is evidence of a gang before we
start using GREAT in a school district. We must continue to be
proactive and educate our young people about the dangers of
gangs. If we wait until there is a problem, it is too late. We
could be facing the Arkansas-type situation.
Thank you, Mr. Chairman. I would also like to recognize
Deputy Cuyler Windham from Fayetteville, NC, who is testifying
here today. I welcome him here and look forward to his
testimony and that also of the other members testifying.
Cuyler, thank you for being here.
Mr. Windham. Thank you, Senator.
Senator Campbell. With that, we will start in the order
that I introduced you with Director Magaw first and Gale
Rossides second, Chief Kondracki and Sheriff Windham last.
John, go ahead.
Statement of John W. Magaw
Mr. Magaw. Mr. Chairman, I appreciate the opportunity to
discuss the merits of our school-based gang prevention program
known as GREAT. With me is our Assistant Director for the
Office of Training and Professional Development, Gale Rossides,
whose office oversees the GREAT Program within ATF.
We will be very short in our comments because the most
important witnesses are the young people and their instructors.
Since the inception of the GREAT Program in 1991, over
3,300 police officers from over 1,400 agencies have been
trained to teach the core curriculum in the classroom. These
uniformed officers have taught well over 1 million children in
50 states, the District of Columbia, Puerto Rico, and Guam.
They have taught America's children about the critical concepts
of gang resistance, successful conflict resolution, self-
esteem, dealing with peer pressures, and quality of life
expectations.
There is a GREAT national policy board which consists of
the police chief in Phoenix, AZ; the Director of the Federal
Enforcement Training Center; and the Director of ATF. We have
recently expanded that national board to include the sheriff of
Orange County, FL; the police commissioner of Philadelphia, PA;
and the chief of police in Portland, OR. As Senator Kohl
referred, we will be adding a Midwest representative at our
meeting next month in Phoenix.
These agencies will set up and administer regional training
sites while bringing added value to our national policy
considerations because of the variation of their cities' size
and population. This composition will better service the
expansion needs of areas all over the country.
The board also actively seeks relationships with
organizations that are already in position such as the boys'
and girls' clubs, the Boy Scouts of America, the National Youth
Sports Program, the Police Athletic League, and I could go on
with others.
GREAT offers a meaningful opportunity to literally save
lives, the life of the young person who may be at risk of going
down the wrong path, if you will, and the lives of his or her
potential victims.
Researchers at the University of Nebraska have studied the
effectiveness of GREAT among 5,900 children in 11 communities.
Their preliminary results indicate that the graduates of GREAT
show lower levels of delinquency and risk-taking behavior and
higher levels of self-esteem, perceived educational
opportunities, of antigang attitudes.
In a continuing effort to verify that this program is doing
what we think it is, the study is continuing now on a
longitudinal basis.
The men and women of ATF are proud of our association with
the students of GREAT and the law enforcement officers who make
the program work. Mr. Chairman, that concludes my statement.
Assistant Director Rossides also has a short statement.
Prepared Statement
Senator Campbell. Thank you, Mr. Magaw. We will insert your
prepared statement in the hearing record.
[The statement follows:]
Prepared Statement of John W. Magaw
Mr. Chairman, permit me to thank you and the distinguished Members
of this Subcommittee for the consistent support you have provided the
Gang Resistance Education and Training Program, known as GREAT, and for
the present opportunity to discuss the merits of this school-based gang
prevention initiative.
With me is our Assistant Director for the Office of Training and
Professional Development, Ms. Gale Rossides, whose office oversees the
GREAT program for ATF.
Since the inception of GREAT in 1991, over 3,300 police officers
from over 1,400 agencies have been trained to teach the core curriculum
in the classroom.
These uniformed officers have taught well over one million children
in 50 States, the District of Columbia, Puerto Rico, and Guam--the
critical concepts of gang resistance, successful conflict resolution,
self-esteem, dealing with peer pressure, and quality of life
expectations.
During this fiscal year, ATF is funding 33 law enforcement agencies
that previously did not receive Federal assistance for GREAT. This
funding was made possible by the $2 million added by Congress for
direct support of local GREAT programs.
GREAT's National Policy Board, consisting of the Police Chief of
the Phoenix, Arizona Police Department, the Director of the Federal Law
Enforcement Training Center, and the Director of ATF--has recently
expanded to include the Sheriff of Orange County, Florida; the Police
Commissioner in Philadelphia, Pennsylvania; and the Chief of Police in
Portland, Oregon.
We will be adding a Mid-West representative as well.
These agencies will set up and administer regional training sites
while bringing added value to national policy considerations for the
program. This composition will better service the needs of all areas of
the country.
The Board also actively seeks relationships with organizations such
as the Boys and Girls Club, the Boy Scouts of America, the National
Youth Sports Program, and the Police Athletic League.
Additionally, we have created a National Quality Assistance Network
to ensure the continued integrity of GREAT; and created an Internet-
based Clearinghouse to provide a single source for assistance and
referral.
GREAT offers a meaningful opportunity to literally save lives--the
life of the young person who may be at risk of going down the wrong
path--and the lives of his or her potential victims.
Researchers at the University of Nebraska studied the effectiveness
of GREAT among 5,935 children in 11 communities. Their preliminary
results indicated that the graduates of GREAT show lower levels of
delinquency and lower levels of risk-taking behavior--and higher levels
of self-esteem, perceived educational opportunities, and anti-gang
attitudes.
In a continuing effort to verify the data and results, the study is
continuing on a longitudinal basis.
AFT takes great pride in our association with the graduates and
officers present today and the many more fine individuals they
represent.
Mr. Chairman, that concludes my statement. Ms. Rossides will now
present a brief history and discuss the curriculum and how it is
managed. Thank you.
Statement of Gale Rossides
Senator Campbell. Gale, if you'd like to proceed?
Ms. Rossides. Good morning. The Gang Resistance Education
and Training Program began as a partnership between local law
enforcement and ATF who developed the nine-lesson middle school
curriculum. Since then, a shorter third and fourth and fifth
and sixth grade curriculum, as well as a summer component, have
been developed.
The program involves training officers to become successful
classroom instructors. The instructional format for the
officers' training provides a spirit of cooperation from
modeling each lesson of the curriculum and requires officers to
present a lesson through the use of role plays and group
exercises.
Some of the topics that the students are presented include
an introduction which allows a student to develop a rapport
with the officer and learn about the program, and other topics,
including crime and victims, cultural sensitivity, conflict
resolution, and goal-setting. Each lesson builds upon the
previous lesson and reinforces the concepts of reducing gang
involvement and youth violence.
For a moment, I will describe some of the structure in
managing the program. The national policy board sets the
overall direction for the program. Then below that body is the
national training committee. Each agency board member has a
subordinate assigned to this committee who meets to deal with
the day-to-day issues involved in the operation of the GREAT
training.
ATF's roles include the responsibility for managing the
cooperative agreements to fund local communities and pay for
the evaluation of the program and the delivery of officer
trainings. GREAT is designed to strengthen the effectiveness of
its classroom lessons at the end of the school year.
With cooperation from the community, parents, law
enforcement agencies, we supplement the GREAT curriculum with a
summer program. In addition to a well-rounded and structured
environment during the summer, the children enjoy recreational
games, outings, and community service projects.
In summary, the success of the GREAT Program is founded on
the mutual commitment of law enforcement and education agencies
who unite to provide children with accurate knowledge about
gang involvement, to provide them with the skills necessary to
resolve conflicts peacefully, and to understand the need to set
goals.
The dedication of the parents, the police, and the school
agencies is an essential part to the program's success, and the
Bureau and its partners are thoroughly committed to this
program. Again, I thank you for the support that you've
provided for the GREAT Program.
We would like to show you an excerpt of a video taken in a
classroom setting. It is an excerpt of a role-play exercise.
The GREAT officer is actually playing the role of the student
and the student is acting as the principal. At the end, a
student in the class summarizes his experiences with GREAT.
Following this panel, it will be our pleasure to have you
hear from the officers and students who have traveled here to
give testimony about their GREAT experiences.
[Videotape played.]
Senator Campbell. I know that did not show the whole thing,
but because of time constraints, we would like to spend a
little more time with the youngsters when they have their
panel, so we will just end with that part of the presentation.
Ms. Rossides. Thank you.
Senator Campbell. Did you have further comments, Gale?
Ms. Rossides. No, sir; I did not.
Prepared Statement
Senator Campbell. Thank you, Ms. Rossides. We will insert
your prepared statement in the hearing record.
[The statement follows:]
Prepared Statement of Gale D. Rossides
Thank you Director Magaw. Good morning, Mr. Chairman and members of
the Subcommittee.
The Gang Resistance Education and Training (GREAT) program began in
fiscal year 1992 as a partnership between police officers and ATF
special agents, who developed a nine-lesson middle school curriculum,
with the goal of reducing gang involvement and youth violence. Since
then, a shorter third/fourth and fifth/sixth grade curriculum, as well
as a summer component, have been developed.
The GREAT Program helps children become responsible members of
their communities. The Program involves training officers to become
successful classroom instructors by ensuring a supportive learning
environment that causes students to become enthusiastic.
The instructional format for the officers' training provides a
spirit of cooperation for modeling each lesson of the curriculum and
requires officers to present a lesson which is the keystone to the
Program's success. Other strengths of the training program include its
use of role-play technique and group exercises.
Now, let me review briefly some of the topics that are presented to
the students.
The first class is an Introduction, which allows the students to
become acquainted with the program and the officer. Other classes
include: ``Crime/Victims'' which covers the impact that crime has on
victims and neighborhoods; ``Cultural Sensitivity'' is where students
examine their own cultures and learn to appreciate cultural differences
and how they impact the community; ``Conflict Resolution'' is taught as
a six-step process in two sessions; and ``Goal Setting'' encourages
students to realize the importance of setting goals in life.
Each lesson builds upon the previous lesson and reinforces the
concepts of reducing gang involvement and youth violence.
Now, let me describe the structure of the Program and how it is
managed.
The National Policy Board meets to review recommendations and set
the direction of the program. Below that body is the National Training
Committee. Each agency board member has a subordinate assigned to this
Committee who meets to deal with the day-to-day issues regarding GREAT
Officer Training, the curriculum, and the effectiveness of the program.
ATF's roles include responsibility for managing Cooperative
Agreements that serve to fund communities; and we pay for the
evaluation of the program and the delivery of officer trainings.
GREAT is designed to strengthen the effectiveness of its classroom
lessons at the end of the school year. In cooperation with the
community, law enforcement agencies can supplement the GREAT curriculum
with a summer Program. In addition to a well-rounded and structured
environment, youth enjoy recreational games, outings and community
service projects.
In summary, the success of the GREAT Program is founded on the
mutual commitment of law enforcement and education agencies to unite in
common goals: To provide children with accurate knowledge about gang
involvement; to provide children with the skills necessary to resolve
conflicts peacefully; and to understand the need to set goals.
The dedication of the police and school agencies is an essential
ingredient to the Program's success. The Bureau and its partners are
thoroughly committed to this innovative, comprehensive gang and
violence prevention program.
Again, thank you for the support that you have provided for the
GREAT Program. Now, we will show you an excerpt of a video taken in a
classroom setting for a role-play exercise. The GREAT Officer is
playing the role of the student and the student is acting as the
principal. At the end, a student summarizes his GREAT experience.
Following this panel, it will be our privilege to have you hear
from the officers and students who have traveled here to give testimony
about their experiences with GREAT.
Statement of Edward N. Kondracki
Senator Campbell. OK. Chief, if you would like to proceed?
Mr. Kondracki. Senator Campbell, members of the
subcommittee, Senator Kohl and Senator Faircloth----
Senator Faircloth. Chief, if you don't mind, would you pull
the microphone a little closer to you?
Mr. Kondracki. All right.
Senator Faircloth. Thank you.
Mr. Kondracki. Thank you for this opportunity to talk to
you about this important issue of gangs. As you could see in
the film and the comments by the young man, gangs, drugs, and
violence are a concern to our young people in our classrooms
across the country.
I have had the opportunity to be the chief of police in the
city of La Crosse for the last 5 years, and that is a city of
53,000 people. We have 94 sworn police officers. Prior to that,
I spent 28 years in the city of Milwaukee Police Department,
which is the 10th largest municipal police agency in the
country, employs 2,800 employees, and polices a community of
about 1 million.
I also teach community policing around the country for
Northwestern University and I have taught police administration
at Marquette University. All of this has given me the
opportunity to personally see the gang situation evolve both in
large and small communities.
What I have seen is quite disturbing. The Office of
Juvenile Justice Assistance predicts that if current trends
continue, violent crime by young people is expected to double
in this country by the year 2010.
After 33 years in policing in both medium and large-sized
police departments, I am convinced that any effort to reverse
this disturbing trend requires a partnership between schools,
the police, the community, parents working together. I have
provided you with a handout of the city of La Crosse's gang
strategy and in it, it emphasizes community, education,
alternatives, and enforcement.
Enforcement is only one-quarter of our strategy since we
feel that that is about how much time we spend enforcing the
law and we need to look at the other aspects of a communitywide
approach.
The GREAT Program is a cornerstone of the city of La
Crosse's antigang strategy. It is that kind of a program. We
call it community policing. Community policing is sweeping the
country. The GREAT Program truly differs from any other program
that I have had the occasion to see.
It has three major components. One is a parent component.
The other is a school component. It pertains to a classroom
curriculum. The third component is a summer program. In La
Crosse, we are providing 300 students each day for 5 weeks with
an alternative opportunity. We are addressing parents through
our Another Way Program.
Senators, I can tell you that parents, with tears streaking
down their faces, have told me that they have never seen a
program as effective as the three components of GREAT when they
are working together.
In our community, we saw a 45-percent increase in juvenile
arrests over the course of 3 years. We saw a 15 percent annual
increase in juvenile arrests. I am happy to say that since the
beginning of the GREAT Program, we have reversed that trend
and, in fact, arrests have begun to decline.
We have been involved in GREAT now since 1994. We have also
noticed that the number of young people who claim to be gang
members in La Crosse has gone down. We have seen the presence
of graffiti, which is considered the most obvious sign of gang
activity, decrease in our city. We have also seen gang-related
shootings decrease in our city.
After teaching community policing around the country for
the last 10 years, I have never seen a more effective program
than the GREAT Program. I am concerned, however. I am concerned
about the fact that only 5 percent of the police departments in
the United States employ more than 100 employees. That means
that 95 percent of the police departments in our country have
less than 100 police officers, most have less than 50, and many
have less than 10.
Policing in the United States is about small agencies. What
we are seeing is a migration of gangs. The national trend is
for gangs to move from larger communities to smaller
communities. They are doing it primarily to escape crime. The
irony is that many families moving to cities like La Crosse and
other small and medium-sized communities are bringing young
people with them who have already been integrated into the gang
philosophy.
Our challenge then for the 95 percent of our smaller
agencies is to see to it that we address that gang philosophy
and mentality early on. I believe that is why we have been as
successful as we have in La Crosse.
I applaud Director Magaw of the ATF and his staff for their
leadership. Without the GREAT Program and without their
leadership, none of this, I believe, would be possible.
I would like to take this opportunity to encourage you to
expand funding for the GREAT Program. There is no more cost-
effective program. When we consider the $33 billion that has
been set aside in the crime bill, I think we need to be more
proactive in funding programs like GREAT. The ATF needs
sufficient funding to assist police agencies of all sizes
across our country.
We can reverse this trend, the trend toward youth violence.
GREAT is already doing it. Now we need to bring this program to
every community, large and small, in the country.
Senators, at times, I feel a little bit like a voice crying
in the wilderness, if you will. My message is a simple one.
Community policing works. GREAT is community policing at its
best. The challenge to law enforcement nationally is that of
meeting increased demands with limited and often diminishing
resources.
I would encourage you to fund this program so that police
agencies of every size can bring the GREAT Program to their
communities, and that is only possible by increasing the amount
of funding that is going to ATF and the GREAT Program. Thank
you.
Senator Campbell. Thank you. Sheriff, if you would like to
continue.
Statement of Cuyler Windham
Mr. Windham. Thank you, Mr. Chairman, Senator Faircloth,
Senator Kohl. I am here today to basically ask that funding be
allowed so my department can continue the school program that
we have. In Cumberland County, NC, we are basically charged
with protecting the schools. We have the school resource
officers and we also teach DARE in the schools.
About 2 years ago, we started trying to identify if we had
a gang problem. Much to our amazement, we determined we had 25
to 30 different types of gangs in our county. Some of these are
small community gangs. Some of them refer to nationally known
gangs such as the Crips and the Bloods I think everybody has
heard about.
They may belong to them or they may not. It does not make
any difference if they are gang members or if they are wanna-be
gang members. We refer to people that do not belong to a
national gang a lot of times as wanna-bes. But if they consider
themselves a part of a gang or if they consider themselves a
local gang and if they hurt somebody or they kill somebody, you
are just as dead as if they belonged to the Crips and the
Bloods.
So we have set out to try to do something about gang
activity in our county. The people that we have assigned to the
schools, we do not have the GREAT Program at this point, but
the officers that we have assigned to our schools have come to
us, the sheriff who is here today supporting this, and myself
as the chief deputy and asked us to try to get some training in
GREAT. That is our intention in the future.
Now, you have before you, I think, some photographs of gang
graffiti that we have taken in the county. Some of it is on the
streets and some of it are actually from the schools, high
schools, and middle schools. You also have before you a paper
that was put out February 27, 1998, by one of the schools in
our county.
One of the things that kind of touches on me from this
paper and in this paper, on the last page, they refer to
interviewing an individual by the name of T.C. T.C. says, ``I
feel people are safer when they are in gangs than they do when
they are on their own or in their own family. I also feel that
a gang is a real family, look out for each other.''
Unfortunately, that is what we are finding a lot when we
are studying the gang problem in our county. A lot of the young
people feel like they are safer. They feel like they have more
of a family with gangs than they do at home and that is why
they are turning to gangs.
That is why I think the GREAT Program would be such a great
program for us in trying to teach the young people to stay away
from gangs and the dangers of gangs. I have one other thing
I'll mention.
On February 6 of this year, of 1998, we received a letter
to Sheriff Butler, and it is addressed, ``Dear Sheriff
Butler''--and this is a letter pertaining to a gang that we
know that operates in our county.
I am writing this letter seeking help for families living--
And I am going to leave out names and addresses.
Living on a certain street in our county. On Sunday, May 3,
1998, I was visiting my mother. She lives with another daughter
who is her caretaker. Mama is bedridden. She is recovering from
a recent heart attack.
About 3:30 p.m. Sunday, the phone rang. It was a neighbor
calling and was telling me that a group of young white male
skinheads had come to her home on a certain street and
terrorized her family by spray-painting devil symbols on the
trees in her yard and throwing handfuls of white powder dust in
her front yard.
We were not physically harmed and they moved on. Just as I
was telling the nature of the phone call is when we heard what
sounded like a platoon of soldiers. We looked out the front
window and saw three white male skinheads running through
Mama's front yard. They were wearing white short-sleeved shirts
and white t-shirts and dark trousers.
They were all clean-cut and wore no hats or no disguises.
The men did not come to the door nor harm us. One threw a
handful of what appeared to be white powder dust in the
driveway in front of Mama's cars. They did not damage the two
cars parked in the yard. They were moving real fast.
The next few minutes, they left Mama's house and had gone
down the driveway to another road. There two men sprayed white
painted signs on the shoulder of the road by Mama's mailbox in
white spray paint. The signs by the mailbox look like this.
And she gives in this letter a symbol that is for
skinheads.
The symbol drawn on the pavement near the mailbox looked
like this.
Which is also another one.
They did not stop there. They kept going on to another
street.
The point I want to make with this letter is, I do not know
if these people belong to national skinheads or whether they
are just wanna-bes in our community, but this lady says in this
letter, ``We were terrified. When we dialed 911, the phone
operator asked several questions,'' and so forth.
But she made a point in this letter. ``Sheriff Butler, I am
counting on you and your deputies to come out and talk with
myself,'' and she gives names, ``and the other God-fearing
people who live in that neighborhood of Cumberland County. I
will testify in court when you find these young men and charge
them that terrified our community and bring them to court for
defacing our property.''
Again, I just point out the fact that how terrorizing gangs
are becoming. I know we read a lot about it in a lot of the
larger areas. Our county is approximately 300,000 people. We
are about 30 miles down the road from Senator Faircloth.
Basically, I am here to point out that we have a problem.
We think GREAT would be a good program for us to integrate with
our DARE Program and our school resource officers to try to
teach the young people to stay out of the gang situation. I
thank you very much for being here today.
Prepared Statement
Senator Campbell. Thank you, Mr. Windham. We will insert
your prepared statement in the hearing record.
[The statement follows:]
Prepared Statement of Cuyler L. Windham, Sr.
gangs in the cumberland county area
In the Cumberland County North Carolina area, gangs are loosely
organized. Some are part of larger structures known as Gangster
Disciples, which are networked nationwide. But, most are loosely knit
groups with several leaders. Most of them are non-traditional gangs and
``wanna-be's'', however, these gangs are the hardest to track because
of their untraditional behavior. These gangs change their gang name and
rules. They do not pattern their conduct to the gangs that we are aware
of, such as the ``Crips'', ``Bloods'', ``People'', and ``Folk
Nations'', et cetera. That's what makes it difficult to work gangs in
our area. We have crimes committed that we're sure are gang related,
however it is difficult to prove.
The spread of gangs in our area can be attributed to at least four
factors. First, parents desiring to protect their gang-culture-
saturated children from the hometown gang's influence, send them to
reside with relatives across the country. Occasionally this strategy
works, but many times it merely transplants the gang culture into a new
community. Secondly, contributing to the gang activity in Cumberland
County is Fort Bragg, with its numerous military transfers from all
over the country into our area. As a result, Cumberland County ends up
with gang members from other areas who start their gang activity here.
Children who were introduced into the gang lifestyle by association,
end up starting gangs or gang ``wanna-be's'' in our area. The third
contributing factor would be the illegal drug market, this being due to
the fact that we are easily accessible from I-95 and I-40. Drugs,
weapons and stolen property are the biggest moneymaker for gangs.
Fourth, the news media, movies and music industries contribute largely
to the gang problem in our area as well as throughout the nation.
Graffiti is one of the first signs of gang activity. Cumberland
County has located gang style graffiti on walls in our high schools,
middle schools, on businesses, streets, and vacated buildings. Gang
style graffiti has also been discovered in many of our neighborhoods.
The neighborhoods which have been targeted are primarily low and middle
income areas. The gang graffiti helps us identify different gangs,
their territory and their rivals. In some cases gang graffiti has
enabled us to know what a particular gang has done or is planning to
do. Gang graffiti often times shows gang members by their monikers or
nicknames. This occasionally aids us in identifying various gang
members. The graffiti that has been discovered in the Cumberland County
area, which includes Fort Bragg, Fayetteville, Hope Mills, Spring Lake,
Stedman and the townships of Linden, Godwin, and Falcon has enabled us
to identify ``Crip'' sets, ``Blood'' sets, ``Latin Kings'',
``Gangsters'' ``Disciples'', ``LaFamilia'', and other non-traditional
gangs which associate themselves with the ``Folk Nation'' and ``People
Nation''.
Some communication by gang members is done through graffiti, hand
signs or signals, tattoos, various colored bandannas, phonic alphabet,
and by the use of gang slang terms.
There are many identifiers of gang affiliation. For example,
clothing, colors, hand signs, and tattoos. All of these gang
identifiers have been found in the Cumberland County area, in our
schools, on the streets and in our neighborhoods.
Gangs are creating problems in many of our neighborhoods by illegal
drug sales, damage to property, assaults, personal robberies, break-
in's, larcenies and intimidation of residents.
Several of our schools are experiencing problems with suspected and
self-admitted gang members. The problems that most often occur are
trespassing, assaults, intimidations, defacing school property and
disruption of school functions.
Most of the ``wanna-be'' gang members hang out at our skating
rinks, Putt-Putt Miniature Golf Courses, shopping malls and shopping
center parking lots. The hard-core gang members hang around streets and
street corners of known or suspected illegal drug dealing areas in our
county. Mobile home parks also experience problems related to gang
activity.
Several of the homicides committed in Cumberland County have had
numerous reported gang members as possible suspects. Fort Bragg
Military Police have made drug related arrests where the suspects were
gang affiliated. They have confiscated drugs, weapons and vehicles on
several occasions. There have been assaults, larcenies, robberies, home
invasions, drive and walk-by shootings that were believed to be drug
related, however ``street talk'' has given credit to these offenses
being gang related. It is difficult to obtain information on the hard-
core gangs because of the code of silence and unfortunately, citizens
are fearful of giving information to law enforcement on these gangs.
Hard core gang members would rather go to jail for a crime they didn't
commit, rather than tell on anyone from their gang. Within the last
year, we have noticed a behavior change in most of our gangs. Their
behavior has turned more low-key, in order not to attract attention to
themselves. This allows them to conduct their business without
interference from law enforcement. We believe that this behavior change
is due to the fact that gang members from larger known gang affiliated
cities are educating our local gangs.
Numerous street gangs have been identified in Cumberland County
through information received by other law enforcement agencies, the
local community, and self-admitted gang members. Those gangs identified
are as follows:
Gangster Disciples
Black Gangster Disciples
Eight Trey Gangsters
21st Street Crips
212 Crips
Rollin 60's
East Side Crips
Deep Creek Road Boys
West Side
LaFamilia
Old Shaw Crips
Latin Kings
Deuces
The Brownside Bloods
Insane 60's
Eight Ball Nation
Folk
Hoover 107
Locos Latinos
Evergreen Posse
Bloods
Village Green Posse
Hoover 8 Ball
Hoover Gangster Crips
Vice Lords
Folk Nation
Skinheads
The Seabrook Bloods
Frats
Latin 57
Blue Devil 64
Little Mafia
Insane Gangster Disciples
Crips
Sunset Posse
Hell's Angels
Outlaws
We have encountered numerous juveniles who have branded themselves
with gang related symbols by using coat hangers or wire. They formed
the design with the material, heated the metal, and then burned the
design into their skin. Some have homemade tattoos. Information has
been received from some parents and self-admitted members about severe
``beat-ins''. ``Beat-ins'' are used in most gangs to initiate new
persons into the gang, however, there are reported cases where females
are sexed into the gang to avoid beatings. There are other ways to
obtain gang membership. Occasionally, gangs may require persons
interested in gang membership to commit a crime of the gang's choosing
in order to become a member.
Not all gangs are involved in drug trafficking and violence. Some
steal vehicles and other items to make money for the gang.
The Cumberland County Gang Intervention Unit works closely with the
Fayetteville and Hope Mills Police Departments and military authorities
to identify gang activity in the Cumberland County area. Presently we
are working with the Violent Crimes Task Force in the attempt to target
the larger gangs at work in our area.
Characteristics of the GREAT Program
Senator Campbell. Thank you, all of you. I have a couple of
questions. I am sure my colleagues do, too.
Chief, I was looking through this book, as all of us were,
and I was really interested in some of the facts and
descriptions. Let me just read a couple things that I just
jotted down while I was looking through that book and listening
to testimony.
If we were to describe a group of people that had regular
meetings; that had stable leadership with some adults involved;
that paid dues; mostly males; had a similar language; they had
a similar dress code, including colors, in parentheses; they
had similar interests; they were involved in that group for
recognition or stature or love or understanding or respect or
so on, we could be describing Boy Scouts or we could be
describing a football team or something of that nature, but we
are describing gangs.
Clearly, one has a positive image and one has a negative
image and it is, I guess, all our duty as Americans to try to
substitute the positive for the negative in terms of leadership
and uniform, all that kind of stuff.
I would just be interested in your feedback from that
observation, that there are so many similarities between good
groups when you are trying to define criteria or
characteristics, and bad groups.
Mr. Kondracki. Senator, one of the three components of our
GREAT Program is the Another Way Program, and that is designed
to involve parents and it is also an effort to get kids out of
gangs. It is reactive. We hear so much today about proactive
programs and other ways designed to help those kids who are
already in gangs.
One of the ways that program evolved is when one of our
gang officers, frankly, said he had a dream. He said he dreamt
that he heard a gang organizer attracting young people by
promising them that they would have safety, that they would
have respect, and that they would have love. He said, ``You
know, why can't we do the same thing?'' Unfortunately, kids
join gangs for all the right reasons. That is, those are very
positive things you have pointed out.
GREAT tends to fill the gap as an extended family. The
Eisenhower Commission pointed out that the causes of crime were
a breakdown in the family, a breakdown in employment, and a
breakdown in the neighborhoods. If that is true, GREAT is
filling a void by operating as an extended family and by
helping to teach kids the self-respect and the problemsolving
skills and giving them the peer recognition that they so much
need, but however, in a very positive, positive way.
One of the people you are going to hear today, Sue Yang,
who is one of our GREAT graduates, will tell you personally how
her participation completely reversed her life for her and how
positive GREAT has been in her particular situation.
Senator Campbell. Well, the reason I mentioned that is
because you do not know me and my background, but I can tell
you that the kids who are going to be testifying, I was one of
those youngsters, high school dropout on the streets running
with bad groups that ended up in reformatories and so on.
It was because of sports and a number of other positive
replacement symbols and activities, I think I got my life
straightened out. So I know it can be done, except it certainly
has to come from adult leadership and community involvement.
I noticed also in your book you mentioned some of the
groups that you work with, NYSP, DARE, and so on. Does your
police department also work with the Police Athletic League? It
was not listed in here.
Mr. Kondracki. We did in Milwaukee. We find that the
National Youth Sports Program in our community is addressing
those very same kinds of issues, and what we are doing, through
a partnership with the University of Wisconsin in La Crosse, we
are reaching out to some 300 at-risk kids for a 5-week period
every single day during the summer.
I think that the Police Athletic League is a very important
program and I am happy to say, though, that the National Youth
Sports Program is filling that void in our community.
Funding Criteria
Senator Campbell. Thank you. Director Magaw, any positive
program gets more and more requests to expand it with certain
justification. We appropriated $10 million last year for grants
to communities who need to participate in GREAT. Will that
amount be sufficient to meet all the criteria of participation
and requests?
Mr. Magaw. Well, it is growing so fast, Mr. Chairman, that
those funds do not meet the requests. We had 198 requests from
cities all over America and we have been able to fund 33
additional of those.
Senator Campbell. This was 198 additional requests?
Mr. Magaw. Yes; and we were able to fund 33 additional ones
over the ones last year. We fund 107 programs right now, but
that leaves 165 of those requests that we were unable to fund.
Senator Campbell. It is really unfortunate that we do not
see the bigger picture of those community activities that we
cannot fund for those youngsters, some day we may be funding
more in terms of prison cells. I know you have a feeling about
that, as Senator Kohl and I both.
The ATF has established criteria for who want to receive
these Federal funds so they can offer the GREAT training.
Apparently it talks about percentage of subcategories, scores,
and so on. What does that mean in simple, laymen's terms?
Mr. Magaw. Well, 4 years ago when I came to ATF, Mr.
Chairman, there really were no criteria, and this is our first
cut at criteria to try to be fair across the country with the
limited amount of resources. How many gang members do you have
in relationship to your population? What do you say the gang
problem is? These forms are filled out by the communities that
come in.
We attach points to each one of the particular areas of
judgment, and then when those points are totaled up, depending
on the number of points, is the amount of funds that can be
allotted to that community under these criteria. Every
community that applied, the 198 that applied, a certain amount
of funds were, by using this criteria, approved, but at 33, we
ran out of money.
GREAT Instructors
Senator Campbell. We will try to help with that. When you
look for people that participate as instructors, officers/
instructors, do you look for a certain kind of an individual?
Is it just basically screened from volunteers that want to do
that, or do you go out and try and recruit special people that
you think would have a sensitivity to youngsters and an ability
to work with them?
Mr. Magaw. There is so much interest in the communities,
for instance, in your State of Colorado, the Colorado State
Patrol. There is more interest in their ranks, there is way
more interest than they have slots to fill, and the quality of
those instructors coming out of there.
Not all who enter the program pass this instructor program,
and so, there is a filtering at the department level, for
instance, the Colorado State Patrol, and then when they come to
the training program, there is additional filtering.
There is a double filtering in the actual training program
and that filtering is, No. 1, let's say you had four or five
Colorado State patrolmen in there and one was not measuring up,
they would then take care of that usually themselves;
otherwise, the program would take care of it. I just use that
example with the Colorado State officers.
Senator Campbell. For the instructor officers, is it part
of the requirement that they live in the area where they are
instructing?
Mr. Magaw. That is up to the individual communities. For
instance, if you would take Portland, OR, for example, the
chief there felt that this program was so important that he
gave up more officers to the training program than he could
really afford.
What he does now is he works them 2 months in a particular
school doing the training program, and then the two units
rotate. A group comes in off the street in that same community
and comes into the school, so that when they see these
youngsters on the street, they not only see them in the
classroom, they then see them on the street.
In the videotape that you just saw, the officer had a
jacket on, but underneath that was his Prince George's County,
MD, uniform, and that is so important to have these youngsters
see that a police officer is warm, they are caring.
Senator Campbell. I think it would be important not only to
see them in a structured classroom, but off duty or at least
outside of that classroom, too, as a working human being.
Mr. Magaw. The closest to that that I am specifically aware
of is Portland, OR.
Senator Campbell. Thank you. Senator Kohl, did you have
some questions?
Fiscal Year 1999 Request
Senator Kohl. Thank you, Mr. Chairman. Director Magaw, in
fiscal year 1998, the GREAT Program received $3 million for
administrative expenses and $10 million for dispersements
through grants to local governments for the GREAT Program.
Director Magaw, what is being requested for fiscal year 1999?
Mr. Magaw. In 1999, the funding of the budget that is in
there now is $10 million in grants and $3 million in the
administrative costs. The total for 1999 is $15 million. It was
$15 million and it was reduced at OMB by $2 million.
Senator Kohl. Well, as I understand it, in 1998, the
program got $13 million, $3 million for administrative expenses
and $10 million for dispersements. For 1999, is it the same
number or are you requesting more?
Mr. Magaw. In 1999, we requested $2 million more. And
again, Senator, it is not what this program needs, but in a
budget year where the whole government is trying to reduce and
trying to have a practical application, I only put forward what
I think I have an opportunity to receive under the
circumstances.
We increased it by $2 million for 1999 and that was
rejected. But my initial response is I would ask for $40 or $45
million, but I know the end result, so I try to be practical so
that the rest of my budget is accepted as being practical.
Youth Gun Crime Interdiction
Senator Kohl. All right. Director Magaw, I also want to
take a moment to ask about another program targeting youth
violence that is yielding some solid results. Yesterday, 13
indictments were handed down in Milwaukee against individuals
allegedly involved in setting up nearly $1 million in drug
deals.
The accused are members of a Los Angeles-based street gang
with operatives in Milwaukee. What is interesting about these
indictments is that they stem from joint work by the ATF and
the Milwaukee Police Department through a Federal program, the
youth gun crime interdiction initiative. This program has used
Federal resources to help local police track guns to their
source and, in this case, led to further charges against these
individuals.
Director Magaw, I would like to hear your perspective on
this program and how do you think it is working in Milwaukee
and throughout the United States? How do you think we can
replicate these types of success stories like we had in
Wisconsin yesterday?
Mr. Magaw. I think the secret, Senator, is the combined
coordination and that is what has happened here in Milwaukee,
not only with the Milwaukee Police Department, but the
surrounding communities and counties. Also, the gun dealer in
Milwaukee suspected that something was wrong here in this
initial purchase last August, called ATF.
We immediately involved the local police departments,
started an investigation, and it went from Milwaukee to Los
Angeles to Winston-Salem, NC, to Minneapolis to San Diego to
Utah, and drugs were being transported throughout that segment
of the country and then dispersed even more there.
As you know, just a day or two ago, there were a number of
arrests made all over the country at the same time. All of our
agents all across the country go into local law enforcement and
say, ``How can we help?''
We understand that that is our charge from not only the
Senate, but also the House. So this is how these cases are
made, bringing the best of all resources together and that is
what has happened here in the communications networks with ATF
and other agencies.
ATF was able to be helpful with the national net of
communication to help tie it together from California to Utah
to North Carolina and that is where we think our expertise is
helpful and that is where we try to spend our resources.
Parental Involvement
Senator Kohl. All right, thank you. Ms. Rossides, I would
like you to describe the nature of parental involvement, the
extent to which there is parental involvement, how they learn,
how they participate, and what kind of an impact they have on
the GREAT Program.
Ms. Rossides. Well, the involvement of the parents is an
essential part of the success of the program and from the
beginning, the officers who are going to teach in the
particular class spend time, as an orientation, with the
parents, telling them exactly what the program is going to
cover.
They actually involve the parents in a lot of the homework.
The homework gets the children in touch with their families,
their extended families, their community issues, and the
parents are encouraged to participate in those.
At any given time, the parents are welcomed in the
classroom to observe. They participate in the graduation and it
really is a total involvement of the parent, even siblings for
some of the children, even siblings are with the children
today.
Senator Kohl. You say they participate in graduation. What
is the length of this program?
Ms. Rossides. It is 9 weeks and then the graduation is
usually--each community does it differently, but it is held as
a real celebration.
Senator Kohl. How much time is spent during these 9 weeks?
Ms. Rossides. The classroom session is usually 1 hour and
that----
Senator Kohl. One hour a week?
Ms. Rossides. Right, while they are in the school
classroom.
Senator Kohl. And it is taught by a police officer?
Ms. Rossides. That is right.
Senator Kohl. The same police officer throughout the 9
weeks?
Ms. Rossides. Yes.
GREAT Program Accomplishments
Senator Kohl. Chief Kondracki, would you state once again
why you think the GREAT Program is successful, why you think it
deserves our funding? Have you had an opportunity to check back
with graduates of the GREAT Program to confirm your conviction
that it is a program that deserves our continuing funding?
Mr. Kondracki. Senator Kohl, we have seen a drastic
reduction in gang activity in La Crosse, and two of our
students are here, two of the graduates, to talk personally
with their own testimonials about that success. When I entered
law enforcement in 1965, my father had spent 33 years with the
Milwaukee Police Department and had retired as a police
captain.
We talked about the hazards of policing. In 1965, you could
not remember when the last police officer had been killed.
Today you cannot remember all their names. I think as we look
at Law Enforcement Memorial Day, that we have to remember how
gangs and drugs and violence have played into that escalation.
When I came to La Crosse, they had never heard of a drive-
by shooting. We have experienced those drive-by shootings and,
frankly, they have been reduced with the inception of GREAT. We
have funded our program in part through a grant from the Office
of Refugee Resettlement and that grant is running out.
Frankly, I think the more appropriate source of funding
would be the crime bill. As our grant from the Refugee
Resettlement runs out, I am concerned that we are going to lose
our program. We have done bake sales and chile cookoffs and
everything like that.
When I hear Director Magaw mention that if the world could
be the way you would want it, that $40 or $45 million would
fund this kind of program nationally, I think, if I can be so
bold as to state that $40 or $45 million, I believe, is a drop
in the bucket, with all due respect, when we look at the $33
billion set aside for the crime bill.
As a practitioner who has been in the field for 33 years, I
cannot tell you how cost effective it is and the direct results
that we are seeing from GREAT. It is community policing at its
best, so I would urge you to consider whatever funding possible
so that every community can combat this problem.
To fight gangs only in the large communities when we see
this migration, by dealing with it in the surrounding
communities, we can stop its spread. It is like fighting a
forest fire. You prevent the spread of it and ultimately put
out the fire.
Senator Kohl. Thank you. Thank you, Chief Kondracki. Thank
you, Mr. Chairman.
Senator Campbell. Senator Faircloth.
Dissemination of Information to the Schools
Senator Faircloth. Thank you, Mr. Chairman. Mr. Magaw, how
are we disseminating the information to the schools so they can
become a part of the GREAT Program? How can schools find out
about it and are they finding out about it? How do we do it?
Mr. Magaw. I think there are probably very few schools
throughout the country that are not aware of it, and basically
it is spread by local law enforcement, and through national
conferences that the ATF attends for both educators and law
enforcement officers.
So that is the way it is spread. We do not have a national
advertisement program. We do have some booklets that we put out
and we send them to the different States and the communities,
but we have done no major videotapes that are sent to all the
schools and law enforcement agencies.
The reason that we are now just expanding and want to
expand to all regions of the country is that only, in the last
2 years, has the program begun to get the kind of support
throughout the country that it should.
It was a brand new program. We wanted to test phase it. We
wanted to make sure that it did work. We wanted universities to
study it and look at it. So it is really right now to the point
where it is ready to explode throughout the country. In order
to be prepared to handle that, should the Congress approve such
expansion, we expanded our GREAT board to represent all the
regions of the country.
GREAT Program in North Carolina
Senator Faircloth. I notice there were only four towns in
North Carolina that were participating and I was just wondering
if they were aware of what it could do and what it might do.
Mr. Magaw. The sheriff may be better able to answer that
question.
Senator Faircloth. Sheriff, how did you all find out about
it?
Mr. Windham. Senator, we have known about the GREAT Program
for, I do not know, 2 or 3 or 4 years. One of the problems we
had and probably the way some of the other departments look at
it also, is that we already have programs in the schools, the
DARE Program and the school resource officer, which ties up a
pretty good percentage of our manpower.
Until recently, I did not realize that we could use those
officers to also teach this program, and I think most of us
were looking at the fact that we just did not have the manpower
to institute new programs. But the 1 hour a week, we hope, can
be taught by that school resource officer who is in the school
for a full schoolday every day, unless he really has a busy
schedule, and we hope that he or she will be able to teach 1
hour a week to teach the GREAT Program.
Our problem now is finding the funding to send these people
away somewhere to get them trained. The original training
center, I think for the Southeastern United States, is in
Orlando, FL. So we have probably got, if we try to institute it
in all of our high schools and middle schools, 25 to 30 people
that we are going to have to have trained, or either we are
going to have to try to bring the training to Fayetteville.
Senator Faircloth. Thank you, Mr. Chairman. I see my time
is up.
Senator Campbell. I thank you and appreciate this panel
being here. John, nice to see you again.
Mr. Magaw. Nice to see you, sir. Thank you.
NONDEPARTMENTAL WITNESSES
STATEMENTS OF:
SARAH MARIE BARAY, STERLING, CO
SGT. SCOTT FRIEND, COLORADO STATE PATROL, STERLING, CO
OFFICER WILL BAKER, MESA COUNTY SHERIFF, GRAND JUNCTION, CO
JOSH HALBERT, GRAND JUNCTION, CO
OFFICER ROGER BARNES, LA CROSSE POLICE DEPARTMENT, LA CROSSE,
WI
SUSAN YANG, LA CROSSE, WI
CHRISTOPHER HENDERSON, LA CROSSE, WI
SGT. DAREN SIMEONA, NAVAJO INDIAN TRIBAL POLICE, WILLOW ROCK,
AZ
GABRIEL TOWNE, WILLOW ROCK, AZ
BERNELL YAZZIE, WILLOW ROCK, AZ
Introduction of Witnesses
Senator Campbell. We will now hear from our stars of the
day. The second panel will be comprised of Sarah Marie Baray of
Sterling, CO, along with Sergeant Scott Friend of the Colorado
State Police. We will hear from Josh Halbert of Grand Junction,
CO, with Officer Will Baker of the Mesa County Sheriff's
Office.
We will hear from Susan Yang and Christopher Henderson of
La Crosse, WI, and Officer Roger Barnes of the La Crosse Police
Department. We will hear from Gabriel Towne and Bernell Yazzie
of Willow Rock, AZ, along with Sgt. Daren Simeona of the Navajo
Indian Tribal Police. I thank you for appearing. You might have
to pull a few more chairs up there. Please do that and then we
will proceed.
We are very happy to see you youngsters and the officers,
too, today. I happen to be a person who believes that you can
do anything you want in America if you are inclined to believe
in it. For you youngsters, this may be your first time visiting
Washington, probably the first time visiting the Senate.
You may not know how it works, but I think I can speak for
all of the Senators on this panel. We were not born Senators.
We come from many, many different lifestyles and different
kinds of childhoods. Mine, as some of my friends know, was not
too good.
I want to tell you of a poem I learned when I was 18 years
old when I decided I did not want any more trouble with the
law. That poem has stuck me with me since I was 18, Senator,
and it goes like this. ``Young people, as you pass by, as you
are now so once was I. As I am now, so you shall be. Prepare
your path and follow me.''
And it means if you see things that you think that you may
not have a chance of ever becoming, maybe a police officer,
maybe a teacher, maybe a college instructor or a scientist, you
can do it. You can do it. If you are really concerned and you
really want to, you can do it with the help of the adults that
are sitting behind you there at the panel. I know you can do
it.
Let's start first with Sarah Marie Baray and we will just
proceed and I will call your name and if you would like to go
ahead and make a statement, do not be uncomfortable. We do have
a little bit of a time limit because we are supposed to be out
of here by noon and we want to ask you some questions, too. So,
Sarah, if you would go ahead? You need to pull that microphone
right over in front of you and speak directly into the
microphone.
Statement of Sarah Marie Baray
Ms. Baray. Dear Senators. My name is Sarah Baray and I am
14 years of age and I live in Sterling, CO. I have lived in
this rural community all my life.
Senator Campbell. Pull it over a little closer, please,
Sarah.
Ms. Baray. I am sorry. I am glad I had the chance to be a
part of the GREAT Program. When I started this class in March,
Sergeant Friend noticed my name, Baray. The sergeant knew some
history about my family. Some of my cousins and family members
do not have the best reputation in my community and I felt
embarrassed.
This program made me think about the right choices I need
to make for myself and I know I want a good reputation in my
community. The main thing I learned from the GREAT Program was
about choosing good friends and knowing when to think for
myself. During class, Sergeant Friend set up situations where
we would have to decide if we were faced with a problem.
We practiced working out problems and came up with
different steps to use if somebody asked us to do something
wrong. It also helped me learn how to choose friends and what
to look for in a person. I am learning to choose friends that
are better for me to be hanging around with.
I think I could use the steps I learned from the GREAT
Program because I could use the methods when I get into a
problem. I can work myself through the steps of the GREAT
Program and make the right choice. As I get these steps in my
head, I think I could teach my family and friends to make the
right choices.
The program needs to continue because other students need
to learn what we have learned. All the students need to learn
to make the right choices. Thank you.
Senator Campbell. Sergeant Friend, I think I did that in
reverse. I think I was supposed to call on you first, but
nevertheless, we are glad you are here. Go ahead and if you
have some comments, make them.
Statement of Scott Friend
Sergeant Friend. Good morning, Senators. The Colorado State
Patrol is fairly new to the GREAT Program. Under the direction
of my chief, Colonel Westfall, we started about a year ago and
have built our program to 28 instructors statewide. Our program
is a partnership with seven law enforcement agencies.
This year we will teach between 5,000 and 6,000 children
this GREAT curriculum. I was instrumental in getting GREAT
started within our organization and was given the opportunity
to coordinate it statewide. From the onset, I was impressed
with the GREAT Program. I listened to the overview of GREAT
from the Bureau of Alcohol, Tobacco and Firearms and I knew the
Colorado State Patrol needed to be involved.
Even more strongly, I felt a personal calling to do this
program. I called around the United States and talked with
current GREAT instructors and tried to learn all that I could.
I was increasingly impressed with GREAT the more I
investigated. I was ecstatic the day I learned that the
Colorado State Patrol was receiving funding.
I would like to tell you about what GREAT has done for our
officers, for our agencies, for our communities, and most of
all, for our youth. First of all, what are the benefits to the
law enforcement officer?
The officer goes through 2 weeks of instructor training. He
is taught the art of instruction, classroom management, public
speaking, and numerous other essentials that ensure every
officer's success in the classroom. The most important gift
taught to an officer is the feeling he can make a difference in
a child's life.
The officer is graduated from the instructor's school and
he leaves there feeling truly empowered. He knows that what he
has can and will make a difference in the life of someone's
daughter, someone's brother, someone's neighbor. No longer do
our officers only react and respond to calls for service when
they are on duty. Now they have an opportunity to make a
difference on the front end to help prevent problems before
they occur in our communities.
Essentially what we have done is given officers another
weapon, one that they do not wear on their belts. The teachers
in Sterling, where I am from, recognize now the impact the
GREAT Program wields. It was not always this way. Before we
started to teach, the middle school teachers were reluctant to
give up their precious teaching time to another program.
We were only allowed into the seventh grade. By the time we
were halfway done, however, the sixth and eighth grade teachers
were begging us to teach their students, also. This is how it
is all over Colorado. The demand for this curriculum in the
classroom is far greater than what our few instructors can
provide.
What has GREAT done for law enforcement agencies? GREAT has
put us back in touch with our communities. The problems our
society faces, the devastation of youth violence and drug abuse
are just that. They are society's problems. They are not just
law enforcement's problems.
This program has given various law enforcement agencies the
opportunity to build partnerships with each other, with
schools, with businesses, and with the community as a whole. We
take advantage of every opportunity to give an overview of the
program to civic organizations, businesses, and others. GREAT
shows the community that law enforcement officers truly do care
and that they are willing to invest their hearts and souls in
leaders of tomorrow.
How has GREAT helped our communities? From almost the first
days of our country's history, our strength has come from our
cultural diversity. It is only when we recognize and embrace
this belief that our communities can live up to their
potential.
GREAT enables the students to see the constructive power
that can come from embracing cultural diversity and the
destructive power that can come from prejudice. What better way
to bring our communities together than teach the benefits of
diversity.
Even though the GREAT Program is just finishing up its
first year in Sterling, CO, we have already seen an impact on
crime. One surprising statistic is that vandalism is down by 34
percent the first quarter of 1998. It is, however, the
individual who stands to gain the most from the GREAT Program.
This program has so much to offer. Who among us does not need
to have the skills of conflict resolution or goal-setting? I
doubt there is anyone here today who has not had to use these
skills on a daily basis, and yet, so many of our youth do not
possess these skills.
GREAT teaches them the necessary skills to resolve the
inevitable conflicts that they will encounter. It is only by
overcoming the hurdles of conflict that they can then go on to
the empowering skill of goal-setting. GREAT helps the
individual take a look at his life's dream and assists him in
striving for and reaching that dream.
I can personally attest to the incredible feeling that
comes when I have seen a student come alive with hope when he
knows that his life dream is attainable. It is that hope, that
hope of something better, something more, something higher that
keeps us reaching. Hope is our society's bridge to a brighter
tomorrow.
If we stop teaching GREAT today, I can honestly say that we
have made a difference and that we have been a success. I have
brought along with me a student to whom I have taught the
program. Her name is Sarah Baray. I do not have enough time to
tell you Sarah's story, but she has been here to tell you what
the GREAT Program has given her. There are thousands of other
Sarah's out there and if GREAT can help Sarah, it can help
others, too.
When we look back 25 years from now, it will not matter
what car we drove or how much money was in our bank accounts.
What will matter is that we have made a difference in a child's
life. I know the GREAT Program can accomplish this. Thank you
so much for this opportunity.
Senator Campbell. Thank you, Sergeant. Very nice statement.
We will go to Officer Baker of the Mesa County Sheriff's
Department before we hear from his student. You will have to
pull that microphone over pretty close to you, Officer Baker.
Before you start, I did want to introduce the group that is
in our audience. I did earlier, but they had a late bus and
they did not get here. Will all the youngsters from the
Baltimore GREAT class wearing the green T-shirts stand up so
you can be recognized? [Applause.]
We are very happy you are here. Officer Baker.
Statement of Will Baker
Mr. Baker. Thank you, Senator. I would like to start by
thanking the members of the Senate that are present today, the
Bureau of Alcohol, Tobacco and Firearms, the Colorado State
Patrol, and the Mesa County Sheriff's Department for allowing
me to come to Washington, DC, to speak in this forum.
My name is Will Baker and I have been a deputy with the
Mesa County Sheriff's Department for about 2 years. I have been
a certified GREAT instructor for about 6 months, and as of June
1, I will have graduated 400 students from the GREAT Program.
When I was first approached with the opportunity to teach
the GREAT Program, I jumped at the chance. It fit in really
well with what I was doing in the school district. I grew up in
the Denver area around the time that gang involvement got
really high, so I had a fascination with gangs.
I have also always wanted to teach and I have been doing
workshops for teachers in School District 51 in Grand Junction.
After one of the workshops, I was approached by one of the
teachers about presenting the information to students. I was
really tentative about doing that because I wanted to be sure
that if I went into the classroom, that I had information for
the students that was not going to make gangs even more
appealing.
Shortly after talking to those teachers, I was approached
by one of my administrators about the prospect of being
involved with the GREAT Program. He told me that it was a
school-based program and that it puts uniformed officers in the
classroom. Well, that was all I needed to know to get me
interested.
When I went to the training, I was blown away. I was sold
on the program for three reasons. No. 1, it is proactive in
nature; No. 2, it can work in any school; and No. 3, it
reinforces positive skills without stressing negatives.
In my opinion, juvenile intervention is the single-most
proactive policing effort that a law enforcement officer can be
involved in. The GREAT Program promotes juvenile intervention
and puts cops and kids together. It helps bridge the large gap
between kids and the police which can be blamed on a number of
things including negative law enforcement contacts and the
media's portrayal of law enforcement.
Whenever I start teaching in a new school, this negativity
is very apparent. I hear things from the kids like, ``Take me
to jail,'' ``arrest me,'' ``shoot me,'' not things like,
``Thanks for driving around my neighborhood last night,'' or
``thanks for finding my little brother.''
This is because these kids see cops in a negative light on
TV and when they do have law enforcement contact, it is because
of the nature of the job and usually someone has been taken
from their home or possibly from their neighborhood.
When I first went into the school that I am teaching at
right now, I got a good idea about this negativity. The first
day I taught the first half of the school. Then when lunch came
around, I bought a school lunch and sat down at the table with
a group of fourth graders. I did not know any of the kids at
the table and I did not have any of them in class at the time.
There was a group of four of them at the table and when I
sat down, all but one of them said, ``Hi,'' and that one kid
just stared at me. As we started to eat, the kids began to make
small talk with me, asking about why I was at the school and
asking me about things on my duty belt. The one kid just
continued to stare at me. After a few minutes, I asked him if
he was OK. He just looked at me and said, ``I'm shaking.''
I looked at him and I could see that he was visibly
shaking. He was holding his hand out. I asked him, ``Well, why
are you shaking?'' He said, ``Because I have never been this
close to a cop without being in trouble.'' I told him, ``I am
just here to hang out, maybe teach you something.'' I remember
thinking to myself, ``A fourth grader should not feel that way
about law enforcement.''
This same kid is getting ready to graduate in 2 weeks from
my fourth grade curriculum class. He is one of the most
talkative kids in the class, and I guarantee you, when I got
into the lunchroom, he is waving, he is waving me over to sit
with him. Those are the kind of things I am talking about. I am
sure each and every one of the officers that are here and the
officers from Baltimore can attest to the same thing.
The second reason I support the GREAT Program is because I
feel that it can work in any school whether it is a rural area
or any inner-city area with lots of gang problems. This program
fits. The GREAT Program teaches lessons that anyone can use to
be successful in life.
This can be seen just by looking at the names of some of
the lessons: Cultural sensitivity, meeting basic needs,
conflict resolution, goal-setting. These are all things that we
use to get along with each other and to be successful in life.
These skills provide students with the blueprints for being
successful. They do have an advantage over ones who have not
been through the program.
The third reason I support the program and I feel that it
works is because the program reinforces positives without
dwelling on negatives. The program does not glorify the ideas
of crime and violence, but addresses them while also giving
skills for dealing with these problems on their own. The
program teaches positive alternatives to crime and violence.
In closing, the GREAT Program works for three reasons:
Proactive juvenile intervention, it can work in any school, and
it reinforces positives without stressing negatives. Thank you.
I would like to introduce Josh Halbert. He is a seventh grader
at Mount Garfield Middle School in Clifton, CO. Josh.
Senator Campbell. Josh, go ahead. Pull that microphone
directly over in front of you.
Statement of Josh Halbert
Mr. Halbert. Senator, my name is Joshua Ryan Halbert. I am
14 years old and I am attending Mount Garfield Middle School in
Clifton, CO. I have recently graduated from the Gang Resistance
Education and Training Program, otherwise known as the GREAT
Program.
Many of the problems that I see today are featured in this
9-week course. Problems like respecting others and confidence
in yourself along with ideas like goal-setting and sticking
with them were taught to me in seven lessons. The impact toward
others, including myself, can be described in one word: Great.
Everything has a special meaning to each individual.
Thoughts and ideas are kept easily, but only if the person is
willing to learn. Conflict resolution in lesson four has six
steps. These, I know for a fact, really work. These steps are:
Identify the problem, what might happen, what are my choices,
which is best, make that choice, and then evaluate afterward.
I am a conflict mediator for Mount Garfield Middle School.
A conflict mediator is a person who tries to solve a quarrel
before it ends up into a physical fight. These lessons from the
GREAT Program have been very useful to me. I have now been able
to get to the bottom of a lot of conflicts.
The lesson that I thought was most useful was lesson seven,
responsibility. This lesson was shown effectively by a skit.
The scenario was an adult posing as a kid who had skipped
school. Four other kids were asked to join in the scenario
posing as adults. Four kids were asked to take one of these
four roles, a teacher, a principal, a parent, and a police
officer.
Each adult asked the child why he had skipped school. In
turn, the child would give a remark such as, ``So, what do you
care,'' or, ``You're not my boss.'' In this lesson, I learned
when an adult tries to do his or her job but a child refuses to
listen to them, it becomes harder for the adult to show them
the best way to avoid trouble.
Another lesson that has stuck with me is lesson five. This
lesson is about meeting basic needs, which was again shown by
using a skit. This time the entire class was involved. The way
it was started was by a trooper asking all of us to come to the
middle of the room.
He then proceeded by telling us that we were stuck on a
desert island. There were no adults to supervise us. We were
told that what we had was what was in our pockets and that we
had to find a way off that island or we were all going to die.
From this lesson, I learned that we all have certain needs
and leadership qualities. During this 9-week course, lesson
three, cultural sensitivity, or lesson six, drugs in the
neighborhood, have an important meaning to me.
In conclusion, I would like to thank the Senate, the Bureau
of Alcohol, Tobacco and Firearms, and the Colorado State
Patrol, and Mesa County Sheriff's Department for the chance to
become aware of how my actions and those around me affect each
other. I feel that this course is helping me today and will
help me in whatever tomorrow brings. Also, that anyone who has
the chance to go through this course can only better his or her
opportunities in their lifetime. Thank you again.
Senator Campbell. That is nice testimony, Josh. One time
when I was your age, I had a teacher tell me I was a menace to
society. Now here I am a U.S. Senator and some people are still
telling me the same thing. [Laughter.]
I am glad you are here.
Officer Barnes, if you would like to proceed before we hear
from your youngsters?
Statement of Roger Barnes
Mr. Barnes. Thank you, Senators. Thank you for the
opportunity to be here today, Senators. Although La Crosse, WI,
is just a midsized community, we are not immune to the effects
from gangs, drugs, and violence. I have been in the classroom
for 9 years, the last 5 teaching the GREAT Program at both
fourth and sixth grade.
I have also been working with approximately 250 to 300, 10-
to 16-year-old at-risk students in our summer component where
we have partnered with the National Youth Sports Program and
have called it the NYSP/GREAT summer component.
I can confidently report that we have made a difference in
the lives of many young people and in our community. What sets
GREAT apart from other programs is its emphasis on life skills,
sense of community, cultural diversity, and the summer
component. The facts and theories are learned in the classroom,
but are practiced during the summer program.
This creates a community of young people who make good
choices, embrace diversity, and return back to the community.
This is reflected in the fact that juvenile referrals declined
anywhere from 7 to 28 percent during our summer component,
according to our human services department.
The fact that the students have fun is obviously evidenced
by the increase of returnees each year, from 36 percent in 1994
to practically 50 percent in 1997. During the summer program in
1994, one of our projects involved painting over graffiti on
public property. We had enough work for each of our six groups
to spend an entire afternoon painting.
At one of our locations, we had several suspected gang
members observing our activities. While our group took a break,
the observers approached one of our officers and asked what was
going on. He explained our goal and asked them if they'd like
to help. They did so enthusiastically. That site, which
previously had been a weekly target of graffiti, remained
graffiti-free for over 1 year. Last year, we only had enough
graffiti in the entire city for one group to paint.
Of all the life skills learned in GREAT, one of the most
important is the decisionmaking processes taught in the
conflict resolution lesson. Over the years, there have been
many cases where students have told me they have been
approached and pressured to join a gang, but having been armed
with the decisionmaking skills learned in GREAT, they were able
to stand firm.
I have also had students tell me that these skills have
helped them make other important decisions regarding such
things as use of tobacco, alcohol, or other drugs, early sexual
activity, crime and violence.
I recently had a high school student that I had taught in
elementary and middle school come up to me in the high school
parking lot. I had not seen her in a couple of years, but she
wanted to thank me for the lessons I had taught her. I asked
what she remembered most and she quoted a statement that I use
in most of my lessons: The choices you make today will affect
your future in every way.
She said she got really sick and tired of hearing it in the
classroom so much, but was really glad that she remembered it
because it did help her avoid some disastrous decisions. These
are just but a few examples of how GREAT makes a difference.
I have brought with me today two of my students, past
students. I have with me Ms. Susan Yang, who is a sophomore at
Central High School. She is a past graduate of the middle
school curriculum. She is also a graduate of our summer
curriculum and has returned as a junior counselor in our summer
curriculum. I also have Mr. Chris Henderson, who is an eighth
grade student at Lincoln Middle School. He is a graduate of
both the fourth and the middle school curriculum and he has
been with our NYSP/GREAT summer component as well. Thank you,
Senators.
Senator Campbell. Susan, would you like to proceed?
Statement of Susan Yang
Ms. Yang. Nyob Zoo. That means hello in Hmong. First of
all, I would like to thank you, Senators, for giving me this
wonderful opportunity to come to Washington, DC, and speak to
you for the benefit of other people. As a young Hmong woman, I
have had to overcome many obstacles such as learning how to
deal with living between two cultures, the Hmong culture and
the American culture.
A lot of Hmong teenagers do not know how to deal with this
problem, so they join gangs as a result of their confusion and
loneliness in life. Some of them are now serving time for their
unwise decisionmaking skills. But you see, Senators, because of
the GREAT and NYSP Program, I did not choose that pathway for
myself, but I was on the edge of choosing too.
Being around a lot of my Hmong friends, I extremely faced
daily peer pressure, media pressure, and a lot of stress with
myself for being the way they wanted me to be. I made many
unwise choices in my life such as smoking, drinking, doing
drugs, stealing, and running away from home.
It was due to those tough experiences that the GREAT and
NYSP Program really helped me change my life for the better.
GREAT was the light of the dark, lonely, and long tunnel in my
life. But that light was only the beginning for the change in
my pathway to the future.
The director of the NYSP and GREAT Program called me out of
the blue one day and asked me if I would be a junior counselor
for the GREAT and NYSP summer program. I thought to myself,
``Why would they want me as a junior counselor? Am I even
worthy to have kids look up to me after all the unwise
decisions that I made in my life?''
That great wonderful opportunity in itself was a turning
point in my life. The GREAT and NYSP Program reemphasized all
the reasons why one should stay away from drugs and one should
stay away from gangs, and the dangers around them and the
dangers of being around with them and the strength to resist
them.
I know that the time spent in the classroom is small
compared to the hours kids spend with their peers and that is
why I believe a combination of programs and continued contact
with the kids is so important. From my experience, the
knowledge learned from the GREAT and NYSP/GREAT Program really
helped me make better and wiser choices in my life, but that
was after I made mistakes.
Without this knowledge ever, I may have not realized my
mistakes until too late. Failure is a seed to success. I know I
have turned all my mistakes into a strong point with the help
of GREAT and that in itself is a great success to me.
Again, I would like to thank all of you, Senators, for
graciously giving me this wonderful opportunity to benefit the
lives of our future, the youth, and I would like to especially
thank God for blessing me with this life and helping and
benefiting others for the better. If you really care about the
future of the youth, then I believe you can do this by
supporting the GREAT Program.
I would like to leave you with a thought. If you can touch
the life of just one youth, you can make a big difference in
the future, our youth.
Senator Campbell. Thank you, Susan, very nice. Christopher.
Statement of Christopher Henderson
Mr. Henderson. Good morning, Senators. Thank you very much
for the opportunity to be here today to share my GREAT
experience with you. GREAT has been an important program for me
and many of my friends in La Crosse. The GREAT Program has
given me confidence in my decisionmaking skills. I feel good
about myself when people ask me to smoke or drink and I can say
no to them without worrying about what they will say.
I feel especially good about being able to make decisions
about who my real friends are. I have learned that real friends
accept me for who I am and what I do and respect me as an
individual. I do not need gangs to tell me what to do and when
to do something. I can make my own decisions.
GREAT has taught me how to recognize dangerous situations
and how to avoid them. The combination of being able to
recognize these dangerous situations and being able to make the
right choices let me be my own person. Because I like sports so
much and other recreational activities so much, I especially
like the summer NYSP/GREAT program at the university.
It allows me to really do what I have learned in the
classroom during the school year. I see that it is more than
just reading books and listening to my teachers. The summer
program lets me practice my decisionmaking skills in a safe and
fun place.
If I were not in the summer program, I would not be making
such good decisions. The summer program gets me involved with
many new kids from other neighborhoods and kids from all
different races and ethnic backgrounds. GREAT is important to
me and my friends. If more GREAT programs were started, they
could help other kids like me. This is a program that means
something to me and helps me make decisions that are for a
lifetime.
Thank you for letting me meet with you to talk about La
Crosse, WI, and our NYSP/GREAT Program.
Senator Campbell. Thank you for being here. Sergeant, did I
pronounce that right?
Mr. Simeona. Yes, sir.
Senator Campbell. Sergeant, if you would like to proceed
before we hear from your youngsters?
Statement of Daren Simeona
Mr. Simeona. Senators, thank you. I am honored to be here
today. I have been teaching the GREAT Program for 2 years now
in several different communities. I am a police officer with
the Navajo Nation and I have been a police officer for 13
years.
I have graduated to date almost 2,000 students from the
GREAT Program in different communities. This program has
established a rapport between the police department, the
students, and the schools. The students have really accepted
the program with little resistance. I believe that this program
has given the native American kids a chance and reassurance
that they can reach out and reach their goals and become
someone.
Being that we are so far away from the big cities, we do
not have the access that city kids do. We tend to be set apart
thinking that we do not have the same problems, but we do. We
have problems with gangs, drugs, alcohol, domestic violence,
child abuse, child neglect, murder, assaults, accidents, broken
families, child abandonment, and the list goes on and on, same
as the big cities.
I truly believe that this program has given the native
American kids and all kids reassurance that they can go out and
become someone, someone special, someone important. I believe
that we in law enforcement have neglected our part in educating
the kids for over 10 years in the communities.
I believe that with programs like the GREAT Program, I have
seen native American kids change their lives and they have
started to work on their education, reestablishing the
families, and setting their sights on their goals. The program
has taught the students to establish, especially native
American kids, the importance in our culture and why it is
important to them.
Some students have gone back to their grandparents and
talked about the tradition and where our ancestors came from,
and most important, they have learned who they really are,
native Americans. I have taken kids on trips, our students on
trips, to watch professional teams play, the Phoenix Suns, and
also the Arizona Cardinals.
Most of the Navajo kids have never been to special events
such as these and were really impressed and enjoyed watching
these professional athletes. We have helped kids raise money in
high schools and we also have police officers that go out and
do volunteer work at high schools teaching and coaching
baseball.
I truly believe that the GREAT Program is very important to
our children and that we cannot stop educating them and helping
them. This is the only way that we can give our kids a chance
in life and watch them blossom into prominent figures in our
communities, by continually educating them and supporting them.
I believe that with having police officers teach this
program, it has really changed our image among our kids. We no
longer are looked on as the bad guys. We are looked at as the
good guys. I know that the GREAT Program has been a great part
in making a difference and without this program, our kids will
fall into a life of trouble, gangs, and death, and we cannot
let that happen.
I thank you very much for this time. I would like to
introduce two of our GREAT student graduates from our program.
The first one will be Gabriel Towne.
Senator Campbell. Gabriel, just bring the microphone over
real close and speak right into it.
Statement of Gabriel Towne
Mr. Towne. Good morning, Senators. My name is Gabriel
Towne. I am from Chinle, AZ. I am 12 years old. I recently
graduated from the GREAT Program. The GREAT Program is one of
the best programs I have learned. The program teaches kids why
it is better to stay out of gangs.
The teacher is also funny, so kids do not want to miss
GREAT. GREAT has also taught us about what we have to do to
reach our goals, like a goal can be anything that helps people
and yourselves. GREAT also teaches us about our culture, to be
proud of what I am, how to respect people like the elderly, how
to solve conflicts, the six steps, and basic needs like
physical needs.
I feel that all of the lessons are important and I believe
if we keep teaching the GREAT Program, we will have a better
world. This program has made my life better and I know it has
made other kids' lives better, too. Help save kids. Keep GREAT
going. Thank you, Senators, for your time.
Senator Campbell. Thank you. Bernell?
Mr. Simeona. Our next student is Bernell Yazzie.
Statement of Bernell Yazzie
Mr. Yazzie. Good morning, Senators. My name is Bernell
Yazzie. I am 15 years old and I am from the Navajo Reservation.
It is a great honor to be here today. I took lessons from the
GREAT Program, which was taught by Sergeant Simeona, and it
helped me make the right choices. The GREAT Program educates
younger kids from keeping them out of gangs and violent
activities.
The program helps change the kids that had made the wrong
choices, but now they enjoy learning and taking lessons from
the GREAT Program. I myself almost made several wrong choices,
but Mr. Simeona helped me make the right choices by giving me
lessons from the GREAT Program.
On the reservation, there are gang-related activities that
go on. There is graffiti on the walls, violence due to gangs,
people claiming they are part of a gang. Chinle might be a
small town in the middle of nowhere, but there are gangs
actually out there. If the gangs and violence increase, it
could become dangerous to the community.
I myself have friends in gangs, but they do not make my
decisions for me. But if the program goes on and more GREAT
officers were to teach, then maybe it would change their lives.
So I kindly ask the Senate to keep the GREAT Program going
because it could change a lot of the youth. Thank you.
Senator Campbell. Thank you for your testimony. I noticed
all of our officers today are in uniform. I assume that when
you teach in schools, you are in the uniforms. I happen to
think that is good because I think symbols are important and if
people see the symbol of a uniform, the badge, in a positive
manner, those youngsters are going to carry that image with
them.
I guess there are some people that say, ``Well, it is a
form of stereotyping,'' but I think that is a positive
stereotype. There are also some negative stereotypes from the
type of dress and so on, too. I might mention a short story.
The officers from Colorado know that my favorite mode of
transportation is two wheels rather than four, on a motorcycle.
Most kids like motorcycles. Their mothers do not, but they do.
A couple of years ago, I went on what is called a charity ride.
We were raising money for the Children's Hospital in Colorado
and there were probably 1,000 people on motorcycles, and you
know how they dress. They tend to be dressed in leather and so
on.
We did this fundraiser to raise money for the Children's
Hospital. The State patrol officers that were assigned to us to
lead the group so we would not be a traffic problem, went with
us and while I was talking to them, they invited me to go to
what they call a motorcycle police shootout. It is a motorcycle
competition where all different departments are invited to
participate and show their skills.
I think they do this all over the United States. So I said,
``Great, I would really like to go see that,'' and we left the
rest of the group and I went with the officers. There were four
of them ahead of me and two of them behind me and we were going
down the freeway in a close group and we passed a car. A guy
rolled down the window and yelled at me through the window,
``Too bad, buddy.'' [Laughter.]
You know what the stereotype was. I had just been booked,
or something. But I mention that police activity because when I
got there, there were a number of youngsters there, and I do
not know who brought them, whether their parents did or who,
but I got to thinking.
There are a lot of activities that police do in their own
time. Perhaps they are with a mounted unit, as I was when I was
in the sheriff's department, or something else, with different
parade groups or boats or something that interest youngsters,
too.
I kept thinking at the time, there must be some kind of a
connection, I do not know, PAL or GREAT or something where
youngsters can watch policemen when they are doing things that
are a little less fun than the mundane stuff they have to do
while they are on duty.
Do any of you participate in activities like that where
there is a connection with the GREAT youngsters?
Mr. Simeona. In our department, I teach baseball at the
high school and the kids, the students that are out there, they
really appreciate seeing a police officer. Sometimes I have to
go in my uniform and I go out there and help coach and
participate with the kids and they really appreciate that. They
like seeing the officers out there with them. Then they look at
us as one of the team, one of the members.
So yes, there are many officers that are out there that do
participate and volunteer their services to help a lot of kids.
Senator Campbell. Being in uniform probably quells little
league disputes, too.
Mr. Simeona. Yes. [Laughter.]
Senator Campbell. Senator Kohl, did you have some questions
you would like to ask these terrific youngsters or the
officers?
Senator Kohl. Yes; well, like you, Senator Campbell, I am
very impressed with the presentation this morning. It leads me
to believe and conclude that the GREAT Program is a very
important program in our country today, and that it is a
program that all officers should have an opportunity to
participate in; that the skills, the experience, the wisdom
that you bring to the program, if it were replicated throughout
our police systems across the country and then brought to the
kids, would really make a big difference in the lives of our
children, as it does on this small scale that we are now
practicing it.
It could make an enormous difference in the lives and the
futures of these young people. I am chagrined at the low level
of funding that we put on the GREAT Program because where we
put our dollars, to an extent, describes what kind of a society
we are. We may not wish to believe that, but it is true.
When we send out $13 or $14 million for GREAT programs
across the country, like it or not, what we are saying is that
we do not think they are all that important and we have to take
that upon ourselves and live with that and try and do something
about it here to see to it that the GREAT programs are more
fully funded.
Now, I do understand that in most cases, there are matching
funds, aren't there, Chief Kondracki, or not at all?
Mr. Kondracki. We have no matching funds at all.
Senator Kohl. In other words, that $13 or $14 million, that
is what the GREAT Program is funded at, no more, just that
amount?
Mr. Kondracki. That is correct. Most cities that do not
receive funding are doing bake sales and chile cookoffs.
Senator Kohl. OK. I really am impressed with the
presentations this morning, particularly with the police
officers and then, most especially, with the young people. I
would like to ask you, Officer Barnes, to explain a little bit
about the summer and National Youth Sports Program components
of GREAT. How is the summer component funded? How do you
describe the value of that summer program?
Mr. Barnes. As far as the funding goes, Senator, I would
like to turn it over to Dr. Tymeson. However, I will address
the other issue and that is what is the effectiveness of the
program.
As I said in my testimony, we have lessons during the
school year, but the students then get an opportunity to see us
in a different setting. When we are at the summer program, we
are in gray shorts and polo shirts and we are out there having
fun with the kids. We are doing a lot of other things outside
the classroom. It allows us to bond more with the students.
One story that comes to mind in particular, a couple years
ago, we had a young man that I had in elementary school. He was
living in foster care. He had been split up from his brother,
who was in another foster care home, did not like that. He had
been caring for his brother for a long, long time. He was the
primary caregiver in the house, he in fifth grade.
He was having problems at his foster care, but he was
having no problems at NYSP because he had bonded with all of
our counselors. We have a very good student/counselor ratio,
about a 4 or 5 to 1. This particular student got kicked out of
foster care, basically, because the foster parents did not want
him there anymore. They said, ``We cannot handle this. We do
not need the disruption in our life.''
Human Services had no place to put this child. He was going
to spend the next three nights in the juvenile detention center
because there was no other place for him. One of the counselors
said, ``That is not right,'' and begged and pleaded and got
emergency authorization for that child to come and stay with
him.
That was the first time that any adult had ever reached out
to that child in such a capacity and it has made a significant
difference in his life. That is just one of many stories. The
summer program puts into practice what we learn throughout the
school year, the diversity, the giving back to the community,
the making good choices, the working relationships, those types
of skills.
Senator Kohl. Do you believe that the responsibilities of a
law enforcement officer are equally important in law
enforcement and in relating to young people? When you think
about a police officer's important role in our society, that it
is equally important that they do a good job of relating to the
young people in their community as, in fact, providing on-the-
job law enforcement?
Mr. Barnes. I am not so sure it is equally important. I
actually think it is more important. The ability to communicate
and relate, particularly with youth, is, I think, 85 to 90
percent of our job, is this communication. If we cannot do
that, we cannot do the rest.
Senator Kohl. How much time is spent? In training for the
GREAT Program, that is what that provides. I understand you
have 94 police officers, is that right, in La Crosse?
Mr. Barnes. That is right.
Senator Kohl. How many of those police officers do we have
the money to train in relating to young people?
Mr. Barnes. That I would have to refer----
Senator Kohl. What would you say, Chief Kondracki?
Mr. Kondracki. Well, Senator, we have nine officers trained
and I think it is important to point out that we are not a
funded agency.
Senator Kohl. So 9 out of 94 is all you have, is all you
can afford to train?
Mr. Kondracki. That is correct.
Senator Kohl. Which is really a shame, truly a shame. Well,
you have done a great job here, folks, and I think as a result
of your appearing here, we will do a lot better in our
responsibilities to you. We thank you all for coming and, young
people, you have done a great job. Chief Kondracki, it is good
to have you here. Senator Campbell, it has been a great
hearing.
Senator Campbell. Senator Kohl and I are of one mind, I
think, when we recognize that we are not doing as good a job as
we ought to, we gave $10 million. That was in the budget last
year for grants, $10 million to be spread clear across the
United States. It is my understanding that to build a new
prison from the ground up, a startup prison, costs about $1
million a cell.
So in other words, we have a choice: Ten cells or that $10
million for all those youngsters. It just seems to me that the
money is much more wisely used to put it into those youngsters.
I also understand it is about $26,000 a year cost to
incarcerate now in the penitentiaries, depending on whether it
is the State or Federal level. That does not include property
loss, trauma, pain, suffering in a hospital and all those
things. It is just the upkeep of keeping somebody warehoused in
a prison.
We know that we have a long way to go in getting ahead of
the curve, not only from the standpoint of what is best for the
country, but from a cost-efficiency standpoint, too. We
certainly appreciate you being here to give some first-hand
testimony on how it has worked for you and we certainly
appreciate our youngsters for being here, too, and we look
forward to watching you grow to be healthy, productive, good
citizens.
We usually keep these records open for about 2 weeks. If
you have anything you want to add, any letters of support,
anything of that nature, you are welcome to turn those in and
we will include those in the record. Do you have anything
further you want to add before we close the hearing? Yes, sir.
Mr. Baker. I just have one thing that I wanted to add. You
stressed the importance of alternative programs, especially in
your own life, sports programs and so forth. Well, there is
part of the GREAT curriculum which identifies the difference
between a club, a positive program, and a gang, a negative
program. I just wanted you to be aware of that.
Senator Campbell. Great. Josh?
Mr. Halbert. I have with me some letters that all say the
same thing. The GREAT Program has helped them throughout my
core, which is in my school. We go by cores instead of classes.
Senator Campbell. All right.
Mr. Halbert. There are 1,800 in school.
Senator Campbell. If you will leave those letters with us,
give them to us, we will make sure that they are included in
the hearing record as testimony. Thank you.
[The information follows:]
Letter From Jasmine Herre
495 Appleblossom Road,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue, Washington, DC.
To Whom It May Concern:
My seventh grade classes at my school had a great opportunity to be
in the GREAT program.
This program should keep coming to our school because it is a
really good learning experience. I learned how to stay out of gangs and
things happening around gangs and what to do if I am face to face with
a gang member.
Sincerely,
Jasmine Herre.
______
Letter From Zach Kareus
3222 D\1/2\ Road, Apt. #103,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I had the chance to participate in the GREAT program, and it taught
me a lot.
This program taught me the dangers of gangs and drugs. It made me
think about how being in a gang or doing drugs can affect my whole
life. It also helped me deal with anger. The program helped me with
dealing with bad situations and how to trust others. It helped me with
communicating.
Sincerely,
Zach Kareus.
______
Letter From Ashley Seibert
3072 Grosbeak Ct.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We have had a very great opportunity to be able to have the GREAT
program come to our school.
The GREAT program taught me how to set goals, how to say no, it
helped me take care of my problems, and how to trust people.
Thank you!
Sincerely,
Ashley Seibert.
______
Letter From Core Dilba
468\1/2\ Seminole Ct.,
Grand Junction, CO 81504,
May 7, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I think people should fund the GREAT Program (Gang Resistance
Education And Training) because it shows kids the problem with gangs.
Everybody chooses to ignore the rising gang problem, but now there
is a program to prevent gang and gang members, this is called the GREAT
Program. It shows the ups and downs of gangs. Believe me there are a
lot more downs than ups. GREAT also teaches people how to say, ``NO''
to gangs, drugs, violence, stealing, and other gang related activities.
GREAT also shows kids why gang and gang members are a problem.
That is why I think the GREAT Program should remain in our schools.
Thank you for your time.
Sincerely,
Core Dilba.
______
Letter From Melissa Gower
3228\1/2\ D\3/4\ Road,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The reason, to me, why the GREAT program is so great is because it
teaches students how to stay away from gangs and tells students what
gangs do so we know what to stay away from and what is wrong to do and
what is right to do. Trooper Moseman also told us what the laws are and
what our rights are. Those are the reasons why I think the GREAT
program should stay in school.
Sincerely,
Melissa Gower.
______
Letter From Zach Auila
3042 Colorado Avenue,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue Washington, D.C.
To Whom It May Concern:
My class was taught the GREAT program; it was wonderful that
Trooper Moseman came to our class. The GREAT program helped me learn
about gangs and how to say NO to Drugs. I learned what I had to do in a
drug situation. The GREAT program will help people get out of
situations.
Sincerely,
Zach Auila.
______
Letter From Amy Johnson
3593 Front Street,
Palisade, CO 81526,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue Washington, DC.
To Whom It May Concern:
Hello, my name is Amy Johnson. I think that the GREAT program is
great because it really influenced my life and my friends. Now I know
how to stay out of fights and gangs, to not get involved with drugs
and/or alcohol.
I know not to play with knives and/or guns because I don't want to
get hurt or hurt other people. It also will help teens with their
problems and feelings. Thanks for your time and patience.
Sincerely,
Amy Johnson.
______
Letter From Nick Hefner
419 Lar Drive,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue Washington, D.C.
To Whom It May Concern:
I think the GREAT program is good because it gives us direction in
life. It taught me not to get involved in gangs or drugs. I like having
someone coming in to teach us the GREAT program. It's cool because you
can ask them almost anything.
Sincerely,
Nick Hefner.
______
Letter From Kendra Adams
3352\1/2\ Price Ditch Road,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I recently went through the GREAT program (Gang Resistance
Education and Training). It was very educational. We learned how to
resist pressure, stay away from gangs and drugs, and what constitutes a
crime. I have benefited a lot from this program. I have also noticed a
big difference in the kids at our school. This is something that would
be a great thing to keep going. We learned how to survive in an ugly
world and Trooper Moseman made it fun. We even had a graduation
ceremony on January 9. Please consider keeping this program in schools!
Thank you.
Sincerely,
Kendra Adams.
______
Letter From Sheena Martinez
428\1/2\ Saxon Ct.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT program was really helpful to a lot of kids because
Trooper Moseman told us about the dangers of drugs and gangs. He told
us what to say and what to do if someone asked us to do something we
didn't want to do. Trooper Moseman was a great help to our school so I
hope everyone will have the chance to experience the GREAT program!
Sincerely,
Sheena Martinez.
______
Letter From Royetta Tohtsonie
460\1/2\ 32\1/8\ Rd. #2,
Clifton, CO 86520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I think GREAT is really good for middle school kids. So in the
future they will know what is good and bad so kids don't get into drugs
and Alcohol. The GREAT program is also good so you can learn your
lesson. GREAT is pretty cool.
Sincerely,
Royetta Tohtsonie.
______
Letter From Kelsey Harrington
3316 F\5/8\ Rd.,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT program is a good program because it is about how to
avoid gangs, and how to get away from gangs and how to say no. Trooper
Moseman talked about the dangers of gangs and what could happen with
the law and your family at home, its a great program.
Sincerely,
Kelsey Harrington.
______
Letter From Matthew Cook
586 33\3/4\ Rd.,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I think that the GREAT program should stay in public schools
because it teaches us to say no to things that would get us in trouble,
and it taught us not to do drugs and what they do to your body. It also
taught us to respect cultural differences, and why we are different.
Sincerely,
Matthew Cook.
______
Letter From Jon Fitzpatrick
414\1/2\ Glendale Way,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Our school has had the experience of Trooper Moseman teaching us
about GREAT. It was fun.
Other schools from now on should learn about GREAT for these great
reasons.
(1) It teaches you to stay away from the dark side.
(2) They teach you to talk about problems, not to use big Bad guns.
(3) It will help keep kids away from gangs.
(4) It teaches people to be friends.
(5) Kids learn to have their own power.
Sincerely,
Jon Fitzpatrick.
______
Letter From Amber Kelleher
426 Morning Dove Dr.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Our school was honored to have the GREAT program. The following are
reasons why I think we should keep the GREAT program in schools: It was
a big help in teaching students how bad drugs are, how gangs can ruin
your life, it helps kids learn right from wrong, teaches ways to keep
away from drugs, ways to tell a gang member you don't want to join, and
it helps us to tell people who want us to do drugs no. Please keep the
GREAT program in schools. Thank you for your time.
Sincerely,
Amber Kelleher.
______
Letter From Kristina M. Pifer
3304 Delicious Drive,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I feel honored to have been through the GREAT program. It was
instructed by Colorado State Trooper, Don Moseman. When Trooper Moseman
first walked into the room, water glass in hand, I thought it would
turn out as just another boring speech.
I was wrong. The GREAT program is filled with educational lessons
and challenging assignments. It was good, I think that if you were to
commit a criminal act during GREAT training (or 9 weeks), you were not
eligible to graduate from the program. All of the activities were fun,
and most hands-on, most kids liked that part. Trooper Moseman said some
things that went straight to my heart. He was a great presenter. I
enjoyed doing the occasional homework assignments and copying down
definitions in my book.
Moseman had a good discipline procedure which we all pretty much
followed to the word. We all had name tag like things on our desks with
class rules on the back. If we didn't meet his expectations at one
moment he would gently remind us of the rules.
What I'm trying to say is that this is the first of these programs
that I've liked, and I'd love to see more of it. Thank so much for your
time.
Sincerely,
Kristina M. Pifer, Student.
______
Letter From Jesse Gordon
35 99E\1/2\ Rd.,
Palisade, CO 31526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Hi, we had the honor to work with Trooper Moseman. He explained
everything to where everybody understand what he wanted them to do. I
think they should keep the GREAT program in schools so kids don't get
the idea to do drugs and drink beer and so they could understand what
is happening in the U.S.A. today. I hope they keep it in schools
because I learned something new each day.
Sincerely,
Jesse Gordon.
______
Letter From Danny Nichols
437 32\1/8\ Road,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania, Ave., Washington, DC.
To Whom It May Concern:
We were happy to have Colorado State Trooper Moseman come to our
school. He taught us how often a crime is committed. We also learned
that teenage crime is rising rapidly and this program helps that rate
slow down. So please, keep the GREAT program running in schools.
Sincerely,
Danny Nichols.
______
Letter From Lawrence Abad
P.O. Box 312,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Our Language Arts class was taught the GREAT Program by Trooper
Moseman.
He taught us about saying NO, and gang resistance. He was a very
good teacher.
We did a lot of hands on activities like acting out getting a job
or dealing with a problem causing child.
I thought the graduation was the best. We all graduated from the
GREAT Program on January 9, 1998.
Sincerely,
Lawrence Abad.
______
Letter From Valarie Russell
P.O. Box 444,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Hello, my name is Valarie Russell and I'm writing you because I
think that the GREAT Program should stay in middle schools because you
learn how drugs and other people can change your life. Trooper Moseman
taught us how to say NO, he taught us how to cope with peer pressure,
how to get out of gangs, how to stay away from people that could be a
bad influence on us, and he also taught us that just because somebody
is new doesn't mean that you have to treat them different.
Sincerely,
Valarie Russell.
______
Letter From Aaron R. Scheetz
491 Anjou Dr.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT Program is GREAT!
I was lucky enough to have participated in the GREAT Program this
year. It stands for Gang Resistant Education And Training. GREAT keeps
kids out of trouble, and it gives real life scenarios to kids so they
know what to do. Kids have to stay out of trouble with the law in order
to stay in the program. GREAT has taught me many things I did not know
before. I also learned the six steps of making a decision, or conflict/
resolution. GREAT has helped me in my life, and I really think that it
should be in other schools across the nation. I am glad I now know
about cultural differences, and I liked the Role playing and hands on
experience the GREAT Program gave me. I hope that GREAT will be around
for my kids in middle school.
Sincerely,
Aaron R. Scheetz.
______
Letter From Ben DiMarco
3306 S. Highland Dr.,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Our class is writing you to tell you how great the GREAT program
really is, and how this program should remain in school districts.
This program helps the kids stay out of trouble. It was really
exciting when Trooper Moseman came to our class because it was really
great learning about the law. Trooper Moseman and all the other Trooper
Teachers taught us about the consequences of our doings. This program
should stay in school because it was a really great learning
experience. This nine week lesson shows a great way of conflict
resolution.
Thank you for your time, and consideration.
Sincerely,
Ben DiMarco.
______
Letter From Bobbi Jo Watt
3513 G. Road,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
My name is Bobbi Jo Watt and I was in the GREAT program. I thought
it was fun and interesting and it should continue in all schools.
Trooper Moseman, the officer who taught us, was very kind and sincere.
He did a very good job of teaching us the GREAT rules and why we
shouldn't join gangs. In the program we learned the six steps to
conflict resolution what we should do if a ``gang'' or group of bad
people tried to get you to do something that is wrong. Overall, I think
the GREAT program did help those at our school making bad choices.
Sincerely,
Bobbi Jo Watt.
______
Letter From Rickie Berg
557 Aaron Ct.,
Clifton, CO 81520,
May 5, 1998
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT program was very educational. It taught us how to say no
and alternatives. It also taught self-discipline.
I think that the GREAT program should stay in the school district
because it teaches respect. We liked having Trooper Moseman come in and
visit us and teach us about gang resistance and how to not get involved
in drugs and alcohol. It gave us scenarios and conflict resolution.
Thank you for your consideration!
Sincerely,
Rickie Berg.
______
Letter From Howie Tate
725 35\6/10\ Road,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT program is a learning program about things you can't
learn in school, but are still important.
Trooper Moseman taught us about gangs, drugs, and illegal acts. He
showed us what to do about these things and also how to work with
others in a group.
He also showed us how to control our emotions.
Sincerely,
Howie Tate.
______
Letter From J.J. Jerome
364 Annanssa Dr.,
Clifton, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We were very happy to have Trooper Moseman come to our school.
One reason why we should keep it is that it help some people get
out of gangs so they don't die.
Trooper Moseman told us about gang resistance so we wouldn't join
the gang and we can say NO to drugs.
Sincerely,
J.J. Jerome.
______
Letter From Tasha Englehart
3133 Brownie Cir. 28,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
When we had Trooper Moseman come to our class for the GREAT
program. I really learned something. I learned about gangs, drugs,
safety issues and violence.
When we went through the program, we learned how to stay away from
danger, such as gangs, drugs, and violence.
I would hope that the same program would be passed next year and
the year after that for many 7th graders. If we learn things like that
now, then we won't be stupid about them later when any pressure comes
our way.
Thank you for your time.
Sincerely,
Tasha Englehart.
______
Letter From Amanda Saduar
424 32nd #87,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We the kids of Mt. Garfield have had the opportunity to graduate
from the GREAT program successfully. I would like to make a comment,
all of the kids at Mt. Garfield would be honored if the GREAT program
would stay with our school to help other kids with violence.
Sincerely,
Amanda Saduar.
______
Letter From Lee R. Brown
3060\1/2\ Hummingbird Ct.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I'm a student from Mt. Garfield Middle School and we had the honor
of having Trooper Moseman and the GREAT program in our classroom. I
think we should keep the GREAT program because it's fun and also
teaches us how to deal with drugs and gangs. It also reduces drugs and
gang activity at our school.
Sincerely,
Lee R. Brown.
______
Letter From Matt Bailey
P.O. Box 3225\1/2\ Bunting,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT program is good for schools because it can help you
decide what is good and what is bad and encourage you from being in
gangs and what to do in their spare time. GREAT means Gang Resistance
Education and Training. It also tells you how many bad things are
happening a day.
Sincerely,
Matt Bailey.
______
Letter From David Corkler
3124 RobRen,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
This year the Mount Garfield 7th grade had the opportunity to
participate in the GREAT program. We learned many things. We first had
to look at examples of different crimes and had to write our own
punishment. This helped us learn more about crimes and punishments,
giving us a better understanding of them. We then had to write down
different actions we might take in situations like parties where others
start to experiment with drugs. Our choices were to stay or leave. This
gave us an idea of what to do in situations like that. We also learned
to respect different cultures, work in groups, and things to do instead
of joining gangs. I think continuing GREAT would improve our country.
Sincerely,
David Corkler.
______
Letter From Mollie Stockman
P.O. Box 1010,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT Program is Gang Resistance Education and Training. We
have had the honor to have this in our school. It teaches us not to do
drugs! It also teaches us how to not get in gangs and to control our
anger! We learned to be nice to our family because so many kids are
being so mean to their parents and elders. It teaches them to behave.
One reason it should stay in our school is it helps kids to understand
violence.
Sincerely,
Mollie Stockman,
______
Letter From Jeni Topai
429 Saxon Ct.,
Clifton, CO 81504,
May 4, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I would like to tell you about my training in the GREAT program
that we had in our class recently. We went through it and graduated, we
learned to say NO if you were asked to do drugs because most of our
teens today were pressured to do drugs, and I strongly feel this
program would help your family and friends to stay drug-free for a
century. The GREAT program is not only educational, but fun too. You do
plays in class on problems with teens and drugs. (We did one on a boy
who did not care about his grades or anything else.) It encourages us
to stay in school and out of gangs and not to do drugs. I feel we
should KEEP THIS PROGRAM! because there's a very high risk that we
won't have any drug problems with our teens.
Sincerely,
Jeni Topai.
______
Letter From Katie Sommermeyer
3349 F Rd. #2,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We have gone through the GREAT program and it really helped out
some kids.
I have five good reasons that we should keep the GREAT program in
our school. It helps kids live their lives better and to keep kids off
drugs and to stay in school and not to do bad things.
Sincerely,
Katie Sommermeyer.
______
Letter From Megan Vaughn
3050 D\1/2\ Rd.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I'm writing to you to tell you about the GREAT program. Trooper
Moseman has told us how to act when a gang comes up to you and ask you
if you want to join, and he also taught us role play where we saw what
it was like to be a cop and get assaulted. He also taught us the
meaning of GREAT. It means Gang Resistance Education and Training. To
the students in my class, this is something to think about. Thank you
for your time.
Sincerely,
Megan Vaughn.
______
Letter From Yvonne Arnett
3608 E\1/4\ Rd.,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
My class was privileged to have Trooper Moseman come and teach us
about the GREAT program. We have learned about drugs, what they do to
us, cooperation, how much it can help us, and violence, how much it can
hurt you along with other innocent people.
I hope that this program will be continued over the years. I
believe that this program will help future 7th graders make important
decisions to the best benefit.
Sincerely,
Yvonne Arnett.
______
Letter From Lydia Allen
P.O. Box 3344,
Grand Junction, CO 81502,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
When we had Trooper Moseman it was great. He taught us a lot of
things, like what kind of drugs there are.
Then he taught us the definition of words like violence. He told us
that we could make it through this program. He showed us what we should
do if our friends talk us into doing stuff. The last thing is, its good
and it teaches kids to do good things.
Sincerely,
Lydia Allen.
______
Letter From Tina Caren
P.O. Box 733,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I had the privilege to be in the GREAT Program at Mt. Garfield
Middle School. I think that GREAT was good for us because it helped us
get out of trouble. I also think it was good for us because we learned
the consequences of our actions if we did something wrong. I also
believe that Trooper Moseman taught us to respect others and ourselves.
Sincerely,
Tina Caren.
______
Letter From Kristeen Carpenter
P.O. Box 703,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The GREAT Program was very educational because it teaches young
people to stay out of gangs, solve problems, work as a team, and not to
do or deal drugs. It taught us to treat each other with respect.
Sincerely,
Kristeen Carpenter.
______
Letter From Blade Douglas
P.O. Box 1741,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
This program is a good program and should stay in schools because
the GREAT Program is very educational and that's why we go to school to
become educated. Right? Another reason to keep GREAT in schools is
because it teaches us how to stay out of gangs and we do have a gang
problem. It also teaches us to say NO to drugs and alcohol. I think
Trooper Moseman did a great job and we all enjoyed it.
Sincerely,
Blade Douglas.
______
Letter From Sarah Kuhns
3081 Sandpiper Ave.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I would like to tell you the GREAT program is a cool way to teach
younger kids and teens how to respect other people. It will teach other
people not to do drugs or kill or rob houses. It will give people an
opportunity to make a choice of what they want to do when they are in a
dangerous situation.
Thank you for your time.
Sincerely,
Sarah Kuhns.
______
Letter From Dayna Martin
518\1/2\ Garland Avenue,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue Washington, D.C.
To Whom It May Concern:
Hello, how are you? I'm fine, and just dandy! How's the weather
there? Here in Grand Junction, CO, it is really starting to get hot!
I'm writing in regards to ask you guys to help keep the GREAT
program in schools.
I think there are many great reasons to keep this program in. First
of all, Trooper Moseman is very fun, and will always be there if you're
in trouble. He teaches you that going to a gang because you have
problems at home or school is not the way to solve them. It can
actually make it worse. Trooper Moseman taught us to work together and
to say no to certain things, and when we should just walk away. I think
this program helped some kids realize that gangs don't help. So, I
think you should consider keeping this program in all schools and in
all grades.
Thank you for your time.
Sincerely,
Dayna Martin.
______
Letter From Kristin Stogsdill
P.O. Box 1334,
Palisade, CO 81226,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We've had the opportunity to have the GREAT program in our school.
Our teacher was Trooper Moseman. He taught us about gangs, drugs, and
alcohol and that we should stay away from them. He also taught us about
illegal acts, family situation, and how to deal with anger. I think the
GREAT program should stay in schools. I think it really helps; I know
it helped me.
Sincerely.
Kristin Stogsdill.
______
Letter From Destinie Salazar
3299 Lombardy Ln. #D,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We were really lucky to have Trooper Moseman teach us the GREAT
Program. It's so useful to middle schools because it teaches us not to
join gangs and try to stay in school, plus he tells us how to handle
conflicts. I think you should keep it in schools because it teaches us
new things. It helps people who have problems with drugs or even gangs.
It shows us how to deal with people trying to get in trouble, how to
achieve our goals, and the six goals to conflict. Well, that's all I
have to say about the GREAT program. So please continue it.
Thanks.
Sincerely,
Destinie Salazar.
______
Letter From Bree Whitney
131 Sunset Cir.,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I am representing the 7th Graders at Mt. Garfield Middle School in
Clifton, CO. The purpose of me writing this letter is to ensure that
the GREAT program remains in our school and other schools in our
district. This program is useful because it teaches us how to resist
gangs and peer pressure. It also puts us in difficult scenarios and
shows us ways to resolve them. This program deals with theft, drugs,
and vandalism and how to avoid them. It puts us in with others and
shows us how to get along. It also taught us goal setting. This program
is very informative.
Sincerely,
Bree Whitney.
______
Letter From Jordan C. Smith
3294 E Road,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
I'm a 7th grader at Mt. Garfield Middle School. We had a wonderful
opportunity to have the GREAT program come to our school, and I believe
that you should proceed to fund this program because it taught many of
us to stay away and ignore gangsters and people who want to get you to
do something violent. It is a very good program and also teaches how to
get help from friends if you are having a problem with something, like
gangs and drugs. It's a very good learning process.
Sincerely,
Jordan C. Smith.
______
Letter From Datasha Beauchamp
414 W. 1st #C,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
At Mt. Garfield Middle School we had a wonderful opportunity to
experience the GREAT program. It was spectacular because we got to
learn new techniques to deal with peer pressure. We also learned how to
stay out of gangs and what to do in a nervous situation we worked
through a booklet and Trooper Moseman explained everything thoroughly.
I would appreciate it if you would keep the GREAT program so my little
sister can get the same knowledge I got from the GREAT program.
Sincerely,
Datasha Beauchamp.
______
Letter From Anita Kitts
3688 G\4/10\ Road,
Palisade, CO 81526,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Well, I've been through the GREAT training. It taught me a lot. I
think that we should keep the GREAT program around because others need
to know what's going on in the world today. Also because we need to
realize that all the drugs, alcohol, and also gangs need to stop!
Especially killing good people, and little innocent babies because the
gang members think you're not good enough for them. I think the GREAT
program could help very much. I used to be very bad until the GREAT
program came to our school. I think it will help young kids to say no
to drugs, gangs, and alcohol. I just want to thank Trooper Moseman for
helping me change my life so much. If it wasn't for him, I would
probably still be in the same place I was.
Sincerely,
Anita Kitts.
______
Letter From Kyla Londberg
660 33rd,
Clifton, CO 81520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Mount Garfield Middle School had the opportunity to learn about the
GREAT program. It was very beneficial for everyone. We learned how to
resist peer pressure of joining gangs, and what to do if you see an act
of violence of the danger of drugs. I think that we should keep the
GREAT program going.
Sincerely,
Kyla Londberg.
______
Letter From Amanda Wilkinson
405 30 Road,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave, Washington, D.C.
To Whom It May Concern:
Other classmates, cores, and I have gone through the GREAT program.
It was very educational and fun. I learned a lot.
I learned about gangs and what they do, things to do to stay out of
gangs. What to do if we see something happening and what we can do to
help ourselves and other people.
Thank you for your time.
Sincerely,
Amanda Wilkinson.
______
Letter From Steven Smythe
3210 White Circle West,
Clifton, CO 81520,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Avenue Washington, D.C.
To Whom It May Concern:
I think that the GREAT program should continue for middle schools.
It is good for us to know how to stay out of trouble and gangs. We also
learned consequences for the trouble we get in. In this class we all
owe Trooper Moseman for teaching us all we know about gangs, drugs, and
other criminal activities. Trooper Moseman taught us about these things
and to avoid them. Please continue the program so other kids can also
have the opportunity to have this program and still have a chance.
Thank you for your time.
Sincerely,
Steven Smythe.
______
Letter From Shinon Clinkenbeard
436 Devon Ct.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Team 701 of Mount Garfield had the privilege of having a Trooper
from our state visit us every Wednesday for nine weeks, to tell us
about the GREAT program. It was actually fun.
I, myself learned some things I had forgotten and I know I may have
some kind of importance in my life, like how to say NO to drugs or
alcohol, but leave a way for them to get out too.
I also learned that being a leader and putting forth your ideas is
better than just sitting around and waiting for other people to solve
them. We learned some valuable things in the GREAT program, and I know
other people did too.
Sincerely,
Shinon Clinkenbeard.
______
Letter From Gabrielle Schultz
3681 G\7/10\ Rd.,
Palisade, CO 81526,
May 6, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We went through the GREAT program and it has certainly left an
impact on our school, and our minds.
Trooper Moseman came to our classroom and we had the honor of being
the first class in our school to take the nine week course.
During that time we learned many valuable lessons. We learned that
outside appearances don't matter as much as the person on the inside,
that we can gain respect by taking on our responsibilities, that gangs
are just troubled kids just like us who need help. I hope that 7th
graders to come will have the opportunity to do the GREAT program too.
Sincerely,
Gabrielle Schultz,
______
Letter From Paul Bailey
443 Lois St.,
Clifton, CO 84520,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Our school had the opportunity to experience the GREAT program. And
Here are some benefits that I learned. First, I learned some new laws
and how to back away from drugs or crime. Also, I learned how criminals
think and how drug dealers think so that we can resist. We also learned
how to take charge of a situation.
Sincerely,
Paul Bailey.
______
Letter From Kendra Herald
468 Meadow Rd.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
The 7th grade at Mt. Garfield Middle School has had a great
opportunity to participate in the GREAT program.
During the nine weeks Trooper Moseman was here, we learned how to
stay out of gangs, how to protect ourselves and say NO when asked to
join a gang. We learned how joining gangs and taking drugs ruins our
lives. The GREAT program taught me how to set goals and how to trust
people when I'm having problems. In the future, I hope the GREAT
program helps more kids learn about the dangers and risks of gangs and
drugs.
Thank you for your time.
Sincerely,
Kendra Herald.
______
Letter From John Sullivan
3251.5 Collyer,
Clifton, CO 81520,
May 7, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
We, the 7-1 core at Mt. Garfield Middle School were honored to have
the GREAT program at our school. I, one of the students, have had hands
on experience in this course. I truly think that you need to support
this group. It has made me think about our town and community. The
class activities were great because we got to role play and get put in
a difficult situation. I was a principal in one of the activities. It
made me think about kids these days. When I didn't know what something
meant, he would tell me. I hope this stays in schools so that the other
grades will learn and train themselves from gangs.
Sincerely,
John Sullivan.
______
Letter From Natalie Puckett
464 Greenleaf Dr.,
Grand Junction, CO 81504,
May 5, 1998.
U.S. Senate, White House, 1600 Pennsylvania Ave., Washington, DC.
To Whom It May Concern:
Mt. Garfield Middle School has had the opportunity to be involved
with the GREAT program. I strongly believe that this program should
stay in our school because I have never learned so much about the
consequences of violence. I also think this program really made kids
think again about joining a gang. When Trooper Moseman taught us about
what drugs did, I was convinced that many kids made the decision not to
do drugs. At the end of the program when we thought and wrote our goals
that we wanted to happen in life, it really made me think about what
choices I would need to make to achieve them. I also learned about the
things that I could do to stop violence.
I know that this program works and has an impact on every student
that goes through this course. I would hate to have to see the GREAT
program stopped.
Sincerely,
Natalie Puckett.
Summer Programming
Mr. Tymeson. Senators Kohl and Campbell, if I could add
some information about the summer program? Senator Kohl asked
the question and I certainly appreciate the opportunity to be
helping represent the La Crosse group here. First I would like
to say I wish I had this panel with me at the University of
Wisconsin-La Crosse. I work with a lot of future teachers and
professionals in youth service areas and I would just love to
bring this group right here in as instructors. They would do a
fabulous job in reality.
I just want to emphasize the importance of summer
programming. Summer programming is a key part of any
comprehensive youth programming, including the GREAT Program.
Summer is a time for youth to have fun, experience new things,
and as we all know, explore. Sometimes in that exploration they
need a little help in making sure that is positive exploration
and to be sure that it is in structured programming with
appropriate role models.
Kids are really challenged today. As a parent of two young
boys who have been through the GREAT and the DARE programs, I
recognize this in what they bring home each day. Kids are
challenged to do the right things. Kids are often alone without
parental role models, unfortunately, and they need to grow to
make good decisions and have those skills to make good
decisions.
A GREAT summer program, a GREAT educational program is
important. Senator Campbell, you mentioned about the importance
of sports and recreational programming in kind of turning
around your life. That served obviously as a very, very
important alternative for you and the kids, I think, up here on
the panel and the officers have mentioned how important those
alternative programs are.
That is the importance of a summer program, giving the kids
an opportunity to apply what they have learned during the
school year, apply it during all of that extra time that they
have during the summer. A quality summer program must be a
multiagency effort. There needs to be education, social, and
human service agencies. All of these must be combined.
This is what makes the NYSP/GREAT program work and this is
what I am sure makes all of these programs work, that it has to
be a multiagency type of program. Recent statistics are very,
very scary from the National Center for Educational Statistics.
They state that there is an increase in gang activity in
schools. The percentage of kids that are victims of crime in
school are increasing.
I would just encourage you to really consider increasing
the funding and giving more kids and officers the
opportunities. Senator Campbell, I think it was you, you
mentioned, do you see the police officers in different roles? I
have the luxury to be working with these guys from La Crosse. I
have the luxury to be a parent who can see the impact, and also
a consumer to be able to enjoy a safe community.
I see the police officers having fun teaching kids during
the summer in the summer GREAT Program. It sheds a whole
different light on the relationship between these kids and the
officers, and I know that it makes a difference. I know that
some night, some time when these kids might be getting into
trouble and not using some of the good decisionmaking skills,
that I know they are going to recognize a police officer.
All over the country this could happen and I know it is
going to prevent some problems from occurring. That interaction
with community policing that is happening is a critical thing
and the GREAT Program, including the summer programs, are
marvelous examples of community policing. Thank you very much.
Senator Campbell. While you police officers are here, I
might recommend, if you have the time, you go to the police
memorial that is here in Washington, DC. Last night, they had a
candlelight vigil there and I, unfortunately, had a conflict
and could not get over there, but once a year, they read the
names of the police officers who have been killed in the line
of duty. This day of remembrance lasts for several days here in
town and we always encourage youngsters to go there.
Mr. Simeona. Senator, if we may, we wanted to present you
with some gifts that we brought.
Senator Campbell. I am not sure of the rules for that, but
I think I am going to recess the subcommittee. It might be
graft and corruption or something. There are rules for all
kinds of things. [Laughter.]
Conclusion of Hearings
With that, this subcommittee has recessed and I will look
forward to that. Thank you. That concludes the hearings. The
subcommittee will recess and reconvene at the call of the
Chair.
[Whereupon, at 11:30 a.m., Thursday, May 14, the hearings
were concluded and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
MATERIAL SUBMITTED BY INDEPENDENT AGENCY NOT APPEARING FOR FORMAL
HEARINGS
[Clerk's note.--The following independent agency of the
Department of the Treasury did not appear before the
subcommittee this year. The subcommittee requested that this
agency submit testimony in support of its fiscal year 1999
budget request. The statement follows:]
U.S. POSTAL SERVICE
Prepared Statement of Marvin Runyon, Postmaster General/Chief Executive
Officer
We appreciate the chance to talk with you about the Postal Service
and our appropriations request for fiscal year 1999.
Today marks my final statement before this subcommittee. I want to
thank the members of this subcommittee for your strong interest in the
nation's mail system. Your counsel and support have been valuable to me
and to the Postal Service. You have also been generous with your praise
when our employees have delivered better service and financial
performance. We appreciate that.
As you know, I have announced my intention to step down as
Postmaster General by May 15. The Governors of the Postal Service are
searching for my successor. There are several highly qualified
candidates within the current officer ranks. I am confident that an
able leader will be selected and that the progress of the Postal
Service will continue.
Whoever that leader is, they will soon learn, as I did, how
important the Postal Service is to the nation. And how much the
American people rely upon it to do business, stay in touch, and carry
out their civic responsibilities.
They will also learn that the Postal Service faces a unique
mandate. On one hand, it is a public service, chartered to deliver to
every home, farm, and factory in the nation. That means keeping open
thousands of small post offices that do not cover their costs. It means
delivering letters at a uniform price to all areas of the country, no
matter how great the distance or how remote the location.
On the other hand, the Postal Service also faces vigorous
competition and a requirement to operate like a business. That means we
must continually prove ourselves in the marketplace of today and
prepare ourselves for the marketplace of tomorrow.
Some see those objectives as incompatible. But the truth is, a self
supporting universal service must be run like a business or it will
cease to be either self-supporting or universal. I believe during the
past six years, the Postal Service has shown that it is possible to do
both.
Recently, the American people cast a strong vote of approval for
the job that postal employees are doing. Nine out of ten Americans gave
the Postal Service the most favorable rating among agencies of the
federal government in a recent study by the Pew Research Center for The
People and The Press. The Pew report said, ``The Postal Service stands
out from other departments.'' The Postal Service stands out because
postal employees stand out. They have made change work for the Postal
Service and delivered excellence to the American people.
The Postal Service has been undergoing a transformation since 1992.
At that time, customers and employees alike voiced concern that the
nation's mail system was in trouble. The Postal Service faced a
projected year-end deficit of $2.2 billion and service was shaky. A
sizable rate increase seemed likely. One that would have continued a
long-standing cycle of red ink and rate hikes.
The first order of business was to break that cycle. To begin, the
organization was restructured, layers reduced, and bureaucracy cut.
Without layoffs, 23,000 overhead positions were eliminated. Expenses
were lowered and unnecessary programs ended. We also refinanced debt,
saving more than $2 billion over 20 years.
In all, the anticipated deficit was trimmed by $1.7 billion in
1992. And prices were held steady for four years until 1995. The rate
increase that followed was one of the lowest ever, two full points
below inflation.
Last summer, we requested the lowest increase in our history. It is
less than half the rate of inflation and only a single penny on the
First-Class stamp. We are asking the Postal Rate Commission for so
little because we have replaced deficits with surpluses. $1.8 billion
in 1995. $1.6 billion in 1996. And $1.3 billion last year. Today, the
Postal Service is well on the road to financial health. And well on the
way to fulfilling the legislative mandate that our finances break even
over time. The net income of the last three years has cut our
accumulated losses since reorganization in half. We have $4.4 billion
yet to recover and a strategy in place to do so.
At the same time, we have also broken the cycle of sacrificing
service to make budget. Postal employees have delivered record service,
while trimming costs and handling increased work loads. In 1994, 79
percent of local First-Class Mail was being delivered overnight. That
figure has risen steadily to a record 92 percent at the close of fiscal
year 1997. Service is up across the board, in rural and suburban areas,
and in all of America's large cities. We expect to close with a new
record in 1998.
These numbers reflect extensive changes that have taken place
across the postal landscape. None more profound than the
CustomerPerfect! Management system we adopted in 1995, based on the
Malcolm Baldrige business principles. As the name implies,
CustomerPerfect! establishes customer needs as our primary business
driver. It also provides the framework for integrating managerial
processes to deliver optimal performance. Market assessments, planning,
budgeting, training, resource allocations, and major initiatives of
every kind are brought together in an understandable and actionable
way.
Another hallmark is that we are setting more specific performance
targets and tracking our progress more precisely. We have incorporated
these measures in the five-year Strategic Plan presented to Congress.
And we're updating them in our yearly performance plans. By the turn of
the century, plans call for higher delivery scores. Not just for local
First-Class Mail, but for two- and three-day deliveries, Priority Mail,
and bulk business mailings. We are also adopting new ``Ease of Use''
measures, to make it increasingly easy for customers to do business
with us.
The future of the Postal Service is taking shape right now across
America in communities large and small and throughout our plants and
offices. It is evident in our new retail attitude, the acceptance of
credit and debit cards, extended business hours, and modern interior
design that takes products and services from behind the counter and
places them at the customer's fingertips.
The future lies in advanced communications technology that is being
deployed to connect our offices and delivery force into a modern
logistical system. This will help us manage the business and provide
customers with value-added services they demand and deserve.
The future is in advanced automation and handling systems that
drive costs down and service up. Computers can now process more than 25
percent of handwritten letter mail. The sorting of magazines,
newspapers, catalogs and small packages is being steadily automated. We
are also in the early stages of creating the plant of the future. One
that will see intelligent transport systems and robots handling the
mail from acceptance to dispatch.
The future is in process management that is simplifying our
systems, eliminating stumbling blocks, and lowering costs. Process
management is at work throughout Headquarters and in a growing number
of plants and offices across the country. We share what we learn at
these sites throughout the organization via our internal web site.
Increasingly, the future will be augmented by electronic means. We
are linking electronically with customers to reduce paperwork, schedule
shipments, and reconcile accounts. We are providing the public with 24-
hour access to information through our public web site. And we are
developing electronic channels that allow a range of postal services to
be purchased from the home or office.
Most important of all, the future is in our people. It is in
seasoned leaders like my Deputy, Mike Coughlin, Chief Operating Officer
Bill Henderson, our officer corps, and our field management team. It is
in the more than 770,000 career postal employees whose dedicated
service makes all of this possible. I can't say enough about what they
have accomplished. They make the changes work. Around the clock, across
the country, despite every act of nature, they deliver for America. I
am very proud of them.
The Postal Service has come a long way. However, the challenges we
face in the marketplace have grown as well. We face competition for
every message, package, and payment we deliver. The rise of the
internet and increasing numbers of personal computers in American
households pose a threat to half of our First-Class Mail volume: the
bills, payments, and statements which provide nearly 30 percent of our
revenue. At risk is not only the heart of our business, but the
underpinnings for the universal mail network that has served this
nation so well for over two centuries.
We are defending our business and universal service through two key
strategies. One, we are raising the value of our services through a
combination of cost-control, price restraint, and service improvement.
Two, we are seeking new growth opportunities in parcel services, global
markets, and satisfying customer needs. To those ends, we have
committed an investment of $17 billion over the next five years to
build the infrastructure and capabilities that are required.
The Postal Service is on the move. We are committed by word, deed,
and dollar to a transformational path that will keep us a vibrant
communications force in the 21st century marketplace. I'm confident we
will be successful. And I appreciate the support of this subcommittee
and this Congress as we move forward.
Today, the Postal Service requests a total appropriation of
$100,195,000 for fiscal year 1999. This amount recovers the expense of
revenue forgone on free and reduced-rate postage for certain types of
mail mandated by Congress. Most of this amount--$68,710,000--reimburses
the Postal Service for the costs of providing free mail for the blind
and overseas voting.
The Postal Service also requests an amount of $29,000,000 toward
reimbursement for past year shortfalls in revenue forgone funding. This
is the sixth payment in a series of 42 annual payments authorized for
this purpose in the Revenue Forgone Reform Act. Consistent with the
law, the remainder of our request--$2,485,000--is a reconciliation
adjustment to appropriations in previous years. Each year,
appropriations for free and reduced rates are based on estimated mail
volumes. When final audited mail volumes become available, these
figures are reconciled with the estimates. Our request for the coming
fiscal year contains an amount to cover an audited funding shortfall in
fiscal year 1996.
Our request, however, no longer includes an amount to cover
workers' compensation payments for employees of the old Post Office
Department. Formerly, transitional appropriations to the Postal Service
funded the compensation paid to approximately 1,800 individuals or
their survivors for injuries which occurred before July 1, 1971. These
expenses are directly related to the operations of the former Post
Office Department and were, by law, a liability of the U.S. Government.
The Balanced Budget Act of 1997 repealed the authorization for these
transitional appropriations, and as of October 1, 1997, made these
compensation costs liabilities of the Postal Service payable out of the
Postal Service Fund. Consistent with business accounting principles, we
have already accrued the full estimated cost of these liabilities,
amounting to about $258 million.
Finally, we have again declined to request the annual public
service appropriation of $460 million which is authorized by law. We
have not received an appropriation of this type since fiscal year 1982.
By not using these funds, the Postal Service and this subcommittee have
saved the Federal Government over $6 billion. We view not requesting
this appropriation as one of the ways we keep faith with the
legislative contract that made the Postal Service a self-supporting
government establishment. Another way, of course, is maintaining
universal service to everyone, everywhere, every day. We are extremely
proud of our success in that regard, and we hope and trust that we will
continue to benefit from your support.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on the Treasury and General Government for
inclusion in the record.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule separate hearings for
nondepartmental witnesses.]
Prepared Statement of Bobby L. Harnage, Sr., National President,
American Federation of Government Employees, AFL-CIO
Mr. Chairman and Members of the Subcommittee, my name is Bobby L.
Harnage, Sr. and I am President of the American Federation of
Government Employees, AFL-CIO. I appreciate the opportunity to testify
before the Subcommittee concerning three issues affecting federal
employees: the 1999 pay adjustment, official time for federal employee
union representatives, and contracting out legislation. AFGE is the
largest federal employee union, representing 600,000 workers across the
nation and overseas.
federal pay--general schedule
General Schedule (GS) federal employees, on average, should have
received pay increases this year in excess of 10 percent. But because
of continued defiance of the law by politicians in both the executive
and legislative branches, those employees are actually receiving, on
average, raises of only 2.8 percent. Short-changing federal employees
on their pay raises is nothing new. Actually, it's happened year after
year after year.
In 1999, GS employees should receive pay increases of almost 13
percent. However, the Clinton Administration has proposed in its budget
that pay raises for GS employees next year be only 3.1 percent, on
average. Unfortunately, the President's budget submissions for the
years 1994 through 1999 have proposed federal GS salary increases far
below that called for under the Federal Employees Pay Comparability Act
(FEPCA). To remedy this gross inequity, legislation has recently been
introduced that would close the loophole in FEPCA which allows the
President to recommend pay raises smaller than the levels required by
law.
That federal employees are underpaid compared to their counterparts
in the private sector and state and local government who perform
similar work is a fact. What remains to be seen is whether the
Administration and the Congress will finally provide federal employees
with the pay raises which are their due under FEPCA. Responding to
studies which showed conclusively that, on average, federal employees
were paid 30 percent less than their private and public sector
counterparts, Democrats, Republicans, and President Bush, urged on by
AFGE and other unions, decided to close that pay gap over a nine-year
period. As agencies continued to downsize, the President and a
bipartisan coalition of lawmakers understood that it was more
imperative than ever that the federal government provide competitive
compensation packages so as to recruit and retain the highest quality
employees. FEPCA was designed to enable the federal government to
compete for applicants in every single labor market. And the law itself
represented a fair, evenhanded approach to balancing the government's
need to control its costs and the need of federal employees to maintain
adequate standards of living.
Following the law's passage, many thought that the pay increases
due GS employees would no longer be cut back or held up by the
President and/or the Congress. Under the law, pay for GS employees
would slowly but surely become more comparable with the salaries of
their counterparts in the private and public sectors. Pay adjustments
for GS employees would consist of two components: (1) a nationwide
increase linked to the Employment Cost Index (ECI), which measures the
change in private sector wages and salaries; and (2) a locality
increase, based on a comparison of non-federal and GS salaries in 32
pay areas across the nation.
In order to minimize the impact on the budget of finally treating
the government's GS employees comparably with their private and public
sector counterparts, the locality portion of the pay adjustment was to
be phased in over a nine-year period. This grand compromise left GS
employees with the expectation that the pay gap would eventually be
closed. In fact, FEPCA mandated that 20 percent of the pay gap between
average non-federal salaries and average federal salaries be closed in
1994 and that an additional 10 percent be closed each year thereafter
through 2002.
Unfortunately, the Administration and successive Congresses have
failed to provide GS employees with the pay raises required by FEPCA.
In fact, the law's mandates were ignored almost from the start.
Although FEPCA mandated that 70 percent of the pay gap be closed by
1999, it will only have been reduced by 30.7 percent.
As reported in a recent Congressional Research Service report
(Implementing the Federal Employees Pay Comparability Act: Results
Since 1991 and the Federal Employee Pay Adjustment for January 1999),
``FEPCA has never been implemented as originally enacted. In 1994, the
annual pay adjustment was not provided and, in 1995, 1996, and 1998,
reduced amounts of the annual adjustment were provided. For the years
1995 through 1998, reduced amounts of the locality payments were
provided. (Only in 1994 was locality pay implemented as FEPCA
required.)'' The record of the Administration and successive Congresses
raises the question of whether the law will ever be fully and
faithfully implemented.
For 1998, for example, the pay raise was only 2.8 percent. The
Congress remained silent on the issue of GS pay in the Treasury
Appropriations conference report, subsequently signed into law by the
President. The President's budget had earlier recommended a total pay
raise of 2.8 percent for 1998, to be divided between the nationwide and
locality adjustments. In September 1997, it was determined that ECI for
1998 would be 2.8 percent. After subtracting 0.5 percent, as required
by FEPCA, the nationwide adjustment for 1998 was 2.3 percent. The
Administration recommended to the Congress limiting the locality
portion of the raise to just 0.5 percent, on average. After combining
the nationwide and locality adjustments, the average pay raise for GS
employees for 1998 worked out to only 2.8 percent--even though FEPCA
said that those dedicated public servants should have had their pay
boosted by much larger amounts. Last year, in fact, FEPCA authorized
closure of 60 percent of the gap. That means GS employees should have
received, on average, 10.5 percent increases in locality pay alone.
After several years of low-balling GS employees on their pay
increases, the crusade begun under FEPCA to finally treat GS employees
comparably with their private and public sector counterparts--by
closing the pay gap with the non-federal work force--is far, far behind
schedule. The lawmakers who crafted FEPCA insisted that the pay gap
between federal employees and their private and public sector
counterparts should have been closed to 17 percent by 1998. However,
because of continued defiance of FEPCA, that gap actually now stands at
24 percent.
How much will the politicians' failure to follow FEPCA cost federal
employees for just this year? Let's take three GS employees in Mobile,
AL. A GS-4, Step 4, worker is making $20,697 this year. If the
politicians had obeyed FEPCA, that same federal employee would now be
making $21,928. A GS-8, Step 8, worker is earning $35,615 this year,
but should actually be paid $37,735. And a GS-12, Step 8, worker who
should be paid $60,439 in 1998 is actually making $57,050. Obviously,
the differences between the ``way it is'' and the ``way it ought to
be'' are not enough to retire on, put five kids through college, or pay
for around-the-world cruises. But it is money which could undoubtedly
be put to good use by the working and middle-class Americans who make
up the federal work force. More importantly, it is money which FEPCA--
and the lawmakers who wrote the law--say belongs to federal employees.
Of course, those losses are just for 1998; they are neither cumulative
nor adjusted for inflation.
Since 1994, the President has continued to deny federal employees
increases called for under FEPCA based on a technicality--by claiming
that an economic emergency exists of such severity that FEPCA must be
disregarded. Economic emergency? The United States of America has
experienced several years of strong economic growth. Moreover, the
budget is in surplus--in large measure thanks to the incredible
sacrifices made by federal employees, federal retirees, and their
families. In fact, over the last eighteen years, the federal employee
community has sacrificed over $180 billion to balance the budget. It's
safe to say that no other specific group of Americans has done more to
reduce the nation's indebtedness than federal employees, federal
retirees, and their families. Based on data provided by the Office of
Personnel Management, between 1994 and 1998 federal pay raises were
reduced approximately $29.6 billion below the increases called for
under FEPCA. In fact, the largest share of those sacrifices has
occurred through the failure of the Administration and the Congress to
follow FEPCA. Now that those sacrifices have paid off, it's time for
politicians to pay federal employees the raises that are their due
under the law.
In conclusion, the Congress and the President should finally
understand that paying GS employees what they deserve is a sound
investment in the future of the federal work force. The continued
defiance of FEPCA fuels the cynical view that seeking good faith
compromises on issues of public policy is futile, because Congress and
the Administration will always do what is easy, rather than what is
right.
federal pay--blue collar
The Federal Wage System (FWS) is the federal government's pay-
setting system for workers in crafts and trades occupations, often
referred to as ``blue-collar'' workers. The FWS is designed to pay
these workers according to the prevailing rates in the private sector
of the local economy. The system's design, intended to provide federal
blue collar employees with a fair wage and assure that the federal
government can attract and retain high quality craft and trade workers,
is sound. But the Congress has consistently imposed arbitrary pay caps
that prevent the system from working properly and leave blue collar
workers further and further behind their counterparts in the private
sector with respect to compensation.
The goals of the FWS, which was enacted in 1972, have largely been
ignored because Congress has imposed artificial limitations on pay
increases that have nothing to do with private sector pay rates, and
everything to do with penny-pinching politics. The comparability
provisions of the FWS have been consistently disregarded by limiting
increases to no more than the same percentage increase paid to white
collar employees under the General Schedule, regardless of the
percentage actually due to blue collar employees under the FWS. These
``pay caps'' have forced federal blue collar workers to see not only
the real value of their pay decline, but also to have their own
salaries fall further and further behind the rates paid to their
counterparts in the private sector who perform similar work. The
government continues to conduct careful surveys of private sector pay
in 134 different wage areas around the country each year. These surveys
are models for labor-management cooperation and produce statistically
valid information on the rates of pay in the local private economy.
Unfortunately, these results are ignored and treated as virtually
meaningless due to the arbitrary pay caps that have been imposed
annually since 1979.
Successive pay caps on the FWS have caused the government's blue
collar workers to see a real, inflation adjusted decline in the value
of their pay compared to their private sector counterparts. The pay
gaps vary in different parts of the country. They also vary by grade. A
WG-2 Janitor in Dothan, AL earns $8.26 per hour, while the prevailing
rate for that work in the local private economy is $10.06. A WG-5
Warehouse Worker in Dothan makes $10.17, while his private sector
counterpart makes $12.53. A WG-10 electrician earns $13.52, while the
private prevailing rate is $16.55. In Oklahoma City, OK, the federal
Janitor makes $10.03, while they pay $10.54 in the private sector. The
Warehouse Worker makes $11.85 vs. $12.65 in the private sector. The
Electrician earns $15.77, while the prevailing rate is $16.15. In San
Bernardino, CA, the federal Janitor is making the same as the private
prevailing rate, $8.34 per hour. The Warehouse Worker is also making
the prevailing rate at $11.72 per hour. The electrician in San
Bernardino still lags behind her private counterpart, earning $16.22 to
the prevailing rate of $17.37.
Under FEPCA, the gaps between federal white collar pay and the
rates in the local economy were so large that the costs of closing them
had to be spread over nine years. Fortunately, no similar major
overhaul of the blue collar pay system is needed to address the pay gap
of that work force. First, the size of the FWS work force is much
smaller than that covered by the General Schedule. As of December 31,
1997, there were only 244,000 blue collar employees; and that number
continues to shrink steadily. In 1957, there were almost 750,000
federal blue collar employees, at a time when there were just under a
million white collar workers. During the Vietnam War there were over
500,000 craft and trade workers. As recently as July 1993 the number
was 333,295. DOD downsizing and often wasteful contracting out are the
main factors contributing to this decline.
Second, FWS pay gaps are much smaller than those in the General
Schedule. According to the Federal Salary Council, the average pay gap
for the General Schedule pay localities this year was 28 percent. OPM
found the average FWS pay gap as of December 31, 1997 to be only 4.94
percent. Less than one percent of federal pay blue collar workers have
gaps in excess of 15 percent.
While the solution to the problem is more easily achieved for blue
collar employees, the failure of the government to pay equitable wages
will only grow worse if the Congress continues to arbitrarily impose
caps on pay increases called for under the FWS.
In conclusion, the system Congress designed in 1972 to set federal
crafts and trades wage rates in accordance with locally prevailing
rates is sound public policy. AFGE has great confidence in the
integrity of this system. The cooperation between management and labor
unions in the implementation of the system is a model of partnership
that is showing the way for others in the federal government. Congress
should honor this policy and allow the system to resume operation
without the imposition of arbitrary pay caps in fiscal year 1999.
official time for federal employee union representatives
The Office of Personnel Management (OPM) was directed by the House
Appropriations Committee to report by December 1, 1998, on the use of
official time by federal employee unions. The report will cover
official time activity for the first six months of calendar year 1998.
AFGE and other federal employee unions have been working closely
with OPM and key federal agencies to ensure a reliable and accurate
report. OPM created a working group of agency and union representatives
who collaborated on the development of an official time survey and a
set of instructions for all federal agencies covered by the Committee's
request. The working group will continue to assist OPM in any way
requested as the data is collected.
government-wide contracting out
Mr. Chairman, as you may know, there's been some talk about
attaching the latest versions of the ``Freedom From Government
Competition Act'' (S. 314) to the Senate Treasury-Postal funding
measure. I urge the Subcommittee to oppose such an effort. Moreover, I
urge the members of this Subcommittee to oppose this legislation
regardless of how it is advanced.
Although the latest versions of this legislation are styled as
``compromises,'' little has changed from before. The latest Senate
draft would replace OMB Circular A-76, the current system for competing
commercial services between federal employees and contractor employees,
with a more pro-contractor system and then put the government up for
bid over a five-year period. Because of the documented lack of
competition for government contracts, this legislation will likely
increase costs to the taxpayers because so many contracts will be sole-
sourced or divided up among a few bidders--as has historically been the
case at the Department of Defense (DOD) and the Department of Energy
(DOE), the two federal agencies which do the most service contracting.
Adding to taxpayers' burdens, the staggering amount of waste, fraud,
and abuse in federal service contracting which exists already will
likely skyrocket once the government is put up for sale.
It is claimed that the federal government doesn't contract out
enough and that OMB Circular A-76, the system by which federal
employees and contractors compete for commercial activities, isn't used
enough. But the federal government already contracts out at least $110
billion annually. That figure is somewhat arbitrary since it doesn't
include a multitude of federal service contracting, like payments to
Medicare providers. Even at that artificially low level, the federal
government spends less annually on pay and retirement for its entire
civilian work force of 1.8 million employees ($108 billion) than it
does on service contracting.
While supporters of S. 314 admit that OMB Circular A-76 is being
used extensively in DOD, they point out that it isn't often used in
other departments. That's true. But does that mean there is no
contracting out occurring outside of DOD? Certainly not! Approximately
two-fifths of the more than $110 billion contracted out annually is
from non-DOD departments. In the absence of OMB Circular A-76, it must
be assumed that most of that contracting out is occurring without
public-private cost comparisons. So supporters of S. 314 have a point,
but not the one they intended to make: Although much contracting out is
occurring outside of DOD, little of it is done under OMB Circular A-
76--meaning that contractors are getting this work without competing
against federal employees.
What's wrong with this legislation:
1. It would junk OMB Circular A-76 in favor of a more pro-
contractor system. Federal employees used to regularly lose the
competitions conducted under OMB Circular A-76. Only a few years ago,
federal employees came out on the losing end 7 out of 10 times. Thanks
to the efforts of federal employees to reinvent themselves, we now win
one-half of the public-private competitions. It is this dramatic change
in fortunes for the contractors which has inspired this most recent
effort to do away with OMB Circular A-76.
Moreover, if anything, it's federal employees who ought to be
complaining about OMB Circular A-76. Under its guidelines, managers are
entitled to contract out--without first doing a cost comparison--work
involving 10 or fewer employees. For work involving 11 or more
employees, cost comparisons can be waived for contractors. And the cost
comparison process can be ``streamlined'' for work involving 65 or more
employees.
It is inevitable that the public sector and the private sector will
find fault with OMB Circular A-76. Jobs and money are at stake. It's
been said that democracy is a terrible way to govern, but it's better
than the alternatives. The same can be said of OMB Circular A-76.
Federal unions and contractors participated extensively in the most
recent revision of OMB Circular A-76. Neither side managed to achieve
all of its objectives. Contractors and their political benefactors need
to learn that compromises must be made when competing interests are at
stake.
2. It would subject to public-private competitions work which is
truly inherently governmental.
The latest draft of S. 314 would allow contractors to protest
agencies decisions to keep work which is inherently governmental in-
house. It would allow agencies to challenge in federal claims court
agencies determinations of what's inherently governmental. The Senate
draft would allow contractors to challenge agencies' awards in federal
claims court. As might be expected, unions would be forbidden from both
challenging agencies' decisions about what's inherently governmental
and taking agencies to court about awards. Obviously, the intent is to
allow contractors to bully agencies with costly and protracted
litigation into forcing as much work to be contracted out as possible.
Decisions about awards and what's inherently governmental should
continue to be made by department officials who are most familiar with
the services actually provided.
Moreover, both versions would involve politicians in the process by
which work is determined to be inherently governmental or commercial.
The new version of S. 314 requires departments to submit to Congress
lists of the commercial services they provide. The resulting
contractors' catalogues would invite a completely unprecedented and
thoroughly unhealthy Congressional micromanagement of contracting out
decisions.
In response to lobbying by constituents back home, politicians are
sure to use their influence to have particular services classified
according to their preferences, rather than how they should be
classified. While some politicians may intervene on behalf of federal
employees, let's face the facts: contractors have deeper pockets and
are thus more capable of getting their way. The result of all this
politicalization: services which are truly inherently governmental bid
will be put up for bid and perhaps steered towards well-connected
contractors.
3. It would put the government up for sale over five years by
mandating public-private competitions under a pro-contractor successor
to OMB Circular A-76 for an expansively-defined list of commercial
activities--regardless of how well federal employees are actually
performing their jobs.
Federal employee unions understand the value of public-private
competitions within the context of OMB Circular A-76. Clearly, work
should not be contracted out without the benefit of public-private
competition. And just as surely as OMB Circular A-76 gives managers the
discretion to subject commercial work to public-private competitions,
it also gives managers the discretion not to compete work when federal
employees are doing their jobs satisfactorily.
Supporters seem to take the position that any commercial work not
subject to public-private competition and still performed by federal
employees is inherently suspect, i.e., that there must be a conspiracy
afoot to keep that work in-house. After 12 years of Reagan-Bush
political appointees, who largely disdained the public sector, and 5
years of Clinton political appointees, who have racked up the largest
service contracting out bills in the nation's history, it would be
difficult to argue that the reason more work hasn't been contracted out
is federal employee protectionism. Sometimes, the real explanation is
also the simplest: federal employees consistently deliver services
departments' customers need at the prices taxpayers can afford. And if
federal employees are performing at least satisfactorily, there's no
need to impose public-private competitions.
Worse, lawmakers already have the power to compel public-private
competitions under OMB Circular A-76 if they think it to be proper. As
is often the case in DOD, lawmakers--presumably after careful study and
consultation with experts--can intelligently determine whether a
particular activity should be considered for contracting out and impose
that requirement in law. That makes more sense than blindly subjecting
to competition every commercial activity in every single federal agency
over a five-year period.
Finally, it must be noted that the savings generated from this
disruptive system of around-the-clock competitions would be one-time
and likely disappear soon thereafter. Work contracted out is unlikely
to ever be brought back in-house because of the expense of
recapitalizing in-house capability and reassembling and retraining the
necessary staff. That means, the taxpayers will become vulnerable to
sole-source contracting--as has been the case at DOD and DOE, which
have done the most contracting out--because of the absence of private-
private competition. Not only will the one-time savings be quickly
consumed but taxpayers could be left on the hook in perpetuity because
of the absence of effective in-house competition. As Representative
Norm Sisisky (D-VA), a businessman before entering politics, has said
repeatedly: ``If you kill the public sector, you kill competition.''
This legislation fails to address several outstanding issues:
1. Our current contract administration system is already busted and
broken beyond repair. Much of it is on the General Accounting Office's
(GAO) list of federal services subject to waste, fraud, and abuse. OMB,
departments, and outside experts like GAO report that the government
cannot adequately supervise all of the service contracting it
undertakes right now. Imagine what will happen when the government is
put up for sale over five years! The ``revolving door'' phenomenon--
whereby managers direct work towards contractors they intend to work
for upon retirement, would surely increase throughout the government--
is also left unaddressed by the draft.
2. Arbitrary personnel ceilings are already forcing work to be
contracted out. Departments don't have enough employees, so they simply
contract out the work without any public-private cost comparisons.
That's not just what federal employee unions say. That what departments
say. That's what inspectors general, GAO, and outside experts say. For
several years, politicians have been bragging about reducing the number
of federal employees. But what the American people haven't been told is
that a ``shadow work force'' is being hidden on the payrolls of
thousands of federal contractors. That is, federal employees are being
replaced with contractor employees--often at greater expense.
Departments should be required to manage by budgets. If they have
the money, then they should be allowed to keep or hire the necessary
number of federal employees to perform the work if they would provide
more efficient and more effective service than their private sector
counterparts.
Unfortunately, these bills doesn't require departments to manage by
budgets. Instead, they would leave federal employees with the worst of
both worlds: they would be forced to compete all of the time but would
often be prevented from actually competing for work because they
couldn't keep on or hire sufficient in-house staff to do the work.
3. Champions of contracting out say that private sector firms
generate savings for taxpayers by devising more efficient ways of
delivering services. However, much contracting out is done to
shortchange employees on pay and benefits; and, often, contracting out
is done to avoid unions. Nothing in the legislation would force
contractors to devise better ways of delivering services and reduce
their incentive to provide substandard wages and benefits. When the
budget is in surplus, the economy's booming, but income distribution
grows worse and worse, how can the federal government justify replacing
working and middle class Americans with poorly-paid, contingent
workers?
4. Despite the dislocation that would obviously result from
enactment of this legislation, no provisions are made for soft
landings, job training, and employment assistance.
I urge the members of this Subcommittee to oppose S. 314, whether
offered as an amendment to the Treasury-Postal appropriations bill or
as stand-alone legislation.
conclusion
Mr. Chairman, I thank you for inviting AFGE to share with you the
perspectives of rank-and-file federal employees. I am eager to answer
any questions you and your colleagues might have for me.
______
Prepared Statement of Robert M. Tobias, National President, National
Treasury Employees Union
Chairman Campbell, Ranking Member Kohl and Members of the
Subcommittee, my name is Robert M. Tobias, and I am the National
President of the National Treasury Employees Union (NTEU). On behalf of
the men and women who collect the revenue for the federal government,
fight to curb the flow of narcotics and contraband into our country,
and enforce our trade laws, I would like to thank you for this
opportunity to present our Union's views on the President's proposal
for fiscal year 1999.
IRS and Customs are the two main revenue collection agencies of the
Federal government. They are also front line enforcement agencies for
our tax and trade laws, assuring equitable sharing of the tax burden,
and protecting our nation from illegal imports. Both agencies continue
to confront rapidly increasing workloads with relatively static
manpower and fiscal resources.
internal revenue service
The total budget request for fiscal year 1999 is $8.196 billion and
100,829 FTE. In addition, the IRS budget includes a request for $143
million and 2,184 FTE in funding outside the caps for the Earned Income
Tax Credit. The total budget request includes a net increase of $529
million and 1,232 FTE over the fiscal year 1998 level. Of this
increase, $176 million represents part of the cost that would be needed
to maintain the current level of operations, taking into account
inflation and mandatory pay increases. The remaining increases
represent increases dedicated to improved near-term customer service
($103 million), near-term and long-term technology investments ($227
million) and organizational modernization ($25 million). NTEU fully
supports the President's request for IRS funding in fiscal year 1999.
NTEU believes that the President's budget proposal is the absolute
minimum required to begin a reinvention of the IRS ``around taxpayers
needs.'' However, there are others in the Congress who are seeking to
gut the IRS budget instead of providing the resources indispensable to
that necessary restructuring. The Senate Budget Committee's recent
action to cut the President's request for the IRS by 6 percent--some
$500 million--makes no sense. It is the wrong cut in the wrong place at
the wrong time.
Mr. Chairman, the plain fact is that no one, not even the Congress,
can have it both ways. We cannot expect the IRS to do what we say we
want it to do to eliminate problems if we cut its budget. That does not
make any sense.
Last September's hearings by the Senate Finance Committee
pinpointed a variety of problems in the agency's systems and processes.
In turn, the hearings also generated a great many proposals as to how
to solve many of these problems and an expectation that the Congress
and this Administration would immediately take steps to respond to the
needs of its customers--the American taxpayers.
Both the recently announced Gore-Rubin ``Reinventing Service at the
IRS'' report and the President's budget are solid first steps in
response to taxpayers' concerns. The Congress should not ignore them.
As the new IRS Commissioner, Mr. Rossotti, advised both the Senate and
House Appropriations Subcommittees in early March: ``The fiscal year
1999 budget we are requesting is absolutely essential to begin this
long-term transformation.''
Among the funding initiatives proposed for fiscal year 1999, NTEU
believes that the Congress should consider the $103 million for near-
term improvements in customer service as one of its highest priorities.
NTEU members have first-hand knowledge of what the American
taxpayers expect and have been working with the new Commissioner, Mr.
Rossotti, to do all that we can within existing resources to improve
customer service. Despite all the shortcomings of the IRS, the
employees are performing exceedingly well in comparison to any similar
organization in the world.
Over the past four fiscal years, fiscal year 1995 to fiscal year
1998, the IRS collected 24 percent more revenue, 8 percent more returns
with 13 percent fewer resources, or more than $1 billion less, in
constant dollars. In fiscal year 1995, the IRS processed 193.3 million
returns. In fiscal year 1998, it is expected to process 208.4 million
returns. In the past year, the total tax revenue collected rose by more
than $70 billion while the agency processed another 5.8 million
returns. Revenues were $1.36 trillion in fiscal year 1996; $1.5
trillion in fiscal year 1997; $1.58 trillion in fiscal year 1998, and
projected revenues for fiscal year 1999 are $1.64 trillion. In
addition, the accuracy rates for tax law inquiries, accounts
information and refunds have dramatically improved.
In fiscal year 1995, the cost to collect $100 of revenue was 59
cents, 53 cents in fiscal year 1996, 48 cents in fiscal year 1997, and
in fiscal year 1998, the cost to collect $100 should drop to 47 cents.
No tax collection agency anywhere comes close, much less matches the
IRS cost per dollar of revenue raised. Most democracies spend nearly
three to four times that much, $1.25 to $1.70, to collect $100 in
income tax revenue.
In 1997, the 102,000 IRS employees collected more than $1.5
billion, processed 215 million tax returns, issued almost 88 million
refunds, assisted more than 110 million taxpayers, distributed more
than one billion forms and publications, sent 70 million notices and
letters to taxpayers, processed more than one billion information
documents, completed more than 1.5 million audits and assessed $10.4
billion on delinquent returns. In fiscal year 1998, the IRS will answer
more than 120 million telephone calls, provide walk-in service to
nearly nine million taxpayers, and will examine nearly 1.3 million
individual returns.
Mr. Chairman, with so many of the agency's numbers going in the
right direction, IRS workers find it bewildering that so many in the
Congress remain so hostile to their achievements. The Senate hearings
last Fall were devastating, but continued attacks by some in the
Congress upon the IRS are having a crippling effect on the IRS' ability
to perform its core functions.
NTEU considers Senator Faircloth's bill, S. 1690, even more
counterproductive than the Senate Budget Committee's actions. The IRS
employee base has already dropped more than 11 percent since fiscal
year 1995. Our nation can ill afford to lose a third of its core tax
law enforcement personnel at the IRS to the Drug Enforcement Agency or
any other agency.
customs fiscal year 1999 budget
Mr. Chairman, the President's fiscal year 1999 budget request
provides $1.7 billion and 16,655 FTE for Salaries and Expenses for the
U.S. Customs Service, an increase of $117.8 million and 111 FTE over
the fiscal year 1998 enacted levels. In addition, the President has
submitted a legislative proposal for $48 million to increase the rate
of the Merchandise Processing Fee (MPF) to offset the costs of
modernizing Customs automated commercial operations.
NTEU believes this request is the bare minimum to meet Customs'
responsibilities to interdict illegal drugs and perform its many other
responsibilities, including the inspection of high-risk shipments to
assure proper manifest recording and duty payment; resolution of
discrepancies related to inbound shipments; trade enforcement at bonded
warehouses and foreign trade zones; non-proliferation related export
enforcement; anti-money laundering enforcement, and the protection of
domestic intellectual property rights. The new positions requested for
fiscal year 1999 will be used to strengthen Customs' ability to disrupt
normal smuggling channels, enhance investigative and intelligence
capabilities and improve the child labor enforcement program.
In fiscal year 1999, Customs estimates it will process 379.4
million land border passenger arrivals, 81.5 million air passenger
arrivals and 10 million sea passenger arrivals. Customs estimates that
122 million vehicles, 136,000 aircraft, and 225,000 vessels will enter
our ports during the current fiscal year. Most significantly, Customs
expects an increase of 13.5 percent in the number of railcars coming
into the U.S. and an increase of 9 percent in the number of commercial
aircraft arrivals (420,000 railcars and 850,000 commercial aircraft).
In fiscal year 1999, Customs estimates it will seize more than 160
thousand pounds of cocaine (2500 seizures), 780 thousand pounds of
marijuana (13,000 seizures) and 3 thousand pounds of heroin (1,250
seizures). In contrast, Customs in fiscal year 1995 seized 158.3 pounds
of cocaine (2,228 seizures), 658.6 pounds of marijuana (10,221
seizures) and only 2.2 thousand pounds of heroin (928 seizures).
Despite the record of achievement in so many law enforcement areas,
the vast majority of Customs employees still do not qualify for law
enforcement status. As in past years, NTEU will continue its efforts to
enact legislation to end this disparity in this Congress. While we
appreciate the significant budget implications, we believe that denying
the brave men and women of the Customs Service the same employment
rights of other federal employees who risk their lives every day to
combat the trafficking of drugs and other dangerous illegal import
activity is unjust.
federal pay issues
NTEU also has concerns regarding the proposed 3.1 percent pay raise
for federal workers in 1999. Almost 40 percent of the federal work
force has a college degree. The jobs, like making computer year 2000
compliant, are very challenging and important. If the federal
government is going to be able to recruit and retain some of the
country's best and brightest workers, we must provide wage levels
comparable to their private sector counterparts. Today's federal work
force today is smaller than any since the Kennedy administration. Many
who criticize the federal work force fail to acknowledge the
substantial growth in the number of Americans served per federal
worker. Only a work force that is working harder and smarter can keep
up with these demands.
The Federal Employees Pay Comparability Act (FEPCA) of 1990
established fundamental changes in setting federal employee pay and
created a system for paying federal employees on a local, rather than
national basis. Under FEPCA, federal employees were to receive an
annual nationwide pay adjustment and a locality-based comparability
adjustment designed to begin to close the gap between federal and
private sector salaries measured at approximately 30 percent.
Although FEPCA resulted from a 4-year bipartisan effort, it has
never been implemented as intended. On January 1, 1999, 70 percent of
the pay comparability gap between federal and private sector employees
should be closed. In reality, with only 4 years remaining under the
timetable set by FEPCA for achieving pay comparability between federal
and private sector salaries by 2002, less than 30 percent of the salary
gap has been closed.
FEPCA authorizes the President to issue an alternative pay proposal
in the event of ``national emergency or serious economic conditions
affecting the general welfare''. Each year, the President has used this
loophole and declared an economic emergency. This has resulted in an
arbitrary pay setting policy with no apparent rationale. Rather than
catching up with their private sector counterparts, federal employees
have continued to fall behind. Congressman Steny Hoyer (D-MD) and
Senator Paul Sarbanes have introduced legislation to restrict the
Administration's authority to claim economic emergencies and issue
alternative pay proposals. NTEU heartily endorses the Hoyer/Sarbanes
legislation (H.R. 3251 and S. 1679).
Our Nation currently enjoys sustained economic growth, shrinking
deficits and the possibility of vast budget surpluses. That the federal
budget is on the verge of being in balance is, in part, a reflection of
the sacrifices made by federal employees. They are working harder and
smarter as part of a work force that has declined by more than 300,000
employees and is the smallest since 1964. They perform their jobs
despite restrictions on training and promotions and in the face of
terrorist attacks, lockouts and layoffs as well as pay and benefit cuts
totaling more than $220 billion over the last 20 years.
The President's fiscal year 1999 budget recommends a 3.1 percent
pay raise in January, 1999. To meet FEPCA's goal of achieving full
comparability by 2002, an average 17 percent increase would be
required. NTEU urges the Committee to consider action that would
address this inequity.
Mr. Chairman, thank you and the Members of the Committee again for
the opportunity for our Union to present its views on the proposed
budgets for fiscal year 1999 for Internal Revenue Service and U.S.
Customs Service and compensation to federal employees.
______
Prepared Statement of the American Association of Retired Persons
The American Association of Retired Persons (AARP), appreciates
this opportunity to comment on appropriations next year for the Tax
Counseling for the Elderly (TCE) program. This cost effective activity
provides free tax assistance for low and moderate income older people.
The AARP Foundation--a separate 501(c)(3) corporation--operates the
AARP Tax Aide Program, which is the largest of the TCE programs.
The Association deeply appreciates the Subcommittee's continued
support of Tax Counseling for the Elderly. Enacted in 1978, TCE
improves taxpayer compliance measurably by helping to ensure that more
tax returns are prepared completely and accurately. At the same time,
TCE volunteers inform taxpayers about their obligations and assist them
in fulfilling their responsibilities. The agency reports that many
taxpayers with incomes below the minimum level required file tax
returns needlessly each year. This results in unnecessary costs to both
the taxpayer and the Federal government. TCE helps prevent such
occurrences.
TCE volunteers are also actively involved in electronic filing and
other alternative filing methods, all of which increase the accuracy of
tax returns while reducing Federal processing costs. TCE involvement in
this arena is growing, and is helping to reduce IRS expenses.
The Tax Counseling for the Elderly program has enabled IRS to
assist aged minorities more effectively as well as disabled and hard-
to-reach taxpayers such as the rural elderly and shut-ins, especially
those residing in nursing homes or senior citizen housing. In 1997 TCE
sites offered assistance in 25 languages, including American sign
language.
Given the discretionary caps, AARP supports the Administration's
recommended $3.7 million freeze for TCE next year. The value of TCE has
been amply demonstrated over the years, and is reflected in growing
demand for assistance. A report issued five years ago by the General
Accounting Office (GAO) indicates that in 1992, TCE accounted for the
preparation of more than four times the number of returns prepared at
Internal Revenue Service (IRS) walk-in sites. More than 31,000
volunteers are involved in TCE services at more than 10,000 sites
across the country. In addition, the agency's annual Individual Master
File (IMF) reported a 95 percent mathematical accuracy rate for TCE
returns in 1997, which was comparable to or higher than those for other
categories of preparers. When the program first began, it helped
846,000 elderly taxpayers prepare their tax returns. Currently, over
1.5 million people receive tax counseling annually. We do not have
complete data for the current tax season, but we expect TCE to continue
to grow in the future. There are several reasons why this is likely to
happen.
First, the elderly population is increasing.
Second, the complexities of our tax code cause many aged taxpayers
particular difficulty in computing their tax obligations. Moreover,
many aged citizens are not aware of the changes made in our tax laws
over the past few years.
Third, the Internal Revenue Service has increasingly turned to TCE
programs for assistance, in large part because budgetary constraints
have stretched the ability of the agency to respond directly to
numerous public inquiries. Volunteers are contributing millions of
hours annually in direct public service to older taxpayers.
TCE volunteers are dedicated to the program and are committed to
helping others. TCE volunteers are also committed to ensuring that
older taxpayers with dependent children or grandchildren are made aware
of their eligibility for the earned income tax credit (EITC). Many
older low income wage earners find themselves responsible for providing
care for their dependent children or grandchildren. EITC is an
important benefit for these individuals.
The TCE program will continue to participate in successful IRS
efforts such as the Reduce Unnecessary Filing (RUF) initiative. In
1997, the agency notified 630,000 taxpayers that they might not have to
file a Federal return. Data indicate that 75 percent of the RUE letters
were sent to taxpayers 61 years of age or older. Many of these older
individuals approached TCE sites in order to receive confirmation that
they did not need to file a return that year.
Thank you again for this opportunity to comment on appropriations
next year for the Tax Counseling for the Elderly program.
______
Prepared Statement of Daniel W. McKinnon, Jr., President, National
Industries for the Severely Handicapped [NISH]
Mr. Chairman and members of the Subcommittee, my name is Daniel W.
McKinnon, Jr. and I am President of NISH, formerly known as the
National Industries for the Severely Handicapped. I want to thank you
for this opportunity to discuss your role in supporting one of the
United States' most successful government programs, the Javits-Wagner-
O'Day (JWOD) Program and urge you to fund the Committee for Purchase
from People who are Blind or Severely Disabled's (Committee for
Purchase) request of $2.464 million for fiscal year 1999.
I am submitting testimony this year in particular because it is the
60th anniversary of the Wagner-O'Day Act, an Act created to help
provide employment opportunities for people who are blind through the
federal procurement process. Twenty-seven years ago, the program was
expanded to provide employment opportunities for people with severe
disabilities other than blindness.
NISH's responsibility in this program is to maximize employment
opportunities for people with severe disabilities through providing
professional and technical assistance to not-for-profit Community
Rehabilitation Programs (CRP's) to enable their participation in the
JWOD Program. NISH is the Central Nonprofit Agency designated by the
Committee for Purchase from People who are Blind or Severely Disabled
to provide assistance to CRP's interested in obtaining federal
contracts under the JWOD Program. Founded twenty-four years ago by
United Cerebral Palsy Association, National Easter Seals Society, The
ARC, Goodwill Industries International, National Association of Jewish
Vocational Services and the American Rehabilitation Association, NISH
is proud to be part of the accomplishments of the past 60 years.
In 1997 nearly 32,000 people with severe disabilities were employed
on JWOD projects. These individuals worked 26 million hours and earned
$172.6 million in wages. NISH associated JWOD employees earned an
average of $6.79 per hour. Of these individuals approximately 2,500
people with disabilities moved into other community jobs based on their
JWOD training and experience.
These results come about by a simple process. A small slice of the
annual federal market of $200 billion purchases of products and
services is made available to CRP's who train and employ people with
disabilities. Government contracts result in empowerment and
independence for people who face often tremendous barriers to
employment. These are men and women who are not fully benefiting from
record 4.7 percent unemployment, the lowest in 25 years. Great advances
have been made in the past years in the employment of people with
disabilities because of the Americans with Disabilities Act and slowly
changing public perceptions. Nevertheless, their unemployment stands at
almost 70 percent and so much remains to be done. Although small, JWOD
is an outstanding government sponsored program that is addressing this
problem. Typically these job opportunities are in the service
industries and include such positions as food service attendant,
building maintenance, mail room operative, shelf-stocker, etc.
The government agency responsible for these results is one of the
smallest in the federal government, the Committee for Purchase from
People who are Blind or Severely Disabled. The Committee for Purchase
has a modest staff of 19 with responsibilities that are vast. Their
duties include evaluating projects, making determinations relative to
adverse impact on other potential contractors, approving projects,
establishing the government's price, overseeing the regulatory
requirements of the program, and handling many other details of this
unique program. Easily the old phrase, ``Never so few . . .'' applies
to this agency.
And who are the organizations that are bringing in the results?
They are today's modern Community Rehabilitation Programs, or CRP's,
that exist in every community and town. Almost 2,000 are associated
with NISH. You may know them by names like Goodwill Industries, Easter
Seals, or many other very uplifting titles such as Pride Industries,
REACH Incorporated, Project Hired, The Opportunity Center, Able
Industries of the Pacific, and Challenge Unlimited. They are managed by
today's new Social Entrepreneurs--men and women who use their business
skills to help others achieve independence through employment. Not only
do they provide training and employment through JWOD projects and other
vocational programs, they are stepping forward to provide housing,
transportation, and other services the community needs when government
cannot or should not. They are in the forefront of self-reliance and
self-help, the American way. A JWOD project provides remarkable
leverage and contributes to a CRP's ability to change lives. Teamed
with the Committee for Purchase under JWOD, they engage in a wonderful
public/private partnership that is easily described as ``government at
its best.''
In recognizing the 60th year of the JWOD program, I would like to
highlight a few figures from the past twenty years. In 1978, this
Committee provided funding for the 10 staff member Committee for
Purchase from People who are Blind or Severely Disabled. In 1978 nearly
5,000 people with severe disabilities worked 3.5 million hours on JWOD
contracts totaling $84.6 million.
Twenty years later, in 1998, the Committee for Purchase from People
who are Blind or Severely Disabled is still one of the smallest federal
agencies with a staff of 19. Last year nearly 32,000 people with
disabilities work 26 million hours on JWOD contracts totaling $793.2
million. The Committee for Purchase's modest budget is more than offset
when people with disabilities return to work and become contributing
members of our economy.
We thank this Committee for its continuing support in funding the
Committee for Purchase. Given its relatively small budget and staff, it
has done remarkable work and achieved outstanding results. We at NISH
are proud to assist both CRP's and the Committee for Purchase achieve
those results.
The following are two stories typical of the JWOD program. The
first is about Marie-Terese Henderson who works with Goodwill
Industries of Central Florida in Orlando, Florida.
Today, Marie-Terese still stuns people. Six years ago, she suffered
multiple trauma and fractures, compounded by a severe head injury as a
result of a car accident in which she was a passenger. When police
arrived on the scene, they were shocked to find Marie-Terese alive.
Once she gained consciousness in the hospital, it became apparent that
she would have to learn to breathe, swallow, talk and walk again.
Marie-Terese still experiences difficulties as a result of the
accident. She has double vision, is frequently unable to maintain her
balance, lacks coordination, has no short-term memory and suffers with
bouts of chronic depression. In spite of these challenges, she has
worked on a Javits-Wagner-O'Day project as a supply technician at the
Naval Air Warfare Center in Orlando, Florida among 1,500 military
personnel. A steno pad is her compass, reminding her each day what her
job entails. Without her volumes of notes, every Monday would seem like
the first day on a new job.
Despite the barriers imposed by her disability, Marie-Terese
controls a fleet of government vehicles, maintains and processes
invoices for shipping, assigns priority for printing requests, and
manages the maintenance of service contracts. Due to her exceptional
abilities and strong, compassionate character, Marie-Terese is a model
employee at Goodwill Industries of Central Florida. ``She is
extraordinarily efficient and organized in carrying out her job,'' said
Patricia Carr, her Vocational Counselor. ``She has compensated for her
disability by relying on her own notes and a unique system that works
best for her.''
A model employee, Marie-Terese has taken the initiative to make
suggestions that have boosted workplace morale. In addition, she has
demonstrated excellent customer services skills, and she has been a
determined advocate for herself and other people with disabilities. She
doesn't dwell on the disabilities her coworkers may have, rather, she
recognizes the capability of the person. ``Marie-Teresa is a team
player who helps out wherever she is needed,'' said Dean Bosnak,
Goodwill's Project Manager at the Orlando Naval Air Warfare Center.
The second story is of a former JWOD employee who has found
employment in another community job. Marian Hollars began work at the
Work Services Corporation (WSC) in Wichita Falls, Texas, on March 3,
1968. With Down's Syndrome and mental retardation, Marian's medical and
vocational prognosis at the time stated that the best employment
setting for Marian would be a sheltered environment. Marian worked at
WSC, primarily producing paper clips with a JWOD project.
As she watched several of her coworkers move into employment
outside the facility, Marian decided that she wanted to follow their
example. Through her persistence, Marian was able to convince the CRP
to find her another job a few months later. With the help of a local
employer, an aggressive job development employee, and an innovative
CRP, on June 6, 1996, at age 46, Marian started working at Bargain
Depot, a local retail store. Initially, Marian's duties were limited to
greeting customers and returning grocery carts from the parking lot to
the store. But this wasn't enough for her. Through her own initiative,
Marian expanded her duties to include stocking shelves, cleaning up
spills, and helping cashiers bag merchandise. The store manager was so
impressed with Marian's performance that she decided to add tasks in
the store lunch counter to Marian's daily schedule. Marian passed the
Wichita County Health Department Food Handler Test on the first try. As
a result, today she fills food orders and cleans counters, tables and
trays in the lunch counter, in addition to a variety of other duties
within the store.
The store manager, Sarah Norton, reports that ``Marian makes the
decisions as to the priority of her tasks. She works on her own with
very little supervision. She sees what needs to be done, and very
quickly carries it out enthusiastically.'' There were concerns about
Marian's ability to communicate and interact with coworkers and the
general public, but these concerns proved to be unfounded. Norton
states, ``my regular customers love Marian and she can greet most by
name. Our employees have nothing but love, respect and praise for
Marian.''
Marian is extremely active in her community. She is a member of
People First, the ARC of Wichita County Self-Advocacy group and has
represented them as a delegate to the Texas State Conference for the
past six years. Marian actively participates in programs at her church,
the Faith Village Church of Christ, attends a weekly bible study, and
although she cannot read music, she sings with her church choir. On the
job at Bargain Depot, Marian conducts tours for special education
students from area high schools. A special education teacher has
commented that Marian's success is a source of inspiration for her
students.
These two Americans are typical examples of people all over the
country who are benefiting, or have benefited from the JWOD program.
Mr. Chairman and members of the Committee, you've helped make this
possible.
For fiscal year 1999, the Committee for Purchase has requested
$2.464 million. NISH supports this request because the need for
training and employment of people with disabilities is so
vast...because the way government does business is ever changing... and
because the Committee for Purchase has such a large role in ensuring
that people with severe disabilities continue to have employment
opportunities. We would like to thank you Mr. Chairman and members of
the Committee, for your continuous support for this small federal
program with such a big return. Because of the 60th Anniversary, we
felt it was necessary to provide you with input, thanking both this
Subcommittee and the Committee for Purchase for maintaining one of the
most successful government programs ever established. We hope you will
allow us to present in person next year on the 25th Anniversary of
NISH.
______
Prepared Statement of Sharpe James, Mayor, City of Newark, NJ
Newark, New Jersey, the largest City in the state, is a regional
hub of State and Federal government operations, as well as home to
municipal and County government. The Federal presence includes such
locations as office buildings, courts and postal facilities. Thousands
of visitors and employees access Federal services in Newark daily, and
their safety and security has become an important issue for the City.
In the aftermath of the tragedy in Oklahoma City, extraordinary
security measures were put into place around Newark's Federal complex.
Streets through and surrounding the buildings were closed, metered
parking spaces were eliminated, and an additional municipal Police
presence was established. As time has passed, these actions have become
part of an overall permanent Federal security plan for the area. Since
Newark's Police Headquarters, Municipal Courts, and City Hall itself
are immediately adjacent to the Federal complex, forming what is called
Government Center, the Federal plan has had a marked impact on the
ability of citizens to access not just Federal services, but Municipal
ones as well.
The City government has worked cooperatively with Federal
authorities on this critical issue over the past two years, and the
City has absorbed the expenses of these measures. However, we are
seeking your assistance in recovering costs that the Newark municipal
government has incurred in advancing the security of Federal
facilities.
The local Federal officials have requested the permanent closing of
five (5) streets to vehicular traffic, and that the streetbeds be
deeded over to the Federal government to allow permanent access
control. An independent appraisal has valued this property at $3
million. In addition, the City has lost revenues from 21 parking meters
surrounding the Peter Rodino Federal Building, which had been high
turn-over spaces, as well as from longer-term parking on adjacent
streets. Further, summons revenue in the area has been eliminated,
while Police overtime and patrol costs have skyrocketed, averaging at
least $13,000 per month. The street closings have dramatically shifted
both the traffic and parking patterns in the Government Center area,
causing further congestion and delays in the already clogged area, and
when they become permanent, the City will have to make a substantial
expenditure for traffic engineering items such as traffic studies,
resignalization and signage replacement. It is estimated that the total
of all of these expenses has exceeded four million dollars
($4,000,000). We are seeking the assistance of this committee in
securing compensation for these expenditures.
In a related matter, several years ago it was recognized that the
United States Post Office distribution facility in the Federal complex
had become crowded and obsolete. In an effort to save Newark-based jobs
and comply with the intent of Executive Order 12072, which directs
federal agencies to be located in downtowns, the City of Newark entered
into discussions with postal officials about locating a new mail
handling facility in the heart of Newark's major redevelopment area.
The original concept was for the USPS to acquire over 17 acres for the
300,000 square foot operation, to employ 1,200 workers. However, our
current realities of downsizing and budget cutting have impacted on
this project too.
Current plans for a site of only 4.5 acres to house a much smaller
and less ambitious project. It will now accommodate the functions of
the relocated 07103 branch facility, which is situated within the
University Heights redevelopment area. A new Post Office in this
neighborhood will service the thousands of new housing units- public,
private, market-rate and low-income- which have been or will be
constructed in the area. It is estimated that site acquisition,
required relocations, site preparation and construction of a modern
postal facility will cost five million dollars ($5,000,000). These
funds will be the first Postal Service investment in a Newark
neighborhood in decades, and show, in bricks and mortar, the Federal
commitment to Newark, its people, and its jobs.
To conclude: I ask you for help in coping with the changing
situation in Newark. It is my understanding that GSA has requested $250
million to upgrade security at Federal facilities throughout the
country. We support that request, and urge the Subcommittee to include
language in the bill that will direct some of these funds to be spent
on the projects noted above.
We have felt the ripples of the impact of a terrible tragedy, and
ask for your help in dealing with them. And we have built a new
neighborhood, with much Federal assistance, and ask for your help in
completing a community by providing an essential service to its
residents. Your help today can make the difference.
______
Prepared Statement of Dr. Raymond E. Bye, Jr., Associate Vice President
for Research, Florida State University
Mr. Chairman, thank you, and the Members of the Subcommittee, for
this opportunity to present testimony. I would like to take a moment to
acquaint you with Florida State University. Located in the state
capital of Tallahassee, we have been a university since 1947; prior to
that, we had a long and proud history as a seminary, a college, and a
women's college. While widely known for our athletics teams, we have a
rapidly emerging reputation as one of the Nation's top public
universities. Having been designated as a Carnegie Research I
University several years ago, Florida State University currently
exceeds $100 million per year in research expenditures. With no
agricultural or medical school, few institutions can boast of that kind
of success. We are strong in both the sciences and the arts. We have
high quality students; we rank in the top 25 among U. S. colleges and
universities in attracting National Merit Scholars. Our scientists and
engineers do excellent research, and they work closely with industry to
commercialize those results. Florida State ranks seventh this year
among all U.S. universities in royalties collected from its patents and
licenses. In short, Florida State University is an exciting and rapidly
changing institution.
Mr. Chairman, let me describe a project that we are pursuing this
year. Florida State University is proposing the creation of The
Institute on World War II and the Human Experience. The generation that
fought World War II is gradually disappearing and, unfortunately, much
of the history they represent is not being systematically and
professionally preserved. One of the major sources of information about
WWII is the personal papers, letters, diaries, oral histories, and
memorabilia collected by the veterans. The major focus of the Institute
is research on and preservation of materials relating to the molding
and survival of the individual in World War II. The emphasis is on the
experiences of ordinary men and women, military and civilian alike,
amid the pressures of wartime life. Located currently on the campus of
Florida State University, the Institute is seeking funding for archival
space and resources for its rapidly expanding collections. We are
exploring a partnership with the National Archives and other
governmental or academic units as well.
Mr. Chairman, the WWII Institute will make an important
contribution to conserving our Nation's history. Your Subcommittee's
support for those activities such as this Institute which will preserve
for all Americans the memory of these brave citizens is greatly
appreciated. Those investments are crucial ones for our Nation's
future. Thank you again for this opportunity to present these views for
your consideration.
______
Prepared Statements of Cyrus M. Jollivette, Vice President for
Government Relations, University of Miami
april 2, 1998
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to present testimony on behalf of the University of Miami.
As the Committee prepares its fiscal year 1999 appropriations bill, we
respectfully ask for your favorable consideration of the University's
proposal concerning the use of the U.S. Naval Observatory/Alternate
Time Service Observatory in Perrine, Florida.
The University of Miami Rosenstiel School of Marine and Atmospheric
Science (Rosenstiel School) proposes to establish a satellite data
ground receiving station on the former U.S. Naval Observatory/Alternate
Time Service Observatory property, Perrine, Florida. The existing Very
Long Baseline Interferometry (VLBI) antenna and the existing ancillary
hardware and buildings are ideal for this purpose. The new ground
receiving station will enable the Rosenstiel School to pursue a variety
of research and educational activities in the general area of land and
ocean remote sensing, with an emphasis on applications in geological
science, oceanographic science, and environmental monitoring and
environmental science. The facility will be used for critical
scientific research and graduate and undergraduate training.
The Rosenstiel School proposes to maintain at the U.S. Naval
Observatory/Alternate Time Service Observatory site the long
established history of high precision geodetic observations. These
observations are currently performed by the dual frequency Global
Positioning (GPS) System operated by the National Oceanic and
Atmospheric Administration (NOAA), periodically supplemented by
satellite laser ranging observations from Geodetic Monuments such as
``TIMER,'' first occupied in the 1960's. The long time series of
geodetic observations at these monuments have been critical for
defining the terrestrial reference frame, for understanding variations
in earth rotation rate (length of day) and polar motion, and for high
precision satellite tracking. Laser calibration piers at various
locations around the property, up to 200 meters from the main mark, are
useful in this regard and should be maintained. The long-term
preservation of the main geodetic marks is a high priority.
Similarly, the University of Miami proposes to maintain a dedicated
monument for absolute gravity; absolute gravity measurements were begun
at the Richmond VLBI site in 1990. Also, the Rosenstiel School proposes
to locate a long-term geological core sample storage facility on the
site. This facility will enhance research, training, and education in
paleoclimate and paleoecology of the Caribbean and Inter-American Seas.
The University of Miami is the nation's premier expert in these fields.
The Synthetic Aperture Radar (SAR) receiving facility will also
provide crucial information during the passage of hurricanes or severe
tropical storms in the region. Such information complements current
satellite and aircraft observations already obtained and used by NOAA,
the Air Force, Navy, and academic institutions in the region. These SAR
data, which will permit the determination of parameters such as wind
speed and direction directional wave-spectra, would establish critical
boundary conditions for regional forecasting models and potential
estimation of storm impacts on coastal property, beach erosion, and
consequent flooding.
While highly specialized scientific research will be the principal
activity, graduate and undergraduate education and training will be
conducted at the site. As an example:
--the classroom oriented Satellite Oceanography program at the
Rosenstiel School will offer a remote-sensing laboratory, which
will focus on the processing, interpretation and use of
satellite data pertinent to oceanographic and atmospheric
research;
--the University of Miami's newly revised undergraduate geological
sciences program will operate a ``hands on'' training seminar
in geological and environmental remote sensing techniques;
--it is anticipated that other units of the University will
participate in these and related educational activities, as
well as more research-oriented activities; and
--opportunities exist for broadening the educational use of the site
through a K-12 education partnership with Miami-Dade County
Public Schools as an environmental study and nature area for
students.
Once again, the University is seeking your full consideration of
this proposal.
april 15, 1998
Mr. Chairman and Members of the Subcommittee; I appreciate the
opportunity to provide testimony concerning the future use of the
former United States Naval Observatory Alternate Time Site in Perrine,
Florida, south of Miami.
The University of Miami has learned from the Department of the Navy
of its intent to excess an 85- acre portion of its Perrine, Florida
site. My colleagues and I hope that it will be possible to transfer the
property OT the University--with appropriate restrictions--to allow for
the establishment of a satellite data ground receiving station on the
site. The facility will be used exclusively for scientific research and
training and undergraduate and graduate education. Respectfully, Mr.
Chairman, we seek your and the Subcommittee's support in transferring
ownership of their property to the University of Miami through the
public benefit discount program.
The Rosensteil School is one of fourteen schools and colleges at
the University of Miami, the most comprehensive private research
university in the Southeast, and is one of the five largest
oceanographic facilities in the nation. It has one of the broadest
research agendas in the global oceanographic community. The Rosensteil
School's basic and applied research interests encompass virtually all
of the marine-related sciences in all oceans; marine and atmospheric
chemistry, marine geology and geophysics, physical oceanography,
satellite oceanography, meteorology, marine biology and fisheries,
biochemistry, marine biomedicine, marine biotechnology, and marine
affairs and management.
The Rosensteil School is a world leader in deep and near shore
oceanic and atmospheric circulation pattern studies and their
implications in oil spill movements, sea level fluctuations, global
warming trends, plankton and fisheries distribution and recruitment
mechanisms, and hurricane and monsoon mechanics. It also offers the
only subtropical marine oceanographic research base in the continental
United States.
The existing 60-meter VLBI antenna and the existing ancillary
hardware and buildings are ideal for the operation of a satellite data
ground receiving station. The new ground receiving station will enable
the Rosensteil School to pursue a variety of research and educational
activities in the general area of land and ocean remote sensing, with
an emphasis on applications in geological science, oceanographic
science, and environmental monitoring and environmental science.
For example, a newly-revised undergraduate geological sciences
program will operate a hands-on training seminar in geological and
environmental remote sensing techniques. The classroom oriented
Satellite Oceanography program at the Rosensteil School will offer a
remote-sensing laboratory, which will focus on the processing,
interpretation and use of satellite data pertinent to oceanographic and
atmospheric research. It is anticipated that other units of the
University will participate in this and related educational activities,
as well as more research-oriented activities. Opportunities exist for
broadening the educational use of the site through a K-12 education
partnership with Miami-Dade County Schools as an environmental study
and nature area for students.
One important function of the site that Rosensteil School programs
proposes to maintain is the long history of high precision geodetic
observations. These are currently performed by a dual frequency GPS
system operated by NOAA, periodically supplemented by satellite laser
ranging observations from Geodetic Monuments, first occupied in the
1960's. The long time series of geodetic observations at these
monuments have been critical for defining the terrestrial reference
frame, for understanding variations in earth rotation rate (length of
day) and polar motion, and for high precision satellite tracking. Laser
calibration piers at various locations around the property, up to 200
meters from the main mark, are useful in this regard and should be
maintained. The long- term preservation of the main geodetic marks are
a high priority. Similarly, Rosenstiel proposes to maintain a dedicated
monument for absolute gravity-absolute gravity measurements begun at
this site in 1990.
The SAR receiving facility will also provide crucial information
during the passage of hurricanes or severe tropical storms in the
region. Such information complements current satellite and aircraft
observations already obtained and used by NOAA, AIR FORCE, NAVY, and
academic institutions in the region. These SAR data, which will permit
the determination of parameters such as wind speed and direction
directional wave-spectra, would establish critical boundary conditions
for regional forecasting models and potential estimation of storm
impacts on coastal property, beach erosion and consequent flooding.
The Rosenstiel School also proposes to locate a long-term
geological core sample storage facility on the site. This facility will
help the University maintain its lead as the premier research and
education institution in the paleoclimate and paleoecology of the
Caribbean and Inter-American Seas.
Mr. Chairman, the University of Miami has proven itself to be a
worthy steward of Federal facilities and in all cases heretofore has
met the mandates of cognizant Federal agencies. My colleagues and I
hope that you will provide the scientists at the Rosenstiel School the
opportunity to utilize the unique resource available at Perrine,
Florida in a way which will benefit the nation.
______
Prepared Statement of Bernard H. Berne, M.D., Ph.D.
summary of testimony
I am a resident of Arlington, Virginia. I serve the Food and Drug
Administration (FDA) as a Medical Officer and as a reviewer medical
device approval applications. I am testifying as a private individual
and not as a representative of FDA or of any other organization.
The General Services Administration (GSA) is evaluating the former
Naval Surface Warfare Center in White Oak, Maryland, for the major FDA
consolidation. However, this is a very poor site for this federal
administrative and laboratory facility.
Metrorail is three miles away. Nearby highways and roads are highly
congested during rush hours.
GSA and FDA are planning a country club in White Oak's affluent
suburbs. FDA's 130-acre campus will have a visitor center and other
amenities. Adjacent federal property will contain a golf course and a
woodland.
Congress must stop this extravaganza. The Administration has not
requested any funds to begin this project, which lacks an approved
prospectus. Congress should not initiate any appropriation to support
the project.
The Southeast Federal Center in Washington, D.C. is now available
for a major federal headquarters. Adjacent to the Navy Yard Metro
station and close to the Capitol, this site appears ideal for FDA's
facility.
Two Executive Orders, GSA's own regulations, and the policies and
of President Clinton's Administration and of the National Capital
Planning Commission (NCPC) require that GSA and FDA give the Southeast
Federal Center preference over the White Oak site. However, because of
past actions and requests by Conference Committees on Appropriations,
GSA is not evaluating it.
I therefore ask the Committee on Appropriations of the United
States Senate to take the following four actions:
1. Please oppose any appropriation of funds to support an FDA
consolidation at the former White Oak Naval Surface Warfare Center in
Montgomery County, Maryland.
2. Please appropriate $4,000,000 to the study of a major FDA
consolidation in the District of Columbia, with an initial focus on the
Southeast Federal Center and its vicinity.
3. Please do not appropriate any funds for the General Services
Administration (GSA) to prepare or acquire any site for any part of the
FDA consolidation until a prospectus for the entire consolidation is
approved in accordance with the provisions of the Public Buildings Act
of 1959.
4. Please ask GSA or the General Accounting Office to appraise the
value of the White Oak site to prepare for a sale of the property.
explanation of requests
1. Please oppose any appropriation of funds to support an FDA
consolidation at the former White Oak Naval Surface Warfare Center in
Montgomery County, Maryland.
The present need for this project is questionable. New FDA
buildings in Prince George's County will house those FDA Centers that
now contain most or all of the FDA offices and laboratories that are
reported to be in poor facilities.
Many FDA offices, including my own, are in excellent buildings.
None of my coworkers complain about their present offices.
Nevertheless, we would all relocate to the Montgomery County
consolidated facility.
My coworkers and I rarely need to visit other FDA centers while
reviewing medical device applications. The need to consolidate seems
small.
White Oak is three miles from the closest Metrorail station. In
contrast, FDA's largest office building is presently only half a mile
from a Metro station. FDA will likely lose many experienced employees
if it moves to White Oak.
The Naval Surface Warfare Center is in an affluent suburban
residential neighborhood. The White Oak area does not require federal
aid to support its development.
Roads and highways near White Oak are highly congested during rush
hours. These include such major arterials as Capital Beltway, New
Hampshire Avenue, and Colesville Road. These do not need the additional
traffic that this project would bring to the area.
The Congressional Concurrent Resolution on the Budget for Fiscal
Year 1996-2002 assumes a 30 percent reduction in funds for Federal
Buildings construction in its seven year plan to balance the federal
budget (Conference Report for H. Con. Res. 67: H. Rept. 104-59, June
26, 1995, p. 84). House and Senate Committees on Appropriations need to
address this programmed reduction in discretionary spending.
President William J. Clinton urged Congress to further reduce
spending on federal building projects when he vetoed the first 1995
rescission bill (H.R. 1158). The President does not appear to support
costly federal construction projects, especially since the
Administration did not propose any 1998 funding to initiate or support
this project.
There is no urgent need for a major FDA consolidation. Congress
needs to implement its Budget Resolution and the President's policies
by appropriating no new 1997 funds for FDA's Montgomery County
consolidation.
FDA and GSA are developing plans for an extravagant 130-acre campus
at White Oak. According to GSA's April 1997 Final Environmental Impact
Statement (FEIS) for the Montgomery County consolidation, the White Oak
campus will contain a visitor center and will feature both a woodland
and a six hole golf course on adjacent federal property.
FDA can accomplish its mission without a sprawling campus, a golf
course, a woodland, or a visitor center. FDA does not need a country
club.
Congress has not reviewed or approved any prospectus for any part
of the FDA consolidation. Congress does not know the specifications or
the costs of this project.
GSA presently has an opportunity to acquire property near the
downtown Silver Spring Metrorail station by donation from the
Montgomery County government. GSA also can locate the project on
federally-owned property in downtown Washington, D.C. With such
opportunities, Congress should not support a White Oak consolidation.
2. Please appropriate $4,000,000 for the study of a major FDA
consolidation in the District of Columbia, with an initial focus on the
Southeast Federal Center and its vicinity.
Rescissions in 1996 removed all of the funding for federal
construction at the Southeast Federal Center. The 1997 Omnibus
Appropriations Act provided funds for environmental clean-up activities
at this site. This federal property is therefore available for the FDA
consolidation.
The Southeast Federal Center is adjacent to the Washington, D.C.,
Navy Yard. It is next to the Navy Yard Metro Station and is only a mile
from the Capitol building.
Previous actions and statements by Congressional conference
committees on appropriations and rescissions have directed FDA's major
consolidation to White Oak. Citing these actions and statements, GSA
officials have refused my repeated requests to evaluate the Southeast
Federal Center site as an alternative site for the consolidation.
The April 1997 FEIS does not evaluate any sites other than the
White Oak Naval Surface Warfare Center. Only Congress or a Federal
court can change GSA's direction.
A 1996 National Capital Planning Commission (NCPC) plan has
recently designated the Southeast Federal Center as an important site
for new offices. NCPC expects this new economic development to ``assist
the transformation of the Southeast Federal Center and adjacent Navy
Yard into a lively urban waterfront of offices, restaurants, shops and
marinas'' (``Extending the Legacy'', Plan for Washington's Monumental
Core, NCPC, March 1996).
The goal of NCPC's plan is to preserve and enhance Washington's
Monumental Core, which is centered at the U.S. Capitol building. An FDA
consolidation at the Southeast Federal Center can revitalize a decaying
D.C. neighborhood and help achieve NCPC's goal.
The Southeast Federal Center and its nearby depressed commercial
area can hold buildings up to 14 stories high. If necessary for the
consolidation, GSA can purchase adjacent commercial property at a low
cost. The Southeast Federal Center is an ideal site for a large new
federal headquarters facility.
The legislation that initiated the FDA consolidation (Public Law
101-635) authorizes only a single consolidated FDA administrative and
laboratory facility. Indeed, Senate Report No. 101-242 (Feb. 1, 1990),
which accompanied the authorizing legislation, states, ``the FDA needs
to be consolidated in a building.'' Public Law 101-635 did not
anticipate or authorize a 130-acre FDA campus and two satellite
facilities.
FDA does not require a 130-acre campus for its consolidation. Large
high-rise buildings can readily house most or all of FDA's offices,
laboratories, and ancillary facilities.
Cities throughout the Nation contain many such research and office
centers. Over 2,000 National Institutes of Health (NIH) research
laboratories are located in a single 14-story building that the
government constructed in 1981 in Bethesda, Maryland. A single 18-story
building in Rockville, Maryland, now houses many of FDA's offices,
including the Office of the Commissioner.
Congress and the Secretary of Health and Human Services (HHS) can
readily oversee FDA's activities if FDA consolidates at the Southeast
Federal Center. Additionally, FDA's visitors and regulated industries
would find this site to be far more convenient than suburban White Oak.
The Southeast Federal Center is close to both Maryland and
Virginia. An FDA consolidation there will enhance the economies of
three jurisdictions (D.C., Maryland, and Virginia). In contrast a
consolidation at White Oak would benefit Maryland at the expense of the
District and Virginia.
The median annual household income in the White Oak residential
neighborhood exceeds affluent Montgomery County's median at $65,000.
Southeast Washington's median household income is much lower. Federally
supported economic development is far more critical to Southeast D.C.
than to White Oak.
Please recommend a survey of other sites in the District if GSA
finds that FDA cannot feasibly consolidate at and near the Southeast
Federal Center.
A direction of planning funds to study sites in the District would
place the project in compliance with Executive Order No. 12072 (August
16, 1978), and with its implementing regulations in 41 CFR Sec. 101-
17.000 et seq., as reaffirmed by the present Administration in 41 CFR
Sec. 17.205 (Location of space) (Federal Register, Vol. 61, No. 46, pp.
9110-9112, March 7, 1996). It would also be consistent with the
purposes of the National Capital Planning Act of 1952 and the policies
and recommendations that NCPC has developed to implement it.
Executive Order 12072 and its implementing regulations direct the
locations of federal facilities in urban areas, including the National
Capital Region. They require federal agencies to locate and use their
space and facilities so that the facilities ``shall serve to strengthen
the Nation's cities'' and ``shall conserve existing urban resources,
and encourage the development and redevelopment of cities.''
Executive Order 12072 and its implementing regulations require GSA
and FDA officials to ``economize in their requirements for space''. The
Order states: ``Except where such selection is otherwise prohibited,
the process for meeting Federal space needs in urban areas shall give
first consideration to a centralized community business area and
adjacent areas of similar character. . . .''
President William J. Clinton reaffirmed Executive Order 12072 in
his Executive Order 13006, May 21, 1996, (Federal Register, Vol. 61,
No. 102, May 24, 1996, pp. 26071-26072). Section 1 of President
Clinton's Order states:
``(Statement of Policy). Through the Administration's community
empowerment initiatives, the Federal Government has undertaken various
efforts to revitalize our central cities, which have historically
served as the centers for growth and commerce in our metropolitan
areas. Accordingly, the Administration hereby reaffirms the commitment
set forth in Executive Order No. 12072 to strengthen our nation's
cities by encouraging the location of Federal facilities in our central
cities.''
On March 11, 1997, President Clinton stated that, as part of his
economic stimulus package to revitalize D.C., he had ``directed his
Cabinet secretaries to find other ways to help the District, beginning
with keeping federal agencies in the city'' (Washington Post, March 12,
1997, page 1). This is consistent with his Executive Order 13006 and
with established federal policies concerning the location of federal
facilities in the Washington Metropolitan Area.
GSA's 1996 interim rule, 41 CFR 101-17.205 (Location of space),
requires GSA and other federal agencies to comply with Executive Order
12072. It also states in paragraph (n), ``. . . These policies shall be
applied in the GSA National Capital Region, in conjunction with
regional policies established by the National Capital Planning
Commission and consistent with the general purposes of the National
Capital Planning Act of 1959 (66 Stat. 781), as amended. These policies
shall guide the strategic plans for housing of Federal agencies within
the National Capital Region.
GSA and FDA have long disregarded the Executive Order and NCPC's
regional policies and recommendations when planning, leasing and
constructing federal buildings in the National Capital Region. To help
President Clinton resolve D.C.'s financial crisis, Congress needs to
correct this.
A long-standing NCPC policy presently encourages government
agencies to redistribute federal jobs in the National Capital Region.
This redistribution is long overdue. Congress needs to address this in
the federal buildings appropriations process.
The redistribution would implement NCPC policies and
recommendations that NCPC has developed in compliance with National
Capital Planning Act. It would reverse recent trends and correct a
growing imbalance of federal employment in the National Capital Region.
In a recent Proposed Federal Capital Improvements Program (PFCIP),
National Capital Region, fiscal years 1997-2001 (April, 1996) (p. 9),
NCPC reported that the District of Columbia will lose 889 federal
employees as a result of the FDA consolidation project. This would
accelerate a continuing transfer of federal employment from the
District to the Maryland and Virginia suburbs.
According to NCPC's PFCIP (p. 10), the District's percentage of the
total Federal employment in the National Capital Region has declined
from 58.0 percent in 1969 to 52.4 percent in 1994.
Because of this trend, NCPC's PFCIP (p. 12) has a final
recommendation that states, ``The Commission encourages each agency to
adhere to the policy in the Federal Employment element of the
Comprehensive Plan adopted in 1983 which specifies that the historic
relative distribution of Federal employment of approximately 60 percent
in the District of Columbia, and 40 percent elsewhere in the Region
should continue during the next two decades. This policy is used by the
Commission to ensure the retention of the historic concentration of
Federal employment in the District of Columbia, the seat of the
national government.''
A major FDA facility at the Southeast Federal Center is consistent
with President Clinton's expressed policies and orders to his Cabinet
secretaries, Executive Orders 12072 and 13006, GSA's implementing
regulations, and NCPC policies and recommendations. A facility at White
Oak would be inconsistent with all of these.
FDA now plans to move about 700 federal employees in its Center for
Food and Applied Nutrition (CFSAN) from the District of Columbia to a
new facility in Prince Georges County, Maryland. To reverse the
accelerating decline of the nation's capital city, Congress must
mitigate such relocations by directing the major FDA consolidation to
the District of Columbia.
4. Please do not appropriate any funds for GSA to prepare or
acquire any site for any part of the FDA consolidation until a
prospectus for the entire consolidation is approved in accordance with
the provisions of the Public Buildings Act of 1959.
The Public Buildings Act of 1959 requires the approval of a
prospectus for all GSA building projects before funds can be
appropriated for construction and site acquisition. However, no
prospectus for any phase of the FDA consolidation has ever been
approved.
Provisions in the 1992, 1993 and 1995 Treasury, Postal Service, and
General Government Appropriations Acts (Public Law 102-141, Public Law
102-393, and Public Law 103-329) permitted GSA to use the funds made
available in those Acts for the FDA consolidation and for certain other
projects, even though no prospectuses for these projects had been
approved. These provisions released GSA from its obligation to comply
with the Public Buildings Act of 1959 when planning the early phases of
the FDA consolidation.
The 1996 and 1997 Appropriations Acts (Public Laws 104-52 and 104-
208) and contained no such exemptions. Provisions in these laws state
that appropriated funds shall not be available for construction,
repair, alteration, and acquisition project for any project if a
prospectus for project has not been approved. The 1998 Appropriations
Act should contain such a provision.
In 1995, the House of Representatives debated the need for a
prospectus for the FDA consolidation (Congressional Record, July 19,
1995, pp. H7200-H7206). Some members of Congress appear to believe that
the consolidation's authorizing legislation (Public Law 101-635)
exempts the consolidation from the prospectus requirement.
Congress must eliminate this ambiguity and ensure proper
congressional oversight. Congress should appropriate no new funds for
any phase of any FDA consolidation until a prospectus describing the
entire project is approved.
Because of a 1996 rescission (Public Law 101-19), GSA and FDA have
no funds available to construct its major consolidated facility at
White Oak or at any other location. Congress needs to review a
prospectus for the project before any funds are appropriated to
construct it.
5. Please ask GSA or the General Accounting Office to appraise the
value of the White Oak site to prepare for a sale of the property.
This would prepare the government for a sale of part or all of the
Naval Surface Warfare Center. It would also help Congress evaluate the
real cost of an FDA consolidation at White Oak. A sale would support
the original purpose of the base closure, which is to help balance the
federal budget.
additional information
The following observations further support my requests:
1. The government long ago designated its Southeast Federal Center
as a site for a new federal facility. However, nothing has been built
there yet. An FDA facility would stimulate the revitalization of this
D.C. area.
2. As noted above, the National Capital Planning Commission's 1996
plan for Washington's Monumental Core states in the category of
Economic Development, ``Assist the transformation of the Southeast
Federal Center and adjacent Navy Yard into a lively urban waterfront of
offices, restaurants, shops and marinas''.
An FDA consolidation at the Center would help implement this Plan.
The government could rent space in the ground floors of FDA's office
buildings to operators of shops and restaurants.
3. Unlike White Oak, the Southeast Federal Center is near a Metro
station. Development at this site would encourage the use of Metrorail.
This would increase the use of the area's financially troubled public
transit system and reduce air pollution and traffic congestion.
If the consolidation occurs at the Southeast Federal Center, many
more FDA workers will likely choose to use Metrorail than presently do.
This would benefit the Washington Metropolitan Transit Authority
(WMATA) and local, state, and federal governments.
In contrast, an FDA facility at White Oak would encourage the use
of private automobiles. The roads near White Oak are already highly
congested.
The sections of I-95 and the Capital Beltway that serve White Oak
rank among the most congested highways in the National Capital Region.
They are the sites of frequent accidents and traffic jams.
The White Oak area is principally residential. For this reason, few
buses run from Metro stations to the White Oak Naval Surface Warfare
Center in the morning and from it in the afternoon. Thus, most FDA
employees would find it difficult to use public transportation to
commute to and from work at White Oak.
New public transportation routes are costly. There can be no
assurance that bus service will improve if FDA moves to White Oak.
If FDA consolidates at White Oak, WMATA will lose revenues from FDA
employees who now use Metrorail and Metrobuses on a daily basis. Local,
state and federal governments will have to pay for this, since WMATA is
heavily subsidized.
4. White Oak's distance from Metrorail and from the core of the
National Capital Region will induce many employees to work at home
under FLEXIPLACE. This will defeat the purpose of the consolidation.
5. The Southeast Federal Center is in a decaying urban commercial
area that is in great need of the economic development that the FDA
consolidation would bring.
Southeast Washington is one of the most economically distressed
areas of the nation's capital city. As is well known, the District of
Columbia is itself in great need of economic development.
According to a table in the April 1997 FEIS, the District of
Columbia had in 1994 the lowest average household income ($30,727) of
nine jurisdictions in the Washington, D.C., Metropolitan Area.
In contrast, the White Oak site is in an affluent residential
neighborhood that is not in great need of economic development.
According to a March 29, 1996, Maryland-National Capital Park and
Planning Commission staff report on the White Oak EIS, the
neighborhood's median household income exceeds the median income for
Montgomery County at $65,000 per year.
According to the Washington Post (April 3, 1996), the White Oak
neighborhood already boasts a community swimming pool, tennis courts,
and four tot lots. A map in the April 1997 FEIS shows that a
neighborhood community center abuts the Naval Surface Warfare Center
near the FDA site. The FDA consolidation would add a federally-owned
golf course to these amenities.
The FEIS states that Montgomery County, Maryland, had in 1994 the
second highest average household income ($64,596) of nine listed
Washington, D.C. Metropolitan Area jurisdictions. Montgomery County
therefore does not appear to be in great need of large federal
employment centers that might otherwise be located in the District of
Columbia.
There is a great economic contrast between Southeast Washington and
White Oak. Federal development would serve a far better purpose at the
Southeast Federal Center than it would at White Oak.
6. FDA can place its laboratories and offices in compact and
efficient 14-story buildings at the Southeast Federal Center. In
contrast, its buildings at White Oak would be only five to six stories
high.
FDA's present headquarters are in a 18 story office building (the
Parklawn Building in Rockville, MD). The Office of the Commissioner of
Food and Drugs is in this building, which is half a mile from the
Twinbrook Metro station.
The National Institutes of Health has a 14 story research
laboratory building that was built in 1981 at its Warren Magnuson
Clinical Center in Bethesda, Maryland. The National Cancer Institute
has some of its nationally-renowned laboratories in the 13th floor of
this building, which, according to an NIH brochure, holds 2,000
separate laboratories.
It is therefore likely that FDA can consolidate its laboratories
and offices in buildings up to 14 stories high in the Southeast Federal
Center. If needed, GSA can purchase additional property nearby at low
cost. Neighboring properties do not appear to be in good condition.
7. The Navy Yard Metrorail Station is on Metro's Green Line. The
station is only three stops from Maryland's Southern Avenue Metrorail
station and only two stops from Virginia's Pentagon Station. An FDA
facility at the Southeast Federal Center will therefore benefit the
economies of both Maryland and Virginia, as well as the District.
In contrast, an FDA facility at White Oak would benefit only
Maryland. It is too far from D.C. and from Virginia to provide any
economic benefits to either of these jurisdictions. Instead, it would
draw federal employees and associated businesses away from Virginia and
D.C.
8. An FDA consolidation at suburban White Oak would violate former
President Jimmy Carter's Executive Order 12072, which President William
J. Clinton's Executive Order 13006 reaffirmed. It would also violate a
federal regulation in 41 CFR 101-17.205 that GSA issued in 1996 to help
implement the Order.
When issuing this new regulation, GSA stated, ``On August 16, 1978,
President Carter issued Executive Order 12072, which directs Federal
agencies to give first consideration to centralized community business
areas while filling federal space needs in urban areas. The objective
of the Executive Order is that Federal facilities and Federal use of
space in urban areas serve to strengthen the Nation's cities and make
them attractive places to live and to work. This regulation serves to
reaffirm the Administration's commitment to Executive Order 12072 and
its goals.'' (Federal Register, Vol. 61, No. 46, March 7, 1996, p.
9110.)
The Southeast Federal Center is in an economically depressed
centralized community business area in the city of Washington D.C. This
area's neighborhood urgently needs revitalization. In contrast, the
Naval Surface Warfare Center at White Oak is not in any city, is far
from any centralized community business area, and is in an affluent
Montgomery County residential neighborhood.
The Executive Order and the CFR have provisions that make them
especially applicable when the neighborhood of the urban site
(Southeast Washington) is economically depressed while the suburban
site is affluent, and when the urban site is adequately served by
public transportation, while the suburban site is not. Because of its
residential suburban location, the White Oak site is served only
infrequently by buses that run from Metrorail stations in the morning
and to the stations in the afternoon.
Appropriations legislation makes funds available for federal
construction in specified locations. The language of such legislation
and its supporting committee reports should not conflict with an
existing Executive Order and a recently revised Federal regulation that
both require federal agencies to give preference to a different
location.
FDA must economize on its space requirements to a great enough
extent to allow it to consolidate at the Southeast Federal Center,
rather than at suburban White Oak. Congress should not support the
appropriation of funds if such an appropriation would encourage GSA to
violate the Executive Order and its implementing regulations.
9. The April 1997 FEIS discusses a federal report to the Secretary
of HHS (Final Report of the Advisory Committee on the Food and Drug
Administration, May 15, 1991) that assessed the need for new FDA
facilities. According to the FEIS, the Committee summarized its chapter
on resources by recommending, ``The FDA must now begin to correct the
most urgent of its facility needs, particularly for food and veterinary
medicine laboratories and field operations.''
It is noteworthy that FDA is now planning to relocate its food and
veterinary medicine laboratories to new facilities in Prince Georges
County, Maryland. Facilities for field operations would not be improved
by an FDA headquarters consolidation. According to documentation cited
in the FEIS, the FDA offices and centers that FDA plans to move to
White Oak do not appear to be in great need of new facilities at this
time.
While some FDA facilities may need renovation or replacement, many
do not. Senate Report 101-242, which supports the consolidation, cites
only one example of a facility that is antiquated. This is a laboratory
in CFSAN, which FDA plans to relocate to Prince Georges County and not
to Montgomery County.
FDA and GSA officials may describe to you certain existing
buildings that are inadequate. These descriptions may be correct;
however, my personal observations indicate that the conditions of such
buildings are not representative of most buildings that FDA now
occupies.
One FDA laboratory building that may need repair is on the NIH
campus in Bethesda, Maryland. This is a laboratory of the Center for
Biologics Evaluation and Research (CBER), which would be relocated to
White Oak. However, this building is owned by the Federal government.
The government will have to fund the CBER lab's renovation even if
FDA leaves it. Further, if FDA leaves this facility, its personnel will
lose valuable personal interactions with world-renowned personnel who
work for NIH. They will also lose the ability to use valuable and
unique NIH equipment. The government will gain nothing from this move.
Some of the CBER laboratories have recently moved into a new
building on the NIH campus. Thus, even within CBER, not all
laboratories are in poor condition.
In contrast to some FDA laboratories, many of the office buildings
used by FDA are in good or excellent condition. Some are in leased
buildings that are quite new. Some even contain amenities such as large
atriums with palm trees.
Such superb facilities can be observed at the Center for Devices
and Radiological Health (CDRH) offices at 9200 Corporate Blvd. in
Rockville. Other excellent CDRH office facilities are located at 1350
Piccard Drive and 2094 and 2098 Gaither Road in Rockville. Still others
can be seen at the offices of other Centers in the Metropark North
buildings on Crabbs Branch Road in Rockville.
The adequacy of the CDRH office facilities is documented in an
Interoffice Memorandum sent by Electronic Mail dated 01-Feb-1995, from
Connie J. Wilhelm-Miller, of the CDRH Office of Management Services,
Division of Resource Management. This memo, whose primary subject is
Smoking Policy (smokers were putting burns in the floors and walls of
new buildings), states that ``most of CDRH's office space is fairly
new''. My personal observations confirm the accuracy of this statement.
A Conference Committee Report (House Report 102-234) that supported
the 1992 Appropriations legislation (Public Law 102-141) stated that
there is no disagreement that FDA facilities are antiquated,
inefficient and overcrowded. This is simply incorrect. It overstates a
problem that is being experienced by only a small portion of FDA.
House and Senate Reports supporting the consolidation state that
FDA's antiquated facilities are causing recruitment and retention
problems. However, this is only true at very few places, and perhaps
only in the CFSAN laboratory that is relocating to Prince Georges
County.
I know of no FDA building housing an office or laboratory that will
move to the White Oak campus that is in such disrepair that people will
not work in it. Some buildings may need improvement, but none are that
bad.
Most FDA workers work only in offices. Many of these are in fairly
new buildings that are in good condition, such as the one in which I
work. There is little reason to expect that many of these employees
will be happier in a new facility at White Oak.
Limited replacement of facilities with local consolidations where
needed may well be desirable. However, a massive consolidation of
Montgomery County facilities is not.
10. FDA facilities are presently dispersed. However, this does not
create great inefficiencies. Many FDA offices with related functions,
such as those in CDRH in Rockville, are consolidated in buildings
within one or two miles of each other. A large number are in and near a
single building (the Parklawn Building) near the Twinbrook Metro
Station in Rockville, MD.
Although there are a number of functions that involve different
offices in different centers, most functions are carried out within one
Center. More importantly, few interoffice functions require more than
occasional face-to-face interactions which necessitate travel.
In addition, travel times between existing Centers that will
consolidate in the Montgomery County campus are not great. All are
connected by Rockville Pike and I-270. The average trip between offices
is probably less than \1/2\ hour.
It is important not to overrate the need for consolidated
facilities.
The U.S. Armed Forces won the Second World War operating from bases
and headquarters throughout the U.S. and in much of the rest of the
world. Only a tiny percentage of defense workers and military personnel
were located in any single facility. Decentralized agencies can and do
often work at least as efficiently as those that are consolidated.
Further, the great majority of product approvals require decision-
making within only a single building. It is only unusual decisions that
require conferences in separate buildings. Only a tiny minority require
conferences among offices in widely scattered facilities.
Most FDA personnel therefore have no need to travel between
different centers or offices on a regular basis. The need for
consolidation is not great, despite the statements made in
Congressional Committee Reports.
A number of present FDA centers are located near Metro stations,
such as Medical Center, Shady Grove, and Twinbrook. The large Parklawn
Building is an example of this. Many employees can therefore now travel
quickly and easily from one Center to another, as well as to meetings
at NIH and in downtown D.C.
In contrast, White Oak is 3 miles from Metrorail. Few, if any,
people will take Metro to commute or to go to meetings at NIH or in
D.C.
Most communications occur today by phone and by electronic mail.
Electronic networks allow documents to be transmitted to anyone with a
receiver. Indeed, many FDA personnel now regularly work at home using
FLEXIPLACE. Using home computer modems, they can connect with FDA
computer networks to perform most necessary functions.
The need for a costly consolidation is not great. It cannot be
expected to greatly increase FDA's efficiency. By causing experienced
workers to leave the agency, it may actually decrease FDA's
effectiveness.
11. Congress should only appropriate funds for a consolidated FDA
facility if the consolidation would help increase the use of mass
transportation or would aid in the redevelopment of a depressed urban
center such as Southeast Washington, D.C. It is environmentally and
economically unsound for Congress to fund the construction of a new
facility at White Oak that is far from an urban center.
12. Most FDA employees need to work only at a single location. The
approval of new drugs and medical devices usually takes place within a
single FDA Center. A major FDA consolidation, if it occurs, will
primarily benefit a small cadre of FDA managers who often travel
between centers and who are promoting the consolidation.
In actuality, a major consolidation is not likely to benefit many
FDA employees. It is even less likely that a consolidation will
significantly speed the approval of new drugs and medical devices.
13. During President George Bush's term in office, the Office of
Management and Budget (OMB) opposed funding of the FDA consolidation
because it was not worth the cost. The Administration considered it
more cost/effective to renovate facilities as needed.
It was a Congressional Appropriations conference committee that
first proposed the appropriation of funds for the FDA consolidation
(Conference Report for Public Law 102-141: House Report 102-234, Oct.
3, 1991). The Conferees directed FDA, GSA, HHS, and OMB to work
together to submit a funding plan for the project and urged OMB and the
President to support the Conferees' concept of the ``consolidation''.
The Conferees introduced the concept of building separate FDA
facilities in Prince Georges and Montgomery Counties. They recommended
the appropriation of $200,000,000 in the Federal Buildings Fund to
begin the process of dismantling the single-site consolidation that the
FDA Revitalization Act (Public Law 101-635) had previously authorized.
Public Law 101-635 had amended the Federal Food, Drugs and
Cosmetics Act. It had authorized the Secretary of HHS (not the
Administrator of GSA) to construct a single consolidated FDA facility.
Despite this authorization, the Conferees recommended the
appropriations of funds from the Federal Buildings Fund for the GSA
Administrator to use to construct two FDA facilities in separate
counties located in the State of Maryland. The Conferees also
recommended that the appropriation for the FDA facilities be exempt
from prospectus requirements of the Public Buildings Act of 1959.
Appropriations Conference Committees have therefore undermined the
FDA Revitalization Act, the Public Buildings Act of 1959, Executive
Order No. 12072, 41 CFR 101-17.000 et seq., and the National Capital
Planning Act of 1952. They have made it difficult for government
officials to follow procedures that assure compliance with
Congressional oversight legislation and site selection requirements in
the National Capital Region and elsewhere.
These Conference Committees have endorsed the appropriations of
funds for more than one FDA ``consolidated'' facility, have designated
the GSA Administrator (rather than the Secretary of HHS) as the planner
and builder of the facilities. They have also allowed GSA to construct
buildings without a prospectus.
Appropriations conferees have recommended that FDA build a campus
rather than consolidate in a single building. Additionally, they have
caused FDA to transfer federal jobs out of the financially distressed
District of Columbia and into more prosperous Maryland counties and
neighborhoods.
This is not good planning. It is pork barrel politics at its worst.
Congress must correct itself.
14. Senate Report No. 101-242, Feb. 1, 1990, which supported the
FDA Revitalization Act (Public Law 101-635) estimated that the cost of
the consolidation would approximate $500,000,000.
FDA and GSA now estimate the total cost of the consolidation to be
at least $600,000,000. This would create a cost overrun exceeding the
original $500,000,000 estimate by $100,000,000.
15. Despite the 1995 rescission of funds for a sprawling FDA
facility in Clarksburg, Maryland, FDA's and GSA's facility engineers
continue to plan for a large FDA campus. They do not wish to seriously
economize in the agency's use of space.
By creating unnecessarily large requirements for space, they are
evading their responsibilities to consider locating the consolidated
facility in a compact site in a central city. One such site is now
available at the Southeast Federal Center.
Unless Congress intervenes as it did in 1995, GSA and FDA will
likely violate major provisions of Executive Order No. 12072 and the
National Capital Planning Act of 1952. As noted above, these now
dictate a preference for the Southeast Federal Center.
16. Some reports on FDA have suggested that certain FDA facilities
are overcrowded. This may no longer be true.
GSA has recently leased a number of new buildings for FDA.
Overcrowding is therefore not as acute as it was several years ago.
17. The FEIS contains no information on the number of buildings
that FDA will reuse at White Oak. FDA will not be able to use many of
the existing buildings because they are contaminated, deteriorated, of
unsatisfactory conformation, and poorly located. FDA will clearly need
to build a number of costly structures at White Oak.
18. Some of the planned excess capacity at the 130 acre White Oak
facility is desired for future expansion. However, this amounts to
nothing more than speculation.
Expectations of FDA expansions may well be unrealistic. FDA has not
grown significantly in recent years, except in a few specific areas.
Further, regulatory agencies often do not grow over long periods of
time when there is an antiregulatory climate, when there are budgetary
problems, or when there are pressures to privatize Federal functions.
FDA's major growth occurred years ago in response to obvious and
important needs. FDA can now meet most of these needs without any
further growth. Although many agencies try to justify their own
expansion, FDA may never be able to significantly increase its size or
number of employees.
A compact site such as the Southeast Federal Center is more
consistent with proposed FDA reform legislation than is a 130 acre site
at White Oak. This reinforces the need for Congress to direct a study
of the Southeast Federal Center.
19. Because FDA would acquire more land at White Oak than it
presently needs, it will surely press for additional funding to
construct more buildings in the future. This will increase future
government expenditures.
As the FDA campus adds buildings at White Oak in the future, it
will increase the urbanization of its surrounding residential
neighborhood. This will eventually exceed the limits imposed by current
zoning and land use plans and will create local controversies.
______
Prepared Statement of Quon Y. Kwan, D. Crim.
appropriation for the study of fda consolidation
I am a resident of Rockville, Maryland. Although I am Secretary and
Transportation Chairman for the Manor Lake Civic Association, I am
writing as a private individual. I am currently employed as a senior
environmental scientist for Energetics, Inc., a contractor for the U.S.
Department of Energy, Assistant Secretary for Environment, Safety and
Health. Neither my company nor I have received or will be receiving any
contracts or grants from the General Services Administration (GSA) or
Food and Drug Administration (FDA).
My interest in the FDA consolidation stems from my involvement as
Vice-President for Action Committee for Transit (Montgomery County) for
the past and current years. Again, my views do not represent the
official position of Action Committee for Transit. I was opposed to the
siting of the consolidated FDA campus at exurban Clarksburg primarily
because of the lack of supporting infrastructure (especially, access to
transit) and the commuting hardship posed on low-income and minority
workers. My other reasons for opposing the Clarksburg site included the
adverse impact in furthering sprawl development and the further
deterioration on the inner city and urban areas. As you are well aware,
the GSA and FDA abandoned Clarksburg as a potential site due to public
outcry.
The GSA and FDA now seems to be focusing on the former Navel
Surface Weapons Center at White Oak as a site for its consolidated
campus. White Oak is also a poor choice for a number of similar
reasons. My primary objection is the inadequacy of public
transportation serving the White Oak site. Although it has bus service,
workers would be using Metrobus service (route K6) and Ride-On service
(route 22) to/from White Oak in the counterflow direction (AM
northbound and PM southbound on New Hampshire Avenue). The frequency of
counterflow bus service (on either route) is every 30 minutes even
during rush hours. In my comments on the draft and final environmental
impact statement for the proposed FDA consolidation at White Oak, I
noted that such frequency of bus service is wholly inadequate to
accommodate even 10 percent of the 6,697 employees that would work at
the site. The GSA misled the public by listing 19 bus routes and 4 rail
lines that serve the study area, when in fact only the two
aforementioned bus routes were within reasonable walking distance (\1/
4\ mile of the site). The closest rail station is the Silver Spring
stations for the Metrorail Red Line and MARC Brunswick Line, which is
three miles away. I noted that the no-action alternative (i.e., to keep
the FDA at its existing locations) was better because the dispersed FDA
sites are located near Metrorail stations and have far better access to
public transportation than White Oak.
My second primary objection to the White Oak site is its location
in the residential suburbs. The FDA consolidated campus does not belong
in a residential suburb but in the inner city or central business
district. President Jimmy Carter signed an Executive Order 12072,
``Strengthening the Nation's Cities,'' which is codified by the General
Service Administration into the Federal Property Management Regulations
at 41 CFR 101-19.002. This Order calls for Federal agencies to site
their facilities and utilize space in such a way as to strengthen the
Nation's cities. This Order has been upheld in Federal courts (rf City
of Reading, PA v. Austin [816 F.Supp. 351 (E.D. Pa. 1993)]). Why does
this Order make good sense? Abandoning the inner city for the suburbs
causes deterioration of the inner city and exacerbates sprawl
development in the suburbs. This in turn has the unintended adverse
effect of furthering division between socio-economic classes and
between races, with of course, the low-income and minorities--the less
mobile--remaining in the inner city and the more affluent and majority
white--the more mobile--fleeing to the suburbs. When Federal agencies
as well as private sector businesses take flight from the inner city to
the suburbs, they create a prodigious redistribution of wealth. The
inner city loses its tax base and becomes enveloped in a downward
spiraling cycle of decreasing job growth and abandoned buildings
accompanied by increasing alienation, poverty, and crime. On the other
hand, the suburbs grow in their tax base and become enveloped in an
upward spiraling cycle of increasing job growth and construction but
accompanied by cookie-cutter gated communities and sterile industrial
parks that exclude ``undesirables'' and oppose diversity. We need
cities because we need identifiable, physical centers of commerce and
culture. We need cities because they provide diversity; places that
thrive with diversity breed new ideas for exchange, growth, and
prosperity. Cities--not suburbs--are where the poor can rub elbows with
the rich, the blacks with the whites, the humble with the powerful, and
the public with the government. These are the places where Federal
agencies belong--inner cities and central business districts--not in
the exurbs or suburbs. Cities are vital for democracy. The Federal
government should set the example and take the lead in strengthening
the inner cities.
As an alternative to the White Oak site, the FDA should be
consolidated at a site in the city, Washington, D.C. (consistent with
Executive Order 12072), and preferably near a Metrorail station. There
are several sites that would fit this criterion. One is at the
Southeast Federal Center, which is adjacent to the Navy Yard Metrorail
Station and is no more than about a mile from the Hubert H. Humphrey
building, headquarters of the Department of Health and Human Services,
the department to which FDA belongs. The other advantages of the
Southeast Federal Center are that it is already owned by the Federal
government (General Services Administration) and it has adequate floor
space to meet FDA's needs. Furthermore, the Southeast Federal Center is
located in an economically depressed area of the District of Columbia
that is in urgent need of revitalization. As you are quite aware, D.C.
has lost many employers, including Federal agencies, and the President
has directed his cabinet secretaries in March 1997 to not contribute to
the economic decline of D.C. by not allowing any more Federal agencies
to abandon D.C. Moreover, the National Capital Planning Commission's
Plan for Washington's Monumental Core (March 1996) under the subject of
economic development proposes that the Southeast Federal Center and
adjacent Navy Yard be transformed into a lively urban water front of
offices, restaurants, shops, and marinas.
In conclusion, it would behoove the Subcommittee to cancel any more
appropriation for the White Oak site, and instead, dedicate an
appropriation of approximately $5 million for studying the feasibility
of consolidating the FDA administrative and laboratory facilities at
the Southeast Federal Center site or similar site within walking
distance of a Metrorail station in D.C.
______
Prepared Statement of Larry Bohlen, D.C. Issues Coordinator, Friends of
the Earth
support for fda consolidation at an urban, metro accessible site
Friends of the Earth is taking an increasing interest in protecting
the urban core and inner suburbs of cities across America. Existing
communities are worthy of protection. In addition, making sure that
existing communities are safe and economically viable places to live is
one of the surest ways to protect undeveloped farms and forests from
falling to haphazard sprawl development.
Moves of Federal jobs outside the D.C. beltway are detrimental to
the health of the District and the inner suburbs of D.C. A currently
proposed move of the Food and Drug Administration to White Oak,
Maryland would threaten the economic viability of areas inside the
Beltway.
To address these issues, we propose that you:
(1) Initiate a study of consolidating the FDA within a half mile of
a Metro-accessible site, such as the Southeast Federal Center in the
District of Columbia. We suggest that at least $4 million be
appropriated to GSA's Buildings Fund in fiscal year 1999 to conduct
such a study.
(2) Oppose Congressional funding of any move of the FDA outside of
the D.C. beltway, including the proposed White Oak site.
(3) Observe federal Executive Order 13006 directing location of
federal facilities in urban centers.
Consolidation of the FDA at the Southeast Federal Center has
several advantages:
--it is adjacent to the Navy Yard Metro;
--it is only one mile from the Dept. Of Health and Human Services,
FDA's parent agency;
--it is owned by the federal government and controlled by GSA;
--it has more than adequate floor space for FDA's site plan and is
currently underutilized;
--the Southeast Federal Center site has no funds appropriated for its
redevelopment; and
--it is in an area of D.C. urgently in need of revitalization.
In comparison, siting of the FDA in White Oak, Maryland, as
proposed, has several disadvantages:
--it is 3 miles from the nearest Metro station and has very limited
bus service;
--it is in a low-density sprawling neighborhood outside the
Washington beltway, not in an urban center as directed by
Executive Order 13006;
--it is 10 miles from other FDA facilities that would not consolidate
in White Oak, raising the question of just what kind of
benefits is consolidation bringing; and
--it would involve development of undeveloped wooded areas near a
stream on the White Oak site whereas the Southeast Federal
Center is already paved.
Your consideration of this matter is greatly appreciated.
cv: Friends of the Earth is a non-profit group advocating the
protection of the environment in the D.C. metro area, nationally and
globally.
Disclosure: Friends of the Earth has no federal grants or contracts
related to the redevelopment of the District of Columbia, nor any
related to the location of federal facilities.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Abad, Lawrence, letter from...................................... 505
Adams, Kendra, letter from....................................... 502
Allen, Ernest E., president and chief executive officer, National
Center for Missing and Exploited Children...................... 361
Prepared statement........................................... 373
Allen, Lydia, letter from........................................ 510
American Association of Retired Persons, prepared statement...... 531
Arnett, Yvonne, letter from...................................... 509
Auila, Zach, letter from......................................... 501
Bailey, Matt, letter from........................................ 508
Bailey, Paul, letter from........................................ 515
Baity, William, Deputy Director, Financial Crimes Enforcement
Network........................................................ 75
Prepared statement........................................... 94
Baker, Officer Will, Mesa County Sheriff, Grand Junction, CO..... 485
Banks, Samuel H., Acting Commissioner, U.S. Customs Service......1, 361
Prepared statements.........................................47, 364
Baray, Sarah Marie, Sterling, CO................................. 485
Barnes, Officer Roger, La Crosse Police Department, La Crosse, WI 485
Basham, W. Ralph, Director, Federal Law Enforcement Training
Center......................................................... 75
Prepared statement........................................... 82
Beauchamp, Datasha, letter from.................................. 512
Berg, Rickie, letter from........................................ 506
Berne, Bernard H., M.D., Ph.D., prepared statement............... 538
Bohlen, Larry, D.C. issues coordinator, Friends of the Earth,
prepared statement............................................. 548
Brown, Lee R., letter from....................................... 508
Brown, Ted F., Assistant Commissioner, Criminal Division,
Internal Revenue Service....................................... 75
Prepared statement........................................... 78
Bye, Dr. Raymond E., Jr., associate vice president for research,
Florida State University, prepared statement................... 535
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
prepared statements............................................2, 330
Caren, Tina, letter from......................................... 510
Carpenter, Kristeen, letter from................................. 510
Clinkenbeard, Shinon, letter from................................ 514
Cook, Matthew, letter from....................................... 503
Corkler, David, letter from...................................... 508
Coverdell, Hon. Paul, U.S. Senator from Georgia, prepared
statements.....................................................4, 202
Crabtree, Laura, Senior Technical Advisor, Information Technology
Management Team, Office of Administration, Executive Office of
the President.................................................. 393
Prepared statement........................................... 396
Dalrymple, John, Deputy Chief Operations Officer, Internal
Revenue Service................................................ 163
Dilba, Core, letter from......................................... 501
DiMarco, Ben, letter from........................................ 506
Douglas, Blade, letter from...................................... 510
Englehart, Tasha, letter from.................................... 507
Fitzpatrick, Jon, letter from.................................... 503
Friend, Sgt. Scott, Colorado State Patrol, Sterling, CO.......... 485
Gordon, Jesse, letter from....................................... 504
Gower, Melissa, letter from...................................... 501
Gray, C. Boyden, Wilmer, Cutler & Pickering, and former White
House Counsel to President Bush................................ 415
Prepared statement........................................... 417
Gross, Arthur, Chief Information Officer, Internal Revenue
Service........................................................ 163
Halbert, Josh, Grand Junction, CO................................ 485
Harnage, Bobby L., Sr., national president, American Federation
of Government Employees, AFL-CIO, prepared statement........... 523
Harrington, Kelsey, letter from.................................. 503
Hefner, Nick, letter from........................................ 502
Henderson, Christopher, La Crosse, WI............................ 485
Herald, Kendra, letter from...................................... 515
Herre, Jasmine, letter from...................................... 500
James, Sharpe, mayor, city of Newark, NJ, prepared statement..... 534
Jerome, J.J., letter from........................................ 507
Johnson, Amy, letter from........................................ 502
Jollivette, Cyrus M., vice president for government relations,
University of Miami, prepared statement........................ 536
Kareus, Zach, letter from........................................ 500
Kelleher, Amber, letter from..................................... 504
Kelly, Raymond W., Under Secretary, Law Enforcement Division,
Department of the Treasury..................................... 1
Prepared statement........................................... 8
Killefer, Nancy, Assistant Secretary for Management, Department
of the Treasury................................................ 269
Kitts, Anita, letter from........................................ 513
Kondracki, Edward N., chief, La Crosse Police Department, La
Crosse, WI..................................................... 465
Kuhns, Sarah, letter from........................................ 511
Kwan, Quon Y., D. Crim., prepared statement...................... 547
Lampson, Hon. Nick, U.S. Representative from Texas, prepared
statement...................................................... 391
Lindsay, Mark, Chief of Staff and General Counsel, Office of
Administration, Executive Office of the President.............. 393
Londberg, Kyla, letter from...................................... 513
MacKinnon, John, Senior Special Agent, U.S. Customs Service...... 361
Magaw, John W., Director, Bureau of Alcohol, Tobacco and Firearms1, 465
Prepared statements.........................................17, 469
Martin, Dayna, letter from....................................... 511
Martinez, Sheena, letter from.................................... 502
McCaffrey, Gen. Barry R., Director, Office of National Drug
Control Policy................................................. 313
Prepared statement........................................... 320
McKinnon, Daniel W., Jr., president, National Industries for the
Severely Handicapped [NISH], prepared statement................ 532
Merletti, Lewis C., Director, U.S. Secret Service................ 1
Prepared statement........................................... 40
Nichols, Danny, letter from...................................... 505
Pifer, Kristina M., letter from.................................. 504
Posey, Ada Louise, Director, Office of Administration, Executive
Office of the President........................................ 393
Puckett, Natalie, letter from.................................... 515
Rossides, Gale D., Assistant Director, Training and Professional
Development, Bureau of Alcohol, Tobacco and Firearms........... 465
Prepared statement........................................... 471
Rossotti, Charles O., Commissioner, Internal Revenue Service..... 163
Prepared statement........................................... 170
Rubin, Hon. Robert E., Secretary, Department of the Treasury..... 269
Prepared statement........................................... 275
Runyon, Marvin, Postmaster General/Chief Executive Officer, U.S.
Postal Service, prepared statement............................. 519
Russell, Valarie, letter from.................................... 505
Saduar, Amanda, letter from...................................... 507
Salazar, Destinie, letter from................................... 512
Scheetz, Aaron R., letter from................................... 505
Schultz, Gabrielle, letter from.................................. 514
Seibert, Ashley, letter from..................................... 501
Simeona, Sgt. Daren, Navajo Indian Tribal Police, Willow Rock, AZ 485
Smith, Jordan C., letter from.................................... 512
Smythe, Steven, letter from...................................... 514
Sommermeyer, Katie, letter from.................................. 509
Stockman, Mollie, letter from.................................... 508
Stogsdill, Kristin, letter from.................................. 511
Sullivan, John, letter from...................................... 515
Tate, Howie, letter from......................................... 507
Tobias, Robert M., national president, National Treasury
Employees Union, prepared statement............................ 528
Tohtsonie, Royetta, letter from.................................. 503
Topai, Jeni, letter from......................................... 509
Towne, Gabriel, Willow Rock, AZ.................................. 485
Vaughn, Megan, letter from....................................... 509
Watt, Bobbi Jo, letter from...................................... 506
Weinschenk, Gene, Head, Cybersmuggling Center, U.S. Customs
Service........................................................ 361
Whitney, Bree, letter from....................................... 512
Wilkinson, Amanda, letter from................................... 513
Windham, Chief Deputy Sheriff Cuyler, Cumberland County Sheriff's
Office, Fayetteville, NC....................................... 465
Prepared statement........................................... 476
Yang, Susan, La Crosse, WI....................................... 485
Yazzie, Bernell, Willow Rock, AZ................................. 485
SUBJECT INDEX
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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco and Firearms
Page
Fiscal year 1999 request......................................... 480
Funding criteria................................................. 479
GREAT Program:
Accomplishments.............................................. 482
Characteristics of........................................... 477
In North Carolina............................................ 483
Instructors.................................................. 479
Parental involvement............................................. 481
Schools, dissemination of information to......................... 483
Summer programming............................................... 516
Youth gun crime interdiction..................................... 481
Bureau of Alcohol, Tobacco and Firearms
U.S. Secret Service
U.S. Customs Service
Internal Revenue Service
Federal Law Enforcement Training Center
Financial Crimes Enforcement Center
Armored limousines............................................... 61
Bank Secrecy Act................................................. 92
Birmingham bombing............................................... 59
Budget request, fiscal year 1999................................. 92
Bureau of Alcohol, Tobacco and Firearms [ATF]:
Budget request............................................... 15
Strategic plan............................................... 15
Child labor:
Enforcement.................................................. 65
Hotline...................................................... 67
Importation of goods......................................... 68
Other forced labor........................................... 68
Regulations.................................................. 68
Child pornography:
Detection.................................................... 69
Tipline...................................................... 70
Confiscating forced child labor products......................... 67
Customs agent, death of.......................................... 56
Customs authority................................................ 66
Drug interdiction initiative..................................... 6
Federal firearms license security measures....................... 58
Federal Law Enforcement Training Center.......................... 7
Fraud program.................................................... 77
Gang Resistance Education and Training Program................... 57
Gateway Program.................................................. 93
International Law Enforcement Training Academy................... 82
International strategy........................................... 77
IRS criminal investigation....................................... 75
Methamphetamine seizures......................................... 65
Mexico's new drug force.......................................... 63
Mexico, Custom's weapons restrictions in......................... 63
Money laundering................................................. 6, 94
Magnitude of................................................. 93
Strategy..................................................... 76
Montana secret banking proposal.................................. 98
Narcotics and money laundering strategy.......................... 64
Narcotics program................................................ 77
Nonintrusive inspection technology............................... 63
Not giving testimony, privilege for.............................. 62
Office of Enforcement............................................ 7
Office of Foreign Assets Control................................. 56
Office of Professional Responsibility............................ 55
Pending nomination, congratulations on........................... 15
Personnel levels................................................. 16
Presidential campaign, 2000...................................... 7
Revenue collection............................................... 59
Seizure rate..................................................... 64
Submitted questions.............................................. 99
Tax gap strategy................................................. 76
Travel budget.................................................... 61
Violent Crime Coordinator Program................................ 16
White House security clearance process........................... 71
Year 2000 Program................................................ 59
Youth crime gun interdiction..................................... 7
Initiative................................................... 16
Internal Revenue Service
Budget:
Outlook...................................................... 169
Request...................................................... 193
Business practices............................................... 166
Century date change.............................................. 189
Completing................................................... 167
Citizens advocacy panels......................................... 184
Customer improvements............................................ 168
Earned income tax credit......................................... 194
EITC program..................................................... 202
Elderly, tax counseling for...................................... 188
Electronic filing................................................ 200
Information accuracy rate........................................ 197
Internal ethics problems......................................... 192
IRS employee browsing............................................ 186
Misprinted bar codes............................................. 201
New information technology systems............................... 190
New technology................................................... 167
Noncustodial parents............................................. 187
Organization:
Modernization of............................................. 169
Structure.................................................... 166
Performance, measures of......................................... 167
Purchasing processes, management of.............................. 199
Section 6103..................................................... 191
Small businesses, problems of.................................... 186
Southerners, disproportionate audits of.......................... 193
Submitted questions.............................................. 203
Tax code, changes in............................................. 195
Tax law enforcement section...................................... 199
Taxpayer service................................................. 197
Taxpayers, mistreatment of....................................... 196
Technology:
Improvements................................................. 168
Investments.................................................. 168
Year 2000........................................................ 201
Date change problem.......................................... 167
Office of the Secretary
Budget surplus................................................... 284
International affairs and law enforcement, interface between..... 281
International Monetary Fund [IMF].........................281, 287, 289
Proposed reforms............................................. 290
Internal Revenue Service [IRS]:
Chief Information Officer.................................... 279
Collections.................................................. 286
Customer service............................................. 279
Oversight board.............................................. 271
Reform....................................................... 273
Law enforcement.................................................. 274
Submitted questions.............................................. 291
Tax Code.......................................................285, 287
Treasury Building, renovation of................................. 281
Year 2000......................................................274, 277
U.S. Customs Service
Child sex tourism................................................ 383
Children, protection of.......................................... 370
Computer forensics............................................... 383
Convictions...................................................... 384
Latest technology................................................ 386
Legislation to extend existing authorities....................... 369
Limitations...................................................... 368
Offenders, occupations of........................................ 368
Online demonstration............................................. 375
Resources........................................................ 382
Submitted questions.............................................. 386
EXECUTIVE OFFICE OF THE PRESIDENT
Office of Administration
Counsel's Office:
Bush and Clinton compared.................................... 421
Bush White House:
Commonsense view of public and private activities of..... 416
Public versus private activities in...................... 418
Size of during the Bush and Reagan administrations........... 422
Skeptical of statutory attempt to establish internal controls
of......................................................... 419
Executive Office of the President [EOP]:
Activities of legal counsel.................................. 402
Allegations of improper use of legal counsel by.............. 395
Budget submission............................................ 396
Information technology infrastructure........................ 395
Information technology planning and coordination............. 401
Executive privilege.............................................. 420
Office of Administration capital investments..................... 399
Old Executive Office Building, GSA fire, life, and safety repairs
and renovations of............................................. 406
Public and private activities, internal controls for
distinguishing between......................................... 419
Submitted questions.............................................. 408
White House Communications Agency agreement with the White House. 407
White House Counsel:
Responsibilities 415
Staff size................................................... 416
Office of National Drug Control Policy
Budget........................................................... 319
Classified strategy.............................................. 316
Counterdrug Technology Assessment Center [CTAC].................. 332
GAO report on................................................ 333
Director's security.............................................. 335
Drug use data.................................................... 316
Drug-free prison zone demonstration.............................. 338
Drugs and prisons................................................ 318
Effectiveness, performance measures of........................... 336
Hardcore drug users.............................................. 339
High-intensity drug trafficking area [HIDTA]..............319, 333, 337
Media campaign.................................................331, 334
Methamphetamine labs............................................. 332
National drug control strategy, 1998............................. 315
National youth media campaign.................................... 318
Performance measures............................................. 316
Prison drug treatment..........................................339, 340
Submitted questions.............................................. 341
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