[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




WASTE, FRAUD AND ABUSE AT THE DEFENSE DEPARTMENT, VETERANS AFFAIRS, AND 
                          DEPARTMENT OF STATE

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  VETERANS AFFAIRS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 25, 1999

                               __________

                            Serial No. 106-2

                               __________

       Printed for the use of the Committee on Government Reform


     Available via the World Wide Web: http://www.house.gov/reform

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
56-026 CC                    WASHINGTON : 1999




                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia            PATSY T. MINK, Hawaii
DAVID M. McINTOSH, Indiana           CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELEANOR HOLMES NORTON, Washington, 
JOE SCARBOROUGH, Florida                 DC
STEVEN C. LaTOURETTE, Ohio           CHAKA FATTAH, Pennsylvania
MARSHALL ``MARK'' SANFORD, South     ELIJAH E. CUMMINGS, Maryland
    Carolina                         DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
ASA HUTCHINSON, Arkansas             JOHN F. TIERNEY, Massachusetts
LEE TERRY, Nebraska                  JIM TURNER, Texas
JUDY BIGGERT, Illinois               THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon                  HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
JOHN T. DOOLITTLE, California            (Independent)
HELEN CHENOWETH, Idaho


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                      Carla J. Martin, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

Subcommittee on National Security, Veterans Affairs, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
ILEANA ROS-LEHTINEN, Florida         TOM LANTOS, California
JOHN M. McHUGH, New York             ROBERT E. WISE, Jr., West Virginia
JOHN L. MICA, Florida                GARY A. CONDIT, California
DAVID M. McINTOSH, Indiana           JOHN F. TIERNEY, Massachusetts
MARSHALL ``MARK'' SANFORD, South     THOMAS H. ALLEN, Maine
    Carolina                         EDOLPHUS TOWNS, New York
LEE TERRY, Nebraska                  BERNARD SANDERS, Vermont 
JUDY BIGGERT, Illinois                   (Independent)
HELEN CHENOWETH, Idaho

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
             Lawrence Halloran, Staff Director and Counsel
                Robert Newman, Professional Staff Member
                        Jonathan Wharton, Clerk
           David Rapallo, Minority Professional Staff Member
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 25, 1999................................     1
Statement of:
    Hinton, Henry L., Jr., Assistant Comptroller General, 
      National Security and International Affairs Division, U.S. 
      General Accounting Office, accompanied by Steve Backhus, 
      Director for Veterans' Affairs and Military Health Care 
      Issues; Lisa G. Jacobson, Director for Defense Financial 
      Audits; Ben Nelson, Director for International Relations 
      and Trade; Eleanor Hill, Inspector General, U.S. Department 
      of Defense, accompanied by Robert J. Lieberman, Assistant 
      Inspector General; Richard J. Griffin, Inspector General, 
      U.S. Department of Veterans Affairs, accompanied by Michael 
      Sullivan, Assistant Inspector General; and Jacquelyn 
      Williams-Bridgers, Inspector General, U.S. Department of 
      State......................................................     3
Letters, statements, etc., submitted for the record by:
    Blagojevich, Hon. Rod R., a Representative in Congress from 
      the State of Illinois, prepared statement of...............    80
    Griffin, Richard J., Inspector General, U.S. Department of 
      Veterans Affairs, prepared statement of....................    84
    Hill, Eleanor, Inspector General, U.S. Department of Defense, 
      prepared statement of......................................    42
    Hinton, Henry L., Jr., Assistant Comptroller General, 
      National Security and International Affairs Division, U.S. 
      General Accounting Office, prepared statement of...........     6
    Williams-Bridgers, Jacquelyn, Inspector General, U.S. 
      Department of State, prepared statement of.................    92

 
WASTE, FRAUD AND ABUSE AT THE DEFENSE DEPARTMENT, VETERANS AFFAIRS, AND 
                          DEPARTMENT OF STATE

                              ----------                              


                      THURSDAY, FEBRUARY 25, 1999

                  House of Representatives,
       Subcommittee on National Security, Veterans 
              Affairs, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:12 a.m., in 
room 2203, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Biggert, Blagojevich, and 
Tierney.
    Staff present: Lawrence Halloran, counsel; J. Vincent 
Chase, chief investigator; Robert Newman, professional staff 
member; Jonathan Wharton, clerk; David Rapallo, minority 
counsel, and Ellen Rayner, minority chief clerk.
    Mr. Shays. I am going to call the hearing to order, because 
I know you all have busy schedules and Members will be coming 
in and out. I welcome all of you here.
    Two weeks ago in testimony before the full Government 
Reform Committee the Comptroller General, General David Walker, 
described programs posing a high risk of waste and abuse and 
``the serious challenges that must be confronted to achieve 
more efficient, effective and economical Federal operations, 
and to build greater public respect for and confidence in their 
Government.''
    To improve performance and accountability Governmentwide, 
he called for greater emphasis on program results, closer 
alignment of organizational structures to program missions and 
improved coordination of multi-agency or cross-cutting efforts. 
Today, we invite our oversight partners, the General Accounting 
Office, GAO, and the Inspector Generals [IGs], to help us 
answer the Comptroller General's call as we focus on high risk 
operation and program vulnerabilities at three crucial 
departments: Defense, State, and Veterans Affairs.
    At the Department of Defense [DOD], weak financial controls 
allowed $1 billion in excess payments to contractors in a 
single year. Inventory systems cannot account for another $9 
billion. Although GAO acknowledges some recent improvements, 
daunting obstacles confront the effort to bring DOD financial 
management and financial managers to the level required to 
support the Department's vastly complex and enormously costly 
mission.
    At the Department of Veterans Affairs, both the GAO and IG 
note structure and operational issues affecting the quality of 
health care and chronic problems with the timeliness and 
integrity of data needed by VA managers to measure performance. 
At the State Department, GAO points to a number of complex 
challenges, most notably the need to enhance embassy security, 
upgrade crucial information and financial systems, and improve 
goals and measures under the Government Performance and Results 
Act.
    Our oversight mission is to improve the effectiveness and 
efficiency of national defense, international relations, 
intelligence and veterans programs. We begin that effort today 
by asking the GAO and Inspector Generals to address broad but 
fundamental questions about the mission, management and 
performance of the departments within their purview, and ours 
as well. Next Thursday, witnesses from DOD, VA and State 
Department will address the same issue.
    Let me at this time welcome our witnesses: Henry Hinton, 
Jr., Assistant Comptroller, National Security and Internal 
Affairs Division, U.S. General Accounting Office, accompanied 
by Steve Backhus, Director for Veterans Affairs and Military 
Health, Lisa Jacobson, Director for Defense Financial 
Management, and Ben Nelson, Director for Internal Relations and 
Trade.
    Also we have Eleanor Hill, Inspector General, U.S. 
Department of Defense, accompanied by Robert J. Lieberman, 
Assistant Inspector General, U.S. Department of Defense. Then 
we have Richard Griffin, Inspector General, U.S. Department of 
Veterans Affairs, accompanied by Michael Sullivan, Assistant 
Inspector General, U.S. Department of Veterans Affairs. 
Finally, we have Jacquelyn Williams-Bridgers, Inspector 
General, U.S. Department of State.
    I know we have a lot of you here. We could have had two 
separate panels. This is a general overview. It is really to 
acknowledge the fact that you all are the most important part 
of this process, and to begin some dialog. Some of what we are 
going to do is going to be a bit superficial, since we 
obviously are not going to have just one of you here talking in 
real depth about the issue. Obviously we are going to have you 
speak for more than 5 minutes, because even though there are a 
lot of you, we need to, and I know some are accompanying and 
not making statements, but it is important to put on the record 
some key points.
    So we are going to be doing a little bit more listening 
today than asking. But I do need to, before we begin, to swear 
you in. I will also say to you that, you wonder, do I do the 
GAOs first, the Inspector Generals, we are all a family here, 
we are partners. Sometimes the Inspector General will go first 
and sometimes the GAO will go first and sometimes they will 
come separately and all that stuff.
    Would all of you please rise, and raise your right hands.
    [Witnesses sworn.]
    Mr. Shays. Thank you. We will note for the record that 
everyone responded in the affirmative. And we are going to go 
in the order that I called you. Mr. Hinton, you can begin, then 
we will go to Eleanor Hill and then to Richard Griffin, and 
then to Jacquelyn Williams-Bridgers.

   STATEMENTS OF HENRY L. HINTON, JR., ASSISTANT COMPTROLLER 
GENERAL, NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION, 
 U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY STEVE BACKHUS, 
DIRECTOR FOR VETERANS' AFFAIRS AND MILITARY HEALTH CARE ISSUES; 
 LISA G. JACOBSON, DIRECTOR FOR DEFENSE FINANCIAL AUDITS; BEN 
NELSON, DIRECTOR FOR INTERNATIONAL RELATIONS AND TRADE; ELEANOR 
     HILL, INSPECTOR GENERAL, U.S. DEPARTMENT OF DEFENSE, 
    ACCOMPANIED BY ROBERT J. LIEBERMAN, ASSISTANT INSPECTOR 
GENERAL; RICHARD J. GRIFFIN, INSPECTOR GENERAL, U.S. DEPARTMENT 
OF VETERANS AFFAIRS, ACCOMPANIED BY MICHAEL SULLIVAN, ASSISTANT 
 INSPECTOR GENERAL; AND JACQUELYN WILLIAMS-BRIDGERS, INSPECTOR 
               GENERAL, U.S. DEPARTMENT OF STATE

    Mr. Hinton. Thank you, Mr. Chairman. I am pleased to be 
here today to discuss major management challenges and program 
risks confronting the Departments of Defense, State and 
Veterans Affairs. As requested, my prepared statement focuses 
on one, the management challenges Defense, State and VA must 
address to improve the efficiency of their support operations, 
and two, whether these departments are meeting performance and 
accountability goals and measurements that are required under 
the Government Performance and Results Act of 1993.
    With your permission, Mr. Chairman, I would like to have my 
statement entered into the record and I will summarize.
    In summary, Mr. Chairman, four themes emerge from the 
performance and management challenges we have identified that 
can adversely affect the operational effectiveness of the 
departments if not addressed. First, Defense, State and VA are 
struggling like other Federal agencies to implement the basic 
results-oriented tenets of performance-based management.
    I need to point out right at the start here, Mr. Chairman, 
that Defense is second to none in its combat effectiveness. But 
what we are really talking about here are business functions 
that I think offer a lot of room for improvements in economies 
and efficiencies of operations.
    Too often we find that the Government's performance is 
limited by a failure to manage on the basis of a clear 
understanding of the results that agencies are to achieve and 
how performance will be gauged. This is true of Defense, State 
and VA. For example, our review of Defense's plans disclose 
many areas where improvements could be made. The principal 
shortcoming in Defense's plan centers on weaknesses; in one, 
establishing results-oriented performance goals with explicit 
strategies and timeframes for achieving them, and two, 
addressing what Defense has done or plans to do to resolve its 
performance management problems that you referred to in your 
opening statement.
    Our review of State and VA's plans identified some strong 
points, but generally, they fell short of the expectations in 
the Government Performance and Results Act.
    Second, Defense, State and VA depend on information 
technology to improve their performance and meet mission goals. 
The challenge is to ensure that modern information technology 
practices are consistently defined and properly implemented.
    As we all know, resolving the year 2000 computing problem 
is the most pervasive, time-critical risk facing Government 
today. For an organization as large as Defense, with over 1.5 
million computers, 28,000 systems, 10,000 networks, addressing 
the year 2000 problem is a formidable task and progress on the 
year 2000 program is slow.
    State, too, has been slow. VA has made progress in 
addressing its year 2000 challenge, but it still has a number 
of associated issues to address. For example, VA faces 
significant information system challenges. It does not know the 
full extent of its challenges and could face widespread 
computer system failures at the turn of the century, if the 
systems cannot distinguish the year 2000 from the year 1900. 
Thus, veterans who are due to receive benefits and medical care 
could appear ineligible.
    Third, Defense, State and VA must have reliable and timely 
performance in financial information to ensure adequate 
accountability, manageable results, and make timely and well-
informed judgments. Widespread financial system weaknesses, 
problems with fundamental recordkeeping, incomplete 
documentation, and weak internal controls prevented the 
Government from adequately reporting a large portion of its 
assets, liabilities and costs.
    For example, the material deficiencies in Defense's 
financial operations represent the single largest obstacle that 
must be effectively addressed to obtain an unqualified opinion 
on the entire Government's consolidated financial statements. 
State received, for the first time, an unqualified opinion on 
its 1997 statements, but needs to bring its systems into full 
compliance with Federal accounting and information management 
requirements.
    State also must work on solving related material internal 
control weaknesses, if it is to adequately protect its assets 
and have timely, reliable data for cost-based decisionmaking, 
reporting and performance management.
    Fourth, the leading performance-based organizations 
understand that effectively managing the organization's 
employees or human capital is essential to achieving results. 
Only when the right employees are on board and provided with 
the training, tools, structure, incentives and accountability 
to work effectively, is organizational success possible.
    For example, Defense is a department that has experienced 
problems in finding and retaining staff with the technical 
training it needs. To achieve the wide ranging reforms 
necessary to address its longstanding financial management 
deficiencies, Defense must upgrade the skills of its financial 
personnel. Defense's vast financial operations include a cadre 
of about 32,000 financial management personnel. A survey we 
completed of over 1,400 key Defense financial managers--
individuals often serving in comptroller, deputy comptroller 
and/or budget officer positions--showed that over half of those 
folks received no financial training in fiscal years 1995 and 
1996.
    To summarize, Mr. Chairman, GAO is committed to help the 
Congress and Federal agencies better serve the American people 
and prepare for the demands of the 21st century. We have 
identified, as my statement points out, the critical challenges 
facing Defense, State and VA. These challenges, again, if not 
addressed, can adversely affect the operational effectiveness 
of these departments.
    We stand ready, Mr. Chairman, when we get through with the 
witnesses, to address your questions.
    [The prepared statement of Mr. Hinton follows:]
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    Mr. Shays. Thank you, Mr. Hinton.
    It is really appropriate, I think, to have the GAO go 
first, since you were covering all three, as a nice 
introduction. At this time, Eleanor Hill.
    Excuse me, Ms. Hill, I really should acknowledge that we 
have a Member here from Massachusetts, John Tierney, and it is 
wonderful to have him on the committee. It is nice to have him 
here. I am going to take advantage of just doing some 
bookkeeping, if I could, given that we have a Member on both 
sides of the aisle. I would ask unanimous consent that all 
members of the subcommittee be permitted to place any opening 
statement in the record and that the record remain open for 3 
days for that purpose.
    Without objection, so ordered.
    And I also ask further unanimous consent that all witnesses 
be permitted to include their written statement in the record. 
Before giving you the floor, I would just ask the gentleman if 
he has any comments.
    Mr. Tierney. Actually, I do not. I am here prepared to 
listen and learn.
    Mr. Shays. OK, thank you.
    Ms. Hill. Thank you. I am going to briefly summarize my 
statement. As you pointed out, Mr. Chairman, we will have the 
full statement in the record.
    Mr. Shays. It is amazing, this is the first time we do not 
have a clock, and all of you are going to be punctual. 
[Laughter.]
    Ms. Hill. We are trying.
    I am pleased to have this opportunity to discuss the 
Department of Defense's vulnerabilities to waste, fraud and 
abuse, as well as opportunities for continuing the momentum 
developed over the past few years toward management reform and 
improvement.
    There are 10 areas where we in the IG's office believe 
further management improvement is particularly important, based 
on recent audit and investigative results. About 98 percent of 
the audits conducted by my office and most of our approximately 
1,700 open criminal investigative cases relate directly or 
indirectly to those top 10 high risk areas. In each of those 
areas, there are numerous problems that are inter-related, 
complex, and involve a wide range of organizations. Many 
specific problems are relatively long-standing. Others have 
emerged only recently.
    Briefly, the 10 problem areas are as follows. No. 1, and 
this is something Mr. Hinton has already alluded to, financial 
management. The DOD remains unable to comply with the various 
laws requiring auditable financial statements for its major 
component funds and for the Department as a whole. For fiscal 
year 1997, only the Military Retirement Trust Fund financial 
statements received a clean audit opinion. We were unable to 
provide favorable opinions on any other major statement.
    We anticipate similar results when we issue opinions next 
week on DOD statements for fiscal year 1998. The inability of 
DOD's systems to produce reliable annual financial statements 
means that DOD managers and commanders lack much of the timely, 
accurate and useful financial information that they need for 
program decisionmaking on a day-to-day basis.
    The second area we have concerns about is weapons system 
acquisition. Increasing the weapons procurement share of the 
budget is a high priority DOD budget goal. There are compelling 
technological and financial reasons to accelerate the 
acquisition cycle and to cut per unit costs, especially 
overhead costs. It is by no means certain, however, that 
support costs can be cut enough to sustain a robust 
modernization effort. In addition, despite many positive 
acquisition reform initiatives, we have seen no significant 
across the board improvement yet in cycle time and unit cost.
    The third area involves other procurement issues. The vast 
majority of the several million annual DOD contracting actions 
involve equipment, ammunition, supplies and services, rather 
than major weapon end items such as ships and missiles. DOD 
administers over $800 billion in open contracts and plans to 
award $135 billion of new contracts in the current fiscal year. 
The sheer volume and great variety of DOD contracting activity 
makes this a high risk area.
    While the Department has made progress in initiating 
acquisition reform initiatives, more needs to be done to ensure 
that the DOD acquisition work force is capable of transitioning 
to new practices, and that those new practices include 
reasonable controls to safeguard against the continuing threat 
of procurement fraud and mismanagement.
    The fourth area is health care. The Defense health program 
serves 8.2 million eligible beneficiaries through a combination 
of DOD in-house and outsourced care. Total DOD health care 
costs are nearly $16 billion annually. The Defense health 
programs cost containment challenges are exacerbated by the 
continued lack of good cost information and significant levels 
of fraud, particularly by some private sector providers. We 
currently have about 500 open criminal investigations on health 
care fraud.
    I should point out that traditionally, the biggest priority 
area in our office in criminal investigations, was procurement 
fraud which started back in the early to mid-1980's, the 
emphasis on that. In recent years, while the largest category 
of our cases are in procurement fraud, the No. 2 priority, 
involving a significant amount of our work is in the health 
care area. So this, in recent years has become a bigger and 
bigger problem for the Department. More of our resources are 
now devoted to health care fraud.
    The fifth area is supply inventory management. The 
Department had reduced wholesale supply stocks by nearly a 
third and is pursuing a number of logistics reform initiatives.
    However, spare parts shortages are being reported more 
frequently by operational units. Audits continue to show that 
war reserves are overstocked in some locations, but short of 
critical items in others. Fraud and inappropriate disposal 
practices remain particular problems in the disposal area, 
where we have almost 70 open criminal investigations.
    The sixth problem area is the year 2000 conversion. The 
Department of Defense depends heavily, as Mr. Hinton has 
mentioned, on automated information processing by about 28,000 
systems, 2,274 of which are considered mission critical. DOD 
faces a $2.5 billion cost and a monumental management challenge 
because of the scale of the year 2000 conversion problem, a 
belated start in seriously addressing it and the legacy of past 
inattention to good information technology and management 
practices.
    As of January 1999, approximately 77 percent of mission 
critical systems have been certified as Y2K compliant. We 
believe that the number and severity of the remaining Y2K 
issues will not be readily apparent until at least June 1999, 
when more testing results become available.
    The seventh area we have designated as other information 
technology issues, aside from the Y2K problem. As indicated in 
21 recent audit reports, the Department faces major problems 
related to the acquisition of computer systems, and the 
security of both old and new systems. Automated system 
development projects have tended to overrun budgets, slip 
schedules, evade data standardization and inter-operability 
requirements and shortchange use needs.
    Audits continue to show lax security measures and 
inadequate focus by program managers on the threat to 
information systems, despite clear awareness at senior levels 
of the need for a very high priority for information assurance. 
Estimates of the number of intrusions attempted by hackers into 
DOD systems each year run as high as 250,000.
    The eighth area is other infrastructure issues. Key 
infrastructure areas, such as transportation, maintenance and 
facilities, offer many opportunities to cut costs. However, 
many logical measures are highly controversial, and it is 
important not to create readiness shortfalls when trimming 
infrastructure. Difficulty in collecting reliable cost 
information with which to make outsourcing or restructuring 
decisions is a major infrastructure management problem. There 
are continued problems in determining facility requirements, 
especially for housing, where estimates of the cost of 
modernizing DOD facilities run as high as $30 billion.
    No. 9, readiness. We have assessed how readiness posture is 
affected by the changing threat environment, which now includes 
bona fide information warfare threats and concerns about 
weapons of mass destruction in the hands of terrorists. 
Accurate reporting of unit level readiness status remains a 
major concern. Units have indicated weaknesses related to 
chemical and biological defense preparedness and communications 
capability.
    Last, we have designated as area No. 10, turbulence from 
change. For most of the past decade, all functional areas 
within the Department of Defense have been engaged in 
fundamental reform and process re-engineering efforts at the 
same time. Conflicting priorities, downsizing, outsourcing, 
dependence on new and unproven systems or processes, de-
emphasis on management controls and oversight, reorganization, 
sustained requirements growth, despite resource constraints, 
and the continued unexpectedly intensive need for frequent U.S. 
military deployments are putting considerable strain on the 
Department's human resources. This turbulent period is one of 
increased vulnerability to waste, fraud and mismanagement.
    In sum, as the largest and most complex government agency 
in the world, the Department of Defense faces huge management 
challenges. In all of the areas that I have discussed, there is 
a mix of significant recent progress toward reform and 
continuing major problems. Department managers have agreed with 
about 96 percent of our audit recommendations, and have 
completed action on over 5,200 audit recommendations over the 
past 5 years, realizing estimated monetary benefits of $18.6 
billion. We will continue to do our best to highlight the 
Department's high risk areas, both in our audit and 
investigative work, and in the semi-annual reports from my 
office to the Congress.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Hill follows:]
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    Mr. Shays. Thank you. Ms. Hill.
    Richard Griffin, who is the Inspector General, U.S. 
Department of Veterans Affairs.
    We've been joined by the ranking member of this committee, 
really a partner in this whole process, Mr. Blagojevich. I 
welcome you here. I do not know if you'd just like to make a 
statement for the record.
    Mr. Blagojevich. Thank you very much, Mr. Chairman. I will 
be very brief. Let me first of all say good morning to our 
distinguished witnesses on the panel, and just say, this is the 
subcommittee's first hearing of the new Congress. It is also my 
first hearing as a ranking member. If I could say a couple of 
things, No. 1, I want to extend my special appreciation to our 
very able chairman, Mr. Shays, and say how much I am looking 
forward to working with you over the next 2 years.
    And second--what do I do next? This is my first hearing as 
ranking member.
    I have a statement for the record. In the interest of time 
and brevity, I will just allow the rest of it to be entered 
into the record, then allow the witnesses to testify. Thank 
you.
    [The prepared statement of Hon. Rod R. Blagojevich 
follows:]
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    Mr. Shays. Thank you very much. I didn't read the third 
page of my statement, and I would just like to read this 
paragraph, now that you are here, and just say, as we proceed 
to narrow our focus further in the weeks and months ahead, I 
want our oversight to be constructive and I want it to be 
bipartisan. I view our work as a zero-sum proposition, with the 
benefits of increased efficiency and reduced waste accusing to 
existing underfunded priorities like force readiness at DOD, 
health care quality at the VA, and embassy security 
enhancements, for example.
    It really is a joy to have you as the ranking member, and I 
know that we will work well together. I know we will be working 
with our colleagues at GAO and the Inspectors General. I know 
that they know what the ranking member wants from you all, as 
if we were asking it for the committee. DOD is responsible to 
both sides of the aisle, as you always have been.
    Thank you. I am sorry for that slight interruption.
    Mr. Griffin. Mr. Chairman and members of the subcommittee, 
I am pleased to be here today to discuss major performance and 
management challenges facing the Department of Veterans Affairs 
and the Department's progress in meeting performance and 
accountability measurements and goals under the Government 
Performance and Results Act. I will also highlight 
contributions of the Office of Inspector General in combating 
waste, fraud and abuse in VA programs and administrative 
activities.
    Last November, I responded at length to Chairman Burton's 
request for the Office of Inspector General's views on the 10 
most serious management problems facing the Department. These 
issues appear in an abbreviated form in my full statement which 
is being submitted for the record for this hearing. While most 
of these challenges are long term in nature, I am pleased to 
report that the Department has made great strides in addressing 
the Y2K issue and expects to complete the implementation of all 
applications into production next month.
    I will briefly highlight recent activities of my office 
that focus on some of the other top 10 issues. Monitoring the 
quality of health care is a top priority for my organization. 
This year, I directed that my Office of Audit, Office of Health 
Care Inspections and Office of Investigations initiate a 
Combined Assessment Program to conduct recurring reviews of VA 
medical centers. These collaborative assessments of medical 
center operations will focus on key indicators or ``pulse 
points'' if you will, to provide medical centers and veterans 
integrated service network management with timely feedback on 
the status of local operations and program effectiveness.
    In the area of workers' compensation, a collaborative pilot 
project, involving OIG investigators and VHA, was initiated to 
identify VA employees who were fraudulently receiving workers' 
compensation benefits. Indictments were obtained against 14 
individuals, all were convicted. Fines and restitution exceeded 
$550,000, and savings to VA resulting from this pilot project 
amounted to $4.4 million.
    In 1998, we audited the workers' compensation program at 
the request of the Department and concluded the program was not 
effectively managed, and that by returning current claimants to 
work who were no longer disabled, VA could reduce future 
payments by $247 million. To help ensure the integrity of VA's 
workers' compensation program, we are developing a protocol 
package for VA managers for enhanced case management and fraud 
detection.
    In the area of improper payments, we recently conducted an 
audit to determine if the disability benefit payments to 
incarcerated veterans were appropriately adjusted as required 
by Public Law 96-385. We reviewed a sample of veterans 
incarcerated in State and Federal prisons, and found that 72 
percent of the cases were not adjusted as required. We 
estimated that nationwide, about 13,700 incarcerated veterans 
have been or will be overpaid by $100 million.
    Additionally, overpayments to newly incarcerated veterans 
totaling approximately $70 million will occur over the next 4 
years if VA does not establish appropriate controls.
    Prior reviews of the implementation of GPRA in VA showed 
that while VA had made progress implementing strategic plans, 
the Department required additional efforts to achieve the 
ultimate goal of using performance measurement as a tool for 
improving the efficiency, effectiveness and economy of VA 
operations. We recommended establishing more specific and 
quantifiable performance measurements and holding managers 
accountable for the development and implementation of the 
Department's strategic plan.
    During fiscal year 1998, the Office of Inspector General 
made significant contributions to the economy, efficiency and 
effectiveness of the Department's programs and operations. 
Audits, investigations and other reviews identified over $734 
million in monetary benefits, including $31 million in 
recoveries. These monetary results constituted a return on 
investment of $21 for every dollar expended on OIG operations.
    Additionally, our oversight of Departmental operations 
identified opportunities to improve benefit services and the 
quality of health care provided to VA patients. Finally, our 
criminal investigations and special inquiries resulted in 111 
criminal convictions and 223 administrative sanctions involving 
patient homicide and assault, drug diversion, theft of 
Government property, bribery, kickbacks and benefits fraud.
    This concludes my oral statement. I will be pleased to 
respond to any questions the Members may have.
    [The prepared statement of Mr. Griffin follows:]
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    Mr. Shays. Thank you, Mr. Griffin.
    We will now go to Jacquelyn Williams-Bridgers.
    Ms. Williams-Bridgers. Mr. Chairman, members of the 
subcommittee, thank you for the opportunity to testify before 
you today on the major management challenges facing the 
Department of State.
    The Office of Inspector has identified several significant 
challenges facing the agencies that we oversee, including the 
need to strengthen border security, consolidate the foreign 
affairs agencies, correct weaknesses in financial management 
and improve management and maintenance of real property 
overseas. I discuss each of these in more detail in the 
statement which I appreciate being submitted into the record.
    I would like to focus my short statement on the 
Department's progress in addressing security vulnerabilities, 
especially overseas, the Y2K compliance and implementation of 
GPRA. No greater challenge exists for the Department today than 
that of providing safety and security for our people, our 
facilities and our information. The scope and gravity of this 
challenge was brought into clear focus by the attacks on our 
embassies in Africa late last year.
    The Department faces an immediate need to address physical 
security vulnerabilities and to enhance emergency planning at 
our overseas posts. For several years, my office has reported 
that the Department faced the challenge of managing and funding 
the security of personnel, data and our buildings. The 
devastation caused by the terrorist strikes on our embassies in 
Nairobi and Dar Es Salaam fundamentally changed the approach to 
security at our missions.
    The Department now assesses the vulnerability of mission 
buildings, the actual buildings, to terrorist attack, coming 
across national borders, in addition to the threat levels 
emanating from the cities in which our embassies are located. 
My office has made corresponding changes in our oversight to 
security.
    The State Department Office of Inspector General provides 
the only regularized security oversight of all U.S. Government 
non-military facilities overseas. I have recently taken a 
number of steps to significantly enhance the security oversight 
component of OIG.
    First, we have expanded our security oversight by including 
experienced security officers on our routine post-management 
inspection teams. The security officer's attention focuses on 
physical security and the emergency preparedness of personnel 
at the post in times of crisis. This year, we plan to complete 
inspections of 31 posts.
    In addition, we will complete security audits of our card 
access control programs at our missions, protective details, 
handling of classified information and overseas 
telecommunications security.
    Second, we will provide oversight of the $1.4 billion in 
emergency security funds recently appropriated to the 
Department. A large portion of the emergency supplemental funds 
will go to procuring goods and services and construction of new 
facilities. Our office plans to perform pre-award contract 
audits to ensure that costs are reasonable.
    We will also evaluate the adequacy of physical and 
technical security being built into our new buildings in 
Nairobi and Dar Es Salaam. In addition, we will examine the 
security for construction personnel, onsite construction and 
logistics for transporting and installing items to be used in 
controlled access areas.
    We also are pressing the Department for improvements in 
emergency preparedness. As a result of our recent audit in 
emergency evacuations, the Department reinstated its crisis 
management exercise program, which trains emergency action 
committees at posts on how to manage crises more effectively.
    The Department also faces challenges in information systems 
security. Our own work has pointed to deficiencies in the 
Department's mainframe and communications systems security, 
including incomplete and unreliable security administration, 
inadequate training of information systems security officers, 
and the lack of controls over who accesses our information 
systems. GAO, as was mentioned earlier, reiterated our findings 
on the need for improved management of information security.
    Another critical challenge facing the foreign affairs 
agencies is our vulnerability to the Y2K problem. Despite the 
Department's steady progress to prepare systems for the year 
2000 date change, we are concerned that the Department's Y2K 
certification process is proceeding much too slowly. Failure to 
meet the Y2K challenge could create havoc in our community, 
including disruption of messaging systems, impediments to 
embassy operations, such as visa and passport processing, and 
failures in the administrative functions, such as payroll and 
personnel processing in the year 2000.
    Embassies and consulates rely on their respective host 
country government's infrastructures to provide essential day 
to day services, such as water, power, and telecommunications. 
In some countries, these services could be disrupted if 
critical infrastructure components and control systems are not 
made Y2K compliant. Many Americans living, traveling, working 
overseas will certainly seek the services from our embassies 
should there be massive, sustained outages in a country.
    My office has been actively engaged in Y2K efforts in three 
major areas. First, we helped the Department establish a 
process to certify Y2K compliance of its mission critical 
systems. We helped them write the guidelines that the bureaus 
now use to document that every necessary step has been taken to 
ensure that their most critical business processes will 
continue after January 1. In addition, we are reviewing the 
adequacy of the documentation they provide.
    Clearly, for the certification process to work, the 
Department must speed up its processes to ensure that there is 
sufficient time to make any changes if they should be necessary 
before December 31st.
    The second area of our focus in Y2K is in reviewing the 
Department and USIA efforts overseas to prepare for the 
millennium change. We have conducted assessments in 25 posts in 
20 countries within the past 6 months to determine if our 
embassies are prepared. Early on, we found very little 
contingency planning in the event of failure of basic 
infrastructure services. The Department is aware of this 
problem and has sent a contingency planning tool kit, if you 
will, to all embassies.
    Finally, because our U.S. embassies and Americans abroad 
might be vulnerable to Y2K failures, we are assessing the Y2K 
readiness of host countries where the U.S. Government maintains 
a presence.
    In conclusion, I would like to make some observations on 
the Department's planning process, and its progress in 
implementing GPRA. As you know, the Results Act requires 
Federal agencies to set measurable goals for program 
performance and to annually report on their results in 
achieving those goals. Over the past 3 years, strategic 
planning efforts as required by GPRA have prompted notable 
improvements in the Department's planning process.
    For example, at posts overseas, there is increased focus on 
and discussion by U.S. Government entities at posts about their 
collective sense of U.S. policy goals in a country. Also, there 
is a much improved collective assessment of all U.S. Government 
resources available at each post to be dedicated toward 
specific U.S. foreign policy goals. Prior to the GPRA mandate, 
our chief submissions could not readily identify the total U.S. 
Government resource commitment to U.S. foreign policy goals in 
a country.
    The challenge that exists for the Department and its 
partners in the foreign affairs community is to define the 
goals stated in mission, bureau and Department plans in 
measurable terms and in terms of outcome. For example, what 
does the U.S. Government hope to achieve within countries and 
within regions?
    Also, the Department needs to establish a credible system 
that will reallocate resources across geographic boundaries as 
changes in priorities and resource requirements are dictated by 
strategic decisionmaking.
    This concludes my statement, Mr. Chairman. I would be happy 
to answer any questions that you or members of the subcommittee 
may have.
    [The prepared statement of Ms. Williams-Bridgers follows:]
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    Mr. Shays. Thank you very much.
    I am going to recognize Mr. Tierney from Massachusetts 
first. But I am going to make a request of all of you for the 
question I am going to ask, and I wanted to give you some time 
to think about it. I want each of you--and I would like, when I 
say each of you, not just those of you who have testified, but 
all of you at this table--to give me your top two priorities, 
if you were the chairman or ranking member of this committee, 
as to what you would look at if you were on this committee.
    Mr. Lieberman, I am going to be asking you to do the same 
thing, and Ms. Hill, and I know you have the kind of 
relationship that you may come up with two different answers. 
That is all right. Because it will be more helpful that way. I 
hope we have that independence. So I am going to ask each of 
you here, and you will not tell me right this second, because 
Mr. Tierney will be asking you some questions, then we will go 
to the ranking member. Then we will go back and forth.
    I thank you for all of your testimony.
    Mr. Tierney. I thank you. I would almost rather hear that 
answer first than ask questions.
    Mr. Shays. We have to give them time to think of it.
    Mr. Tierney. Ms. Hill, you indicated in your testimony that 
some estimated monetary benefits of the number of audits that 
were done in compliance was about $18.6 billion. Can we 
anticipate savings in that ball park as we go forward, if we 
continue the processing of auditing and cooperation?
    Ms. Hill. You cannot guarantee that you will have the same 
amount of savings. But I can say that we have consistently come 
up with high savings figures not only in terms of audits, but 
also in terms of our recoveries from civil and criminal cases. 
Recovery figures have been consistently high. I would echo what 
Mr. Griffin said about VA. Historically, at the OIG's office in 
Defense, there has been a substantial return on costs. In other 
words, the cost of operating the Inspector General's office is 
far outweighed by the dollar we are able to return to the 
Department.
    Mr. Tierney. Thank you. You also testified that there were 
barriers, in your remarks on that. Would you expand on that a 
little bit, what effect does that have on this?
    Ms. Hill. I think there are a couple of things to consider. 
One thing that strikes me about the Department is that it is 
simply huge to start with. It is a massive task for anybody to 
manage the Department. And that is compounded by the fact that 
within the Department, because it is so huge, you have the 
services and you have all sorts of other, I call them fiefdoms, 
out there, whether they are agencies or commands or services.
    Historically, it has been a stovepiped organization. 
Everybody has had a separate chain of command. So it is very 
difficult to break down that historical culture, if you will, 
and try and integrate the Department and get, not only the 
services, but all the different parts and the components of the 
civilian side of the Department to focus on these common 
problems. It is very, very difficult.
    An example is in the financial management area, where the 
Department has had to combine systems, financial systems and 
accounting systems, that historically were developed among the 
services. They have tried to bring those together. One of the 
big problems now is to get good financial information into 
DOD's finance and accounting systems, which need to be vastly 
improved to get clean audit opinions. Part of the problem is 
that the information that comes into those systems comes from 
all sorts of what we call ``feeder systems'' throughout the 
Department that are run by separate entities. So you have to 
get them integrated with the finance and accounting systems to 
try to get a smooth transition and accurate information.
    So, it is still very fragmented, there are a lot of walls, 
and barriers and there is a lot of parochialism. One of the 
biggest challenges is simply to get so many different 
organizations or different components to work together on 
common problems.
    Mr. Tierney. Mr. Hinton, did you want to make a remark on 
that?
    Mr. Hinton. We have the same concerns that Ms. Hill does 
across this whole area, where you have the individual 
components that are very difficult to cut across. That is one 
of the cultural issues that we see within the Department in 
trying to move to achieve efficiency across all the issues I 
think we have been talking about, particularly Ms. Hill and 
myself, as it relates to the business activities, whether it be 
financial management, logistics, or acquisitions. We have that 
phenomenon that is out there, and we have to find ways to find 
more jointness across those business activities to get the 
efficiencies that we need.
    Mr. Tierney. Let's talk about that for a second. When we 
look at recommendations from the different branches to those of 
the F-22, the FA-18, the joint strike fighter or whatever, 
those recommendations to build simultaneously all of those, 
moving in the direction, are those likely to be affected by 
this kind of parochialism and culture?
    Mr. Hinton. I think that is an ultimate issue for the 
Congress and the administration, because it is one of 
affordability. As we look at all the priority needs for the 
Department, we have to ask ourselves the question that Congress 
has to ask, where do we have the highest priority needs, do we 
need three separate tactical aircraft programs working at one 
time. That is a judgment that has to be made in part up here.
    Our work has looked at the individual systems to try to 
keep the facts and analyses up here around the individual 
systems on cost, schedule and where they are against 
performance for the individual systems. But the ultimate 
question is going to be, can we afford all three, and will that 
meet the top needs that we have going into the next century?
    Mr. Tierney. In view of the larger amounts we are now 
talking about in the national defense system on this, the 
missile defense system on that, are you of a mind that the 
Department of Defense is being overly optimistic with regard to 
the maturity of this particular system?
    Mr. Hinton. I think that what we have seen over our work 
has been mixed across the various programs, whether they are 
aircraft, national missile defense and those things. A lot of 
this evolves around technology, where are we and how ready are 
we to launch programs. Do we have the knowledge that the 
technology will work? Where we have seen some of the concerns 
that we've had in the past was, we would move too quick to 
launch programs, hence you come up with a lot of the concerns 
that we've raised in the acquisition programs that we've 
exceeded costs, it has taken longer to produce the systems, and 
we did not get what we started out to get for those systems to 
do. That was because of technology, unit costs rose as we did 
not have all those answers at the beginning.
    National missile defense, I think that is a tremendous 
challenge. The counsel that we would offer is that we need to 
move slowly to make sure that we have a good system that works. 
I think that is part of the debate that has to occur as DOD 
comes up for its funding to support the programs for that.
    Mr. Tierney. Ms. Hill, do you have a comment on that?
    Ms. Hill. We have not looked specifically at that proposal. 
But I would share what Mr. Hinton just said, that historically 
there have been problems in starting out down the road to get 
something, and then we find out it has either slipped the 
schedule, or it is not what we really wanted in the first 
place. Those sorts of things happen repeatedly.
    I would think if they are going to embark on something like 
that, it needs to be done very carefully. Hopefully all the 
lessons learned from the past mistakes, will be considered.
    Mr. Tierney. Thank you.
    Mr. Shays. Mr. Blagojevich, you have the floor.
    Mr. Blagojevich. Thank you.
    Mr. Hinton, I would like to talk a little bit about the 
discrepancy between the administration's request of $3 billion 
over 5 years to bring the U.S. embassies into compliance with 
security standards and a group headed by Admiral Crowe, which 
recommends the spending of $14 billion over 10 years to meet 
those security needs. I am hopeful, first of all, that you saw 
the reports, and second, rather than tell us who you think is 
right, could you give us your assessment with regard to the 
financial and management processes used by the two groups, 
Admiral Crowe's group and the administration, to determine 
these estimates?
    Mr. Hinton. Congressman, we have not looked specifically 
behind the estimates on these programs. I think as Ms. Bridgers 
mentioned in her statement, and I kind of reinforced across the 
three agencies here, our concern at the Federal level has been 
over whether or not the systems give you good data in terms of 
the cost of the programs. That is one issue I think that is 
very important as we think through the cost of these programs. 
That is a key issue we really have to define, what are the 
requirements and what are the true costs.
    I would also echo something that Ms. Bridgers raised, too, 
is a challenge in this area and that is knowing what the 
Government's full presence is overseas. Not just State, but 
look at the other agencies over the years where there has been 
growth in the overseas deployment of their resources. So you 
have to factor that into the total picture and determine your 
requirements. Then you have to come up with good methodology to 
assess the cost.
    Then I think the true challenge that is out there, and it 
goes back to some work that we have done in the early 1990's, 
where we had issues around the capacity to carry out and 
actually do the programs that we set up for enhancing the 
security of our overseas missions and folks that we had 
deployed overseas. We found issues of not having adequate 
resources, both on the human side, questions around contract 
management issues, site selection issues, and a host of those 
programmatic issues that have to be carefully looked at as we 
advance into this area.
    Mr. Blagojevich. Mr. Hinton, some of those deficiencies, 
can you give us an illustration of what you are talking about?
    Mr. Hinton. Well, I think that you have to look at the data 
behind cost estimates. And you have to look at the assumptions 
and see whether or not we agree with the assumptions upon which 
the estimates are made. That is going to be very key to the 
members of this committee and also the appropriations 
committees, as we decide the amount of money to go forward to 
support the estimates. I think that remains to be seen in terms 
of the total costs.
    We have the varying estimates out there, and I think we 
have to look carefully at them, and we have to ask ourselves 
the capacity question. Do we have a good program to launch, do 
we have the right people, do we have the right designs, do we 
have the right location for the security issues that Jackie 
brought up to you. I think they are the fundamental types of 
questions we need to ask.
    Mr. Blagojevich. OK. Ms. Williams-Bridgers, are you 
familiar with the report by Admiral Crowe and the 
administration's position?
    Ms. Williams-Bridgers. Yes, I am generally familiar with 
the findings.
    Mr. Blagojevich. Could you just kind of free flow and tell 
us what you think?
    Ms. Williams-Bridgers. I would be glad to. I would like to 
make three points about Admiral Crowe's report. First, I would 
like to say he provided invaluable information to the 
community. Some of the recommendations, in fact, reiterated 
some of the same types of recommendations OIG had made about 
the need for emergency preparedness, the need for duck and 
cover drills. When you hear the indications of a bomb going 
off, do not go to the windows and look out and see what is 
happening. Find some place to hide under and prevent the glass 
from injuring your body, which so often occurred in the two 
attacks last August.
    Three points about the Crowe report. One is the $1.4 
billion that he estimated for annualized costs of embassy 
security. It is just an estimate. It was based on his review, 
the panel's review of what happened in Africa. The $1.4 billion 
may not be enough. Because Africa is not representative of all 
the types of threats in security vulnerabilities that we have 
throughout the world, first point.
    A couple of years ago, OIG looked at what is the security 
posture of DS given its current levels, then-current levels of 
funding. What we found was that security resources for 
diplomatic security had declined by 12 percent between 1991 and 
1996. They were providing minimal levels of safety to personnel 
overseas, minimal levels of security to our buildings overseas, 
at that point in time.
    So I think we need to look behind the $1.4 billion. We did 
not look at all the methodology used to come up with that 
estimate.
    No. 2, we must go beyond the Crowe report. As I mentioned, 
the Crowe report looked at Africa, looked at what happened in 
Africa as any accountability review board should do. But what 
it did not take into account as adequately as we think should 
be taken into account is the trans-national threat. In Africa 
what happened was, we had embassies where we never suspected 
there would be a terrorist strike. Because those were low 
terrorist posts.
    The threat came across the borders, from places that we 
least suspected. So we have to take that into account now, and 
we are taking that into account now, with the revised 
methodology, to analyze the integrity of our buildings to 
sustain any attack, regardless of where that attack comes from.
    A third point, some of our posts will never be secure, 
given where they are now. Are we going to move London? Are we 
going to move Paris? Can we afford to relocate to places to 
provide adequate setback? It would be tantamount to buying a 
Manhattan city block, the investment that we would have to 
make.
    Another point I would like to make, though, about the cost 
estimates of the Department, one of the things we are most 
concerned about in the representation of the budget is that 
there is no allowance for recurring costs, the maintenance, the 
operating, the life cycle costs associated with equipment that 
the Department intends to procure. The costs that we see as 
represented in the budget are for procurement only. So we have 
to look long term, what is the investment going to be.
    Mr. Blagojevich. Thank you.
    Mr. Shays. What I'd like to do is, Mr. Backhus, I will 
start with you. Basically you have the VA responsibilities. 
What would be the first two priorities?
    Mr. Backhus. May I have a third as it relates to the DOD?
    Mr. Shays. You may have a third. Let me just say, the 
purpose for this is that this committee has the resource of 11 
members on the majority side and 2 on the minority, but they 
also have other responsibilities as well. So our resources are 
limited, and we want to really make sure we are spending them 
well.
    And I also will say, you may give us a very important 
issue, all of you, to look at. But we may determine that 
another committee is going to be doing that extensively. But 
yes, you may have three.
    Mr. Backhus. Obviously, limiting issues to two probably 
puts this in the realm of those that are the most difficult to 
deal with. Understand that.
    The two issues I would really concentrate on working on in 
VA are first, as far as the health care side of VA goes, the 
infrastructure of that system. If you were going to build a 
health care system today, it would not look like the current VA 
health care delivery system. They are not structures that are 
built to provide health care in the next century. They were 
built to provide health care a long, long time ago.
    The future for health care is not in that kind of a 
delivery system. Consequently, they have hundreds of facilities 
that are not well suited for that mission. Roughly, we are 
talking about approximately 25 percent of the health care 
budget is consumed by the cost of keeping those buildings 
maintained.
    If there was a way to potentially close hospitals and open 
more ambulatory kinds of health care facilities that can do 
outpatient surgeries on a more efficient basis, that could be 
located closer to veterans, I think care would improve, access 
would improve and costs would probably be less.
    Mr. Shays. An excellent suggestion. I am going to suggest 
that that is going to be Mr. Blagojevich's suggestion, to have 
a VA BRAC.
    Mr. Backhus. Good luck.
    Mr. Tierney. How does that play into your community based 
outpatient clinic? Is that the alternative?
    Mr. Backhus. That is the step in the right direction, that 
is correct. And it is great to open up those community based 
outpatient clinics. But there is a limit to how many there are 
going to be that they can open, given that VA is burdened and 
saddled with this huge infrastructure that they have to 
continue to fund and maintain.
    So if that money from those huge over-built, inefficient 
facilities could be transferred into these community based 
outpatient clinics, you have a much more efficient and 
effective health care delivery.
    Mr. Shays. Kind of like a base closing bill, though. But it 
is very significant. What is No. 2?
    Mr. Backhus. Switching over now to the benefits side, the 
VA pays some $20 billion a year in compensation to veterans 
with disabilities. They have struggled for years to do and 
adjudicate claims in a timely fashion. In fact, there was an 
article in the paper the day before yesterday about this, and 
their re-engineering attempts to reduce that backlog and the 
timeframe; they have just been unsuccessful.
    So we are talking about a need to really re-engineer and to 
restructure this whole benefits area to be more responsive to 
the veterans. In some cases, appeals to the initial 
adjudication take 2 years to resolve. So we have veterans who 
are waiting upwards of 3 years for a determination as to 
whether their claim will be approved.
    Mr. Shays. One thing this committee could do would be to 
look at how long it takes claims to be resolved and decide how 
that process could be sped up.
    Mr. Backhus. Yes, I think we are really talking about a 
technology infusion here that is going to be needed. This is a 
paper-intensive kind of activity.
    Mr. Shays. You asked for three.
    Mr. Backhus. I did, because I also have responsibility for 
evaluating the military health care system.
    Mr. Shays. That is wonderful that you are connected to the 
two. That is the advantage GAO has.
    Mr. Backhus. There is an opportunity here, I think, for a 
lot more jointness between the DOD and the VA. I heard these 
folks talk about the stovepiping that occurs within the 
Department of Defense. Well, there has also been historically a 
lack of cooperation and collaboration between the VA and the 
military health care systems.
    They do a lot of things alike, health care is health care 
in many respects. They have facilities that they could share 
considerably more. There is purchasing they could share 
considerably more. There are personnel that they could share 
significantly more. And it goes on and on and on.
    I have to say there is progress that has been made over the 
years to get the two departments to work together more 
collaboratively. It is, however, probably just a pittance of 
what the potential really is though.
    Mr. Shays. One of the advantages GAO has is that you can 
cross different departments. I know Inspector Generals speak 
with one another and so on, and there is coordination. But you 
can do it more directly. But the committee can do the same 
thing.
    In my former life as chairman of the Human Resources 
Subcommittee in Government Reform, we oversaw all of HHS and 
VA. So we brought in one of the employees we had then, and we 
thought to ask her to do just particularly your third 
recommendation. How we can coordinate the two? I can see 
coordinating and having some impact with No. 2 as well--the 
benefits side.
    Mr. Backhus. Is that Marcia? Yes, we have been working with 
her.
    Mr. Shays. Did she put this idea in your bonnet? Because 
this is--I was going to change her responsibilities, now I am 
going to say, OK, we are going to go back to plan A.
    That is very helpful, thank you. I think, Ms. Williams-
Bridgers, if we could come to you, if you would give me your 
suggestions. You are not accompanied at the desk by anyone 
formally introduced. So you get to jump right in. What would 
they be?
    Ms. Williams-Bridgers. I would have two. One is security. 
Security of the U.S. Government's----
    Mr. Shays. I am sorry, I meant VA. I apologize. We are 
going to start with you, Mr. Sullivan.
    Mr. Sullivan. Thank you. With Steve here, as often comes 
about in these situations, Mr. Backhus over at GAO, we are very 
consistent in our view of the VA.
    Mr. Shays. I like consistency.
    Mr. Sullivan. VA, just in their purpose for being part of 
the Government, is to serve the veteran. Service is their No. 1 
priority. And he picked the absolute two things that the VA is 
here for.
    Mr. Shays. Would you just pick your two issues, though?
    Mr. Sullivan. The two issues are, one, to provide good 
quality health care to the veterans, first the disabled vets 
and then the other veterans who may not be disabled on a space 
available basis. Steve is right on target, it is the structure 
of those facilities, the movement from inpatient to outpatient 
needs to be looked at, and how VA can move construction money 
and any of their operating moneys to do so, to allow these 
large, vacant structures that have been built over the years to 
be converted to outpatient clinics. And then the further 
establishment of these CBOCs, these community based outpatient 
clinics.
    The second issue, of course, is the benefit aspects. The VA 
provides compensation, pension and education benefits to all 
veterans. Our concern over the years has been the timeliness in 
which claims are processed, as well as when one does try to 
speed up those claims, what are the vulnerabilities to fraud 
and misuse of that money if you go too far in those system 
changes, by eliminating some of the controls established, did 
we look at that.
    So the two areas are very consistent with Mr. Backhus.
    Mr. Shays. I know we are talking about third rail issues in 
some cases, but what we are dealing with is honesty before the 
committee. We may decide that there are only so many real heavy 
lifting issues. But it is really important to establish what 
you think are the crucial issues. It is really very 
interesting. I am fascinated with this.
    Mr. Griffin.
    Mr. Griffin. The No. 1 issue in the eyes of my senior 
management team, which came out of a retreat that we had, is 
quality of care in the VA. Notwithstanding the fact that Mr. 
Backhus put that on the table, that is our No. 1 priority. That 
is why we created this new combined assessment program, to get 
out to VA facilities, to satisfy ourselves that the right 
quality controls are in place, that the right level of service 
exists, waiting times are not excessive, that the right medical 
professionals are in place at that facility.
    All of these things are issues that when Dr. Kaiser came 
into VA and started this movement, which parallels the movement 
in the private sector of moving from inpatient care to primary 
care, that creates a whole host of issues. Previously maybe 
your staff is loaded up with specialists as opposed to 
physicians that are primary care physicians.
    In addition to caring for patients, VA has a number of 
veterans under their stewardship in nursing homes. There are a 
lot of post-traumatic stress syndrome vets who are in long term 
care facilities. What they are trying to do to address that is, 
if we have excess capacity, which clearly exists in some of the 
173 originally constructed hospitals, they are trying to 
convert some of that capacity into long term care facilities. 
That requires budget money.
    In the past 3 or 4 years, they have opened over 500 
outpatient clinics. That requires budget money also. So it is a 
balancing act as to, where you cut your losses on that excess 
space? Is it most prudent from a business standpoint to convert 
that space for long term care, or do you pour the money into 
the outpatient clinics?
    Their perspective has been that health care is not about 
buildings, it is about access to medical professionals, which 
is why they have moved in the direction of outpatient clinics. 
But it takes a long time to turn that aircraft carrier around, 
to get things up and running in an efficient----
    Mr. Shays. And your second issue?
    Mr. Griffin. The second issue is a combination of things. 
The Department got a qualified opinion this year on their 
financial statements. I think stewardship over this $43 billion 
or $44 billion in a broad is the issue. If you do not have 
systems in place to address some of these items that I raised 
in my opening remarks, like workers compensation, incarcerated 
veterans, where you cannot show where those tax dollars that 
you were given are being spent, then that is a major problem. I 
think that is an umbrella issue which speaks to a lot of the 
shortcomings that are outlined in the financial statement 
audit.
    Mr. Shays. I am happy to jump back to my cause, but I would 
like to finish, we've done State. Mr. Hinton, we left you out a 
little bit on State. We've done VA. I am sorry. Now what I 
would like to do is State. Mr. Nelson.
    Mr. Nelson. With respect to the State Department, I think 
there will not be much disagreement that the primary challenge 
to the Department is enhancing security over U.S. buildings and 
staff overseas. The caution, however, is that as the Department 
receives funds to deal with this issue that oversight must be 
vigilant. It is important to have a clear game plan for how 
those funds will be spent.
    In the past, programs have been affected by lack of 
agreement on design, construction problems, locations that 
changed from time to time, resulting in increased costs. I 
believe for the last major building program in the mid 1980's, 
very few of the projects actually came in on time and at cost. 
So I believe that is a critical area for the committee to focus 
on, as it is very important to have a strong, capable overseas 
presence to carry out our foreign policy objectives, but to 
have those people be as safe and secure as possible. I think 
that would rate No. 1.
    I will be surprised if my colleagues here were to disagree 
on that. That is a possibility, but I will be surprised.
    The second area is the area of strategic planning and 
performance. I think the Department will not be able to address 
some of the sub-issues or challenges absent some greater 
statement of what the critical missions are and how the funds 
will be applied to these missions are adequately funded, and 
there is a clear sense of where the Department is trying to go. 
Their performance plans have been good in some respects, but 
they have not been clear on performance goals or on performance 
measures.
    Now, I know we are limited to two. But I think in order for 
the Department to address the second one, it has to deal with 
two other items that are included in the statement.
    Mr. Shays. A and B?
    Mr. Nelson. Yes, A and B. You need better information in 
order to make decisions about what it is you are going to do or 
not do, because you need to understand what things really cost. 
In the past, the Department has not had a good handle on what 
things cost. We have had some difficulty when trying to make 
recommendations for the adoption of best practices, because of 
limited, very limited financial information.
    The other challenge facing the Department is the 
consolidation of the Arms Control and Disarmament Agency and 
the USIA.
    Mr. Shays. That is really three. In other words, the 
strategic planning and performance, what's its critical 
mission. One way they have to deal with is better information. 
Do you have anything else related to that, No. 2?
    Mr. Nelson. Do you mean an example?
    Mr. Shays. No. In other words, is there any other part to 
that? You said, you had two things. So this really is a third 
issue you want us to look at it?
    Mr. Nelson. Yes, it is a third issue. And maybe I misspoke 
when I said A and B. But you cannot accomplish either goal 
without good financial information. With respect to the 
consolidation, you need good information to make good decisions 
about what functions and roles and missions you have to pursue.
    Mr. Shays. Right, I've got you.
    Mr. Nelson. So they are all tied together.
    Mr. Shays. Ms. Williams-Bridgers.
    Ms. Williams-Bridgers. I certainly agree with Ben Nelson on 
his assessment of security being the No. 1 area of focus, and 
the need of congressional oversight and attention, for a couple 
of additional reasons, though. One is State Department, while 
it serves as the platform for all U.S. Government entities 
overseas, it represents only 25 percent of our presence 
overseas. State Department, USIA and ACDA, sum total of those 
organizations is about 20,000 people, Americans.
    Then we have, triple that number and you get the total U.S. 
Government effort, if you will, if you include FSNs, for whom 
we have some liability.
    Mr. Shays. What are FSNs?
    Ms. Williams-Bridgers. Foreign service national employees.
    In Africa, we absorb the cost not only of the loss of life 
of Americans, but the loss of life of foreign service nationals 
as well. There was a financial liability associated with our 
employees there. And the foreign service nationals represent 
the largest part of our work force overseas.
    I think also that the reason it is important for this 
committee to pay attention to security is that the Department 
cannot attend to security alone. It needs the help of the 
Congress. We talked about the costs of providing security 
facilities and secure networks for our information overseas. We 
are going to need the help of Congress, the commitment of 
resources, over a sustained period of time, in order to fully 
address those security needs.
    While I agree with Mr. Nelson that strategic planning is 
extremely important, and the lack of good information, 
financial systems, information systems, have been an impediment 
to good resource planning and goals, setting of goals, I think 
the more immediate problem is the failure of those information 
systems and financial systems to provide you the information 
after January 1, 2000. So in terms of a short term goal, I 
would say the Y2K problem is something that warrants this 
committee's attention. Not only because of Department of 
State's precarious position, although I think they are making 
progress. But Department of State is taking a lead in many ways 
in the rest of the world's attention to Y2K. From work that we 
have done with host country governments, we know that there are 
varying levels of attention being paid to the Y2K problem.
    For the tens of millions of Americans that are traveling 
overseas, in Rome alone they are celebrating a jubilee, January 
1, 2000 millions of Americans are expected to attend this 
jubilee. There is a lot of question of whether or not that 
country will be prepared on January 1. So I think the Y2K is 
more of a short term need that warrants this committee's 
attention.
    Mr. Shays. Thank you very much.
    We have a vote, and I think what we will do is end with 
Defense. Ms. Jacobson, you are in one area of the Defense area, 
but I still want you to give me your two, even if one goes 
beyond your area. And Mr. Hinton, I will ask you to comment on 
Defense.
    Then we will ask the Inspector Generals, then come to you, 
Mr. Lieberman. I think that is what we will do--do we only have 
one vote? Sometimes we leave and we find out there is another 
vote, and that we should keep going. Why don't we start with 
you, Ms. Jacobson, and we will make sure there is only one 
vote.
    Ms. Jacobson. Mine is financial management and you are all 
pretty aware of the issues in financial management at DOD. They 
are not denying them. There are serious difficulties, both in 
the stewardship of the assets, and in cost, and accumulating 
cost information and data.
    Mr. Shays. When you all told me that in 1 year alone, 
vendors returned $1 billion of overpayment, I was shocked. And 
you all had probably quite frankly become desensitized to it. 
That is not a criticism. It just tells me the challenge. For 
me, I thought, wow. At one time, you all probably did, too.
    Ms. Williams-Bridgers. When I first started, I did, too. 
When you first come out of the private sector, and $1 million 
is a big number, $1 billion kind of shocks you.
    Mr. Shays. How much more is out there? All we need to do is 
find out if we have more than one vote. OK.
    Ms. Williams-Bridgers. I think one of the most serious 
issues facing us, and challenges for GAO right now, in working 
with the Department to try to help them address their financial 
management problems, is getting them to view financial 
management in the broadest perspective.
    We just issued a report on their biennial financial 
management plan. In that report, they eliminate from the 
discussion of financial management the budget side of the 
equation. That is a basic element of financial management. 
Until you look at financial management in a broad perspective, 
including how information is shared not only upwards to the 
financial systems, but also between financial program systems 
that need that information to control the assets and provide 
stewardship over the assets, and you do not have an adequate 
plan going forward to address the serious problems that we've 
seen with financial management.
    Mr. Shays. We are going to go vote. The bottom line I am 
hearing you say is, we have to connect the budget to financial 
management, that is one issue we need to look at. Give me 
another one as well.
    Ms. Williams-Bridgers. Connecting, providing the control 
element of the functional areas, feeding information to each 
other at the same time as the financial management systems as 
well. For example, when you acquire something, acquisition, 
provide that information to logistics, it is coming in, at the 
same time they provided it to accounting, pay for it. Then at 
the end of the day, accounting and logistics look and see if we 
got everything that we paid for. That is a basic element of the 
financial management control system that is totally lacking in 
DOD, and not planned for right now as far as we can tell.
    Mr. Shays. Thank you very much.
    We have been joined by Judy Biggert, and I do not know if 
Judy is going to be able to come back afterward. I want to 
welcome you to the committee. The purpose today is just to get 
a sense of where we are going to begin our travels here. 
Welcome.
    Ms. Biggert. Thank you. Unfortunately, I will not be able 
to come back. But I have just been traveling in six countries 
in South America, Latin America. I have visited so many of the 
embassies there, and the problems they are having, particularly 
those that are street levels, four sides exposed, and how 
concerned they are about the security there.
    [Recess.]
    Mr. Shays. Are we all done? You have given me your two 
points, and I will go to Mr. Hinton. We are taking Defense, 
first focus on Defense. I did not want you to use up all your 
good ideas on the other two.
    Mr. Hinton. That is OK. My jurisdiction runs both to the 
international side, too. I will echo where they have been on 
that. I want to spend my time right now on Defense.
    When I got your invitation to testify, I was really 
thinking how I would spread together all three departments in 
my statement. I want to come back to one of my key points right 
at the beginning, because I think it rises to Defense in a very 
important way. In the last page of my prepared statement, you 
will see a list of high risk areas which are about six or seven 
that we have had in DOD for many years.
    Ms. Hill touched on those as she went through. Our work 
parallels each other. I think the issue I would have, Mr. 
Chairman, is GPRA implementation, to try to push the Department 
around to try and identify measures, goals, that will move 
forward trying to get some metrics out there that we can see 
progress going against these high risk areas.
    Those high risk areas form the basis of the challenges that 
we have laid out in our reports here. I think that is very key, 
and as more knowledge becomes available, and the Department is 
starting to embrace that legislation more, I think you will see 
more measures, more metrics, and you will be in a position to 
look at the progress.
    The other important part that comes on is that at some 
point, we tie the budget to some of these areas, so that we can 
see where the dollars are going and what we are getting for the 
execution and expenditure of those dollars against those goals 
and objectives. I think your committee is in a very good 
position to kind of watch that evolution of that and challenge 
the Department, are we getting where we want to go against 
these high risk areas?
    I always think about these, I think that $1 that is not 
well spent in these areas is $1 less that we have to devote to 
readiness and modernization and those types of priority needs 
that the Department has been seeking additional moneys for.
    My second one in DOD truly goes to the issue of financial 
management. The issues that Ms. Hill and I both talked about 
and Ms. Jacobson raised here really has at its heart the 
execution of the budget. Unless you have real good information, 
decisionmakers are not in a very good position to make informed 
judgments. That ties to the data itself and the systems we have 
in DOD. We are not in good shape. I would put that right there 
second to the first one that I mentioned.
    Mr. Shays. Thank you very much.
    Mr. Lieberman.
    Mr. Lieberman. I have a list of stuff written down on this 
paper, and I have been trying to find some innovative way to 
squeeze it all into two things.
    Mr. Shays. I am all up for creativity.
    Mr. Lieberman. I think the No. 1 priority for the 
Department is military readiness. I believe that we cannot do 
too much oversight in terms of looking for readiness 
inhibitors. I think there are plenty of them out there.
    Mr. Shays. I like the way you say that, readiness 
inhibitors.
    Mr. Lieberman. Questions arise such as, we spend $83 
billion a year, approximately, on logistics. Yet we have the 
operating forces complaining, vehemently nowadays, about spare 
part shortages. How can this be? Are we really ready to deal 
with weapons of mass destruction, either in a war environment 
or in terms of counteracting terrorism, abroad or at home? 
There are others; it is certainly a long list. But I think, as 
a genre, that readiness is terribly important.
    Mr. Shays. In regard to readiness, a good chunk was dealt 
with in your statement, Ms. Hill. You say accurate reporting of 
unit level readiness status remains a concern. In addition, 
audits have indicated weakness related to chemical and 
biological defense preparedness and communications capability. 
So did you inject that into her report?
    Mr. Lieberman. Yes. [Laughter.]
    Mr. Shays. It caught my attention.
    Mr. Lieberman. I trust it is OK to let the secret out here.
    Mr. Shays. When you say communications capability, can you 
elaborate a little more on that, Ms. Hill?
    Ms. Hill. I think the one on communication, both of those 
are very critical areas. I was going to say that----
    Mr. Shays. I am going to come back to you, Mr. Lieberman.
    Ms. Hill. My first problem would also be readiness. My 
biggest concern is particularly in the chemical and biological 
area, where we have done a series of reports, some of which are 
classified. We cannot go into all the details here, but it is 
an area that I think is worth looking at.
    Mr. Shays. Not all of the 12 are in regard to chemical and 
biological?
    Ms. Hill. No.
    Mr. Shays. The 12 are readiness overall?
    Ms. Hill. The communications one, I believe, is the audit 
report on the frequency issue overseas, where we are using 
communications equipment where, and I am not a technical 
expert, and Bob can correct me if I am wrong, they are not 
using approved frequencies and not complying with all the 
requirements of the host nation. Therefore, the efficiency of 
the whole program or of the equipment is seriously in doubt.
    Mr. Shays. Let me have you give me your second one, or if 
you wanted to elaborate more. I interrupted you.
    Mr. Lieberman. I think the second one relates to 
acquisition. Acquisition is the area of the Department where 
there is the most money. Last September, the Under Secretary of 
Defense for Acquisition and Technology made a statement, a 
public statement, in which he said the entire modernization 
program was in a death spiral due to underfunding. We are 
spending approximately $60 billion a year on weapons 
acquisition. So again, the question is, how can that be?
    There are a lot of different facets to that. It leads you 
into the question of where do we go with acquisition reform. 
How have the reforms so far worked, and what kinds of further 
changes, if any, are necessary?
    If I could impose and have a third?
    Mr. Shays. Sure. For Defense, I think a third would be 
appropriate.
    Mr. Lieberman. Thank you. Information systems are really at 
the heart of everything that the Department does. All of our 
processes are completely automated. All of us, as managers, are 
dependent on information coming out of automated systems. There 
is a chronic lack of accurate day to day management 
information, as has been mentioned earlier. I think that 
pervades every single part of the Department's operation.
    It leads you into areas like Y2K and security, as well as 
systems design. So how we can have 20 some thousand information 
systems and still have bad information, is my third question.
    Mr. Shays. Does Mr. Horn tend to get into those issues as 
well into his committee, Ms. Jacobson? One of the things we 
have to decide is what we do in that regard.
    Mr. Hinton. He is real key into the Y2K right now, but also 
in the broader picture around some of the information 
technology and systems development side.
    Mr. Shays. Is it fair to say that GAO would tend to focus 
more on management because you tend to get into less--let me 
preface it by, I would think the Inspector Generals on occasion 
are going to get into some very specific programs, sometimes 
fairly narrow in focus, more micro. You can also get into macro 
issues as well. But it would seem to me that GAO would tend to 
get into more macro issues.
    Mr. Hinton. Both. But largely on the macros. If we are 
going to have, if you could give Bob a third one, I would like 
to come back after Ms. Hill, because I have a couple at a 
broader national security level that go beyond Defense.
    Mr. Shays. Great. I am going to ask Ms. Hill to give me her 
first two, then I am going to ask each of you to tell me the 
question you wish we had gotten into, the issue we wished, and 
each of you comment. And then I am going to let you get on your 
way, because this is just kind of a general introduction for me 
and the committee.
    Ms. Hill. I preface it by saying that the problem with 
Defense, obviously, is there are so many important issues. Not 
only are there so many, but they are so interrelated. If you 
pick one issue, some other issue feeds right into it.
    Mr. Shays. Fair enough.
    Ms. Hill. But great minds must think alike, because Bob's 
list and mine are very similar here. My first would also be 
readiness, and particularly from what I have seen in our 
audits, it would be in the biological and chemical weapons 
area. Obviously, I would put readiness first, because to me, 
that involves the safety of our men and women in uniform. 
Although everything else, including financial management, is 
very important; readiness is a critical area with obviously a 
huge potential for disaster if it is not the way it should be.
    Second, I would suggest the general area of acquisition 
procurement, because the amount of dollars that is at risk in 
that area is huge given the extent of the Department's 
activity. There is also a lot of reform going on in acquisition 
in the Department, some of which is very good and some of which 
we have supported, not only in the Department, but in the 
Congress, in the last few years.
    There are some concerns that we have in that area. As the 
reform moves forward, there is a tendency to move more and more 
toward commercial practices. My own concern is that we are 
talking about the largest acquisition system in the world here, 
where a huge amount of taxpayers' dollars are at stake. We need 
to make very sure of what we are doing, before we implement 
commercial processes.
    Not only understand what the practice is, but also that it 
makes sense in the Department of Defense, and that we do not 
just automatically implement something because its 
``commercial'' before we have the evidence to support doing so.
    Second, there is a lot of concern about going so 
``commercial'' that we eliminate any of the traditional 
safeguards that we have had in the acquisition area, such as 
the False Claims Act, the Truth in Negotiations Act, cost 
accounting standards, and other internal controls. I am not 
saying those are sacrosanct, because certainly you can change 
things and moderate them where reasonable.
    But I do not think we should throw everything out without 
looking at the risks there and making sure that whatever it is 
we put in place in the new system, it is done carefully and 
with evidence that it is going to work. So that would be my 
second area, and that of course feeds into every part of the 
Department in terms of acquisition and systems.
    If I had a third, it would also be in the information area, 
but it would probably be more focused on information security. 
Everything we have seen and all the data and estimates suggest 
that there is a huge vulnerability in the Department as to the 
security of its information systems. Given the way the country 
and the world are going in the way of computers and information 
systems, I do not see that problem shrinking. I see that threat 
getting bigger.
    The Department needs to be prepared to handle it again, 
because the potential for disaster there, if the worst 
happened, would be a terrible thing for the country and for the 
Department. That would be my third area, if I had a third area.
    Mr. Shays. Mr. Hinton, I am going to ask you and I will ask 
John Tierney if he has any other questions before I go to that 
last quick question.
    Mr. Hinton. I too would associate myself with the issues 
Mr. Lieberman and Ms. Hill had just brought up on readiness and 
the other. Our body of work is the same as theirs in terms of 
coordination.
    There are a couple others I would like to bring up for you, 
Mr. Chairman, and one is broader than Defense. It is combating 
terrorism. It cuts across Government, it is a large effort. We 
have been heavily involved, largely with this committee, 
looking at that and identifying who the players were and 
combating the issue and working the issue, what the funding 
trail has been and trying to assess the level of coordination 
amongst the Government team to combat terrorism and the 
effectiveness of our efforts as a Government to deal with the 
issues. That is one.
    The second is, I think, the issue of human capital. As we 
look across all the issues, there are a lot of people working 
the issues within the agencies. Whether or not we have the 
right number, the right training, the right skills, good 
strategies as a Government to deal with these many important 
issues that you are hearing, I think, in itself, is a very key 
issue that we cannot lose sight of.
    It is where we are today, because the public servants who 
work these issues, and I think we have to look at it from one, 
making sure we have a pipeline of people who are coming behind 
the ones who are working them now that have the skills and the 
tools as well as the focus for a lot of that. So I would add 
those two to the list we've already discussed.
    Mr. Shays. Thank you very much.
    Mr. Tierney.
    Mr. Tierney. I only had one question, and I hope I am not 
repeating. Ms. Hill, I missed your first one.
    Ms. Hill. It was readiness, particularly in the chemical 
and biological area.
    Mr. Tierney. Do we have a real definition that is common 
right across the board of what people are talking about in each 
of the branches when they talk about readiness, or might they 
all be talking about different things and measuring it in 
different ways?
    Ms. Hill. I do not know if there is an official definition. 
To me it is a common sense thing, and obviously----
    Mr. Tierney. You would think so, except sometimes in 
listening to the different services, I wonder if we all have 
the same common sense. [Laughter.]
    Ms. Hill. Certainly there is some standardization, since 
they look at readiness in terms of what they would be prepared 
to confront in a warfare situation. In that sense, I think they 
are pretty much on the same wave length. But I do not know if 
we could guarantee it is identical.
    Bob, would you care to add to that?
    Mr. Lieberman. I think there is a tendency to miscategorize 
a lot of things as either related to readiness or not related 
to readiness. Many times that gets inconsistent.
    Frankly, it is a real plus for someone's budget request to 
be able to say, we need this for readiness purposes. So it is 
more a case of everyone trying to jump on that bandwagon, 
rather than saying what they do is not related to readiness. I 
think we have had problems in ascertaining the ability of 
individual units to perform various kinds of missions.
    That is not so much a definitional thing, as it is making 
it clear to people exactly what they are reporting and then 
being assured that what they are reporting is really accurate. 
There is still a lot of subjectivity in the process, which 
makes it difficult to accurately measure force capability.
    Mr. Shays. Let me do this. If I could, we will end with 
this, and then I will just have a closing comment. Is there 
anything you wish we had asked you to talk about? Obviously 
there may have been a few, but any one particular thing you 
feel you would have liked to have addressed? I am not looking 
for a long comment, but an explanation.
    Mr. Sullivan. I have just one thing. Knowing the overall 
responsibility the subcommittee has over all three of these 
activities, I could see further discussions of why VA and DOD 
cannot work closer together. The portability of a veteran 
leaving the health care system of Defense and moving into the 
VA system, the use of common records as a serviceman leaves his 
service and moves into the VA, that sort of thing.
    Mr. Shays. Great. Thank you.
    Mr. Griffin. I would say that in the area of workers 
compensation, which I identified as $140 million a year budget 
item for VA, and a $1.8 billion item Governmentwide.
    Mr. Shays. Let me be clear. Why is that so large?
    Mr. Griffin. There are over 200,000 employees in the 
Department. Once someone gets placed on workers compensation--
--
    Mr. Shays. These are the employees? What is the number 
again?
    Mr. Griffin. The dollar value for the chargeback, year of 
1996, because you pay it in arrears, was $140 million, roughly. 
Governmentwide, it is $1.8 billion.
    Those of us who are involved in investigating these things 
are handcuffed somewhat by some of the existing rules. One of 
those rules makes it very difficult to get access to income 
data. Part of the deal, when you go on workers compensation, is 
you sign a claim form wherein you say that you are unable to 
work or you are only able to work and earn a certain amount of 
income. There is not an easy way right now to do a data match 
with IRS records or Social Security records in order to 
determine whether or not an employee who is on workers 
compensation is in fact getting additional income on the side. 
This is something that we are going to be working through the 
system and seeking proposed legislation to fix.
    Mr. Shays. I think we will also be encouraging the Civil 
Service Subcommittee to take a look at that in Government 
Reform. It is truly a very important issue. I got involved in 
the State. It is a big problem sometimes.
    Ms. Williams-Bridgers. One area I think that was touched on 
briefly but I think warrants more attention is our overseas 
presence, the size of the U.S. Government's presence overseas. 
Our overseas presence has grown tremendously over the past 
several years, and it has come at tremendous cost. Security 
increases, and our vulnerability increases, with each American 
that establishes a presence overseas. I think there needs to be 
some general oversight over the reasons for increasing the 
numbers of Americans overseas, and whether we are in the right 
places for the right reason.
    Mr. Shays. What I am surprised about is the number of what 
I call nontraditional State Department employees, like 
Commerce, Agriculture and so on. But you are talking about 
private citizens just being there?
    Ms. Williams-Bridgers. No, I am talking about official U.S. 
Government presence.
    Mr. Shays. OK, just like what I was mentioning?
    Ms. Williams-Bridgers. Yes, Commerce, State, Justice, 
Transportation, Agriculture. The list goes on, 34 different 
U.S. Federal agencies.
    Mr. Shays. I would like to say to the committee that I do 
believe that is something that would be logical for us to look 
at, and not all that difficult. How could we do it with our 
limited resources? That is something I think we can look at 
fairly easily. It is a fascinating issue.
    Mr. Lieberman. We mentioned human resources, and 
specifically, training people in financial management oriented 
jobs. I would agree wholeheartedly that that is an important 
thing to do. But I think the training in the acquisition area 
is even more critical. Also, the difficulty the Government has 
in retaining highly skilled information technology experts is a 
major problem that cuts across the whole Government.
    So training tends to get short shrift. It sounds boring, 
but it really is critical, also.
    Mr. Shays. Thank you.
    Ms. Hill. The only one that I would mention fits into part 
of the acquisition process, namely the requirements process, 
the method by which the services, the components, whoever, set 
forth what their requirements are. The issue is the basis on 
what they're basing those requirements on, whether or not they 
are valid, whether the method they used to arrive at those 
requirements was a legitimate method, and how convincing the 
ultimate requirement is if you look at what is backing it up. 
We have certainly seen some problems in that area. And that is 
an important area, because it feeds right into the spending of 
dollars in the acquisition area.
    Mr. Hinton. Two things, Mr. Chairman. One would be theft of 
inventory due to weak controls. I think it is probably broader 
than DOD, but particularly in DOD.
    Mr. Shays. Do we see it in VA? Do we see it in State as 
much?
    Ms. Williams-Bridgers. No. State Department, our largest 
assets are our real property. If you can walk off with the 
embassy--[laughter]----
    Mr. Hinton. The second issue I would put is the incentives 
to effect change in behavior to address the many issues that 
are on the table here, particularly as they relate to the high 
risk programs in DOD.
    Mr. Shays. Which programs?
    Mr. Hinton. The high risk programs that are in DOD that we 
have identified cut across acquisition and information 
management and those things. I think also as it relates to the 
challenges that cuts across all the issues. There have to be 
incentives to motivate and to do things differently. You cannot 
operate the same way in the future that we have in the past.
    Ms. Jacobson. I guess I would just answer a question you 
asked earlier about other subcommittees' interests. You asked 
if Congressman Horn gets involved in financial management. He 
certainly does, and in the security area as well.
    Financial management in DOD is a very broad issue. It does 
cut across national security and other areas of readiness and 
those kinds of issues as well. No one committee can cover all 
of those issues. I would be glad to work with you and your 
staff on identifying the specific aspects of financial 
management that might be of interest to the committee.
    Mr. Shays. Something that we could get a handle on. I do 
not know if I would be chairman of the committee. One, be back 
here; two, be the chairman--would Republicans be in the 
majority or Democrats? But I kind of think we almost have to 
have a 4-year plan, and that is something I would talk to Rod 
about, so whoever is there, we could continue. There is just a 
lot to deal with.
    Mr. Backhus. This next decade, the VA is going to be faced 
with the largest number of deaths of veterans it has ever had 
to confront. The peak years I think are projected to be 2007 
and 2008, World War II veterans and Vietnam veterans, and 
Korean War veterans.
    The question is, will they have the capacity through the 
National Cemetery Administration to meet that demand. There are 
efforts underway to try to involve States in contributing to 
constructing and maintaining cemeteries to meet this demand. 
But it is uncertain at this time whether they will be able to.
    One last comment if I could make it, in terms of, if there 
was another question that you had asked. I have taken a quick 
look at the fiscal year 2000 performance plan for VA. I have 
seen where they are making a substantial amount of progress in 
terms of being responsive to the criticisms we have made in the 
past.
    While we are not through reviewing it, we will be 
concentrating on it the next month, it appears that VA is 
really doing a lot more in the way of trying to identify more 
results-oriented measures to which to track their progress, and 
engaging folks like the IG's office in trying to improve the 
data reliability upon which they are going to report. If they 
can do those two things, then I think next year at this time, 
we might have a better report to give.
    Mr. Shays. Mr. Tierney, do you have anything else?
    Mr. Tierney. Nothing else, thank you, except to thank 
everybody very much.
    Mr. Shays. We are going to close, and I will make a few 
observations. One, I truly found this very interesting. My 
motivation was primarily to get you here to make sure we 
develop a nice relationship. We have met privately, and one 
thing I would like to say on the record is, all of you do very 
important reports. We want to make sure that they do not just 
lie on the shelf and not get noticed.
    You triggered, as you did in the beginning, Mr. Backhus, 
some ideas that I want to just comment on. One of them is for 
instance, for you to look at this issue of what will be there 
for our veterans and their families, primarily, obviously, in 
terms of cemetery space. That seems to be kind of this all 
encompassing forever kind of study. I think we could get a 
pretty good handle on it and make some suggestions and write a 
report that hopefully could be helpful to other committees, and 
then pursue it in legislation.
    That can be done with not as much of our time, maybe some 
of yours. Then we could highlight it and make sure the public 
knew, and make sure our colleagues knew and move forward. 
Obviously, the one that becomes the most daunting would be this 
whole financial management.
    I would ask, Ms. Jacobson, that maybe you can just get out 
some niches of that. I do know that we are going to focus in on 
terrorism in a big way and use more than one of our personnel 
for that from our staff. That really cuts across two in 
particular, and to some measure the health care system of VA 
and DOD.
    We are going to look at how we coordinate DOD and VA health 
care. It is a natural for us, because we have 4 years of 
experience in health care, so we come with a knowledge base. We 
are going to obviously look at the public safety issue of 
embassies--and that does get involved with the whole issue of 
terrorism.
    All the suggestions that were made I think have tremendous 
merit. Some of them we will not look at, simply, we will not 
have the resources. I will conclude by saying that this truly 
is a partnership. Some of you all may be doing more of the 
work, we may do some really concentrated effort, we will pool 
our resources, and we will make sure the public knows about it 
and our colleagues know about it, and that we make some 
intelligent recommendations.
    This has been helpful, very helpful. Thank you, and we will 
cause the hearing to adjourn, and we thank our recorder.
    [Whereupon, at 12:19 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]

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