[Senate Hearing 106-314]
[From the U.S. Government Publishing Office]
S. Hrg. 106-314
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2000
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
on
H.R. 2490/S. 1282
AN ACT MAKING APPROPRIATIONS FOR THE TREASURY DEPARTMENT, THE UNITED
STATES POSTAL SERVICE, THE EXECUTIVE OFFICE OF THE PRESIDENT, AND
CERTAIN INDEPENDENT AGENCIES FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
2000, AND FOR OTHER PURPOSES
__________
Department of the Treasury
Executive Office of the President
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
______
U.S. GOVERNMENT PRINTING OFFICE
54-236 CC WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
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ISBN 0-16-060084-7
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington FRANK R. LAUTENBERG, New Jersey
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
JON KYL, Arizona
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
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Subcommittee on Treasury and General Government
BEN NIGHTHORSE CAMPBELL, Colorado, Chairman
RICHARD C. SHELBY, Alabama BYRON L. DORGAN, North Dakota
JON KYL, Arizona BARBARA A. MIKULSKI, Maryland
TED STEVENS, Alaska ROBERT C. BYRD, West Virginia
(ex officio) (ex officio)
Professional Staff
Patricia A. Raymond
Tammy Perrin
Lula Edwards
Administrative Support
Barbara A. Retzlaff (Minority)
Elizabeth Blevins (Minority)
C O N T E N T S
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Thursday, February 25, 1999
Page
Department of the Treasury: Internal Revenue Service............. 1
Thursday, March 4, 1999
Executive Office of the President: Office of National Drug
Control Policy................................................. 53
Thursday, March 25, 1999
Department of the Treasury: Office of the Secretary.............. 111
Thursday, April 15, 1999
Department of the Treasury....................................... 159
U.S. Customs Service......................................... 183
Bureau of Alcohol, Tobacco and Firearms...................... 213
U.S. Secret Service.......................................... 239
Federal Law Enforcement Training Center...................... 253
Financial Crimes Enforcement Network......................... 269
Material submitted subsequent to the conclusion of hearing:
General Services Administration.............................. 283
Office of Personnel Management............................... 284
Office of Management and Budget.............................. 288
Merit Systems Protection Board............................... 291
Nondepartmental witnesses........................................ 295
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2000
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THURSDAY, FEBRUARY 25, 1999
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:02 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell and Dorgan.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
STATEMENT OF CHARLES O. ROSSOTTI, COMMISSIONER
ACCOMPANIED BY:
JOHN LAFAVER, DEPUTY COMMISSIONER, MODERNIZATION
BOB WENZEL, DEPUTY COMMISSIONER OPERATIONS
JOHN DALRYMPLE, CHIEF OPERATIONS OFFICER
opening remarks
Senator Campbell. The Treasury Subcommittee will come to
order. This will be the first fiscal year 2000 budget hearing
for the Subcommittee on Treasury and General Government.
Commissioner, did you bring all those notebooks with you.
Mr. Rossotti. Yes, just a few props.
Senator Campbell. We will not be here long enough for you
to go through all of them.
Mr. Rossotti. I do not intend to review them in any detail.
Senator Campbell. You are well-prepared. First, I would
like to take this opportunity to welcome a colleague and
friend, Senator Dorgan, as a member of the subcommittee.
Senator Dorgan and I came in as freshmen together on the House
side, as I remember, and served on several committees together
on both sides of the Hill, and I certainly welcome you to this
committee.
Senator Dorgan. Mr. Chairman, thank you.
Senator Campbell. I might also mention, we both just came
from a hearing where there were so many opening statements, we
ran out of time and never did get to ask any questions of the
people that were making the presentation, Secretary Richardson.
We will not go through that lengthy opening here, but I would
like to say a few things.
This morning we will be discussing the fiscal year 2000
budget for the Internal Revenue Service, and the current status
of changes at the agency. Appearing before us today, of course,
is Commissioner Rossotti. I certainly appreciate the new energy
you have brought to the IRS, and your personal commitment to
get around the country to talk to people who have felt, for all
kinds of real or imaginary reasons, about the behavior that
they feel they have received at the IRS. I know that you are
making some rapid and good changes. That is not the kind of
thing that gets turned around overnight, but I know you have
put your best energy toward it and I certainly do appreciate
that.
As one of the largest Government users of computer
technology, the IRS is faced with a huge task of correcting the
year 2000 recognition problem. Emergency funding was provided
last year for the IRS Y2K conversion costs, $483 million in
fact. The fiscal year 2000 budget requests a little more than
half as much again. Hopefully, that will be enough to finish
the job before the clock changes. We are certainly interested
in knowing how that process is going.
So I think with that, in the interest of time, Commissioner
Rossotti, I will ask Senator Dorgan if he has an opening
statement and get right to your comments.
senator dorgan's statement
Senator Dorgan. Mr. Chairman, thank you very much. I
appreciate your work on this subcommittee and I am pleased to
join you. You do know that I was a tax administrator in North
Dakota for a good number of years, so I understand some of the
job that the commissioner has in administering a tax code that
seems at times quite complex, and trying to make sure that
administration is fair and collects the revenue for this
country that it expects to get from the system.
I would expect that I speak on behalf of the chairman and
myself, that we want the Internal Revenue Service to succeed.
We want the Internal Revenue Service to have the resources and
the capability to succeed.
I would say, as I have told Commissioner Rossotti, I was
disturbed by the hearings last year. I think everyone
understood that those hearings disclosed some practices that
had occurred with some people in the Internal Revenue Service.
And I know the Internal Revenue Service was disturbed as well
by some of those disclosures, and the Service has taken action
to respond to it. We think that, Mr. Commissioner, your
stewardship of this agency is refreshing, and I know that you
bring a reform-minded notion of wanting to do the right thing,
and to make changes in the Internal Revenue Service to see that
the Service does what it is supposed to do for this country.
Especially because I was a tax administrator at one point,
I understand, as you well do, any time anyone alleges
inappropriate or improper behavior on the part of those who
have the enforcement capability, especially in the tax area
where we deal with people's most sensitive information, it is
very serious. I know that you have taken it that way and have
taken immediate steps to respond to it, and for that I am
appreciative.
I want to mention a couple of items that are of special
concern to me. Obviously one is that one of the words in the
Internal Revenue Service is service. I have spoken to you, Mr.
Commissioner, and many of your predecessors about that.
Notwithstanding the Code that we create here in Congress, the
Tax Code, whether it is more or less complicated,
notwithstanding that, one way or another the Internal Revenue
Service must be involved in providing service. Not just
enforcement, but service. Because part of compliance with the
Tax Code for the taxpayers is to be able to understand and take
reasonable steps on their own behalf to comply with the code.
I have made the point to many commissioners that the
Internal Revenue Service, like the rest of the world, seems
intent on consolidating. You take folks out of the rural parts
of the country and move them into the big city someplace. We
have seen a steady stream of folks going from North Dakota to
St. Paul. It is all under the name of centralizing and
improving services. Regrettably, it has never really improved
service. It has simply taken services away from folks in the
more rural States.
If I might just show a chart, it shows that in our part of
the country there are very few areas where people could get
taxpayer assistance. This is an Internal Revenue Service chart.
You can see the large white areas. Up in North Dakota you have
got three little dots. There is where people can reasonably
expect to show up and get assistance. But most of the other
folks cannot.
Now I understand that you are not able to, because you do
not have the staff, put people in every little small town, and
every shopping center, and extend yourself to say, service
means that we are going to reach out and help everybody. I
understand that.
By the same token, I think service means not just folks in
the big cities. It means reasonably covering the rural States
as well with some modicum of service and helping people comply
with their tax responsibilities. That is something that I will
be working with the chairman on, and working with you and the
Service on as well, to see if we cannot reverse the fortunes of
some of the less-populated areas, at least to extend on a
temporary basis from time to time, better service.
transfer pricing
Finally, I am going to submit a statement for the record,
but I do want to state for the record that one of my special
concerns is the issue of transfer pricing. I have discussed
that with you as well. I remain convinced that at a time when
we say to the working men and women of this country who pay a
very significant payroll tax--in most cases their payroll tax
is higher than their income tax. They pay a payroll tax, they
pay an income tax, and we say to them, you do not have any
choice. We have payroll tax and then we have withholding on
your income tax, and you do not have any flexibility.
At the same time that we are telling working folks that
message--and it is appropriate--we are also allowing large
multinational and international corporations to avoid their tax
responsibility. Some 70 percent of the corporations, foreign
corporations doing business in this country, pay zero in
Federal income taxes--zero. And those would all be brand names
that everyone in the audience would recognize if I mentioned
the corporations that do billions and billions of dollars of
business here and pay zero in corporate income taxes.
My feeling is, you do business here, you make profits here,
you should pay taxes here. And through transfer pricing
incredibly sophisticated schemes are developed by which wholly-
owned subsidiaries and parents can sell and buy things from
each other, charging $15 for toothbrushes, and $7.50 for
tractor tires, either under-pricing or over-pricing, and just
move profit wherever they want to move profit, especially away
from the tax collector.
There are a couple folks who have done some studies that
say that the loss to this country is perhaps $40 billion a
year. Some tax professionals scoff at that. I, frankly, scoff
at the tax professionals who scoff at that. I think the tax
professionals are wrong. I think this is massive tax avoidance
to the tune of perhaps $10 billion, maybe $15 billion a year at
least.
In the meantime, you have folks down in the enforcement
division who are trying to use buggy-whip, antiquated
approaches to connect in effect, as I have described it,
connecting the ends of two plates of spaghetti on individual
transactions to see if they can put together the relationship
between parents and subsidiaries to determine at what price
they sold each other goods, and how did they transfer, if they
did, profits, either in or out. And the fact is, it does not
work at all. It is a miserable failure.
Some advance pricing agreements have been done, of course,
in secret that I think represent themselves an admission that
the current system does not work at all. Our tax courts are
clogged with all this nonsense.
I want to work with you. I know I do not serve on the
Finance Committee, but I served on the Ways and Means Committee
for 10 years in the other body, and I am determined and have
been determined for some long while to get my hands around this
and do something that addresses it. I want to work with you on
the enforcement side of this so that we understand exactly what
is the size of this problem, and how do we change tax law, if
necessary, to get at it, or how do we add enforcement muscle to
your agency to get at it.
I am sorry to take a little extra time to do that, but it
was therapeutic for me, even if it does not resolve anything in
the future. [Laughter.]
But I will be a thorn on this issue just because I feel so
strongly about it. I want you to have the muscle and the
capability to say to those people that make $2 billion in
profits doing business in America, that all the folks out there
who work for you are paying taxes because they have no
flexibility, and you make $2 billion of income and then
transfer it out with $15 toothbrushes to inflate the price so
that you do not have to pay taxes here. This country will not
accept that, and will not put up with it any more.
So that is a thumbnail sketch of a long story that I hope
to work with you on in the future.
prepared statement
Mr. Commissioner, thank you. I will put the rest of the
statement in the record.
[The statement follows:]
Prepared Statement of Senator Dorgan
Thank you Mr. Chairman. This is my first hearing as ranking member
of the Treasury General Government Subcommittee and I want to take this
opportunity to say that I am looking forward to working with you, Mr.
Chairman, on the critical issues decided by this important
subcommittee.
Today let me welcome Commissioner Rossotti. Mr. Commissioner, as we
discussed when you came to my office I am very interested in the
Internal Revenue Service. As a former tax commissioner of North Dakota,
I know that the mission of the Internal Revenue Service is to collect
the appropriate level of taxes while providing America's taxpayers the
highest level of assistance to understand their tax liability. Last
year, Congress passed the Internal Revenue Service Restructuring and
Reform Act of 1998. From my conversations with you Mr. Commissioner,
and others in the tax community, I believe that important changes are
occurring--changes that will make the Internal Revenue Service the
first class organization our taxpayers deserve.
Let me take this opportunity to say the vast majority of Internal
Revenue Service's employees are hard working, honest people trying to
do a good job. Rather then vilify them as a group, we should commend
them as hard working individuals. But let me also say, I have no
tolerance for IRS employees who have no regard for taxpayer's and their
privacy. Mr. Commissioner, I want your assurance that you will take
swift and direct action if an IRS employee has abused their position,
violated our taxpayer's privacy of if a supervisors employ polices that
are convenient for them but are damaging to taxpayers rights.
While we are discussing customer service, I would like to address
an issue that impacts my state, North Dakota and I expect other rural
communities. I am aware of the changes being proposed for the IRS--
redesigning the services along taxpayers rather than geographic lines.
However, I am concerned that face to face tax service has been reduced,
particularly in rural states. Why, in Minot, North Dakota alone, nine
IRS positions were lost. I hope you are willing to look at this issue
and make adjustments as necessary, to ensure all taxpayers are able to
receive the same level of service whether they are in an urban area or
in a rural location 50 miles from the nearest walk-in service centers.
This is an issue we can explore further during the question and answer
portion of this hearing.
While I am eager to see the IRS focus its resources on efforts to
improve customer service, I am concerned that we may not be providing
the appropriate level of attention to other important aspects of the
IRS and revenue collection.
Let me give you an example. The General Accounting Office did a
study that indicated that 73 percent of foreign controlled
multinational firms are transacting hundreds of billions of dollars of
business in this country and are not paying taxes. In fact 46 percent
of the largest corporations--firms with more than $100 million in
assets--are not paying taxes. And, it is not only the foreign-based
corporations. U.S. based companies fair little better. Many
corporations doing business around the globe are finding ways to avoid
paying any taxes through the use of transfer pricing which allows them
to move their profits outside the United States. Mr. Commissioner, we
are losing billions of dollars annually because the IRS is forced to
respond to transfer pricing and other complicated tax issues with
resources that cannot compete against the private sector. I hope we can
work together to plug this and other tax loopholes.
One other area I would like to address today is the need to examine
the status of tax exempt organizations. More than one million
organizations are approved for tax-exempt status because of their
charitable, educational, social welfare or member benefit purposes.
Most charities are working hard to get help to individuals that in many
cases the government cannot provide. But I continue to see reports,
such as the GAO report ``Tax Exempt Organizations--Additional
Information on Activities and IRS Oversight'', about abuses within some
of these organizations. And, at a time when we have seen a phenomenal
growth in tax exempt organizations the IRS has not had a similar growth
in resources dedicated to ensure these organizations are operating as
intended.
Again, thank you Mr. Commissioner for joining us this morning to
discuss the improved Internal Revenue Service. I welcome the
opportunity to work with you to ensure that the IRS has the resources
and direction to carry out its mission effectively and appropriately.
Statement of Charles Rossotti
Senator Campbell. I do not feel any need of therapy, so
maybe we can get right to this. I notice you have Deputy
Commissioner John LaFaver with you, and Deputy Commissioner Bob
Wenzel. Will they have comments too, or do you want them to
come to the table?
Mr. Rossotti. I think in response to specific questions I
think I might ask Mr. LaFaver to actually, later on, respond to
your comment about the service in the rural areas, Senator
Dorgan.
Senator Campbell. Why do you not go ahead and proceed,
Commissioner.
Mr. Rossotti. Thank you very much, Senator Campbell and
Senator Dorgan. I think I would like to just give this brief
overview statement, and then I think as we get into the
questions I would like to try to more specifically say a few
things about the two points that you raised in your opening
comments, Senator Dorgan.
But first let me just summarize by saying that I think the
fiscal year that we are currently in, 1999, and fiscal year
2000 coming up, really represent a crucial period and almost a
turning point in the long history of the IRS. It is because
this is the period in which we are really aggressively trying
to address the problems that were identified over the last few
years by the Congress and the people.
As we know, as was mandated in the Restructuring and Reform
Act, we know that our agency is expected to do a much better
job in serving the taxpayers based on an actual understanding
of the taxpayer's point of view. That is really the mandate
that we are attempting to deliver on in the fiscal year 2000
budget.
I believe that the many problems that were identified can
be solved. They will require fundamental change in order to
modernize, really, almost all aspects of the IRS. I do want to
be honest and say that this process carries with it not only
some costs, but some risks. We may have to change our plans
from time to time, make adjustments. We may make some errors.
But I think the important point is, I do not think there is any
low risk plan to do the massive job we have.
I would just like to mention some of the things that are
currently underway. They are kind of listed in brief form on
this chart. Of course, we are in the midst of carrying out our
1999 filing season, which is made particularly challenging
because of all the technology change and tax law change that we
are encountering. We are also completing our year 2000
compliance program to make our computers compliant, which is
over a $1 billion job.
We are implementing at the present time 157 near-term
initiatives to improve service and treatment of taxpayers, of
which about half are mandated by the Restructuring Act. At the
same time we are implementing about 1,260 changes in the tax
code from the last two years' worth of tax bills. Many of
these, or at least some of them, require rather significant
interpretations to guide our employers, and our taxpayers, of
course.
Modernized Organization
We are completing the planning for a fundamental
reorganization of the IRS, which is specifically designed to
improve accountability for serving taxpayers, particular kinds
of taxpayers with particular needs. We are taking the first
steps to modernize and redesign and actually replace our
antiquated base of technology.
We are implementing a completely new system for measuring
performance of people and organizations within the IRS,
throughout the whole organization. Then, of course, we are
doing a great deal of training that is related to all of these
other changes for, or actually affecting all of our 100,000-
plus employees.
We plan to complete the planning for our new organizational
structure this year, but we have already begun implementing
parts of it, and much more implementation will be occurring
during fiscal year 2000. We have also, under the authority
granted to us by Congress, really put in place a new top
management team and we are actively recruiting to fill top
leadership positions as we establish our new operating units.
Updating our business practices for dealing with taxpayers
will require almost a complete replacement of our IRS
information technology systems, which are today built on a 30-
year-old, fundamentally deficient foundation which cannot do
two of the main things it needs to do, which is provide
accurate, up-to-date information about taxpayer accounts, and
as the GAO has repeatedly reported, it really cannot provide
reliable financial information for managing the agency. Those
are very serious problems.
PRIME SYSTEMS CONTRACT
In December of last year we awarded a prime systems
integration contract with Computer Sciences Corporation and
other vendors, and we are currently working with them to update
our strategic systems plan, which is a long term plan. We will
also begin to implement some near term projects which focus on
improved phone service and electronic filing.
Now, Mr. Chairman, despite the fact that we have got a lot
of these changes ahead, in preparing our budget request for
fiscal year 2000 we, of course, are well aware of budget
constraints that exist. Therefore, we have requested, we
believe, the bare minimum that is necessary to continue
progress at least at a steady pace. Without this funding, we
think that progress could be stalled and the risks would
increase.
Fiscal Year 2000 Budget Request
Specifically, the request for fiscal year 2000 is $8.105
billion, which is essentially level with the resources we
received last year, which were $8.103 billion. Last year that
included $483 million from the year 2000 emergency fund.
Now on the face of it this seems to be an unlikely
combination in that we are having a lot of major changes that
require investments, but at the same time we have essentially a
flat budget. We think we can do this in fiscal year 2000 for
three particular reasons. One is that simply because of the
stringency of the fiscal constraints we are carrying out many
of the changes by diverting or reallocating resources from
ongoing programs such as compliance.
Secondly, the Congress did advance fund our Information
Technology Investment Account in a level that will sustain us
through fiscal year 2000, but we will need additional funds for
fiscal year 2001.
Thirdly, based on our currently known requirements for the
year 2000 program for fiscal year 2000, they are less than the
cost for fiscal year 1999.
So when you put these three together, it did enable us to
include in our budget request, even though overall it is level,
some essential items for moving forward. These include $40
million for implementing the Restructuring and Reform Act's
customer service and electronic filing initiatives, $17 million
for some additional training to train our employees in the tax
laws that Congress has passed, and $140 million for
implementing the overall modernization plan which is also
called for in the RRA, and particularly for retraining and
reallocating our employees.
Training
I just want to make one last point and talk about training
so our employees can learn what they need to learn to deliver
on the mandates that Congress has given us. About 70 percent of
our 100,000 employees deal directly with taxpayers in their
everyday jobs. We believe that taxpayers have a right in every
encounter that they have with an IRS employee which could be
from just answering a phone call about how to fill out a tax
return, to meeting with a revenue agent about an audit, to know
that the IRS employee should be expected to understand the
current tax law and also have the skills to understand the
particular facts and circumstances of that taxpayer's case.
Frankly, when I took office a little over a year ago it
quickly became very clear to me that we had a very major
deficit in this area. Of course, since then we have had even
more tax law changes, and of course, a mandate to restructure
the whole way we do business with taxpayers. And I know that
training sometimes seems a little abstract so I did bring some
examples. I do not intend to go through them in detail, but
there is a long list of changes. I just want to mention three
of them.
This one is what is called Section 3401, which is called
due process in collections; a very important one to give
additional rights to taxpayers who are in collection
situations. But what it means is that we have about 11,000
people who are involved in collection activities that really
have to be retrained significantly in the whole way that they
have done business for many, many years.
This is a book that gives just the first version of the
training that we are giving to these people. We have given it
to them, and we know that it is really not even yet sufficient.
We are going to have to do another round of training this year.
This one is called Section 1203, which our employees take
very seriously because this one lists what are referred to
inside the agency as the 10 deadly sins. This gets at the point
that Senator Dorgan made. These are 10 specific kinds of
violations or offenses for which the penalty is mandatory
termination for any employee. So our employees take this very,
very seriously. There is a lot of anxiety about this. Over
100,000 people have to go for either a half a day, to a day
initially, of familiarization training with this. We are
working on this.
Then finally this one here, which I am not going to lift
because it is too heavy, is known inside the IRS as IRM 21.
This is the set of manuals which is constantly being updated
which is given to our 21,000 employees who deal with taxpayers
and are called customer service representatives. They deal with
taxpayers.
If you call in on the phone and you have a question about
your account or taxes, or you write in, these are generally
people at the GS-8 level, which means they make about $35,000 a
year. This is the documentation that has just been updated to
indicate the information that they have to be familiar with to
answer these kinds of calls.
So I think you can see, when I say that we are really
seriously in need of money for training, we really, really mean
this. I think it is really essential, the money we have both in
the modernization account and in the base account, in order to
begin to rectify this deficit.
So let me just summarize by just making one last point,
which is that with the budget that we have requested, it will
continue the trend of the last six years in which the IRS
workforce will actually be shrinking in relation to the size of
the economy. In fiscal year 2000 we are going to have, of
course, a growth in workload.
The economy is growing. Tax returns are growing, and we
have all these new provisions in the acts. But the workforce
size by this budget will be about the same or just slightly
declining. I think we can achieve this trend, but it will only
be possible if we do make the investments that are proposing in
organizing, training, and technology.
PREPARED STATEMENT
So Mr. Chairman, just to say, I recognize the risks and
challenges ahead, and it is a long road, but with the continued
support of Congress, this committee, and the American people,
we are confident that we can succeed.
Thank you.
[The statement follows:]
Prepared Statement of Charles O. Rossotti
The year 2000 represents a crucial turning point in the
modernization of the IRS. We are systematically and aggressively
addressing the problems described by Congress and the American people--
problems that include antiquated systems and a workforce inadequately
trained and inadequately equipped. We now have the opportunity to turn
that situation around and achieve meaningful change at the IRS and
provide better service to America's taxpayers.
The bipartisan IRS Restructuring and Reform Act of 1998 (the
Restructuring Act), which overwhelmingly passed Congress, points the
IRS in the right direction. The IRS was told that it was expected to do
a far better job serving the public based on a much better
understanding of the taxpayers' point of view. Our fiscal year 2000
budget represents the Agency's commitment to deliver on the sweeping
congressional mandates contained in that landmark bill.
That new course is expressed in the new IRS mission statement we
released last fall, in response to the mandate in the Restructuring
Act. It is: ``Provide America's taxpayers top quality service by
helping them understand and meet their tax responsibilities and by
applying the tax law with integrity and fairness to all.'' The mission
statement sets a higher performance standard for the IRS.
If we are successful, millions of taxpayers and thousands of IRS
employees will benefit for years to come: taxpayers because they will
have a tax agency providing the service they expect and deserve;
employees because they will work for an IRS that is trusted by those
both within and outside the Agency.
Rising to the challenge is not a simple task. Our efforts thus far
represent only a beginning. Modernizing the IRS will require
fundamental change in almost all aspects of the IRS and will affect the
way employees work with taxpayers and with each other. This process
also carries with it considerable risk. Our plans may need to be
revised and operational problems may occur. However, there is no low
risk plan for the massive job we must do at the IRS. Specifically,
today we are in the midst of major activities:
--carrying out a 1999 filing season that is extremely challenging
because of the massive amount of technology changes made to
ensure that our systems will meet the Year 2000 challenge and
numerous tax law changes;
--completing the Year 2000 compliance program, including the
installation of our Integrated Submission and Remittance
Processing System and Mainframe consolidation, and conducting
our full scale end-to-end test of all of our renovated
technology;
--implementing 157 near-term initiatives to improve service and
treatment of taxpayers, of which 82 are mandated by the
Restructuring Act;
--implementing 1,260 tax code changes from the Taxpayer Relief Act of
1997 and the Restructuring Act of 1998, many of which require
significant and complex interpretations to guide taxpayers and
employees;
--completing the planning for a fundamental reorganization of the IRS
to increase accountability for meeting taxpayer needs;
--taking the first steps in a long-term effort to redesign and
replace our business systems and supporting information
technology;
--implementing a completely redesigned and balanced system for
measuring performance throughout the organization; and
--providing essential training related to these many changes to
nearly every one of our over 100,000 full time and seasonal
employees, including technical and procedural changes in the
tax law, changes in business process and technology related to
service improvements, and changes in performance standards
related to our new goals and mission.
These changes all represent steps along the way to implement the
specific mandates and the intent of the Restructuring Act. The Act,
together with the concepts I presented to the Congress last January,
which we broadly refer to as modernization, form the basis for the most
significant changes to the IRS organization, operations and culture
since the last major reorganization of the Agency in 1952. We are on a
path to revamping our business practices in all areas in which we
interact with taxpayers, including filing, customer service,
collections and examination--all aimed at understanding, preventing and
solving problems from the taxpayers' point of view.
Some of our changes will improve service to the public this year
through a series of initiatives such as providing 24 hour a day/7 day a
week phone service; rewriting some notices; expanding walk-in service;
making it easier to get forms and information from our web site and by
fax; and improving service to small businesses.
Many other changes will take several years to complete, but
important progress will be made during this fiscal year and fiscal year
2000. We will complete the plan for our new organization structure this
year and have already begun implementing parts of it. Much more
implementation will occur in fiscal year 2000. Using the authority
granted by Congress, we put in place a new top management team and are
actively recruiting to fill leadership positions in our new operating
divisions.
Updating our business practices for dealing with taxpayers requires
almost a complete replacement of IRS information technology systems,
which are built on a 30-year old fundamentally deficient foundation
that cannot provide accurate up-to-date information about taxpayer
accounts. On December 9, 1998, the IRS awarded a Prime Systems
Integration Services Contract (PRIME) to Computer Sciences Corporation
(CSC) and their partners. We are currently working with CSC in an
intense planning phase which we expect will result in award of work
orders in mid-1999 for the first releases of the new technology
blueprint, which will focus on improved phone service and electronic
filing options.
Mr. Chairman, the stakes at the IRS are high and fiscal year 2000
will be a crucial test. If we succeed, the IRS will: fix one of the
most massive Year 2000 computer problems in the U.S., complete a filing
season involving many complex changes, and launch lasting changes to
improve service to America's taxpayers. Despite these many challenges,
in preparing the budget request for fiscal year 2000, we are well aware
of funding constraints and have therefore requested the bare minimum.
Without this funding, the entire reform and restructuring program
demanded by Congress and the public could stall and the risks increase.
fiscal year 2000 budget request
The fiscal year 2000 resource request of $8.105 billion will enable
steady progress on the many changes needed to deliver on the reform and
restructuring program and the Year 2000 Conversion. This request in
total is essentially flat with resources provided in fiscal year 1999,
which totaled $8.103 billion including $483 million from the Y2K
emergency fund. This unlikely combination--a flat budget while carrying
out major changes requiring investment--is only possible for three
reasons: first, because of fiscal constraints many of the changes are
being carried out by diverting resources from on-going programs such as
compliance, potentially imposing long term costs and revenue losses;
second, the Congress ``advance funded'' the Information Technology
Investments account to a level that will sustain us through fiscal year
2000; and third, our current estimates of specifically identified and
known Year 2000 costs are less than the costs for fiscal year 1999.
Overall, this budget will continue the trend of the last six years
in which the IRS workforce has been shrinking in relation to the size
of the economy. In fiscal year 2000, while the workload grows as a
result of the growth in the economy and the additional demands of the
Restructuring Act, the total workforce size will remain approximately
constant.
Although we are asking for only a very small increase, funding at
the level that I am requesting is crucial in order for us to implement
the Restructuring Act and to continue the Year 2000 Conversion.
Modernizing the IRS as Required by the IRS Restructuring and Reform Act
of 1998
Implementing the Restructuring Act is the IRS's top priority in the
fiscal year 2000 budget request. Our many initiatives and programs,
including employee training on the provisions of the Act, implementing
taxpayer protection provisions, expanding electronic filing, and
modernizing the IRS, all support our efforts to deliver on the mandates
contained in the Restructuring Act. The IRS's fiscal year 2000 budget
request is critical to carrying out this landmark legislation on behalf
of America's taxpayers.
Enhancing Customer Service Through Improved Training
About 70 percent of IRS employees deal directly with taxpayers on
matters that affect the taxpayers' tax situation. Taxpayers have every
right to expect that in every such encounter with an IRS employee,
whether it is a phone call asking a question about how to fill out a
return, or a meeting with a revenue agent in an audit, the IRS employee
understands current tax law and has the skills needed to understand the
facts and circumstances of the taxpayer's situation and to help the
taxpayer address promptly any issues that may be identified. In order
to meet this fundamental expectation of the public, the IRS must
provide regular and on-going training to employees on a wide range of
matters, including current tax law, IRS procedures, and technology
needed to get essential information, all of which are complex and
constantly changing. In addition, the major change in focus to provide
improved service can only be achieved by training employees how to
serve taxpayers effectively in a wide range of situations.
Regrettably, a major gap in this area developed over the past
years. This was due to divergent and contradictory trends of
increasingly rapid change of both tax law and public expectations, on
the one hand, and reduced and inadequate training resources on the
other hand. Given the massive and pervasive change taking place in the
IRS, we cannot succeed without a major and sustained increase in the
quality and quantity of training, a fact which is recognized and
mandated by the Restructuring Act.
For fiscal year 2000, we are requesting $17 million for tax-related
technical training. This will provide funding for the first phase of a
several year effort to provide essential training to increase
competencies of IRS employees as mandated by the Restructuring Act.
Given the gap between the public's expectations and our current
performance, we are requesting in fiscal year 2000 a permanent
adjustment of $17 million to the IRS training base to support
development of training materials. This level will restore the base
funding levels for employee technical and proficiency training.
Additional training resources to support the modernization effort
and the new performance management system are required to support these
major transitions, and are included in the budget request for
modernization.
Implementing Taxpayer Protection Provisions and Expanding Electronic
Filing
The IRS operational organizations estimate that they will spend
over $200 million in fiscal year 1999 to implement taxpayer protection
provisions of the Restructuring Act. This money will come largely from
the curtailment of compliance activities and could result in reduced
direct compliance revenue. Full implementation of the Restructuring Act
in fiscal year 2000, and thereafter, including implementation of the
taxpayer protection provisions and expanding electronic filing, is
dependent upon receipt of the requested funds. The two program areas
for which we are requesting funds in fiscal year 2000 are:
Taxpayer Protection and Rights.--$27 million and 500 FTE to
implement major taxpayer protections and rights provisions of the
Restructuring Act. Of the $27 million, we are requesting 500 FTE and
$18.6 million for the Processing, Assistance, and Management
appropriation to support staffing costs. The 300 FTE in Submission
Processing are needed to meet increased notice activity and processing
for innocent spouse relief [Section 3201] and due process in collection
actions (pre-levy notices) [Section 3401]. The 200 FTE in Telephone and
Correspondence are required to provide Spanish language taxpayer
assistance [Section 3705]. Other support costs include $4 million to
fund additional grants for Low Income Taxpayer Clinics [Section 3601],
included in the Tax Law Enforcement appropriation, and an additional $4
million to fund toll-free circuitry and equipment costs and enhanced
Internet access [Section 2003], included in the Information Systems
appropriation.
Electronic Filing.--$13 million for Electronic Tax Administration
(ETA). Of this, $5 million would be used to better inform and educate
taxpayers and practitioners about the benefits of electronic filing and
the Electronic Federal Tax Payment System; $5 million would be used to
deliver enhanced ETA products and services through partnership with the
private sector, including such critical areas as signature alternatives
and electronic payments; and $2.5 million would be used to provide
incentives to the more than 90,000 IRS-authorized Electronic Return
Originators (EROs), who provide electronic filing services to taxpayers
[Sections 2001 and 2002]. The plans for this initiative are directly
aimed at meeting the Restructuring Act goal of 80 percent
electronically-filed tax and information returns by the year 2007.
Modernizing the IRS
A major part of the reorganization of the IRS will take place in
fiscal year 2000. This reorganization will affect the jobs of nearly
every IRS manager and nearly all front-line employees. $140 million is
required for a series of organizational investments to restructure,
reorganize, and retrain the IRS workforce. This covers all aspects of
organizational change that will complement the Service's systems
modernization efforts and implementation of the Restructuring Act
reorganization mandate. The requested resources build on $25 million
provided by the Congress in fiscal year 1999. The funding will support
realigning and shifting the focus of the IRS from its own internal
operations to an agency with greatly increased accountability for
meeting the specific needs of each taxpayer.
The modernization blueprint plans call for establishing four main
operating divisions based on customer segments: wage and investment,
small business/self-employed, large and mid-size business, and tax
exempt. This will require an additional investment of $140 million in
fiscal year 2000 to realign, revise, and retool certain occupations
through buyouts, relocations, and retraining of IRS staff. We
anticipate that base funding will have to be spent to deliver on other
aspects of the modernization concept. These include: contract support,
continued support of the IRS teams and facilities modifications,
computer support, and other expenses for establishing the four new
operating divisions while also realigning the other divisions (Appeals,
Chief Counsel, Information Systems, Criminal Investigation, Shared
Services, Taxpayer Advocate, and the National Office).
Given the enormity of the organizational changes, it is absolutely
essential that they be implemented promptly with the greatest part of
the change occurring in fiscal year 2000.
Funding for Year 2000 Conversion
We are requesting $250 million and 239 FTE to assure continued
operation of IRS's information systems into the new century. This
includes staffing, telecommunications, and related support to convert
and ensure Y2K compliance of the programming code operating IRS tax
administration systems, including acquisition of new software or
hardware when appropriate. The funding also supports resources for
consolidation of mainframe computers in the data centers, replacement
of the antiquated systems used to enter tax return data into IRS's
automated systems, and management of tax payments with an Integrated
Submission and Remittance Processing System.
The CIO is planning multiple activities that will be required to
ensure that all measures are taken to reduce risk and ensure a
successful Y2K implementation. This funding represents our estimate of
specific needs known at this time and is $200 million less than was
spent in fiscal year 1999. We must emphasize that the current 1999
filing season is a high-risk period for Y2K problems.
Information Technology Investments (ITI) and the PRIME
In fiscal year 2000, we are not requesting any additional funds for
the ITI Appropriation. This is possible because Congress ``advance
funded'' the Information Technology Investments account to a level,
$506 million, that will sustain us through fiscal year 2000. However,
we are requesting fiscal year 2001 advance funding of $325 million.
The IRS, in partnership with the PRIME, has begun to develop the
detailed processes needed to manage this large undertaking and to
update the business and technology plan to reflect the overall
modernization concept. In early January 1999, the Core Business Systems
Executive Steering Committee was established to provide IRS-wide
strategy planning and budgeting for core systems replacement, to
oversee core business systems modernization, and to review and approve
major core systems projects at initiation and key points in the systems
life cycle. In mid-July, we plan to submit for Congressional approval
an expenditure plan, as required by the 1999 Appropriations Act.
The Earned Income Tax Credit Funding Outside the Discretionary Caps
We are requesting $144 million and 2,095 FTE. This is the account's
third year. The account is funded outside the spending caps and is
shown separately in the overall Treasury request. It provides for
expanded customer service and public outreach programs, strengthened
enforcement activities, and enhanced research efforts to reduce
overclaims and erroneous filings associated with EITC.
conclusion
Mr. Chairman, the $8.105 billion is requested to implement the IRS
Restructuring and Reform Act of 1998, continue the Year 2000
Conversion, maintain current services, and invest in critical systems
projects. While recognizing the enormous challenge and the long road
ahead, we are nevertheless convinced of the necessity and value to
America's taxpayers of reaching the higher level of performance for the
IRS. With the continued support of the Congress and the American
people, we are confident we can succeed.
Training
Senator Campbell. Thank you, Mr. Commissioner. I have some
questions that Senator Kyl submitted, because he cannot be
here. He is in another hearing. I would like to send them to
you and have you answer them in writing for him, if you would.
Mr. Rossotti. Sure.
Senator Campbell. Let me ask a little bit about this
training. I was looking at your chart. You have 157 new near-
term initiatives to improve service. Is training one of those
initiatives?
Mr. Rossotti. Training is what we need to do in order to
deliver on the initiatives. The initiatives are things like,
for examples, opening up more hours of service for walk-in
sites on Saturdays during the filing season, longer hours on
the phone, some of the taxpayer rights provisions such as I
just mentioned; the due process in collections. It goes on and
on. Those are the kind of things----
Senator Campbell. Is this training primarily for the
employees that are there?
Mr. Rossotti. Yes.
Senator Campbell. Does this include something for new
hires, too?
Mr. Rossotti. We do not have very many new hires, but yes,
it would include entry level training. But mostly it is
training for the people who are already there. As I mentioned,
you have got due process in collections as an example, which is
really a fundamental reform in the way collections is done in
the IRS. So everybody that is involved in collections really
has to understand this, and it is rather complicated. That is
what we mean by training.
Then you have just the ordinary tax law.
Senator Campbell. Yes, I remember a few years ago somebody
made a study and they made a half dozen or 10 calls to
different IRS agents to get some information on what they would
owe on a tax return and they got 10 different answers.
Mr. Rossotti. Well, I would have to say, this book, which
is the book that the people you call have to know to refer to,
many of the people I saw when I went around to these sites
personally, did not even have up-to-date copies of the law. It
was not because--you know, it was just because the system of
getting them out there was not very good.
It should not even be on paper. It should be on computers.
This is the first year that we are starting to put some of it
out there to the people in any volume on computers.
Senator Campbell. Of that 100,000 employees, 21,000 are
customer service people, the ones that would be dealing
actually with the customers?
Mr. Rossotti. Yes.
Costs of Organization Modernization
Senator Campbell. Let me ask you about funding a little
bit. Do you believe the funding contained in your fiscal year
2000 request is going to be enough to cover all the costs, or
are we going to have to have a number of outyears of funding in
addition to that?
Mr. Rossotti. Beyond fiscal year 2000? Oh, yes, we will
definitely have additional costs in the outyears beyond fiscal
year 2000 for a number of these things. I think in terms of the
organizational part of what we are doing, we will complete most
of that in fiscal year 2001. But beyond that, of course the
really long term, the biggest part of the cost is going to be
for the technology. That is going to be many years.
Year 2000
Senator Campbell. And you are currently completing your
end-to-end testing for Y2K?
Mr. Rossotti. We are in the middle of doing our end-to-end
testing.
Senator Campbell. When will you finish that?
Mr. Rossotti. That is the biggest job we have for the rest
of this year.
Senator Campbell. The rest of the year? By January 1st it
should be done?
Mr. Rossotti. The rest of the year.
Taxpayer Advocate
Senator Campbell. As part of the Restructuring and Reform
Act last year we created the Office of Taxpayer Advocate, and
they are primarily responsible for managing taxpayer advocates
across the country. How do you get along with them? How would
you characterize your working relationship?
Mr. Rossotti. I think that has been one of the things on
which we have put the first emphasis. First of all, as you
might have heard, we recruited a new national Taxpayer Advocate
from outside the agency. He is actually from the State of Utah,
Mr. Val Oveson. He had his first testimony before Ways and
Means just a few weeks ago. I think it was well-received.
We have, as you indicated, implemented the first phase of
the reorganization so that those taxpayer advocates around the
country, including the one out in your State, and all the
States, reports up directly to Mr. Oveson. So they no longer
report, as they used to, to the local district and the
compliance functions. We are in the process now of going to the
second step where we are going to move a lot of the casework
directly under him.
This has already had an effect. I think we had some very
good comments. Yesterday I was at the Ways and Means Committee
and the House Appropriations Committee and several members said
that they have already seen an effect of this directly in their
States. I think this is a very important initial step to deal
with these particularly difficult kinds of cases that--some of
the ones such as we encountered out in the hearing that you
had, Senator. I think it has had an effect already. I think
this is one of the near term steps that we have taken.
Senator Campbell. Have you had any real major hurdles in
dealing with it though?
TRAINING
Your fiscal year 2000 request includes $17 million for the
customer service training. This year as we move into the tax
season in just a short period of time, are we going to see any
kind of a significant change as a result of spending that $17
million?
Mr. Rossotti. This is for fiscal year 2000, of course. But
I think that that part of it is basically to deal with this
basic kind of training in the tax laws provisions, and the
procedural changes that have been mandated. That is what the
purpose of that is. I think that really, while it says that it
is $17 million, in reality we have been spending some money by
diverting it from other sources. So it is not really as much of
an increase as it might seem.
I think that what we will see over time--and I do not want
to make the claim that it is going to be instantaneous, but I
think what we will see over time is simply that the people who
are dealing with taxpayers will have a more accurate knowledge
of the current tax law, and be able to give more accurate
responses, number one.
Number two, as we know, we are trying to change the way
that people interact with taxpayers in terms of being more
sensitive to the specific needs of taxpayers, and there is a
certain amount of training that is required to make that kind
of change.
So I think if we sustain this over a period of several
years, yes, we will see an impact in the sense of getting
better information quicker, resolving taxpayer's problems
quicker, and less chance of cases dragging on and resulting in
the kinds of stories that none of us like to hear.
Senator Campbell. The training program that you initiated,
is that all done in-house?
Mr. Rossotti. A good deal of it is done in-house, but we
are starting to use some outside sources. Actually, that is one
of the things, over time, that we want to take a harder look
at, because there are many good sources for, even in some
cases, tax law training. Right now almost all the tax law
training is done in-house, but we do use outside sources for
things like customer service training, and leadership training,
and those kinds of things.
As a matter of fact, one of our new recruits is a new
Assistant Commissioner for Human Resources who has come in with
a great deal of experience from the Defense Department mainly,
and they use a wide range of training resources. So we are
counting on him to help us.
Senator Campbell. So you use training from other agencies
as well as the private sector too, and contractors?
Mr. Rossotti. I think this is where we are going to be
going.
IRS REORGANIZATION
Senator Campbell. You have announced your intention to
reorganize the IRS in four main operating divisions. Will that
impact your budget?
Mr. Rossotti. I think that we have included in here the
money that we need to make the transition. In terms of the long
term budget, it will not impact the budget because we are
basically doing that with the idea that it has to stay within
our budgetary resources. But there is a transition cost any
time you change, and that is what----
Senator Campbell. Will that affect retirements or buyouts
or anything of that nature?
Mr. Rossotti. In the $140 million that we have got in the
budget, that is part of what that money is intended for. As we
begin to change the structure and we change people's jobs there
will be some people--we are trying to avoid relocation as much
as possible--but there will be, inevitably, some relocation.
But mainly there may be some people whose jobs are changed
sufficiently that they prefer to not adapt, in that way, and we
want to have the flexibility to do the buyouts.
So retraining is the key item. Buyouts may happen in some
cases, where people, either for various reasons cannot make the
transition, and for a relatively small number of people,
relocation. Those are the three ways that we have to do it.
Senator Campbell. Personally, before I turn it over to
Senator Dorgan, I have to tell you, I think you have done a
terrific job and I appreciate that. I sometimes think though,
the way bureaucracies get so institutionalized back here, that
when we get new people in that have really great ideas and they
really want to make some changes, that some of the old guard
simply waits them out until they go home again, and they just
go back to the same old thing. So I hope that some of the
changes you are implementing really stay with us and mean
something.
When you came out to Colorado, I remember you talked
personally to some of the people that expressed some of the
real problems they had: the lady that lost her home, and the
fellow who has a brother that committed suicide, those kinds of
things. It is my understanding, from my own staff in Colorado
that of all the different cases that we were dealing with that
came before the committee and they testified, that only one of
them has been cleared, but all the rest seem to be stalled
somewhere.
I do not know exactly the reason, but I would appreciate it
if you could have somebody report back----
Mr. Rossotti. We will.
Senator Campbell To the subcommittee or to me personally
before April about why or what is the reason this cannot be
resolved. Could you do that?
Mr. Rossotti. Certainly.
Senator Campbell. I'll appreciate that.
Senator Dorgan, do you have some questions?
RURAL TAXPAYER ASSISTANCE
Senator Dorgan. Mr. Chairman, thank you. Let me just
explore a couple of the areas. Perhaps first we could explore
the area of taxpayer assistance in the less populated States in
the country. Mr. Commissioner, would you want to comment?
Mr. Rossotti. Yes. I am going to ask Mr. LaFaver to join me
here just to say what we are doing. In almost all these things,
in terms of improving service there is one basic point which I
just want to make which is, we are trying to approach this in
what we can do quickly and what is going to take long. I mean,
that is just fundamental. With resources and other changes, we
cannot do everything.
In the short term, what we are doing is we are simply
opening up the sites that we have for Saturday hours, for
example, for longer hours, and we are adding a few sites. But
basically we are primarily just extending the hours and making
it more convenient for people.
But the longer term strategy is exactly what Mr. LaFaver's
main job is right now. It is rethinking our whole structure.
The chart that you showed actually, I believe, came from the
work that his team was doing, where we are trying to go back to
fundamentals, and what should it be. And of course, we have
limitations of resources, but I will just ask John to comment
on some of the ideas that we hope to do longer term.
Mr. LaFaver. Thank you, Mr. Chairman and Senator Dorgan.
Let me start and make it very clear that, the effort that we
are involved with now in terms of restructuring contrasts with
the consolidation effort that I am sure the senator remembers
from three or four years ago where a significant number of
offices were closed and staff moved to the more populous areas.
That is not what this effort is all about. We are committed to
providing top level of service in every State.
As someone who has had many of the same responsibilities
that you had in North Dakota, I have run the tax agencies in
Montana and Maine and Kansas. And from the vantage point of
those States, when you are in the State capital trying to make
the tax agency work, it is a very different task and a very
different challenge to, for example, provide service in Topeka
as it is in Ulysses. It is a very different task, as you know,
to provide it in Fargo than it is in Williston.
Thankfully, here in the last few years technology has given
people access to tax information and tax filing at an
unprecedented rate. Certainly in terms of Telefile, in terms of
being able to phone in and get tax issues resolved, that is an
important asset. There is no way that, for example, the State
of North Dakota or the State of Montana could put people in
every rural site. But now with the real magic of technology,
you can provide virtual assistance in very powerful ways that
simply were not available when you and I started in the tax
business. So that is an important asset that we are going to
continue to utilize.
At the same time, we realize that there is a need, an
imperative, to have face to face help. While that is not always
going to be possible when you look at the map, again, to have
face to face assistance with someone who works for the IRS, a
revenue agent as an example, there are people in many rural
areas whether they are AARP, whether they are enrolled agents,
whether they are other tax preparers, whether they are
officials of State tax agencies. A very important part of the
effort that we are involved with is to provide very specific
responsibilities to IRS people in the field to develop those
partnerships.
So both from the partnership standpoint, from the use of
technology that is now available, as well as from the
commitment to utilize the sites that we have now and, if
possible, strengthen them, I do not believe that you are
going--I certainly hope and pray that as we roll this out you
will not have anything like the concerns that I am sure that
you had in 1995. That is not what this effort is all about.
Senator Dorgan. I am trying to understand the effort. Can
you sharpen the pencil a little bit for me to tell me what will
we see a year, two years, or five years from now that is
different than what now exists? What now exists is the use of
existing resources to provide much more substantial assistance
to those in the urban areas.
My notion some years ago with then-Governor Dukakis and
some others who put together a plan called the IRS Across
America, in which the Internal Revenue Service would, with a
smile, provide service moving out in teams to shopping centers,
and with mobile vans and so on to say, part of the service here
is to say we understand you have an obligation. We want to help
you meet that obligation.
So can you just provide a bit more grist for me so that I
understand what it is you are talking about.
IRS REORGANIZATION
Mr. LaFaver. From a structural standpoint, we are talking
about four units. One that focuses on the needs of wage and
investment taxpayers. Those are, of course, by far the most
numerous, that have generally the most straightforward tax
forms.
Second, we are talking about a structure that handles small
business issues. Those are, by and large, the most complex.
Most of the issues that were raised by the Senate Finance
Committee comes from that group of taxpayers. A staff that from
top to bottom would focus on the unique needs and issues and
problems of those taxpayers.
The third unit is large and mid-sized. Those are the firms,
the very large firms--who, of course, pay a very large amount,
a very large percentage of total revenues, but there are
relatively few of them: about 180,000. Again, a staff that from
start to finish focuses on the unique issues and unique
problems that arise with that group.
Then the final group is the tax-exempt. While there is not
a lot of tax money that comes from there, there are a host of
tax issues that are extremely important.
In terms of looking at where those units would be, for
example, in North Dakota, without looking and auditing exactly
all of the people there, my hunch is that most of the field
staff there now would be assigned to the small business area.
Likewise though, there would be staff from the wage and
investment unit whose primary purpose would be to form the
partnerships and alliances that I was speaking about.
So from a national standpoint, that is the type of
structure that we will be rolling out, and most of it will be
rolled out by the end of 2000.
SERVICE AND COMPLIANCE
Mr. Rossotti. I would just like to add one point because I
think it is relevant, I think directly to your point about
service versus compliance. Right now if you just look at the
relative balance of resources, and we can divide it in a simple
way to everything we do to help taxpayers get their return
right, and just the filing and then what we call post-filing,
which is compliance. Only about 9 percent of the budget
resources go to the front end, the service part of it to help
them get it right. Over 70 percent goes to the back end in the
form of compliance.
Now we cannot change that overnight. But a big part of the
strategy in terms of the structure is, for example, as John
mentioned, the small business and the wage and investment--
especially in the wage and investment and small business. That
is where we need to put more emphasis on the service element.
Over time--and this may take three to five years as we move
this.
Once we get the structure in place, a part of this is to
specifically put people in charge of what we call the front
end, the pre-filing, the actual service to taxpayers to help
them get it right. Right now that is, frankly, somewhat of an
afterthought. I mean, it is kind of--you have a compliance
function and then they have secondary responsibilities to
provide service.
So a big part of this is to put people directly in charge.
They would be in charge in each area, in each geographical area
as well of not just the compliance--that is certainly very
important--but also the taxpayer education, the outreach, and
the assistance. Much of it we can do with partnerships.
I was out in Utah, for example, and we had a cooperative
site that we established with the State tax agency, and other
agencies. We called it a one-stop tax shop where people could
come in and get service from the IRS, as well as the State
agency, as well as motor vehicle and other things.
Those are the kinds of things, as John says, with a
partnership that we hope to do over time in ways that are
appropriate to each State. Some of it may be mobile vans. I
mean, we are right now doing a little bit of this in terms of
opening up shopping center locations on Saturdays, for example.
As we roll this out, we hope we can do more of that.
TELEPHONE ASSISTANCE
Senator Dorgan. Where do you do your phone servicing?
Mr. Rossotti. We have about 25 phone sites around the
country that do phone service of different kinds. As a matter
of fact, that is one of the other major issues. They have been
managed in a very fragmented way until very, very recently.
This is one of the reasons that the phone service has not been
up to par. We are now beginning to manage them as a nationwide
network so that--you know, when you call an 800 number, you
expect to get service. It really does not matter too much where
the call goes as long as you get good service.
So we are now beginning--and this is where part of the
technology comes in, to be able to manage these as integrated
networks, which every big company does, and thereby, over time,
gradually be able to provide basically what people want. They
want to get through to somebody who knows the answer to their
question and can solve the problem for them on the first try,
if at all possible. We have made progress in that in the last
year, but none of us would claim that we are anywhere near up
to a level that is what you would expect, for example, in a
commercial environment.
AUDITS OF TAX--EXEMPT ORGANIZATIONS
Senator Dorgan. I would like to get information--I will
just seek information later about your phone servicing and the
resources for that.
Let me ask a couple of other questions, if I might. One is
about tax-exempt organizations and audits and so on. I recall a
year or two ago about tax-exempt--more than that actually,
three or four years ago, and the explosion of tax-exempt
organizations in our country. A literal explosion. Everybody
starts a tax-exempt organization for their own deal, and then
sends out mailings trying to get contributions, tax-exempt
contributions, and so on.
One of the things that I recall from those previous
initiatives was that almost never had the Internal Revenue
Service revoked the tax-exempt status of an organization,
despite the fact there were tens and tens and tens of thousands
of them, and the number of new tax-exempt organizations just
exploded. Has that changed at all? What is the enforcement in
that area, and what kind of situation exists with revocation?
Mr. Rossotti. I would have to get back to you on the
numbers. I really do not have those numbers. But there is a
compliance program for tax-exempt organizations that has a
field staff that does auditing throughout the country, and they
do review the compliance of tax-exempt organizations. I do not
have the exact numbers, and I will get them for you, Senator.
[The information follows:]
The Service's responsibility in the Exempt Organizations area is to
apply, evenly and fairly, the Federal tax rules that govern tax-exempt
organizations.
Given the large number of exempt organizations, and that many
exempt organizations are small and run on a voluntary basis, we believe
that the most effective way to achieve compliance is through taxpayer
education and assistance, and by working individually with
organizations to bring them into compliance with the Federal tax laws.
The enforcement program begins with the determination letter
process, a careful review of an organization's application for tax-
exempt status. The determination letter process serves as a vital up-
front check on compliance. In 1997, the Service processed over 75,000
applications for exemption. Of that number, less than 55,000 were
finally approved. The balance either received denials for exemption, or
were never completed because the Service questioned some aspect of the
application, or the applicant, for whatever reason, declined to pursue
the matter.
Education and determination letter programs are not the entire
answer, however, and so we also have an active examination program. In
fiscal year 1995, we conducted examinations of approximately 10,497
returns; in fiscal year 1996, 11,020; in fiscal year 1997, 10,700; and
in fiscal year 1998, 10,353.
Generally, we view the revocation of an organization's tax-exempt
status as the least desirable enforcement technique available to us,
due to its draconian nature. We believe that working with an
organization to correct errors, thereby bringing it into compliance
with the Federal tax laws, is usually a much more effective approach.
Nonetheless, where necessary, we will, and do, revoke tax-exempt
status.
TAX-EXEMPT SECTOR
Mr. Rossotti. But here again with the organization, this is
a very interesting, specific point because right now, as you
say, this tax-exempt sector is extremely important, and it is
growing. There is actually, if you add up everything, about $5
trillion of assets that the IRS has the responsibility of
regulating in the tax-exempt sector, of all types. That
function, because it is not really a revenue-generating
function, tends to be a little bit buried underneath the big
structure that we have throughout the country.
Specifically, the point you mentioned about compliance is
handled through four, what are called key districts, around the
country. There are people, for example, in the Los Angeles
district who have responsibility for the Western part of the
country.
But what we are going to do in this new structure is
really, I think, have a much greater focus on that. We are
going to have a whole unit at the top level that will be
responsible for all functions related to the tax-exempt sector.
They will have both the initial approval authority to grant
tax-exempt status, for example, but they will also have people
throughout the country that will be directly responsible for
checking up on compliance. We have that now, but the
responsibility is very fragmented.
So I will get you the specific numbers that you asked in
terms of revocations and audits and so forth.
Senator Campbell. Would you yield for an additional
question along that line?
Senator Dorgan. Yes.
Senator Campbell. I understand you have some pretty well-
defined criteria for tax-exempt groups that are nonprofits.
Mr. Rossotti. Yes.
Senator Campbell. One of the really complicated ones, as I
understand, are how you define a religion or church that is
tax-exempt. Are you trying at all to deal with that?
Mr. Rossotti. I am afraid that that gets into a highly
technical area, Senator.
Senator Campbell. It really has nothing to do with your
budget, but since Senator Dorgan opened that line, I would be
interested----
Mr. Rossotti. I would be happy--I cannot honestly say that
I know enough to respond to you--on that topic to respond very
intelligently to your question. I would have to get some help
from some experts on that topic. There are defined criteria,
but of course, it is also a sensitive kind of an area and it
requires a great deal of application of judgment to that.
[The information follows:]
Under the Internal Revenue Code, a church need not approach the
Service seeking tax-exempt status. Many do, however, in order to assure
themselves that they meet exemption requirements, and that the
contributions they receive are tax-deductible by the donors. When a
church does apply for recognition, the Service recognizes the sensitive
nature of the process of determining what is or is not a tax-exempt
``church.''
However, consistent with the First Amendment, neither the Internal
Revenue Code nor the Internal Revenue Service defines ``religion.'' Nor
do we examine or question the validity of the religious beliefs of any
individual or organization.
The standards the Service uses to define a church are those
determined by the Federal courts. For example, in American Guidance
Foundation, Inc. v. U.S., 490 F. Supp. 304 (D.D.C. 1980), the court
said that, at a minimum, a church must include a body of believers that
assemble regularly in order to worship. A church must also be
reasonably available to the public in its conduct of worship, in its
educational instruction, and in its promulgation of doctrine.
The court identified fourteen criteria used to determine if an
organization is a church. These criteria are as follows: A distinct
legal existence; A recognized creed and form of worship; A definite and
distinct ecclesiastical government; A formal code of doctrine and
discipline; A distinct religious history; A membership not associated
with any other church or denomination; Ordained ministers ministering
to its congregations; Ordained ministers selected after completing
prescribed studies; A literature of its own; Established places of
worship; Regular congregations; Regular religious services; Sunday
schools for religious instruction of the young; and Schools for the
preparation of its ministers.
We also consider any other relevant factors.
Senator Dorgan. It is sensitive and obviously most of these
organizations are wonderful organizations doing wonderful work.
In 1985 a colleague and I had the GAO do an analysis for it and
it showed this growth of 140 percent, 45 percent, 47 percent,
in these categories. The point is, these tax-exempt
organizations are just exploding.
Mr. Rossotti. Yes. I actually have some numbers here that I
have gotten now and I can give you. They verify your point. In
1981 there were 862,000 exempt organizations. Today there is
1.4 million, and our staffing is about level. So clearly we
have had a decline in----
Senator Dorgan. In 1992 and 1994, according to the GAO, 2/
100ths of 1 percent lost their tax-exempt status--2/100ths of 1
percent. The point is that it happens very rarely.
The reason I asked the question is, just yesterday on my
desk I received two letters from constituents in North Dakota
who had gotten very interesting, fancy, wonderful mailings that
cost a great deal, by organizations neither of which I knew
anything about that had--they clearly had a political agenda.
They had a tax-exempt capability. And this happens on all sides
of these issues.
So the constituents wrote and said, what is this
organization? Can you tell me anything about it? Frankly, I
cannot. I do not know anything about either organization. But
they are soliciting tax-exempt contributions from my
constituents and others around the country.
As I thought about that and thought about the GAO report, I
just wanted to ask questions. Perhaps you can submit, have your
staff submit some information about what has happened since the
GAO report with respect to compliance in this area. How
aggressive is it?
Mr. Rossotti. Yes.
[The information follows:]
GAO Report GAO/GGD-95-84BR, dated February, 1995, entitled ``Tax-
Exempt Organizations Information on Selected Types of Organizations,''
stated, at page 44, that in fiscal years 1992, 1993, and 1994, the
Service revoked the tax-exempt status of 17, 27, and 23 organizations
(social welfare organizations, labor and agricultural organizations,
and business leagues) respectively.
The Service revokes the tax-exempt status of relatively few tax-
exempt organizations, preferring, as previously stated, to work with
organizations to bring them into compliance with the Federal tax laws.
This is reflected in the number of organizations that have lost their
tax-exempt status. For example, in fiscal year 1997, 17 charities
(501(c)(3)s) lost their tax-exempt status, and, in fiscal year 1998, 38
charities lost their tax-exempt status.
For other types of tax-exempt organizations, the Service's
management information system tracks revocations by return rather than
by entity. In fiscal year 1997, 72 returns were closed by revocation,
and, in fiscal year 1998, 59 returns were closed by revocation. In some
instances, several revocations may be attributable to a single
organization, so the number of organizations that lose their tax-exempt
status in a given year may be less than the number of returns closed by
revocation for that year.
Most recently, Congress has recognized the draconian nature of the
act of revoking the exempt status of an organization, and has provided
alternative remedies--so-called ``intermediate sanctions''--in the form
of excise taxes in the case where the earnings of an organization inure
to the benefit of those with influence over the organization (see, IRC
section 4958), and in the case of political activity (see, IRC section
4955) and excessive lobbying (see, IRC section 4911) by certain tax-
exempt organizations.
Senator Dorgan. Even as I say that, let me say, as you will
say, that many of these organizations are wonderful
organizations. I am not suggesting in any way that there is
anything untoward about them. But there are some, clearly on
the edges, that grow up only for purposes of harvesting that
tax-exempt contribution for their own interest. It is very
important, that in order to preserve this for the wonderful
groups that do great work, that we make sure it is enforced
properly.
Mr. Rossotti. Sure. We agree, and that is why we are trying
to put more emphasis on this area by the organization. But we
will get you the numbers in terms of what has happened. And
there have been some new initiatives, which we will get back to
you on, to try to deal with the compliance issue in a more
practical way.
[The information follows:]
The Service is well along in the process of designing a new
organizational structure under which we will be reorganized into four
Operating Units, each of which will focus on a distinct group of
related taxpayers. One of the four is the Tax Exempt Operating Unit,
which will have full responsibility for exempt organizations, as well
as for employee plans, tax-exempt bonds, and state and local
governments. Indeed, we expect the Tax Exempt group to be one of the
first of the four Operating Units to begin operating in the new
configuration.
Responsibility for all aspects of exempt organizations will be
vested in the management of the Tax Exempt Operating Unit. The
placement of exempt organizations and other tax-exempt taxpayers in one
of only four Operating Units assures high visibility within the Service
for this important sector of the economy. Moreover, we expect the
concentration of responsibility for the entire tax exempt program in
the management of the Tax Exempt Operating Unit to bring about a more
focussed and effective program.
In addition, a number of changes and initiatives have occurred in
the area of Exempt Organizations enforcement.
We have developed plain-language publications, such as the recent
``Gaming Publication for Tax-Exempt Organizations'' (Pub. 3079, April,
1998).
We have realigned and refocussed the Exempt Organizations field
staff. The processing of applications for exemption has been
centralized in Cincinnati; the processing of Forms 990 has been
centralized in Ogden, and Exempt Organizations examination agents now
have a broader array of enforcement tools as result of Congressional
enactment of IRC sections 4911, 4955 and 4958.
The Exempt Organizations' examination program is focussing on
assessments of particular segments of the exempt community. A good
example of this is our Coordinated Examination Program (CEP) that
focuses on large, complex tax-exempt organizations, such as hospitals
and universities.
Further, in recognition of the significant enforcement effect of
public disclosure, Congress recently expanded the requirement under IRC
section 6104(e) that exempt organizations make their Forms 990 publicly
available. We are currently completing the regulations that implement
the new statutory requirements.
Senator Dorgan. I would like to ask about transfer pricing,
but I would be happy to yield if----
Senator Campbell. I have no further questions except the
ones submitted for the record by other senators.
Senator Dorgan. Might I just ask then briefly about
transfer pricing?
Senator Campbell. Sure.
Senator Dorgan. I do not know if you have someone on your
staff available to----
Mr. Rossotti. Yes. Let me just make some general comments
and I might ask Mr. Dalrymple to come up for a second and make
some more comments. But clearly, as you indicated, this is one
of the more important compliance areas or compliance issues,
one of the more difficult ones, especially in the large
business sector.
TRANSFER PRICES
There has been one significant initiative that was taken in
the last few years, prior to my arrival but it is beginning to
play out now. With the help of some legislation, and some
regulations from Congress, a significant change occurred in
that there was a requirement for contemporaneous justification
by taxpayers for submission of justification of transfer
prices.
One of the more difficult points, as you indicated, is
simply getting accurate and complete information on what
actually these transfer price arrangements are, under the
existing laws. When you are auditing something that was two or
three or four or five years ago, and trying to find out what
happened, just the process of getting to the bottom of it is
very difficult.
Now this requirement went into effect in about 1995, I
believe, and by the time the regulations came out and we began
to audit, we are just starting to get to, to find out what the
results of this initiative are. So we do not really have yet, I
would say, a good handle.
But I would like to ask Mr. Dalrymple, who has been
instrumental in some of this, to make some comments.
Mr. Dalrymple. I guess I need to reiterate a couple of
things. Prior to 1994 there was no requirement for taxpayers to
document their transfer pricing methodology. So because of that
we had to literally construct a methodology during the
examination, and that extended the audit for quite a while. It
led to controversy and a lot of disagreements between our
examination people and, of course, the tax representatives for
these large companies, and frankly, even in our appeals
organization.
The law changes in 1994 gave us--required taxpayers to
contemporaneously document their transfer transactions or
pricing transactions. And the other significant thing is it
required them to provide us the documentation within 30 days of
request, which was a major difference.
That really gets to a couple of questions you asked earlier
also, Senator, and that was how many people do we have involved
in this operation, and what have they been doing? We have about
650 international examiners, and frankly, about half of that is
spent on pricing agreements. So that is somewhere in the
neighborhood of 375 examiners. We have been able to leverage
their time much more over a much larger number of these issues
since the regulation went into effect because of the
requirement now, and the fact that they do not have to
construct the documentation that has to be provided to them.
Senator Dorgan. The chairman has another responsibility
this morning and I want to be attentive to that, so let me do
this. Let me submit some questions to you, and then with two
other points. You are required under last year's appropriation
to make a report to us on this area and I expect that is coming
soon?
Mr. Dalrymple. It is underway.
Senator Dorgan. But is it coming soon?
Mr. Dalrymple. I do not have a date that we expect to
finish now. I think the language in the appropriation said
March----
Senator Dorgan. Underway is a term of art. I am just trying
to----
Mr. Dalrymple. You are correct, it is a term of art. I am
not trying to be evasive, but I do not have a date that we
expect it. We have joined with Treasury tax policy to put this
report together. But we will get back to you with literally the
date that we expect the report to be completed.
[The information follows:]
The Service expects to complete the report no later than May 31,
1999.
TRANSFER PRICING
Senator Dorgan. I appreciate that.
Mr. Chairman, I am going to meet with the IRS and suggest
something with respect to this appropriation. I am going to
suggest that we take a group of taxpayers, perhaps 20, perhaps
10, and on current filings, sanitize them if we need to, and do
a real test on a contemporaneous basis of what is there and
what is not. I understand the three-year cycles and all that
sort of thing. I am interested in getting at what is the level
of enforcement here or lack of compliance. And that relates to
what we might want to invest in the Service in this particular
area versus other areas.
So I will talk to you all about that on just a pilot basis
that we could do on top of the study that you are now going to
report to us on.
Mr. Dalrymple. Absolutely.
SUBMITTED QUESTIONS
Senator Dorgan. Then I will submit a list of questions, and
I thank you for being attentive to this. I will get with you at
some other point.
Mr. Chairman, thank you very much.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
internal revenue service
y2k
Question. Do you believe that the funding contained in your fiscal
year 2000 request for Y2K conversion will be sufficient to cover those
costs?
Answer. At this time we believe that the $250 million in our fiscal
year 2000 request will meet our needs. However, as we complete our
independent validation and verification (IV&V) and end-to-end
integration testing efforts, we may identify additional Y2K issues that
need to be addressed.
Question. How many outyears of funding do you anticipate having to
request for Y2K conversion costs?
Answer. The IRS anticipates completing its Y2K conversion
activities in fiscal year 2000. Resources will need to be realigned to
operations and maintenance (O&M) costs in fiscal year 2001 to support
ongoing costs of Y2K-compliant systems and products such as software
licenses, and operations of the Integrated Submission and Remittance
Processing System (ISRP) and the Service Center Mainframe Consolidation
program. There is, however, a small chance that some additional Y2K
funds will be needed in fiscal year 2001.
telephone assistance
Question. Will Taxpayers be able to receive accurate and timely
answers to their questions on the first telephone call they make
concerning a problem?
Answer. The Service's focus on improving customer service includes
enhancing our assistors' ability to provide accurate and timely answers
to taxpayers on their first telephone call. Early in fiscal year 1999
Customer Service commissioned a task group to redesign and improve
employee reference materials. The Internal Revenue Manual was revised
and includes a user-friendly index, glossary and a comprehensive table
of contents; job aids were developed to ensure consistency and
accuracy, and to expedite resolution of a taxpayer's inquiry; training
was provided to each employee on how to use the new reference
materials; and extensive training was provided on new tax laws. Also,
the primary Customer Service quality review system was modernized and
centralized. This improved system maximizes independence of the review
process and reliability of the data and provides diagnostic information
on quality, customer satisfaction and courtesy, providing the
organization increased ability to evaluate organizational performance
as well as focus on improvement opportunities, such as training.
Question. What specific actions has IRS taken or does IRS plan to
take to improve the Telephone Routing Interactive System?
Answer. The Telephone Routing Interactive System (TRIS) represents
the automated portion of the IRS toll-free telephone service. TRIS
consists of two components: First, the Master Customer Service Script
which is the basic telephone script a caller hears when calling the
toll-free assistance line that routes all touch tone callers to the
appropriate assistance--either an interactive application or a customer
service representative. Second, TRIS also provides callers the
opportunity to receive assistance via several automated, interactive
applications.
To enhance assistance to customers, this filing season we
implemented two new automated applications: (1) The Refund Release
application which allows callers whose tax refunds are being held by
IRS due to name or SSN mismatch to resolve the discrepancy and have
their refund released and (2) The Refund Trace application which allows
callers to file a claim for a lost, stolen, or destroyed current year
refund. (Callers NOT eligible to file a telephonic claim are sent the
appropriate form (Form 3911) to mail in a claim.)
Additionally, two of the existing TRIS applications were made
available on the account and refund toll-free lines in addition to the
general tax assistance toll-free line. And, we added the Location
application to the account product line (previously it could only be
accessed via the 1040 line). The Location application provides callers
with the appropriate IRS mailing address depending on caller's ZIP
code, what form is being filed, and whether a payment is being made. We
determined that many callers to these other toll-free lines were
requesting refund status or location information and could easily be
serviced in automation--thereby freeing time for Customer Service
Representatives to address more complex issues.
System improvements were implemented which will make it easier to
add and delete from the TRIS script time-sensitive messages required to
address specific hot issues. For example, to include messages (1)
routing callers needing locations/times of Saturday service or other
walk-in assistance during filing season; (2) routing callers with
questions regarding our electronic filed return and credit card payment
options pilot; and (3) routing callers with innocent spouse issues. The
TRIS hardware and software were upgraded to increase capacity and
provide Y2K compliance. Also, TRIS is now available nationwide.
For January 2000 we plan to implement a Spanish version of the
Master Customer Service Script and automated TRIS applications. Also,
the eligibility criteria for the Voice Balance Due (Installment
Agreement) application will be adjusted to allow eligible callers to
set up streamlined installment agreements of up to $25,000 (up from
$15,000). This will allow more callers to complete business in the
application. The Refund Trace and Refund Release applications will be
enhanced to service callers who have data at more than one service
center, thereby increasing the number of callers who can complete
business in these applications. Additionally, in fiscal year 2000, we
plan to remove the ``touch tone callers, press one'' prompt from the
beginning of the script. According to the contractor currently working
with us on an assessment of TRIS, industry practices show that the
prompt encourages callers to opt out of automation.
Question. Please provide the number of taxpayers who accessed,
abandoned, and completed the different applications.
Answer: We are continually looking at ways to enhance the
effectiveness and responsiveness of service to our customers. In fiscal
year 1999, we procured consultant services to conduct an assessment of
TRIS and recommend improvements to make the automated applications more
user friendly thereby encouraging callers to take advantage of the
automated applications. In fiscal year 2000 we plan to solicit direct
feedback from customers on the effectiveness of TRIS via an automated
voluntary, survey offered to a sample of taxpayers who complete TRIS
applications. The chart below reflects the usage of the TRIS
applications for fiscal year 1999 (October 1, 1998 through March 5,
1999).
----------------------------------------------------------------------------------------------------------------
Calls Calls
Application \1\ Calls Completed Routed to Calls
Received in TRIS CSRs Abandoned
----------------------------------------------------------------------------------------------------------------
Master Customer Service Script.............................. 18,435,900 N/A 14,828,300 3,607,600
Refund Inquiry.............................................. 7,000,000 4,270,700 2,382,600 346,600
Voice Balance Due (Installment Agreement)................... 1,025,000 96,600 893,800 34,600
Payoff...................................................... 484,000 40,300 397,800 46,000
View Debit.................................................. 479,400 9,300 415,100 55,000
View Credit................................................. 333,200 18,500 275,700 39,000
Location.................................................... 318,700 70,100 222,000 26,600
Transcript Request.......................................... 260,300 49,900 133,500 77,000
PIN Maintenance............................................. 179,200 200 152,800 26,200
Refund Trace................................................ 3,200 1,800 1,300 200
Refund Release.............................................. 2,000 400 1,500 100
---------------------------------------------------
Totals................................................ 28,520,900 4,557,800 19,704,400 4,258,900
----------------------------------------------------------------------------------------------------------------
\1\ TRIS Application Definitions.
Refund Inquiry--allows caller to obtain status of refund.
Voice Balance Due (Installment Plan)--allows caller to set up
payment plan.
Payoff--allows caller to hear payoff balance(s) as of call date and
balances up to 120 days in the future. Also allows caller to obtain the
address of the nearest IRS office and menu option into VBD to set up
payment plan.
View Debit--allows the caller to listen to account information. It
is a spoken explanation of the information on an account transcript.
View Credit--allows the caller to confirm receipt of payment(s)
sent to IRS and to hear how those payments were applied.
Location--allows caller to get the mailing address of the IRS. The
address given is based on the zip code of the caller, type of form to
be filed and whether a remittance is also mailed.
Transcript Request--allows the caller to request the form to order
a photocopy of return, an account transcript, or return transcript (for
student loans, etc.)
PIN Maintenance--allows the caller to block, delete, or change
existing PIN number.
Refund Trace--allows a caller to file a claim telephonically to
request a replacement check for a current year refund which has been
lost, stolen, destroyed, or was never received.
Refund Release--allows a caller to correct three situations where a
name/SSN mismatch is preventing a refund from being issued.
Question. How many dollars and FTE's does IRS plan to devote to
assisting taxpayers in fiscal year 2000? How does that plan compare
with actual expenditures in fiscal year 1998 and expected expenditures
in fiscal year 1999?
Answer. Expenditures for taxpayer assistance are as follows:
FTE
------------------------------------------------------------------------
Fiscal year--
Service --------------------------------------
1998 1999 2000
------------------------------------------------------------------------
Toll Free Telephone.............. 7,399 7,089 7,289
Walk-In Service.................. 1,127 1,170 1,174
Taxpayer Education............... 225 252 253
--------------------------------------
Total...................... 8,751 8,511 8,716
------------------------------------------------------------------------
LABOR DOLLARS
----------------------------------------------------------------------------------------------------------------
Fiscal year--
Service -----------------------------------------------------
1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Toll Free Telephone....................................... $296,981,000 $301,050,000 $324,807,000
Walk-In Service........................................... 10,999,000 13,234,000 13,342,000
Taxpayer Education........................................ 47,125,000 51,774,000 53,390,000
-----------------------------------------------------
Total............................................... 355,105,000 366,058,000 391,539,000
----------------------------------------------------------------------------------------------------------------
In addition to the labor dollars cited above, a total of $6 million
is planned for grants for Low Income Taxpayer Clinics.
In fiscal year 2000, 200 FTE are added for Spanish language toll
free telephone assistance.
Question. How much does the IRS expect to actually spend on
customer service improvements in fiscal year 2000?
Answer. In fiscal year 2000, IRS will continue to implement 157
near-term initiatives as part of an on-going Taxpayer Treatment and
Service Improvement Program. Over half of those initiatives are
directly related to the IRS Restructuring and Reform Act of 1998
(RRA98). The $40 million requested increase for implementing Titles II
and III of RRA98 includes $17.5 million for customer service
improvements in such areas as Spanish-language telephone assistance,
Low Income Taxpayer Clinics and enhanced Internet access for taxpayers
and practitioners. Absent an activity-based cost accounting system,
only such program increases and information systems costs (not base
resources in Operations programs) can be clearly associated with the
broad concept of ``customer service improvements.''
Related technology costs total $22 million--including investments
in such projects as Forecaster/Scheduler, Telephone Routing Interactive
System (TRIS) and Servicewide Electronic Research Project (SERP).
Finally, in fiscal year 2000, IRS expects to spend $120.9 million from
the Information Technology Investment Account (in partnership with the
Prime Alliance) on customer service improvements, including Call
Routing and Management and Customer Service Infrastructure and
Security.
Question. I understand that there has been customer service
training at the IRS in the past, so how will you raise the bar in order
to deliver customer service that's on par with private industry?
Answer. The IRS is fully committed to becoming a world class
customer service organization delivering world class quality service to
its customers, the taxpayers of America. In support of this commitment,
the Agency has committed financial and human resources to the
development and delivery of quality training programs to meet the needs
of the employees charged with serving America's taxpayers.
Specifically, the IRS has conducted benchmarking studies against
private industry organizations and engaged outside vendors in the
validation of our customer service strategies. Customer service tenets
are being embedded in technical training as additional reinforcement
and functional curricula are being reviewed to ensure adequacy and
consistency with the move to a more customer focused approach in
dealing with the American taxpayers. All of these initiatives are being
blended into a comprehensive approach that complements the Agency's
modernization initiatives to maximize the effectiveness of the training
and the employees' receptiveness to the training interventions. On
March 5, 1999 IRS provided the Congress a report required by Section
1205 of RRA 98 which describes in detail how IRS will accomplish these
actions and achieve this goal. The centerpiece of these activities is a
course we call World Class Customer Service Training which will be
delivered later this fiscal year.
irs reorganization
Question. What assurances can you provide that training will be
revamped to reflect the kind of IRS you envision?
Answer. To ensure that our training efforts fully support the
transition to a customer-focused organization, we are obtaining
feedback on our processes from a broad base of both internal and
external stakeholders, including front-line IRS employees, the National
Treasury Employees Union, and members of the taxpaying public.
customer service funding
Question. Will IRS be carrying over into fiscal year 2000 any prior
year Customer Service training funding? If so, what will that funding
be used for?
Answer. The IRS does not anticipate carrying over any prior year
Customer Service training funding into fiscal year 2000.
union support
Question. Have employees and the employees' union been supportive
of testing and training? What concerns have been raised?
Answer. Employees and their union have concerns with regard to
Customer Service testing, both with the validity of the tests and how
the tests will be used. In general the tests are being used to identify
training needs or measure the attainment of training objectives, once
training has been completed. We continue to work with the union on
these issues.
In general, the employees and their union are supportive of
Customer Service training. However, there are concerns by all parties
with regard to the necessity of balancing program roll-out demands and
available resources with our goal of providing employees with complete
and timely training to enable them to perform their duties.
irs reorganization
Question. You have announced your intention to reorganize the IRS
into four main operating divisions. How will the current regional
structure be affected by this new organization?
Answer. Although regional and district offices will not exist in
the new IRS organization structure there are no plans to reduce the
number of employees in the Service. Everyone will have a job but roles
may change. The Commissioner has pledged that employee movement will be
minimal. The impact will be managed in a methodical, sequenced manner
taking into account the start-up schedules of new business units,
emerging career management strategies and various personnel options.
irra98
Question. Will your fiscal year 2000 request for taxpayer
protection--$27 million--provide the funding necessary to implement all
of the measures to protect the taxpayer as mandated by the
Restructuring Act?
Answer. During fiscal year 1999, IRS will absorb--from base
resources--nearly $160 million and 2,300 FTE in staffing and support
costs necessary to implement the Restructuring and Reform Act of 1998
(RRA98). Of the total, $135 million is directly related to Title III--
Taxpayer Protection and Rights. Fiscal year 2000 costs will increase by
at least $10 million and 400 FTE as new provisions take effect. For
example, beginning January 1, 2000, Section 3705 requires that IRS
provide Spanish-language telephone assistance (including a ``live
assistor'' option). The $27 million and 500 FTE requested as part of
this $40 million program increase will also fund service center
workload increases associated with ``innocent spouse'' and ``pre-levy
collection notice'' provisions in the service centers--and an expansion
of taxpayer education programs such as the Low Income Taxpayer Clinics.
[Note: The remaining $13 million supports Title II--Electronic Filing.]
Question. If not, when do you expect the IRS to have this area of
the Act fully implemented?
Answer. IRS is committed to fully implementing taxpayer protections
by their effective dates as mandated by the Restructuring Act--most of
which were effective at the date of enactment. Since the program
increase requested represents only 20 percent of estimated costs, the
balance will be accomplished within the IRS budget base.
Question. How are you going to be able to reach into the depths of
the organization and energize all at the IRS--management, regions, and
most importantly, the employees of the IRS--to give them the same
energy and commitment to change that you have in order to really affect
a culture change?
Answer. The best way to create commitment to change is to
communicate a clear vision to employees and involve them in the change.
Our vision is clear. We have a variety of efforts underway to
continuously communicate about the change as we make progress. For
example, we have a newsletter which has an exclusive focus on
modernization. Employees have been actively recruited for the
modernization Design Teams. The Design Teams not only include
employees, but they have solicited their input through focus group
interviews to get ideas on barriers to be overcome and actions the
Service can take to better serve taxpayers. Employees ideas and
questions are also captured through a web site set up for this purpose.
We believe if we treat our employees well they will, in turn, treat our
customers well. Therefore, as part of our balanced measures, one major
focus is on employee satisfaction. This Spring all employees will be
invited to participate in an employee climate survey which will give us
input into how they feel about working in IRS. We have commissioned a
process (Treatment of Taxpayers and Service Improvements) which
oversees our strategic initiatives including a category titled ``Create
an IRS culture that values employees and rewards top quality service.''
Fourteen separate initiatives have begun to further this goal. Other
activities to promote our culture change include: establishing a
Customer Service expectation for employees and managers to ensure that
they know what performance is expected. Employees will receive training
on providing customer service. The top grade level of Customer Service
representatives has been raised to recognize the complexity and
importance of their roles in helping taxpayers comply with tax laws.
Although each of the previous initiatives will help promote buy in by
employees and managers, we are also planning to pull it altogether
through a Culture Change initiative, which will use world-class
contractor support to help us in our efforts.
Question. What has IRS done (or plan to do) to get managers,
employees, and union officials to buy into and support the
reorganization? How will employee position descriptions and career
paths be changed to reflect the different operating divisions? How is
the National Treasury Employees Union involved in making these
decisions?
Answer. The Design Teams are made up of more than 200 executives,
management, and bargaining unit members to ensure full participation in
the planning, design, integration, and implementation of the
Modernization initiative. The Teams are continuously seeking input from
managers and employees as well as conducting focus groups with them.
Having NTEU (bargaining unit) employees as part of the design teams is
ensuring that major changes, issues and concerns for bargaining unit
employees are identified and factored into the implementation planning
and timing.
NTEU has been involved with management in all phases of activities
to design the new business lines in the modernized IRS. The
Commissioner and President of NTEU have ongoing discussions about
modernization and the President of NTEU is involved in all Executive
Steering Committee briefings on Modernization. NTEU is currently in the
process within the labor statute, of negotiating over these changes
with IRS. There is also a communication package that will be employee
friendly to get them the information they need.
Position Classification Specialists are engaged at the earliest
possible step of any job redesign. In concert with the Design Teams,
the Position Classification Specialist reviews the current position
descriptions to determine the impact of these changes. When changes are
significant or new positions are needed, the Design teams, subject
matter experts and personnel specialists meet to describe these new
positions, and subsequently new or amended position descriptions are
prepared.
Career and future career paths both within and outside each
operating division are being explored during discussions with the
Design Teams. Employees of the newly created Career Management
Organization, which includes Personnel and Training professionals, are
working with successive Design Teams to identify the competencies and
tasks of newly created positions. A review of the competencies required
will result in the initial identification of opportunities for movement
both within and across operating divisions.
Question. How will IRS inform taxpayers of the reorganization and
the different options they have for getting assistance and resolving
problems?
Answer. A key objective of the reorganization is improved
communication with and service to taxpayers. However, this will happen
gradually. IRS will continue to use various forms of media (print,
television, Internet) to inform taxpayers of the reorganization. In
addition, just as companies develop particular products and marketing
programs to reach customers with differing needs, most IRS business
practices can be tailored to address particular taxpayer needs and
problems. Pre-filing assistance programs, such as customer education
and telephone and Internet assistance, and publications and forms
design, all represent opportunities for clear and effective
communications. Filing related programs, such as electronic filing,
telephone account assistance and notices also can be tailored to suit
the needs of individual, small business and large business taxpayers.
submission processing
Question. Specifically, how was the $71 million increase for
Submission Processing computed? Does that request reflect expected
savings from increased electronic filing in fiscal year 2000?
Answer. The $71 million increase for Submission Processing
represents increases for the pay raise and non labor increases based on
general inflation. This request reflects expected savings from
increased electronic filing in fiscal year 2000. The savings are
reflected in two actions--(1) FTE were reprogrammed from Submission
Processing to Employee Plans/Exempt Organizations and Statistics of
Income in the Tax Law Enforcement appropriation, and (2) No increase
was requested in Submission Processing for projected workload growth
due to increased filers.
alternative dispute resolution
Question. The IRS Restructuring and Reform Act requires better use
of alternative dispute resolution methods. What has been done to expand
the use of ADR? Will this result in any savings? If so, what is the
expectation?
Answer. Early Referral.--Revenue Procedure 96-9,1996-1 C.B. 575,
contained the procedures that allowed Coordinated Examination Program
(CEP) taxpayers to request early referral of an issue from Examination
to Appeals. New IRC section 7123 provides that the Secretary shall
prescribe procedures by which any taxpayer may request the early
referral of one or more unresolved issues from the Examination or
Collection Division to the Internal Revenue Service Office of Appeals.
The Service is preparing a revenue procedure which will expand the
early referral process and describe the method by which a taxpayer
requests such an early referral. This revenue procedure will also
describe the method by which a taxpayer may request early referral of
one or more unagreed issues from the Employee Plans/Exempt
Organizations Division (EP/EO) to the Office of Appeals. We expect to
publish this revenue procedure in the near future.
Mediation.--Appeals has tested the use of mediation for Coordinated
Examination Program (CEP) cases assigned to Appeals Team Chiefs.
Announcement 95-86, 1995-44 I.R.B. 27, and Announcement 97-1, 1997-2
I.R.B. 62, contained the procedures that taxpayers previously used to
request mediation. In Announcement 98-99, 1998-46 I.R.B. 34, Appeals
has expanded the mediation test to allow taxpayers to request mediation
for factual issues involving an adjustment of $1 million or more that
are already in the Appeals administrative process. The mediation
procedure is effective for requests for mediation made during the two-
year test period beginning on November 16, 1998, the date Announcement
98-99 was published in the Internal Revenue Bulletin.
Additionally, new IRC section 7123 provides for expansion of
mediation below the $1 million threshold contained in Announcement 98-
99. Appeals is currently developing procedures to expand the
availability of mediation as required by the new law. We have also
solicited comments from the public on the expansion of the mediation
process.
Arbitration.--New IRC section 7123 also provides that the Secretary
shall establish a pilot program under which a taxpayer and the Internal
Revenue Service Office of Appeals may jointly request binding
arbitration on any issue unresolved at the conclusion of: (A) appeals
procedures, or (B) unsuccessful attempts to enter into a closing
agreement under IRC section 7121 or a compromise under IRC section
7122. Appeals is developing procedures for a pilot program to test
binding arbitration. This would allow taxpayers to request arbitration
for factual issues that are already in the Appeals administrative
process. We expect to publish an announcement with the arbitration
procedures for public comment in the near future.
Savings from the use of ADR methods.--The Appeals ADR programs are
cost effective for taxpayers in relation to the alternative of
litigating issues not resolved in Appeals, and must also be compared to
the amount of time spent in the audit and other dispute resolution
processes.
Our ADR techniques are tools that address the heart of the
Administrative Dispute Resolution Act of 1996 and the IRS Restructuring
and Reform Act of 1998. These programs are alternatives to litigation.
If any one of these ADR techniques prevents one or more issues from
being litigated, then they will have served their purpose.
earned income tax credit compliance
Question. As you know, Congress appropriated $138 Million (for
2,358 FTE) in fiscal year 1998 and 143 Million (for 1,972 FTE) in
fiscal year 1999 for the Earned Income Tax Credit Compliance
Initiative. The purpose of this separate appropriation is to help
address non-compliance issues which was expected to in turn save money.
How much as actually saved in fiscal year 1998? How much is expected to
be saved in fiscal year 1999?
Answer. For fiscal year 1998, Enforcement Revenue and Revenue
Protected $977.2 M. For fiscal year 1999, Enforcement Revenue and
Revenue Protected is projected to be $1,259.9B.
______
Questions Submitted by Senator Kyl
problem solving days
First, just a comment. My staff in Arizona reports that the IRS
problem solving days you've scheduled in the state appear to be very
successful and well-attended. We're not receiving as many complaints
about the local IRS offices since they started their new taxpayer-
friendly programs. So I want to congratulate you for the progress being
made there, and recognize the good work of the IRS staff in Arizona.
We are still receiving complaints that the IRS service centers--for
example, in Ogden--are not as taxpayer-oriented as the local offices,
and I will be in touch with you with specific examples of that as they
arise. But I think it is appropriate here to note the success of the
problem solving days in Arizona.
insider fraud
Several weeks ago, the media carried reports about the high risk of
insider fraud in certain federal agencies. A Knight Ridder report, for
example, suggested that employee theft or embezzlement at the IRS
amounted to $5.3 million from 1995 to 1997. Some schemes were
apparently as simple as changing a check made out to the IRS to ``I.R.
Smith'' and cashing it. Others were more complicated. One employee,
according to the report, using financial data on a submitted check from
a large corporate account, made a duplicate of it and pocketed
$590,000.
According to a General Accounting Office report, delays in
receiving background and fingerprint checks have resulted in the IRS
hiring employees with previous arrests or convictions. The GAO found
unarmed couriers, traveling alone, transporting multi-million dollar
tax payments into IRS centers. One bicycle messenger delivered daily
deposits as high as $100 million at one district office. Another
courier left unattended a $200 million payment in an unlocked van. The
GAO found receipts and returns at one center stored in a hallway
accessible to a nearby fitness center, ready for any willing check
washer to come by and steal them.
Question. My understanding is that the IRS has taken some action to
better protect returns and payments, but the GAO contends it does not
go far enough. Can you tell me what the IRS has done--both with regard
to the problem of insider fraud, as well as the security of receipts
and returns? Could you respond specifically with regard to the
recommendations made by the GAO?
Answer. In response to GAO recommendations, IRS has taken the
following actions to mitigate the problem of insider fraud, as well as
the security of receipts and returns:
We are in the process of reevaluating the risk classification of
all positions in IRS' Receipt and Control Branch and will reclassify
such positions where appropriate.
All applicants are fingerprinted and the fingerprints submitted to
the Office of Personnel Management and forwarded to the Federal Bureau
of Investigation (FBI). We will reemphasize our procedures for
fingerprinting job applicants and include a policy for fingerprinting
potential employees upon receipt of an application.
We have issued guidelines to our personnel offices regarding the
feasibility of obtaining local police checks for prospective employees.
Most notably, we have procured live scan fingerprint equipment for
the personnel offices servicing each of our service centers. The
equipment is compatible with the FBI's Integrated Automated Fingerprint
Identification System (IAFIS) which is scheduled to be implemented
summer 1999. The IAFIS will provide fingerprint check results in
approximately 5 days in lieu of 15 to 120 days. The equipment has been
installed and tested and employees trained in its use. The IRS has
taken the lead in preparing for IAFIS.
All service centers store receipts and returns in secured areas
during off-peak times; however, some service centers store mail in an
unsecured area during peak due to space and resource limitations. We
are working with our service centers to improve physical security
controls over receipts and returns stored in overflow areas and to
ensure that all final candling activities are located in a restricted
access area. We expect both actions to be completed by the next filing
season.
New procedures are in place for storing discovered remittances in a
secure container and properly recording the required information. We
are also in the process of obtaining suitable containers for storing
unmatched checks.
We have established a supplemental procedure to reinforce
overstamping of returned refund checks as soon as they are extracted.
We have initiated a contracting action for a study on the various
security methods available for transporting deposits to the depository.
The contract will be used to determine the best method to help ensure
that the Government's assets are not exposed to loss, theft, or damage
in transit. A policy will then be developed. We are also working on the
best solution for limiting courier access to service center premises
for deposit pick-up.
We have completed locker feasibility studies at the service centers
and are in the process of negotiating with the National Treasury
Employees Union. When completed, we will procure and install lockers
for use by all employees who work with remittances. The employees will
be required to store coats, purses, backpacks, and related items in
their locker before entering the work area.
Additional actions taken by IRS include:
We convened a task team to look at the issues of recruitment
background and security investigations. The task team proposed and
management approved 7 recommendations which have been or are in the
process of being implemented. Many of the task team's recommendations
(e.g. procurement of live scan fingerprint equipment) were shared with
GAO and incorporated into their recommendations. We developed an action
plan that includes the recommendations of the task team as well as
other actions related to mitigating the risk of loss, theft, or
embezzlement in service center remittance processing areas. The GAO
recommendations relating to recruitment background and security
investigations were added to the action plan. The majority of
significant actions are scheduled for completion by September 30, 1999.
We developed action plans for the protection of monetary
instruments. For example, our summary action plan addresses protection
of monetary instruments in general terms. It includes actions such as
security awareness training, lockers for remittance processing area
employees, development of related action plans, etc. We developed site-
specific action plans for the Receipt and Control Branch at each
service center. The actions include construction of slab-to-slab walls,
installation of motion sensors under raised floors and above ceilings,
installation of intrusion detection and alarm devices, etc.
Funding for lockers for our service centers is an immediate need.
The estimated cost is $1 million.
Question. Do you believe there are sufficient resources at the
Inspector General's Office to help deal with these problems? What needs
do you have, in terms of additional funding or legislative authority,
to adequately respond here?
Answer. (Provided by the Acting Treasury Inspector General for Tax
Administration): The Office of the Treasury Inspector General for Tax
Administration (OTIGTA) was established by the IRS Restructuring and
Reform Act of 1998 and became effective on January 18, 1999. Most of
the resources of the former IRS office of the Chief Inspector
transferred to this new Office. The Acting Treasury Inspector General
for Tax Administration has commenced establishing the structure of this
organization to meet its new responsibilities. The nomination of the
Treasury Inspector General for Tax Administration is pending before the
Senate.
______
Questions Submitted by Senator Dorgan
compliance programs
Question. Even though you state that the fiscal year 2000 budget
request is flat, the IRS' operating budget is a 6.3 percent increase
over the fiscal year 1999 enacted level. In light of that please
elaborate on two comments in the Commissioner's written statement . . .
``current estimates of specifically identified and known Year 2000
costs are less than the costs for fiscal year 1999'' and ``because of
fiscal constraints many changes are being carried out by diverting
resources from ongoing programs such as compliance, potentially
imposing long term costs and revenue losses''. Can you explain why, if
costs are decreasing and the fiscal year 2000 request is a 6 percent
increase over the fiscal year 1999 enacted level, fiscal restraints
require a diversion of funds from compliance programs?
Answer. The 6 percent increase was specifically requested to fund
$40 million in new requirements for RRA98, $17 million for customer
service related training, $140 million for Organizational
Modernization, $250 million for Year 2000 costs, and $250 million for
the costs of pay raises less non-recurs.
Therefore, increases needed to fund other programs must be funded
by diverting resources. In fiscal year 1999, the Service will absorb
the full cost of implementing RRA98 by diverting approximately $160
million and 2,300 FTE from compliance programs. Since the resource
needs of RRA98 are recurring, the redirection of these compliance
resources is permanent. The modest program increase of $40 million in
fiscal year 2000 will not allow any of the diverted resources to be
returned to front-line compliance programs because the increase is
needed to fund the statutory RRA98 mandates that take effect in fiscal
year 2000.
In addition, in fiscal year 2000, the IRS is taking a $50 million
cut to its base to fund non-labor inflationary needs. This cut will
result in an additional reduction of 580 FTE.
Question. In the fiscal year 2000 request, it appears that around
2,500 employees are being diverted away from traditional exam and
compliance work. What is the effect of this diversion of resources on
exam coverage and collection of revenue?
Answer. Although the Service estimates that implementation of the
Restructuring and Reform Act of 1998 (RRA98) will require diversion of
some 2,300 FTE and nearly $160 million in fiscal year 1999, Examination
and Collection account for only 1,022 FTE. The remainder of nearly
1,278 FTE are in other program areas--including Appeals, Chief Counsel,
Submission Processing, Customer Service, Information Systems and
Management and Finance. Absorption of these increased resource needs
from the existing budget base will reduce audit coverage rates and
direct enforcement revenue. In terms of overall audit coverage,
Servicewide rates will decline from .99 percent in fiscal year 1998 to
.84 percent in fiscal year 1999 and 2000.
Examination--Coverage History
Total Audit
Fiscal year Coverage (Percent)
1992.............................................................. 1.08
1993.............................................................. 0.95
1994.............................................................. 1.08
1995.............................................................. 1.62
1996.............................................................. 1.62
1997.............................................................. 1.28
1998.............................................................. 0.99
1999.............................................................. 0.84
2000.............................................................. 0.84
This reduction represents the combined impact of absorbing RRA98
workload (389 FTE) and absolute reductions to Examination's base (180
FTE) to offset unfunded increases to non-labor MCL's (i.e.,
inflationary increases). Beyond reductions in audit coverage,
absorption of RRA98 costs in Collection (676 FTE)--plus a reduction of
100 FTE for non-labor MCL's--will result in some reduction to direct
enforcement revenue.
Despite short-term reductions in dollars collected in the
Examination and Collection programs, IRS is committed to a long-term
shift in emphasis--away from traditional approaches that rely on one-
on-one, face-to-face enforcement--to wholesale treatments that
emphasize systemic solutions to noncompliance in identifiable market
segments (e.g., industry groupings and/or classes of taxpayers who
share common filing patterns and economic/demographic characteristics).
New program initiatives target educational programs and outreach
efforts aimed at improving voluntary compliance--and total dollars
collected--through partnerships with customer groups and external
stakeholders.
Question. In terms of all compliance programs, how are resources
allocated? How will they be allocated along taxpayer categories?
Answer. Available resources are allocated among major Compliance
program areas to achieve a balanced enforcement presence that addresses
known compliance problems and promotes voluntary compliance throughout
the economy. Over the last several years, Operations has made a
concerted effort to move the focus to up-front, early detection and
systemic approaches and compliance treatments that minimize reliance on
costly, intrusive face-to-face enforcement actions by revenue agents,
tax auditors, revenue officers and special agents. Annual executive-
level reviews of program budgets and priorities have required
significant base realignments to support new initiatives.
The Modernization Design Teams are looking at the best way to
allocate resources by taxpayer category. We expect to have preliminary
staffing numbers by the time the fiscal year 2001 budget is submitted.
The goal is to tailor tax administration practices and strategies to
address specific taxpayer needs and problems.
training
Question. In the Commissioner's testimony, he stated that the
request for training funds is pivotal to driving the improvements in
service that we want to provide our taxpayers. The fiscal year 2000
budget requests a $17 million increase in the base funding for tax
related technical training. This is a 25 percent increase over the $66
million base. What percentage of the total training needs does the
fiscal year 1999 budget provide?
Answer. We estimate that at base funding levels the Service will be
able to meet approximately 72 percent of the training needs identified
by management. With the fiscal year 2000 budget, we will invest in
Workforce Modeling that integrates workforce planning with training
needs assessment. The model will enable the Service to project the
skills needed to meet our objectives based on employees' occupations,
their career path and competencies, and, the business needs of the
Service. Using the workforce-planning model, we will more accurately
project the resources needed to implement a strategic human resources
approach.
Question. Please define tax-related technical training.
Answer. Tax-related technical training is training in tax law and
IRS procedures for employees who have direct contact with taxpayers or
tax returns. These employees examine tax returns, make technical
corrections and adjustments to tax returns, compute tax liability and
interest, provide information to taxpayers regarding tax procedures,
collect unpaid taxes, or secure unfiled returns. This category includes
basic, advanced, and specialty training for Customer Service
Representatives, Revenue Officers, Revenue Agents, Appeals Officers,
Criminal Investigators, and other professional employees in the
Customer Service and Compliance functions.
Question. Of the training funds requested please explain how they
will be distributed by taxpayer segments.
Answer. We have not yet prepared a distribution of the fiscal year
2000 training budget by taxpayer segments. For planning purposes,
Corporate Education will prepare a tentative distribution based on the
current location of employees to be trained. As those employees and
their workload are aligned to the new business units, training funds
will be distributed to the appropriate organizations.
Question. Are the IRS employees being trained on the impact of
Section 1203(b) Termination of Employment for Misconduct? Does this
constitute a marked change from the IRS's previous reaction to employee
misconduct?
Answer. Beginning July 1998, we began the process of educating IRS
managers and employees on Section 1203. Initially, we provided a
Commerce Clearinghouse publication to all subject matter experts. In
September, we developed and distributed a Section 1203 guide, ``IRS
Restructuring and Reform Act of 1998 (RRA 1998) Conduct Provisions--
Employee Guide'', which included a plain language interpretation of the
new law, templates, procedural guidance, and questions & answers.
In addition, the following training materials were developed and
delivered to all employees: An Organizational Change video featuring
the Commissioner and Deputy Commissioner; A Section 1203 Training Video
providing scenarios and discussions for employees and managers; and,
Section 1203 Employee and Manager Training Guides.
Since October, we have been conducting mandatory Section 1203
training for all Service executives, managers, and employees. To
further our training efforts, we will continue to develop and
distribute materials and procedural guides for all employees. In
addition, Section 1203 information will be added to our new employee
orientation sessions and specific aspects will be included in all
appropriate curriculums for IRS personnel. We will also conduct annual
all employee briefings to reinforce employee Section 1203 awareness.
The Service has also set up a Section 1203 Hotline and e-mail
address, where personnel can ask questions and obtain additional
guidance. In addition, we have established two internal web sites, to
provide additional information and guidance with regard to Section 1203
as well as other RRA 1998 provisions.
Previously, the Service has provided annual manager/employee
training and briefings on standards of conduct. Employees have always
been expected to observe and practice good conduct in the performance
of their work. What has now changed are the consequences of employee
violations of Section 1203 provisions.
Question. Can the committee expect these requirements to reduce in
the future, after a basic training program has been instituted?
Answer. The funds requested for fiscal year 2000 for the Improve
Customer Service Through Training initiative constitute an increase to
the training base. Training budgets for the last several years have
been insufficient to meet the total training demand and we expect the
demand for training to increase as the Service strives to create an
environment in which employees are able to perform to their fullest and
focus on the customer.
customer service
Question. IRS personnel providing walk-in assistance in rural
states, such as North Dakota, has been dramatically reduced over the
past few years. In fact North Dakota has loss dozens of IRS employees
who were providing front line assistance. In the Commissioner's
statement for the record he indicates the IRS is on a ``path to
revamping our business practices in all areas'' including ``expanding
walk-in service''. Please explain: how will the services be expanded.
Answer. As part of Modernizing America's Tax agency, we intend to
significantly expand walk-in assistance by redirecting in excess of 500
staff years to this operation. Not only will we be adding employees, we
will provide service utilizing new and improved methods. A key
component of our strategy will be the use of mobile vans staffed by
trained personnel that can not only assist our customers in the
preparation of their tax returns/answer tax law questions but also
enter into payment agreements and/or resolve examination issues. We
believe the mobile van initiative will be particularly helpful in our
effort to provide assistance in less populated, rural areas.
Additionally, we intend to offer service thru kiosks in retail
locations. We believe the kiosk concept will enable our customers to
conduct their transactions with IRS at the same time and place they
complete other commercial interactions. We also envision renting space
for temporary offices, which would make us far more accessible to our
customers. Such temporary space may be open for a portion of the year
and/or for certain days of the week.
All three of these avenues (mobile van, kiosk and temporary space)
will enable us to spread our staff over more locations thereby
providing greater access to our customers and reducing their travel
time and frustration regarding their inability to receive service.
While these initiatives will benefit all of our customers, we believe
they will be of particular interest to individuals in rural areas.
Question. Will the expansion incorporate ``problem solving days''
principals into the IRS' day-to-day operations?
Answer. While Problem Solving Days (PSD's) will be continued
through the end of calendar year 1999, PSD principals will be
incorporated into our everyday operations to make ``every day a problem
solving day''. We have learned from PSD's what features taxpayers find
most desirable including: the ability to schedule an appointment;
having teams of employees (Collection, Customer Service, etc.,)
available to facilitate one stop service; providing service outside of
normal business hours; and, locating PSD's in different locales outside
normal IRS facilities.
If these features can be successfully incorporated into our daily
operations the need for separate PSD's may be eliminated.
We intend to incorporate ``problem solving days'' into daily
operations by the creation of a position tentatively titled Tax
Resolution Representative (TRR). Individuals selected for these
positions will be trained on a range of disciplines including
collection techniques, Audit/Examination procedures and Tax Law. We
believe that these individuals will be able to offer ``full service''
to customers seeking our assistance. They will be expected to take
ownership of customer problems and work them through resolution. Their
focus will be on timely resolution of problems.
Question. Will there be an increase in the level of resources
dedicated to walk-in services?
Answer. Our vision for the future walk-in service increases the
resource levels dedicated to assisting customers. This will be achieved
by redeploying existing resources into a new position that is focused
on resolving customer problems. This position will have the skills and
training necessary to assist customers with issues that span across
traditional IRS functional boundaries (walk-in, customer service
accounts, exam, collection).
As mentioned earlier there will be an increase in resources devoted
to walk-in. Additionally, resources will be added to our efforts to
reach our customers through partnership with public and private
organizations who share a common a common interest/connection to
segments of the public we serve. For example, we intend to partner with
financial institutions, state tax agencies and volunteer/community
organizations such as AARP to leverage our resources to provide greater
access for our customers.
Question. How will the resources be allocated?
Answer. Our first priority when allocating resources will be
maintaining positions in the same geography for existing employees. All
employees will have a position in the new organization. We have not
completed a geographic footprint which would reflect distribution of
resources. However, it is our intent to distribute a significant
portion of the resources to smaller offices to ensure adequate coverage
and back-up.
Question. Many states, particularly rural states, are at a
disadvantage in receiving the benefits of services provided by the IRS
such as ``problem solving days''. For rural areas, the use of mobile
units to provide problem solving services, as well as general taxpayer
assistance, would make greater sense. Has the IRS looked into this
option? Is consideration being given to conducting a mobile unit
demonstration project?
Answer. During the fiscal year 1999 filing season we are conducting
two mobile unit demonstration projects in the Georgia District and the
Pacific-Northwest District. The purpose of these projects is to provide
tax return preparation, tax form distribution and technical assistance
to taxpayers who do not have ready access to an IRS office. We will
analyze the results of these projects after the filing season ends.
Question. Between November 1997 and July 1998 the IRS ``problem
solving days'' provided taxpayer services to 22,000 taxpayers. These
``problem solving days'' incurred an incremental cost of $11.5 million
(in the form of overtime salaries and related personnel compensation).
In terms of the people assisted one could say that the cost to the IRS
we percent 522.72 per taxpayer provided service. That cost does not
include the cost to the taxpayer of traveling to the participating IRS
office. Do you believe the cost of a mobile unit would far exceed those
related to conducting the ``problem solving days''?
Answer. We cannot answer this question at this time as there is
insufficient data.
electronic tax administration
Question. The Internal Revenue Service Restructuring and Reform Act
of 1998 (RRA) requires an increase in electronic tax filing. The Act
has set a goal requiring that 80 percent of all filings be made
electronically by calendar year 2007. To ensure this occurs $5 million
was allocated in 1998 (for Electronic Tax Administration marketing), $8
million was allocated in 1999, and $13 million is requested in fiscal
year 2000. Is this goal achievable?
Answer. In December 1998, the IRS issued for public comment its
first-ever Strategic Plan for Electronic Tax Administration which was
designed to make significant progress toward (i) the congressionally
mandated goal of 80 percent of all tax and information returns being
filed electronically by the year 2007, and (ii) the interim goal that,
to the extent practicable, all returns prepared electronically should
be filed electronically for taxable years beginning after 2001.
In conjunction with the issuance of the Strategic Plan, the
professional forecasters under the Assistant Commissioner (Research and
Statistics of Income) developed IRS' official projections of
electronically filed individual returns for 1998-2007 as indicated
below.
[In millions]
E-File
Year Projections
1998.......................................................... 24.6
1999.......................................................... 29.6
2000.......................................................... 32.5-39.3
2001.......................................................... 35.1-44.5
2002.......................................................... 37.4-48.8
2003.......................................................... 39.8-53.0
2004.......................................................... 42.1-57.3
2005.......................................................... 44.5-61.6
2006.......................................................... 47.0-66.0
2007.......................................................... 49.4-70.4
These projections represent baseline extrapolations of current
trends, existing market approaches, enacted legislation, and confirmed
(or reasonably certain) IRS program changes including recent
enhancements to IRS' e-file programs such as this year's credit card
and signature alternative pilots. However, these projections do not
reflect the full impact of all of the initiatives contained in the
Strategic Plan. At this time, the IRS does not have sufficient
information to make reasonable projections for many of the future
initiatives. As the IRS gains more experience with the impact of the
recently announced initiatives as well as the additional enhancements
reflected in the Strategic Plan, increases to the current projections
are expected.
Question. How will this money be spent?
Answer. An additional $5 million or a total marketing budget of $13
million is needed in fiscal year 2000 to better inform and educate
individual taxpayers, small and large businesses and practitioners
about the benefits of electronic filing and electronic payments and to
take advantage of the provision contained in the IRS Restructuring and
Reform Act of 1998 which authorizes the use of mass communications to
promote and encourage the benefits of ETA programs. The majority of the
funding increase would be spent on paid advertising in the print media,
radio and television. It is important to note that similar product and
services launches in the private sector are typically allocated five to
seven times this amount on an annual basis.
Question. What kind of return can we expect on this investment?
Answer. The IRS cannot specifically quantify the return on
investment for our marketing initiatives at this time. However, we do
know that similar product and service launches in the private sector
are typically allocated five to seven times that allocated for ETA
marketing.
The IRS is continuing to gather quantitative data to better assess
the impact of our marketing efforts on changes to taxpayer filing
habits which we believe will be considerable. IRS' experience with
marketing ETA products and services during the base years of 1998, 1999
and 2000 will provide the data and information necessary to better
answer this question. Specific initiatives underway include:
--To measure whether the level of awareness and filings has increased
nationwide as well as in specific markets as a result of paid
advertising by monitoring specific zip codes and building on
awareness to influence behavior.
--To quantify taxpayer and Electronic Return Originators satisfaction
with the e-file products and services we now offer, identify
perceived strengths and weaknesses (diagnostics) of current ETA
products and identify opportunities for future ETA product
development by capturing customer and non-customer ideas about
how ETA can improve or add to its electronic product offerings.
--To quantify taxpayer attitudes towards and usage of technology, how
they segment attitudinally in terms of technology and how these
segments can be reached.
--The ETA Marketing Database has also been constructed to
demographically profile taxpayers, establish baselines,
identify taxpayer eligibility to use various products such as
TeleFile, On-Line and practitioner e-file, measure product
usage, and make informed decisions to direct resources towards
new marketing campaigns or product development. It currently
contains two years of individual return information and will be
expanded to include three years of individual, business and
payment data.
Question. Does the IRS have adequate systems to accommodate a
significant growth in electronically filed returns?
Answer. The IRS is working with the Prime Alliance on a long-term
plan to expand ETA's capabilities to ensure that we are capable of
meeting the goals required by the Internal Revenue Service
Restructuring and Reform Act of 1998. Significant increases in capacity
are expected with the redesign of the programs and systems that
receive, process and store electronic data under the auspices of the
Prime contract during the next few years.
Question. The RRA authorizes the IRS to pay appropriate incentives
for electronically filed returns. Should the IRS be paying these
incentives? Why? What is the IRS requesting to provide these
incentives?
Answer. The IRS has decided to engage in a practitioner incentive
program as authorized under the IRS Restructuring and Reform Act of
1998. Tax practitioners authorized to electronically file tax returns
to the IRS (Electronic Return Originators or ERO's) must be recognized,
supported and motivated as ETA product and service distributors. Much
as the private sector employs store front operations (whether
independent, franchise or corporate owned), the IRS depends upon tax
practitioners to promote electronic filing and payment to taxpayers. In
support of this vital channel, ETA will seek to support ERO's by
establishing an Extranet consisting of management information system,
account resolution and tax law capabilities; expanding the marketing
support available to ERO's including national advertising and
promotional kits; implementing a program of product and service
incentives, rewards and special recognition depending upon an ERO's
success in marketing ETA products and services; and establishing
account management programs.
For fiscal year 2000, the IRS is requesting $2.5 million to begin
implementing a program of distributor incentives/services to support
the more than 90,000 IRS-authorized Electronic Return Originators
(ERO's) who provide electronic filing services to taxpayers.
Question. Is the IRS requesting any additional funding for
Electronic Tax Administration?
Answer. In addition to the $5 million requested for ETA marketing
(see S36) and the $2.5 million requested for distributor incentives/
services (see S39), as indicated below the IRS is also requesting
additional funding of $5 million for private sector partnering and
$300,000 for training, travel and support for the Electronic Tax
Administration Advisory Committee (ETAAC).
Private Sector Partnering--$5.0 million.--In order to achieve
significant growth in electronic tax administration, the IRS must
embark on a new stage in its relationship with external stakeholders to
deliver enhanced ETA products and services through partnership with the
private sector. $5 million is needed in fiscal year 2000 to continue to
implement the results of ETA's initial Request for Proposals (RFP) in
such critical areas as signature alternatives and electronic payments
and to pursue additional pilots and RFP's including those affecting
business taxpayers.
Training, Travel and Electronic Tax Administration Advisory
Committee Support--$300K.--An additional $300,000 is requested to cover
the costs of supporting the ETAAC which was required by the IRS
Restructuring and Reform Act and for additional travel and training for
ETA employees in such critical areas as marketing and finance which
will enable Electronic Tax Administration to operate more like the
private sector.
information technology investments
Question. The IRS budget request does not include a fiscal year
2000 request for the Information Technology Investment Account. That
account, which is not part of the IRS operating budget, has a balance
of more than $500 million. The IRS projects fiscal year 1999
expenditures of less than $70 million, leaving a balance of more than
$400 million. Please tell the committee how this $400 million and how
the $325 million advanced appropriation will be obligated?
Answer. Our current schedule for obligation of funds is being
revised in coordination with the PRIME contractor. By June 1999, a
multi-year expenditure plan will be completed which will show proposed
obligations of the funds that are currently available and the
anticipated requirements for funding in fiscal year 2001.
The level of funding by year will be determined as a result of the
detailed planning that is currently taking place. IRS strategic plans
that incorporate congressional guidance together with analyses of best
practices will result in an expenditure plan that details costs based
upon strategic goals. The expenditure plan will reflect costs for
ongoing modernization activities which include: Program management;
Blueprint and Sequencing Plan updates; Development of prioritized
modernization projects; and Future work driven by business systems
planning, alternatives analysis, electronic tax administration, and
organizational modernization.
Question. What services is the Prime Contractor providing now?
Answer. The first task orders for the PRIME include: Building
process maturity to manage Modernization, such as the
institutionalization of the PRIME's CatalystSM methodology
as our Enterprise Life Cycle (ELC) and developing processes,
procedures, and plans for program management; Developing the business
and information technology strategic plan including evaluating
alternatives for migrating to the Modernization Blueprint; and Planning
and design of the first subreleases of the Modernization Blueprint in
support of Customer Service and Compliance. These subreleases are:
Subrelease 1.1--Primary Telephone Call Routing and Management,
Subrelease 1.2--Enhanced Secondary Telephone Call Routing and
Management, and Subrelease 1.3--Infrastructure and Security.
low income tax clinics
Question. The Restructuring and Reform Act of 1998 authorizes the
IRS to fund Low-Income Tax Clinics in the amount of $6 million. The
funding will be distributed in the form of grants which will provide
matching funding of up to $100,000. The fiscal year 1999 appropriation
bill provided $2 million in start up costs for this program. How will
the program be implemented?
Answer. The program is being implemented through the development of
a Low Income Taxpayer Clinic Program Guidelines and Application
Package. We consulted with the IRS Chief Counsel and appropriate
external stakeholders prior to completion of this package. We placed a
draft Low Income Taxpayer Clinic (LITC) Application Package on the IRS
Web Page on January 11, 1999 and in the Internal Revenue Bulletin (IRB)
on January 25, 1999. A notice of the availability of the application
package on the IRS Web Page appeared in the January 14, 1999 Federal
Register. The public was given until February 27, 1999 to provide
comments regarding the draft application package. Their comments are
currently being reviewed. We plan to publish a Federal Register notice
in April 1999 announcing the availability of the final application
package. We plan to award grants to qualifying organizations in July
1999.
Question. Who will be eligible for the matching funds?
Answer. Qualifying organizations that provide legal assistance to
low-income taxpayers in controversies with the Internal Revenue Service
and inform individuals for whom English is a second language of their
tax rights and responsibilities. A qualifying organization is either an
accredited law, business or accounting school where students represent
taxpayers in controversies with the IRS; or an organization described
in section 501(c) that is exempt from tax under section 501(a). A
qualifying clinic cannot charge more than a nominal fee and must
provide either representation or referral of taxpayers and/or
dissemination of information to individuals for whom English is a
second language regarding their tax rights and responsibilities.
Question. What criterion is being developed to prioritize requests?
Answer. Eligibility standards, prescreening guidelines
administrative procedures and selection criteria are currently being
developed for the program.
Question. Are the IRS employing outreach efforts to ensure all
eligible institutions are aware of the availability of these funds?
Answer. Yes. We have participated in two LITC workshops sponsored
by the American Bar Association. Over 100 individuals attended these
workshops but we do not know how many of them will apply for a grant.
We placed a notice of the availability of the draft LITC Application
Package on the IRS Web Page, in the January 11, 1999 Federal Register,
and in the January 25, 1999 IRB. A national news release was issued by
our Communications Office to coincide with the notices. In addition, we
have mailed out notices to 50 external stakeholders who have a
potential interest in the availability of the LITC matching grant
funds.
exam audit coverage
Question. Over the past few years funds have been depleted in the
audit coverage activity. What impact has that had on revenue
collection?
Answer. The purpose of Examination audit coverage, in addition to
determining the correct amount of tax, is to ensure voluntary
compliance. IRS is committed to a long-term shift in emphasis--away
from traditional approaches that rely on one-on-one, face-to-face
enforcement--to wholesale treatments that emphasize systemic solutions
to noncompliance in identifiable market segments (e.g., industry
groupings and/or classes of taxpayers who share common filing patterns
and economic/demographic characteristics). New program initiatives
target educational programs and outreach efforts aimed at improving
voluntary compliance--and total dollars collected--through partnerships
with customer groups and external stakeholders.
Question. How does the IRS allocate the available resources?
Answer. Examination staffing is allocated using a resource
allocation model. This model allocates resources where they can be used
in the most effective manner, within certain constraints. Such
constraints include the projected revenue agent and tax auditor
staffing and the number of returns which can be examined per year. The
key component of this allocation model is the DIF (Discriminate
Function) return scoring system. Through DIF we are able to rank our
inventory of returns with the greatest probability of error on a
national basis. In addition to providing resources to audit classes
where we believe the potential for error is greatest, resources are
also allocated to maintain minimum levels of coverage in each audit
class and to support special compliance programs. Staffing for a
district will be equal to its share of the highest potential for error
DIF returns and special program staffing.
Question. Are the resources being dedicating (sic) to cases that
represent a substantial portion of the estimated ``tax gap'' (e.g.,
large and mid size corporations) to those cases where it is easier to
get a faster return?
Answer. Revenue agents examine the ``large and mid size
corporations'' (defined as corporations with assets of $5 Million or
more). As the question indicates, between fiscal year 1997 and fiscal
year 1998 revenue agent examination time decreased. The percentage
decrease in the time applied to large and mid size corporations was 6
percent. This compares to a decrease of 17 percent of the revenue agent
time spent examining individual returns. Overall coverage of individual
returns was 0.99 percent and about 19 percent of the large and mid size
corporations in fiscal year 1998.
organizational modernization
Question. The IRS is requesting $140 million for implementing the
Modernization concept to restructure, reorganize, and retrain the IRS
workforce. How will that request be allocated?
Answer. The IRS is asking for Congressional support in the fiscal
year 2000 appropriation process as it works to finalize the
modernization blueprint and refine the projected costs to modernize the
agency. We anticipate that the costs of modernization will shift within
the $140 million as projections for staffing and the geographic
footprints of the headquarters of the four new operating divisions are
finalized. Regarding staffing, the ``human behavior'' factor, which is
difficult to predict and will probably cause changes in our cost
projections for buyouts and relocations, must be considered. In some
cases, managers and employees will choose new jobs requiring additional
skills; and they must be provided with appropriate training. In other
cases, they will choose to take jobs in different cities; and their
relocation expenses must be provided. In addition, there will be those
who will opt for a buyout. Given those factors, the Service currently
estimates that the $140 million would be applied as follows: $53
million for buyouts, $41 million for relocations, $3 million for
recruitment, $36 million for training related to organizational change,
and $7 million for moving and realigning computer equipment.
Question. The fiscal year 1998 and fiscal year 1999 appropriation
bills included $46.6 million to hire contractors to carry out this
modernization. The fiscal year 2000 budget requests an additional $21
million. What have the contractors provided?
Answer. The contractor has analyzed and validated the initial
organizational concept, and has subsequently supported the development
of a corresponding implementation plan that would reorganize the IRS
and refocus its attention on our various customer segments and their
needs. A variety of deliverables were submitted as this effort was
undertaken as described below:
Phase I deliverables: Completed and delivered April 1998:
Identification of customer segments
Analyses of the particular needs of our customer segments
Baseline organizational report
Organizational design principles and overall management
architecture
Migration and transformation plan
Communication plan
Final report and executive summary
Phase II deliverables: All deliverables on target for delivery April
1999:
Initial organizational hypotheses and approaches
Key findings
Preliminary blueprint of new organization
Refined blueprint of new organization
Comprehensive team deliverable, which merges individual team plans
Integrated blueprint
Archival support data
Question. Although there will be ongoing costs associated with the
organizational modernization, much of the fiscal year 2000 request
associated with the modernization are one time costs that should not be
built into the IRS baseline. Should the appropriations committee
consider separating these costs by establishing a separate account to
track organizational modernization costs?
Answer. The IRS will track Organizational Modernization costs
regardless of how funding is provided and reflect one-time needs as
non-recurring in the subsequent budget submission.
Question. GAO's fiscal year 1998 Financial Audit issues a qualified
opinion of IRS's administrative functions. In part, the qualified
opinion was due to IRS's inability to reconcile its fund balance with
Treasury, and its understatement of property and equipment on its
financial statement. In addition, there are outstanding issues
concerning the IRS's Statement of Budgetary Resources. These problems
are indicative of weak financial management. What mechanisms has the
IRS developed to ensure that you will receive an unqualified audit in
the future?
Answer. First, the IRS has made this a top priority and has
established a corrective action team under the direct control of the
Chief Financial Officer (CFO) to address the issues, concerns, and
weaknesses raised in the report. The team is working with the
Department of Treasury, OMB, and GAO to achieve buy-in on the plan,
which will be shared with Congress. The team anticipates that the plan
will be completed by March 31, 1999.
Second, while the Service's systems were not designed to meet
today's standards and are in non-compliance in some cases, interim
solutions are being planned and implemented to bridge the gap until
enhanced or new integrated systems can be delivered over the next
several years. The Chief Information Officer (CIO) is bringing on board
an executive with expertise in addressing management and finance
systems issues to assist in this effort. The CFO will be working with
the CIO to identify priorities and resources necessary to complete
these systems solutions.
Third, outside experts will be brought in during fiscal year 1999
to assist internal staff in clearing up already known deficiencies and
problems in administrative activities and to assist in designing
solutions to these problems.
The IRS regrets that the fund balance with Treasury was a problem
in fiscal year 1998 and is taking immediate action to ensure that this
does not happen in fiscal year 1999. On the property and equipment
issue, the Service follows Treasury policy on the capitalization of
property and equipment. GAO has been advised that this is a government-
wide problem and probably needs to be addressed by the Chief Financial
Officer's Council. While a clean opinion in fiscal year 1999 cannot be
guaranteed, the Service is fully committed to meeting all
Congressionally mandated and other legal requirements, complying with
financial accounting and reporting standards, and making the necessary
improvements in its financial systems and financial management
processes to secure a clean opinion on its financial statements as soon
as possible.
Question. What systems are you establishing to ensure that your
financial systems can report critical audit information?
Answer. The IRS has developed extensive ``work around'' procedures
to meet these financial requirements and track this information. The
Service's requirements for enhanced or new systems include the
capabilities to track this information and provide the necessary
financial information to support financial statements; however, this
solution is some years down the road. Until then, the Service will need
to use and refine these interim procedures to produce its financial
statement information.
year 2000 date change
Question. The fiscal year 2000 budget requests $250 million and 239
FTE (Full Time Equivalents) to meet Year 2000 requirements. Please
explain these continuing requirements--$123.4 million for staffing,
telecommunications, and contractual support, $26.4 million for
Integrated Submission and Remittance Processing, and $100.6 million for
the Service Center Mainframe Consolidation.
Answer. The IRS has made significant progress in preparing for the
Year 2000. As of January 1999, nearly all of our mission-critical
systems were made Y2K compliant and were placed back into production
for the 1999 Filing Season. Approximately half of these systems have
been successfully tested ``end-to-end'' with the clocks rolled forward.
We will continue focusing our repair efforts on mission critical
systems from now until the end of March. From April through the end of
1999, most of the effort will be applied to wrapping up some smaller
systems and, most importantly, completing the full-scale end-to-end
testing.
While this picture is generally positive, there is still a great
deal of risk and some trouble spots. In fact, we believe that the next
90 days represent the riskiest period. The massive amount of changes
made to our systems in the last year, coupled with the extremely heavy
volumes of processing that occur during the filing season, may cause
localized problems. We have organized an internal process to identify
and respond to such problems immediately and to eliminate or mitigate
any possible impact on taxpayers.
Because of the complexity and integrated nature of the Service's
computer systems, the Y2K conversion was planned and scheduled to take
place over several years; consequently there are a significant number
of critical Y2K related tasks and monitoring activities that are
scheduled for completion during fiscal year 2000.
Of the $250 million requested, $123.4 million will be used to fund
the staffing, telecommunications and contractual support required to
manage and complete the remaining conversion work and ensure that all
IRS tax and critical systems are Y2K compliant as of January 2000.
Specifically, the Service will concentrate on conducting a final, all-
inclusive code review to ensure compliance with IRS/Treasury/OMB
standards, on conducting owner-sponsored end-to-end integration testing
to ensure integration with year 2000 filing season changes, on
continuing the formal risk management (identification, monitoring,
resolution) process, and on implementing an ``End Game'' strategy
designed to reduce risk. ``End Game'' activities include establishing
and operating a Situation Response Center (SRC) equipped to resolve all
Y2K related problems/issues, providing back-up SRC activities and
communications, providing storage for mission-critical supplies and
services and expanding testing and technical help-desk support. In
addition, the Service will maintain the test beds, software packages
and telecommunication products used in converting the nationwide
telecommunications infrastructure.
Within IRS' overall Y2K program, the Mainframe Consolidation
project and the ISRP project represent the two efforts that contained
the largest degree of risk, and hence required the most sophisticated
project management techniques. In the past, IRS was overly focused on
simply meeting dates, rather than focusing on strategic priorities. The
management process we are using today is managing risk more effectively
by being flexible, constantly evaluating our options, adjusting
schedules to meet constantly changing business priorities and jointly
managing project between the Information Systems and Business
Operations organizations. All projects are run with a focus on
maximizing benefits for the taxpayer and obtaining the best utilization
of our limited resources, both human and capital.
With respect to the Integrated Submission and Remittance Processing
(ISRP) project, we chose to delay installing remittance processing in
the last four centers because we did not want to increase the risk on
the 1999 filing season. We will have all sites fully operational in
time for next year's filing season, and we will have a full year of
operational experience behind us in six sites and two full years in one
site. During fiscal year 2000, the system will require $26.4 million to
fund hardware/software maintenance, continued program development,
contract support for testing, technical management, integration
testing, and the Phase 2 rollout and implementation of the Remittance
Processing System (RPS) component at the Cincinnati, Philadelphia,
Atlanta, and Fresno Service Centers.
The addition of disaster recovery capabilities recommended by the
GAO, along with the need to devote resources to Y2K work, has extended
both the timeframe and cost of the Mainframe Consolidation effort.
After delivering on all Y2K requirements, implementing basic disaster
recovery and fully consolidating three mainframe sites, the Mainframe
Consolidation effort will require $100.6 million to manage and complete
the consolidation of the Service's mainframe computing operations.
Specifically, costs include system maintenance costs for the Service
Center Replacement System (SCRS), the Security and Communications
System (SACS), and the Integrated Collection System/Automated
Collection System/PRINT (I/A/P) systems; recurring lease-to-purchase
costs for SCRS and I/A/P; software maintenance costs for SCRS and I/A/
P; third party (vendor) software maintenance costs; and disaster and
business recovery costs. In addition, the IRS has identified
requirements that impact fiscal year 2000 Mainframe Consolidation
efforts, including standardizing service center operating processes,
staffing computing centers and year 2000 end-to-end integration
testing.
FISCAL YEAR 2000 Y2K INITIATIVE
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Cost of FTE
-------------------- Non- Program
Program Labor Labor Total Program Activities
FTE Dollars Dollars
----------------------------------------------------------------------------------------------------------------
Year 2000 (Y2K).............. 209 $21.8 $101.6 $123.4 Complete final, all-inclusive code review
to ensure compliance with IRS, Treasury,
and OMB standards.
Conduct owner-sponsored end-to-end
integration testing to ensure
integration with the CY 2000 filing
season changes.
Continue formal risk management process.
Implement an ``End Game'' strategy, which
includes: implementing/operating a
Situation Response Center (SRC) to
resolve problems; providing back-up SRC
and communications; providing storage
for critical supplies and services;
expanding testing and technical help
desk support; maintaining test beds,
software, telecommunications products
used in converting the nationwide
telecommunications infrastructure.
Integrated Submission and 30 3.2 23.2 26.4 Hardware/software maintenance.
Remittance Processing (ISRP). Continued program development.
Contract support for testing.
Integration testing.
Technical management.
Phase 2 Implementation of the Remittance
Processing System (RPS) component at the
Cincinnati, Philadelphia, Atlanta, and
Fresno Service Centers.
Service Center Mainframe ........ ........ 100.6 100.6 Complete the consolidation of mainframe
Consolidation (SCMC). computing operations from ten Service
Centers to two Computing Centers through
lease-to-purchase acquisition/
maintenance agreements.
Data transmission.
Contractual support activities.
Implement and test improved Disaster
Recovery.
Independent validation/verification.
----------------------------------------
Initiative Total....... 239 25.0 225.4 250.4
----------------------------------------------------------------------------------------------------------------
Question. Should these requirements be considered an ``emergency'',
in other words shouldn't the funds be requested from the fiscal year
1999 Emergency Fund so we would not impact our scarce fiscal year 2000
allocation? Were these costs known when the fiscal year 1999 Emergency
Funds were requested?
Answer. The funding for these requirements should not be considered
an emergency. The $250 million was requested in the fiscal year 2000
budget because the need for this funding was known when the fiscal year
2000 budget was being formulated (and the time when the fiscal year
1999 Emergency Funds request was made).
Question. What happens to the 239 FTE in fiscal year 2001?
Answer. These FTE will be moved from Y2K work into roles supporting
modernization and continued implementation of legislative changes.
Specifically, these resources will be used to:
--Provide development staffing to support the Modernization
Blueprint/PRIME. Tasks and activities include development of
requirements for legacy bridge programs that support key
modernization initiatives, configuration management, planning,
scheduling, systems analysis, technical evaluation, software
and system modifications, and PRIME partnership support.
--Provide Capacity and Performance Review resources to support the
PRIME contract and Modernization bridges and initiatives; and
to conduct capacity and performance impact analysis of
modernization and near term initiatives in support of the PRIME
contract.
--Perform a substantial number of coding changes and the realignment
of systems operations to reorient tax processing to the
requirements of the four new tax divisions of the Service.
--In the long term, support the redesign and evolution of batch and
paper-oriented core data repository to an online, interactive
database architecture and to facilitate the resolution of
issues involving legacy corporate processing.
--Provide development/maintenance staffing for system application
changes resulting from the IRS Restructuring and Reform Act of
1998 and other anticipated/proposed legislative requirements.
With the completion of Y2K work, Information Systems will resume
making enhancements, based on defined business needs, to existing
systems. There is at least a two year backlog of necessary systems
application change requirements from the Taxpayer Relief Act of 1997,
the IRS Restructuring and Reform Act of 1998 and required program
(customer service, collection, examination) changes. Staff previously
devoted to Y2K testing will be redirected to increase the number of tax
processing program changes tested in Product Assurance before release
to production. Staff who have been devoted to Y2K related program/
project management activities will be redirected to integrated product
teams working with the PRIME contractor to define requirements, oversee
contractor performance, validate the quality of contractor
deliverables, and implement systems in accordance with the new Systems
Life Cycle.
transfer pricing
Question. How many employees at the IRS are currently working on
transfer pricing compliance issues? Please describe the nature of their
work and the length of time they have worked on such issues.
Answer. International Examiners (IE's).--IE's (approximately 650
nationwide) are responsible for all the international issues associated
with an examination. They routinely examine transfer pricing issues on
corporate examinations. Approximately 50 percent of total IE direct
examination time is spent on section 482 issues in cases closed during
each fiscal year.
International Field Assistance Specialization Program (IFASP).--
IFASP specialists support field examination work by providing case
assistance and training to field international personnel nationwide.
The four section 482 specialists have approximately 70 years experience
in the international arena, most of which was at the examination level.
They have played a significant role in recommending changes and
additions to the section 482 regulations, which assist the field in
better enforcement of the transfer pricing area.
Competent Authority.--Two groups of professionals (23 employees)
work on double taxation cases with treaty partners regarding transfer
pricing issues. Their inventory also includes bilateral and
multilateral Advanced Pricing Agreements (APA's).
Associate Chief Counsel (International).--Approximately 10
attorneys are devoted to transfer pricing, which includes
interpretation of the law, issuance of regulations, and numerous
guidance projects.
Advanced Pricing Agreement (APA).--The APA program affords a means,
in appropriate cases, of addressing the principal section 482
compliance and enforcement problems. Through that program, a taxpayer
and the IRS can negotiate and agree upon a system of records and an
appropriate transfer pricing methodology. In bilateral and multilateral
cases, the competent authority of treaty partner countries may also
participate, so that the maximum amount of certainty and predictability
regarding future tax treatment of specified types of transactions can
be obtained. As mentioned below, there are currently 18 professional
employees directly responsible for APA's; in addition, the field
expends approximately 16 to 20 direct examination staff years as part
of the APA Team.
Question. How many Advanced Pricing Agreements (APA's) have been
reached between the IRS and corporate taxpayers? How many of these
corporate taxpayers are foreign based? How many are U.S. based
companies?
Answer. Since the issuance of the first APA on January 15, 1991,
through March 3, 1999, 174 APA's have been agreed to between the IRS
and corporate taxpayers. Due to improvement of the process for issuing
APA's over time, 130 of these agreements have been completed in the
last three years. Of the 174 completed APA's, 101 are with foreign-
based parent companies and 73 are with U.S.-based parent companies.
Question. How many IRS employees are directly or indirectly
involved in the APA program?
Answer. There are currently 18 full time professionals and three
support staff assigned to the APA Program in the Office of the
Associate Chief Counsel (International). In addition, IRS field
employees assist in the evaluation of taxpayer requests for APA's that
conduct their business operations within the boundaries of the District
office. Nationwide, according to time reports filed by examiners, it
appears that approximately 16-20 field direct staffyears annually have
been incurred in coordinating APA's.
Question. Does the IRS believe that its APA program is improving
transfer-pricing compliance? If yes, how does the IRS measure its
success in this area?
Answer. In terms of compliance, every APA that is entered into with
a taxpayer essentially results in 100 percent voluntary compliance with
the rules governing transfer pricing for that taxpayer. That is, by
signing the agreement, the taxpayer agrees to file tax returns that
fully comply with the arm's length standard. In the opinion of many
transfer pricing experts, in both the public and private sectors,
establishing ``up front'' guidelines for compliance for a particular
taxpayer in this manner is less costly than the traditional adversarial
process of audit and litigation. To date, however, the APA program has
not developed a method for measuring these resource savings.
As an alternative dispute resolution program, the APA program
serves an important role in the Service's overall transfer pricing
compliance strategy. In recent years, Congress has enhanced the ability
of the Service to enforce transfer pricing compliance by enacting
documentation requirements and strict penalty provisions. These
measures are designed to encourage taxpayers to report their transfer
prices correctly at the outset. The APA program complements these
measures by providing a mechanism by which taxpayers can achieve early
certainty that they will avoid the large penalties and heavy expenses
that accompany a post facto transfer pricing dispute.
Finally, the APA program is voluntary and nonadversarial, which
allows for a cooperative environment where taxpayers are willing to
provide information freely. Such information not only can be utilized
in connection with the specific case, but can also allow the Service to
obtain a more current understanding of industry conditions and
practices, which, in turn, enables the Service to develop more
responsive general guidance and more effective regulations.
Question. In the past, the IRS has been recovering only about 20
cents on every dollar it believes is owed to the U.S. government by
companies due to transfer pricing. What is the IRS's current sustention
rate on Section 482 transfer pricing adjustments?
Answer.
Sustention
Year (Percent)
1993.............................................................. 33.00
1994.............................................................. 19.41
1995.............................................................. 34.00
1996.............................................................. 17.00
1997.............................................................. 14.00
1998.............................................................. 29.00
Our Centaur database includes both Appeals and Counsel disposals.
These rates reflect the net Appeals/Counsel sustentions.
Question. The IRS is currently studying the estimated revenue loss
due to transfer pricing abuses. In a more limited study in 1994, the
IRS determined that the possible revenue losses from improper transfer
pricing by foreign based companies was between $1-2 Billion a year. But
the IRS admitted that its audit adjustment based methodology might
significantly understate the true size of the losses. How will the IRS
improve its current study to give a more accurate assessment of the tax
gap in this area?
Answer. IRS's current estimates of revenue loss due to transfer
pricing abuse, like the estimates in its 1994 study, are once again
based on operational audit adjustment data, as these are the best data
currently available on which to base these estimates. It is true that
estimates based on operational audit data are not as good as estimates
based on the random, intensive audits of IRS's Taxpayer Compliance
Measurement Program (TCMP). However, the only TCMP data available for
corporations date back to 1987 and are limited to small (under $10
million in assets) corporations.
IRS's current estimates are based on operational audit data for
fiscal years 1995-1998. These data are more detailed than the
operational audit data used in IRS's 1994 study. The estimates in the
1994 study could only distinguish in general between FCC revenue losses
due to ``international adjustments'' and those due to ``domestic
adjustments.'' IRS's current estimates, however, will focus on section
482 issues, and particularly on transfer pricing adjustments. In
another improvement over the 1994 study, IRS's current estimates will
include revenue loss estimates for U.S.-based multinational
corporations as well as for FCC's.
Question. Has the IRS used, or plan to use, the authority to
increase wages that Congress granted it in last year's major IRS reform
bill to help retain the best-trained and most experienced IRS employees
working in the international tax area?
Answer. The IRS is using critical pay authority as judiciously as
possible. Starting with some top level positions, we will fill new key
operating division head and selected critical positions in other parts
of the organization using critical pay. We will soon begin to explore
the feasibility and business needs for positions below senior
leadership. We are currently in the process of exploring all options
including paybanding, retention allowances, and demonstration projects.
In doing this, we are coordinating closely with Treasury, the Office of
Personnel Management and the National Treasury Employees Union. We
expect to have more definitive plans in this arena in the next 90-180
days. These plans will address our front line occupations including
those in the international tax area.
______
Questions Submitted by Senator Mikulski
new carrollton facility
Question. What are the IRS staffing plans for the New Carrollton
facility--both in civil service and contractor personnel?
Answer. The New Carrollton facility master plan accommodates a
total of 4,440 employees (4,160 IRS employees, and 280 contractor
employees). New Carrollton has also been identified as the new
Headquarters location of the Small Business & Self-Employed Business
Division and the Information Systems function. Through 2002, employees
will be realigned into and out of New Carrollton to fully staff these
two primary business units.
We also have additional National Office employees in the following
Maryland suburbs: Bethesda (67 IRS employees, and 10 contractor
employees); Constellation Building in Oxon Hill (260 IRS employees, and
21 contractor employees); and Salubria Building in Oxon Hill (89 IRS
employees, and 468 contractor employees).
Question. The IRS has announced that new headquarters locations
will be set up in the Washington D.C. area for Small Business and Self-
Employed Operating Division and the Tax Exempt Operating Division. Will
either of these organizations be located in New Carrollton?
Answer. The Small Business and Self-Employed Operating Division
will be located in New Carrollton, Md. The Tax Exempt Operating
Division will be located in Washington D.C.
Question. What is your projection for the staff buildup for the
newly awarded IRS Prime Contractor? How many of these jobs do you
expect to be in the New Carrollton area?
Answer. There are no projected staffing increases for the IRS to
support the newly-awarded IRS PRIME Contract. However, the PRIME
intends to have about 50 staff on board in April 1999 and will ramp up
to about 100 staff by September 1999, with increases based upon the
defined work. The PRIME intends to locate these staff in the New
Carrollton, Maryland area.
Question. With the award of the PRIME, how do you see New
Carrollton becoming a technical center of excellence for the IRS, much
like Goddard is for NASA?
Answer. The Information Systems organization is embarking on
several initiatives that will ensure that the technical expertise
required to deliver and maintain its programs and systems is available.
Partnering with the Prime contractor is a major factor in direction.
The Information Systems' personnel located in the New Carrollton
facility, supported by the Prime contractor, will form the core of our
nation-wide technical support that will provide all systems' customers
with quality products and services no matter where they are located. As
we restructure our Information Systems organization to meet the
challenges before us, our technical personnel will receive the training
they need to make our New Carrollton facility the center of excellence
our internal and external customers expect and deserve.
Question. How do you see this affecting the local communities?
Answer. Internal Revenue Service employees have traditionally been
extremely supportive of the communities in which they live. Not only is
the local economy positively affected by the many IRS workers who buy
goods and services at this time, we anticipate that as Prime contractor
personnel and supporting partners visit our facility, the economy will
be even more positively affected. In addition, many of our New
Carrollton personnel--as well as those in all of our locations
nationwide--support local charitable and civic organizations with their
time and money. As our center of technical excellence grows, so will
our support of the communities that support us.
We expect that any impact on the New Carrollton area will be
positive. The New Carrollton site is geographically convenient for many
current and future occupants due to its accessibility to public
transportation and major roadways. We anticipate that many new recruits
for the New Carrollton facility will be relocating to the Maryland
area. Current employees in the New Carrollton facility utilize the
local vendors including a variety of restaurants and shopping areas.
This, coupled with an already steady economy, should be beneficial to
the immediate New Carrollton area including the surrounding local
communities.
service to taxpayers
Question. How will the Prime Contractor be used to help improve the
service that IRS provides taxpayers?
Answer. Initially, the PRIME will support the IRS to develop the
business and IT strategic plan with insight from commercial ``best
practices'' and to establish the prioritized Modernization initiatives
with a focus on improving service to taxpayers. The PRIME will also be
jointly responsible and accountable for effectuating our Modernization
effort. Early initiatives will provide enhanced call management, a
single database for refund and fact-of-filing inquiries, daily posting
of fact-of-filing, and better security, auditing, and managing
information data. Infrastructure improvements include modern Internet
technology and infrastructure development and deployment plans. These
increased technical capabilities will provide taxpayers with improved
telephone services and expanded Internet capabilities while protecting
privacy, as well as allowing IRS to better manage operations that will
increase the quality of service.
Another early initiative provides infrastructure and security for
employee access to modernized and legacy data through a single
universal secure workstation. The implementation of the Interim
Regional Infrastructure Services (IRIS) at field locations and enhanced
national infrastructure services will provide: Standardized
identification and authentication security; Employee access controls
through the Authentication Database (AUTHDB); and Expanded audit trail
data collection to include legacy access audit information via secure
workstations.
Universal Secure Workstations (USW) supported through the
implementation of IRIS enable access to modernized and legacy systems.
Question. What is the schedule for achieving some of these service
improvements?
Answer. The initial deployment of some of these improvements will
be piloted during mid-2000 and then made available to the taxpayer in
January 2001. Subsequent capabilities will be deployed on an
incremental basis over the next several years.
Question. Will some of the new service being provided to taxpayers
include more opportunities for taxpayers to interact with the IRS
electronically?
Answer. Yes. Working with the Prime Alliance, the IRS expects to
enable expanded and improved services to taxpayers. Some of the early
releases of functionality the IRS is seeking funding for from the
Information Technology Investment Account (ITIA) includes electronic
self-service applications such as fact of filing and refund inquiry.
Additionally, the IRS and the Prime Alliance will be working this
spring to review the electronic filing, payment, and communications
capabilities called out in ETA's strategic plan, ``A Strategy for
Growth.'' This review will help determine which electronic service
capabilities are best suited for partnering with the Prime Alliance for
delivery in the near term.
Question. When will the average taxpayer be able to file his or her
taxes over the Internet?
Answer. Most taxpayers can file their taxes over the Internet now.
In partnership with the IRS, the private sector has enabled
sophisticated tax preparation and e-filing capabilities on the Internet
using the World Wide Web (WWW). The fastest growing method for e-filing
is the ``on-line filing'' channel, which is a combination of taxpayers
using WWW products and personal computer tax preparation software to
file their taxes electronically.
prime contractor
Question. What are some of the other major initiatives that the IRS
and the Prime Contractor will be undertaking?
Answer. Other initiatives to be undertaken with the PRIME in the
next stage of Modernization are now being identified as part of an
ongoing business and IT strategic systems planning. We expect to
identify a limited number of high-priority and high-impact initiatives
that can be developed in the next five years.
Question. The previous CIO testified that the IRS has almost 60
stovepipe databases that make it very difficult for the IRS to provide
immediate answers to taxpayers questions. When do you expect to begin
developing new IRS master files that integrate these stovepipe
databases into a single integrated database that allows IRS customer
service representatives to provide timely information to taxpayers?
Answer. Migrating taxpayer records from the existing MasterFile
into a single integrated database is a vast, complex, and risky
undertaking that will require many years to complete. In order to limit
risk and to accomplish this effort in the mostly timely manner, we are
undertaking detailed planning considering both technical and business
requirements and impacts. We are currently in the process of developing
an approach to accelerate migrating taxpayer records from the existing
systems to the new integrated database in support of our new operating
divisions and consistent with our Modernization strategic planning
efforts. We are studying the feasibility of beginning with selected
market segments to validate our concept, minimize risk, and deliver
early benefits. These early benefits will provide more timely service
and more accurate information for taxpayer customer service.
Question. What will be the Prime Contractor's role in this
development?
Answer. The PRIME has the responsibility and accountability to
deliver the single integrated database. This includes the: Associated
program management; Procurement administration to select from among
competing alternative business solutions; and Horizontal integration
with the legacy environment as well as the evolving Modernization
environment.
Question. What assurances can you give the committee that the money
we appropriate for modernization will be well spent?
Answer. The IRS is investing in the solid foundation needed to
manage and execute Modernization effectively. To that end, we have
implemented an agency-wide Governance structure and processes to manage
Modernization. This Governance is under the direction of the IRS Core
Business Systems Executive Steering Committee (CBS ESC), chaired by the
IRS Commissioner. Members include the top executives across the
Service, Treasury, National Treasury Employees Union (NTEU), and the
PRIME. This committee directs Modernization and strategic planning and
oversees critical program management activities and major programs. The
CBS ESC is responsible for making investment decisions following a
process consistent with commercial and government ``best practices.''
Day-to-day management of Modernization and the PRIME activities is
the responsibility of the Program Management and Architecture (PM&A)
organization under the direction of the CIO, and the Business Systems
Modernization Planning (BSMP) office under the direction of the Deputy
Commissioner for Modernization. This management responsibility and
accountability includes program control for Modernization. This is
supported by a strategic risk management process to identify and
mitigate potential problems in cost, schedule, and performance. We are
leveraging the PRIME's best practices and existing proven processes for
our program management and execution policies and procedures to ensure
the best business case development and cost control over execution.
Question. One problem the IRS has had in the past is that business
and technology goals were not always in alignment. How do you plan to
correct this problem?
Answer. As described above, the Modernization governance and
program management is a shared responsibility between the business and
information systems organizations. We have adopted the PRIME's
CatalystSM methodology as our Enterprise Life Cycle (ELC).
CatalystSM is a combined business process reengineering
(BPR) and software development methodology which is designed for timely
implementation of the information systems necessary to enable the
implementation of redesigned processes.
Throughout the ELC, the business and information systems
organizations work closely together. The first phase of the ELC
involves the integration of business strategic planning and information
technology and is jointly led by business and information system
executives. Throughout the other stages of the ELC, from business
process reengineering through deployment, business and information
systems staff work side-by-side in integrated product teams with the
PRIME. This extensive partnership ensures that business and technology
goals are aligned.
Question. The IRS has used contractors in the past for some
programs that did not turn out well. How will your use of the Prime
Contract be different than previous attempts to use contractors?
Answer. The fundamental difference from our previous use of
contractors is the creation of an IRS and PRIME strategic partnership.
In order for Modernization to succeed, it is essential for the IRS and
the PRIME to form a strategic partnership in which the IRS contributes
its knowledge of tax administration and the operational systems, while
the PRIME provides project management, business reengineering, systems
engineering, design, development, and integration expertise. This
partnership begins with high-level Governance, where the PRIME sits on
the CBS ESC.
The PRIME is an integral component for management at the program
level and co-leads integrated product teams focused on specific project
execution. IRS employees will work side-by-side with the PRIME to
develop modernized systems, and will operate and maintain them once
they are delivered. This is not the traditional turn-key contracting
relationship where IRS throws business requirements over the fence and
the contractor delivers a completed system.
Another difference is that the PRIME is the integrator for
Modernization, including both business process change and technology.
The IRS intends to contractually require that the PRIME contractor, as
the single systems integrator, share the risk of performance. This
intention is reflected in the PRIME contract, which identifies that the
IRS will use Performance Based and Fixed Price task orders where
appropriate. The selected PRIME contractor clearly demonstrated its
commitment to risk sharing in its proposal.
Question. Have you achieved the managerial and technical
sophistication needed to effectively manage the Prime Contractor?
Answer. We have achieved a significant measure of the managerial
and technical sophistication we need to effectively manage the PRIME
contractor. Using the authority granted by Congress, we have put in
place a new top management team with extensive private and public
sector experience. This team, and IRS staff engaged in Modernization,
are supported by our private sector partners, such as the PRIME and our
Federally Funded Research and Development Center (FFRDC), who bring
strong disciplined management techniques proven through experience. We
are deliberately and steadily maturing our processes and investing in
the training and development of our staff. We are confident that we can
and will effectively manage the PRIME.
Question. How do you plan to manage the Prime Contractor so that it
most effectively contributes to your success?
Answer. At the highest level, we have established the Core Business
Systems Executive Steering Committee to direct Modernization and
strategic planning, and oversee critical program management activities
and major programs. At the next level, the Assistant Commissioner for
Program Management & Architecture (PM&A) is responsible for managing
the PRIME contractor relationship. The PM&A organization is responsible
for program management and control, project management, technical
contract management, and management of the overall architecture. PM&A
is implementing formal processes to assess contractor performance at
both the strategic and tactical levels.
The Business Systems Modernization Planning office is responsible
for defining the scope and objectives of proposed major business
technology modernization programs, preparing business cases and
assisting in developing and maintaining a modernization activity
sequencing plan which includes identification of business requirements.
Working with PM&A is our Procurement organization. The Contracting
Officer is responsible for the overall administration of the PRIME
contract. The day-to-day requirements of the PRIME contractor will be
reflected in many individual task orders administered by several IRS
contracting officers who report directly to the PRIME contract
Contracting Officer. These task order contracting officers are
supported by several technical representatives (Contracting Officer
Technical Representatives or ``COTR's'') and many Government Task
Managers (GTM's) who monitor and inspect the contractor's performance
on a daily basis.
Question. In addition to the Prime Contractor, the IRS has several
other major contractors that are performing major elements of work,
such as Booz-Allen, TRW, and Mitre. How will you ensure that the
efforts of these and other contractors are seamlessly integrated into a
coherent whole? Please delineate the roles of each of these contracts
and their dollar values as well.
Answer. We have strategically defined and managed our Modernization
related contracts. These contracts have expressly different purposes
and scope, and we are carefully defining their roles and
responsibilities. The PRIME has the responsibility and accountability
to provide: Program Management, under the direction of the IRS, to
provide comprehensive systems life cycle and program management
functions; Procurement administration to select from among competing
alternative business solutions; Modernization infrastructure to
maintain the architecture and standards reflective in the Modernization
Blueprint; and Horizontal integration of business solutions to include
the integration of business solutions into the legacy environment as
well as the evolving Modernization environment.
The Integration Support Contractor, TRW, has the responsibility to
provide assistance for knowledge transfer of the legacy environment and
current Modernization Blueprint to the PRIME. They are also a secondary
source for integration support services acting under the PRIME for:
Development of business requirements; and Integration, test, and
deployment of modernized systems.
The organizational modernization contractor, Booz, Allen &
Hamilton, is supporting the Organizational Modernization and
implementation of new balanced performance measures.
The Federally Funded Research and Development Center, MITRE, with
its freedom from conflict of interest and special relationship with the
Government, supports the IRS in government activities for: Strategic
management; Assessment of major program management activities;
Independent evaluations; Independent verifications and validations;
Research; and Technical advice.
The dollar values of each of these contracts are based on task
orders as approved through the Governance and Program Management
processes and do not have predefined yearly values.
The PRIME, as the overall integrator, has the responsibility to
manage and coordinate the work of its sub-contractors. When the IRS
contracts resources other than the PRIME, such as from the ISC, the
PRIME works with the IRS to manage and coordinate these resources. The
Enterprise Life Cycle (ELC) will be utilized by the IRS and PRIME,
thereby ensuring a consistent management structure for the oversight of
all contractor activities.
Question. Is there some potential that the work of these
contractors will overlap?
Answer. We recognize the potential that the work of our various
contractors could overlap. With our constrained funding we cannot
afford to allow for duplication of efforts or ineffective use of our
contracting resources. To minimize this potential, we have established
contracts with expressly different purposes and scope, and are
carefully defining their roles and responsibilities. We are actively
managing the utilization of these contractors. This includes formal
processes to resolve utilization issues that may arise.
Question. Do you have defined roles for each of these contractors?
Answer. We recognize the need for clear delineated roles among our
various contracts in order to minimize the potential for overlap and
ensure proper use of contracting services. The description of the
various contracts and roles is given above.
performance measures
Question. Do you have measurable goals that you will use to
determine that the IRS has achieved improved levels of taxpayer
satisfaction?
Answer. One of the components of the balanced measurement system is
customer satisfaction. This element of the balanced measures will be
based on results from various customer satisfaction surveys that are
being administered by a third party to a statistically significant
sample of taxpayers who have interacted with the IRS. The surveys are
designed to measure taxpayers' perceptions of how they were served. In
this transition year to the balanced measurement system, we have not
set a goal for customer satisfaction because the new measures are being
baselined. The IRS will use the baselines identified during fiscal year
1999 to establish goals for future years. Currently, customer surveys
are administered in the following areas: Toll-free, Walk-in, Exempt
Organizations (EO) Determination, Employee Plans (EP) Determination,
Collection, Examination, Automated Collection System (ACS), Service
Center Examination, EO Examination, EP Examination, and Appeals. The
use of surveys in other areas will be considered as the balanced
measurement system is implemented and adopted throughout the entire
organization.
Question. How will the average taxpayer know that the IRS has
achieved its goals for improved customer service?
Answer. While Congress will be able to assess IRS' progress in
improving service to customers through specific measures in the
balanced measurement system such as timeliness, level of service,
quality, and accuracy, taxpayers will know that the IRS has achieved
its goals for improved customer service based on their direct
experiences. For example, as taxpayers receive easy-to-understand forms
and notices, or when callers can quickly reach an IRS assistor through
telephone service that is now available 24 hours a day, seven days a
week or through visits to walk-in offices that offer longer hours and
Saturday services, or when questions or problems are resolved during
the initial contact, taxpayers will experience a change in the level
and quality of service delivered by the IRS.
SUBCOMMITTEE RECESS
Senator Campbell. Thank you. We have no further business,
Mr. Commissioner, thank you so much for coming.
Mr. Rossotti. Thank you.
Senator Campbell. This hearing is recessed.
[Whereupon, at 10:56 a.m., Thursday, February 25, the
subcommittee was recessed, to reconvene at 9:30 a.m., Thursday,
March 4.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2000
----------
THURSDAY, MARCH 4, 1999
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met, at 9:48 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Kyl, and Dorgan.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
STATEMENT OF GENERAL BARRY R. McCAFFREY, DIRECTOR
opening remarks
Senator Campbell. Good morning. The Treasury Subcommittee
will come to order. Senator Dorgan will be along. We were in an
energy meeting, and he is still up there, so he will be down in
just a few minutes. We will go ahead and start.
I would like to welcome Barry McCaffrey, the director of
the Office of National Drug Control Policy before the committee
once again. Today, we are here to discuss your fiscal year 2000
budget submission. I once again apologize that we could not get
the camera that you requested. We needed 48 hours in order to
do that, and we just did not get the request soon enough.
We are here today to discuss your fiscal 2000 initiatives,
and specifically I have an interest in receiving an update of
the current trends of drug use and availability and how your
2000 budget request addresses these issues. I know that the
members of the committee are also interested in discussing the
media campaign. You mentioned to me just a moment ago, General,
that you do have some tapes. I would be very interested in
seeing those even if I have to look at them in the office.
To date, that campaign has received $380 million in
funding, and in your fiscal year 2000 budget, if this is
approved, we will have appropriated over $500 million for this
one project alone, which is the single largest portion of your
budget request. I know when you first came to this committee
asking for this money a few years ago, some of us were a little
bit wary, but I think it is moving along nicely and I would
look forward to you talking about that a bit in your opening
statement and testimony.
Obviously, we want to ensure that the program is achieving
its goal and that we are getting a good return on the
Government investment. I did read your testimony and from the
contents of your testimony it does look like there's been a
decrease of drug use among teens. I notice from over 12.9
percent down to 12.1 percent. I would hope that that has
something to do with that media campaign that youngsters are
watching, and I will be interested in listening to your
testimony on that.
I am also interested in knowing more about the achievements
over the last fiscal year and how the emergency drug
supplemental funding specifically translated into reducing drug
problems in this country. When we fund initiatives like the
media campaign, those are big ticket items and it is not like
we have so many resources that we do not have to reduce
spending somewhere else.
One of the concerns, of course, was if there would be a
decrease in donated media time on the part of the private
industry if we increased money availability so that they could
tap into that. The budget situation is so tight we often have
to make very conscious and careful decisions.
Therefore, I would ask you to go ahead, General McCaffrey,
and we look forward to your testimony.
General McCaffrey. Mr. Chairman, thanks very much for the
opportunity to be here and to address your own concerns and
listen to your viewpoints and those of your fellow committee
members. I look forward to working with Senator Dorgan also. I
have not had an opportunity to work with him before.
Let me, if I may, ask for your permission to enter into the
record the written statement.
Senator Campbell. Yes, without objection, your complete
testimony will be included in the record.
General McCaffrey. As you know we do an enormous amount of
work to try and make sure that is an accurate depiction of
where we are, and we will put that up on our web page later on
today, making it available for the many people who watch very
closely what we are doing and the drug problem.
Let me also, if I may, mention some of the many people who
have helped craft our drug strategy and who are really doing
the preponderance of the work around the country. We have
several in this hearing today. I am honored to be joined by
Major General retired Art Dean, and Sue Thau of the Community
Anti-Drug Coalitions of America. As you know, they represent
more than 4,000 community coalitions and have acted as an
umbrella organization for a lot of the community activity
around the country.
Dick Bonnet and Mike Townsend from Partnership for a Drug-
Free America are also here. And you know, Jim Burke has really
been, in many ways, the driving force behind the notion of
talking to America's youth using modern means of communication
and helping change youth attitudes. I am very grateful for
their partnership and their continuing influence.
Dr. Linda Wolf-Jones is here. She is with Therapeutic
Communities of America, representing what is possibly the
single easiest payoff for us, which is to address America's 4.1
million chronic addicts with effective drug treatment. I know
we will talk about that more during the hearing.
Jim McGivney is here, deputy director of DARE America.
Arguably, there is certainly no larger or more effective
school-based prevention program than the 26 million-plus young
people involved in DARE, now growing rapidly in the
international community, particularly in our hemisphere. So we
are grateful for their revised curriculum and their engagement
in schools across America.
Kathleen Sheehan from NASADAD is here. They have been very
heavily involved in trying to bring sensible management at
State level to these Federal resources you have provided to us.
And Johnny Hughes from the National Troopers Coalition, who has
been a personal friend and an advisor throughout the last three
years.
CONCEPTUAL ORGANIZATION
Mr. Chairman, if I may, let me just for the record talk
about the conceptual organization of our national drug control
policy. With your permission, I will just hold up and briefly
talk about five volumes.
Beginning with the National Drug Control Strategy which you
are obviously familiar with, as is your staff. There is a
difference though. This year, thanks to the omnibus legislation
that you passed last year which reauthorized the National Drug
Control Policy Office. It was the subject, as you remember, of
two years of sort of intense negotiations, and I am very
grateful for the bipartisan involvement of Congress in getting
that bill passed.
So this National Drug Control Strategy is now not only
mandated by law that I produce it, but it is operative for five
years. So I will come down each year and explain if it still
fits the environmental circumstances. But this is now a long
term document that we are proud to put in play, the 1999
National Drug Control Strategy.
That strategy has been revised from last year. We went out
to more than 4,000 institutions and individuals throughout the
country. We sought their advice. We have read their input and
it is on the table to guide our actions.
The second document, if I can underscore it, is the five-
year drug budget summary. So we have submitted not only Fiscal
Year 2000 drug budget, but also a five-year projection. It is
better than last year's five-year projection. It still is not
very good.
But there is a key difference, that last year it was the
OMB director and I who got through collegial discussion, my
colleagues to agree to submit a five-year budget projection.
This year they did it because you changed the law last year,
though I will submit each year a new five-year budget
projection. I expect we will get more informed debate as we
look at the long term trade-offs between prevention, treatment,
law enforcement, and interdiction. I commend that to your
attention.
Mr. Chairman, the third volume in the national drug control
strategy are Performance Measures of Effectiveness. We have
again revised this document which we presented to you last year
for the first time. We think it is even more effective. If you
look at it, there are now 12 target outcomes where we looked
out 10 years and asked, where do we expect to be, and then we
designed a way to measure achieving our objectives.
There are also 85 subordinate variables which allow to
determine whether or not we are getting to those 12 outcome
objectives.
We have to design data bases, but this is a serious
management effort to look at what we are actually achieving
year by year with the money you give us.
There is a fourth volume that is available through your
classified controlled procedures, a secret, noforn volume
entitled, Classified Annex on Drug Interdiction, International
Law Enforcement Policy and Programs. Mr. Chairman, that is the
second year we have put that out. It is an attempt to give the
intelligence community, Department of Defense, and law
enforcement communities standing guidance on how to achieve our
purpose.
Finally, we have a tabbed booklet for your consideration
which is Congressional budget submission, which tries to pull
together the various aspects of the ONDCP budget, which of
course is reasonably small in terms of the $17.8 billion total
in the nine appropriations bills that have some drug funding in
them.
ONDCP BUDGET
My own operating budget in ONDCP is $21.9 million; a fairly
modest amount. It is about one-tenth of 1 percent of the
Federal drug control budget.
Finally, Mr. Chairman, if I can, let me just summarize a
snapshot, because there has been a lot of back and forth on
whether we should be spending more? How much more? Is there a
decrease in interdiction?
I asked Dr. John Carnavale, my budget expert, to focus on
the period Fiscal Year 1996 to Fiscal Year 2000, and to take a
snapshot. Those are the budget years that the team I have
assembled under the new law have been able to effect.
If you look at those budget years, we have increased
prevention dollars by 55 percent. We have increased treatment
dollars by 25 percent. Research, particularly in NIDA, National
Institute of Drug Abuse, is up by 35 percent. Domestic law
enforcement is up by 24 percent, interdiction by 47 percent,
and our international programs have increased 120 percent.
Now I say this because at the end of the day, if you look
at the whole Federal counter-drug budget, it has increased in
those budget years by about one-third. There has been a 32
percent increase. It went up $1 billion a year. I say that
because I understand in a tight budget environment that we have
to produce results with those dollars. I think the intent of
Congress is being met, and I think the budget as it is evolving
is supporting our strategy.
Some quick comments. First of all, in the National Youth
Anti-Drug Media Campaign--and I will expect that you will want
to talk about that with your own questions--the initial results
are pretty encouraging. We have now hired some extremely
sophisticated people to work with us on this program.
It is being executed by Partnership for a Drug-Free America
and the Advertising Council. Essentially, more than 200
advertising corporations are doing this work for free. We are
paying for production costs, but these are essentially donated
efforts garnered through both PDFA and the Ad Council. The
Actors Guild waives their fees. We are getting a lot of impact
for our money.
We are meeting our matching goal. That is encouraging news.
There was legitimate concern that the PSA time would dry up.
And we are essentially achieving 107 percent of what we asked.
There has also been a rather significant corporate in-kind
contribution. And depending on how you measure it, and we have
got rather conservative assessments, it is probably a $41
million in-kind contribution. We are also seeing the
entertainment industry team up with us, and we think we are
doing extremely well on addressing minority concerns. This
effort by the end of the summer will be in 11 languages and
some $33 million worth of our effort is targeted to minority
and ethnic audiences.
DRUG ABUSE
A quick snapshot on drug use in America. As you are aware,
there is some good news and some bad news. Let me talk about
the bad news. Drug use in America is unacceptable; 6 percent of
the population is abusing drugs. That is 14 million Americans.
Most of that is poly-drug abuse; marijuana and alcohol and
other stuff.
Now some of the drug abuse patterns are changing, and in
ways in which we're going to have to be very careful to measure
it. Heroin abuse in the last decade is clearly going up. Huge
quantities of high purity, low cost heroin are appearing. New
drugs are showing up. Methamphetamines may be the worst drug to
ever hit America. And if we are smart, and I think we are
trying to work it in that fashion, we will get in front of the
meth epidemic as we did not for the crack epidemic in the mid
1980s.
We are also seeing other drugs like MDMA, PCP, Rohypnol,
other chemically manufactured drugs showing up in the rave
scene and affecting new subpopulations.
It is clear that the impact of older, sicker chronic
addicts is causing devastating impact on America. We say it is
$110 billion a year damages, and probably 16,000 dead. If you
look at hospital emergency room admission rates, they have gone
steadily up as this chronic addict population has aged.
Now turning around on the other hand, the results of the
last two monitoring the future studies and national household
survey data leaves room for encouragement. Our strategy
essentially posits the argument that if you can reduce the
number of American adolescents who are exposed to gateway drug-
taking behavior, over time you will reduce the addict
population.
We have seen two years ago, after five years of steadily
worsening attitudes, and four years of increasing drug abuse by
American youngsters, two years ago we saw a leveling out of
those statistics. Then last year, although Secretary Shalala
and I were careful to downplay expectations, we saw an
unequivocal decrease in drug abuse and an improvement in
attitudes almost across the board among 12th graders, 10th
graders, and eighth graders. The most dramatic impact was among
eighth graders, as you would expect, the newer populations
hitting the drug exposure zone.
We think if we keep that up for an additional 10 years we
are going to see remarkable impact on abuse rates throughout
the country.
There is reason to believe we are on the right track and
that if we deliver on some shortcomings, and the shortcomings
we have left in front of us is to more effectively tie drug
treatment to the criminal justice system. That is a big one.
Secretary Shalala, Attorney General Reno and I have done the
groundwork. We have the conceptual organization. There is a
great willingness among the States and localities to support
this attempt.
But that is the next emphasis. How do we go to that 1.8
million Americans who are behind bars, half of whom, 50 percent
to 80 percent of whom have an alcohol or drug-related
compulsive use problem, how do we get them into mandated
treatment? So there is a series of programs, many of them
driven by the Attorney General.
DRUG REDUCTION PROGRAMS
The drug court system has grown explosively. Three years
ago we had 12 drug courts. Now we have about 500 either
operating or being formed up. I hope by the time we walk out of
office we will leave more than 1,000 ongoing.
We have expanded the Break the Cycle program, which
essentially mandates drug testing and treatment regardless of
your offense. The drug court is sort of a front end diversion
program. Break the Cycle says, if you are arrested, violent
criminal or not, and you test positive, you are going into
treatment and your compliance with that treatment protocol will
affect how we deal with you in the criminal justice system.
So we have got now three adult test sites, and we have gone
to two juvenile test sites. I think that shows great promise,
along with prison-based drug treatment and post-release follow-
on monitoring.
We also owe you better organization of the Southwest Border
and America's ports of entry. We have done a lot of work. The
situation is better. We have completed our studies on how to
reorganize our intelligence collection system to support the
drug issue. Now Director Tenet and Attorney General Reno and I
will try and give the President a package of recommendations on
how to ensure that our intelligence system better supports law
enforcement.
There is also a lot of work going on to rationalize the
more than 15,000 Federal employees who work along the 2,000
mile southwest border, to make sure it is a more coherent,
results oriented operation that depends on non-intrusive
technology as opposed to National Guard soldiers unloading 18-
wheelers cargo and drilling holes in the wall looking for
drugs. You just simply cannot do it that way.
Finally, there is a lot of reason to believe that our HIDTA
program is showing great payoffs. We have got a wonderful new
associate, Mr. Joe Peters, who is going to help us organize the
HIDTA program. As you know, it has grown from six to 21 HIDTAs.
You have put significant amounts of money into it. I am
concerned about managing it the right way, so I am going to ask
for funds to make sure I have got an external audit going on
that program.
But having said that, local, State, and Federal law
enforcement and prosecutors are making good use of that fund,
and there are many other applicants for HIDTA status. By this
summer I will have a study done that will probably be a better
guide for Congress and me on how to expand the HIDTA program,
if we choose to do so.
PREPARED STATEMENT
On that note, Mr. Chairman, I thank you for the chance to
appear in front of the committee and I look forward to
answering your questions.
[The statement follows:]
Prepared Statement of General Barry R. McCaffrey
i. introduction
All of us in the Office of National Drug Control Policy thank the
Committee for the opportunity to testify today about the Office of
National Drug Control Policy's (ONDCP) Fiscal year 2000 budget.
Chairman Campbell, Senator Dorgan distinguished members of the
subcommittee, your interest in all aspects of drug control policy and
your commitment to bipartisan support of a comprehensive response to
the nation's drug abuse problem are much appreciated. We welcome this
opportunity to review the fiscal year 2000 budget request for ONDCP.
However, to provide a framework for understanding this budget, this
testimony must begin with an overview of the 1999 National Drug Control
Strategy and an analysis of current drug trends.
ii. overview of the 1999 national drug control strategy
The Requirement for a National Drug Control Strategy
The Office of National Drug Control Policy Reauthorization Act of
1998 required the President to submit to Congress by February 1999 a
comprehensive National Drug Control Strategy for reducing drug abuse
and the consequences of drug abuse in the United States by limiting the
availability of and reducing the demand for illegal drugs.
Specifically, the Act required that the strategy include:
--Comprehensive, research-based, long-range, quantifiable, goals for
reducing drug abuse and the consequences of drug abuse in the
United States.
--Annual, quantifiable, and measurable objectives and specific
targets to accomplish long-term quantifiable goals that the
Director determines may be achieved during each year of the
period beginning on the date on which the National Drug Control
Strategy is submitted.
--Five-year projections for program and budget priorities.
--A review of international, state, local, and private sector drug
control activities to ensure that the United States pursues
well-coordinated and effective drug control at all levels of
government.
ONDCP has prepared the following documents in compliance with this
Act:
--The National Drug Control Strategy.
--Drug Control Budget: fiscal year 2000.
--Performance Measures of Effectiveness: Implementation and Findings.
--Classified Annex.
It was the sense of the Congress in this Act that substantial
progress could be made toward achieving specific reductions in drug
supply and demand by the year 2003 as well as during the intervening
years. This Strategy sets in motion policies and programs designed to
make progress toward these targets. It contains careful analysis of
what is achievable by specified years. Specifically, it proposes a
multi-year conceptual framework to reduce illegal drug use and
availability by 50 percent. If this goal is achieved, just 3 percent of
the household population aged twelve and over would use illegal drugs.
This level would be the lowest recorded drug-use rate in American
history. Drug-related health, economic, social, and criminal costs
would also be reduced commensurately. The Strategy also presents a
detailed performance measurement system that links goals, objectives,
and mid- and long-term targets. As we succeed in reaching our targets,
we will continue to achieve even further reductions insofar as
resources and other developments allow.
Annual Strategy Report
The ONDCP Reauthorization Act of 1998 also requires the President
to submit to Congress each February a report on progress in
implementing the Strategy. The 1999 Strategy contains a detailed report
(in Chapter II) on: progress in reducing drug use and availability in
the United States; the consequences of drug abuse; and the
effectiveness of prevention, treatment, enforcement, interdiction, and
international programs. A summary of the report contained in the
Strategy follows:
Overall Trends.--In 1997, there were 13.9 million current users of
any illicit drug in the total household population aged 12 and older,
down from the peak year of 1979, when 25 million (or 14.1 percent of
the population) abused illegal drugs. The 13.9 million number
represents 6.4 percent of the total population and is statistically
unchanged from 1996. 36 percent aged twelve and older have used an
illegal drug in their lifetime. Of these, more than 90 percent used
either marijuana or hashish and approximately 30 percent tried cocaine.
There are an estimated 4 million chronic drug users in America: 3.6
million chronic cocaine users (primarily crack cocaine) and 810,000
chronic heroin users.
Juvenile Trends.--Drug use among 12-17 year olds declined slightly
in 1997 and 1998. Among 8th graders, past month use of illicit drugs
declined from 12.9 percent to 12.1 percent. Among 10th graders, the
percentage declined from 12.9 to 12.1. Among 12th graders, the decline
was from 26.2 percent to 25.6 percent. These declines follow an earlier
four-year trend or increasing drug use rates among 12-17 year olds.
Between 1992 and 1996, past month illicit drug use had increased from
6.8 percent to 14.6 percent among 8th graders, increased from 11
percent to 23.2 percent among 10th graders, and increased from 14.4
percent to 24.6 percent among 12th graders. Use of inhalants declined
among 8th graders from 5.6 percent in 1997 to 4.8 percent in 1998. In
1998 alcohol use decreased among 10th graders, and remained stable
among 8th graders and 12th graders, albeit at unacceptably high levels.
Past-month use of cigarettes slightly declined among 8th, 10th, and
12th graders from 1997 to 1998. We are concerned that every day more
than 6,000 people aged eighteen or younger try their first cigarette,
and more than 3,000 people aged eighteen or younger become daily
smokers.
Drug Availability.--In 1997, an estimated 289 metric tons (MTs) of
cocaine were available in the U.S., the lowest amount since the 1980s
and far below the peak of 529 MTs in 1992. 145 MTs of cocaine were
seized enroute to the U.S. in 1998. Marijuana remains readily
available. Information about heroin price and purity is imprecise. In
1998 the average retail price for a pure gram of heroin was
approximately $1,799; the wholesale price was $318. These prices were
significantly lower than in 1981, when the retail price per gram was
estimated to be $3,115 and the wholesale price $1,194. The average
purity for retail heroin in 1998 was 25 percent, much higher than
1991's average of 19 percent. Methamphetamine remains the most
prevalent synthetic drug. Americans spent $57 billion on illegal drugs
in 1995, down 37 percent since 1988.
Consequences of Drug Abuse.--Drug-related deaths climbed throughout
the 1990s but have leveled off at about 9,300. Drug-related medical
emergencies remain near historic highs but remained statistically
constant, with 514,347 episodes in 1996 and 527,058 in 1997. Illegal
drugs cost our society approximately $110 billion each year.
Drugs and Crime.--More than 60 percent of adult male arrestees
tested positive for drugs in twenty major cities in 1997. Drug
offenders account for 25 percent of the growth in the state prison
population and 72 percent of the growth in the federal prison
population since 1990.
Drugs and the Workplace.--6.7 million current illegal drug users
were employed full-time in 1997. Another 1.6 million current users
worked part-time. Drug abuse is twice as prevalent among the unemployed
compared to those employed full-time. Drug users are less dependable
than other workers and decrease workplace productivity. They are more
likely to have taken an unexcused absence in the past month; 12.1
percent did so compared to 6.1 percent of drug-free workers. Illegal
drug users get fired more frequently (4.6 percent were terminated
within the past year compared to 1.4 percent of non-users). Drug users
also switch jobs more frequently; 32.1 percent worked for three or more
employers in the past year, compared to 17.9 percent of non-drug-using
workers. One-quarter of drug users left a job voluntarily in the past
year. This high turnover increases training and other productivity-
related costs to American businesses.
Goals and objectives of the 1999 National Drug Control Strategy
Goals.--The Strategy's five goals are comprehensive in that they
cover the three broad aspects of drug control: demand reduction, supply
reduction, and adverse consequences of drug abuse and trafficking. In
addition, these goals are national in that they state what we must
collectively achieve; they are not markers for solely a federal effort.
Finally, these goals are research-based, quantifiable, and long-range.
The five goals and thirty-one objectives reflect the need for
prevention and education to protect all Americans, especially children,
from the perils of drugs; treatment to help the chemically dependent;
law enforcement to bring traffickers and other drug offenders to
justice; interdiction to reduce the flow of drugs into our nation;
international cooperation to confront drug cultivation, production,
trafficking, and use; and research to ensure policy is based on
science.
Goal 1: Educate and enable America's youth to reject
illegal drugs as well as alcohol and tobacco
The Strategy focuses on youth for both moral and practical reasons.
Children must be nurtured and protected from drug use and other forms
of risky behavior to ensure that they grow up as healthy, productive
members of society. As youngsters grow, they assimilate what they
observe. Drug use is preventable. If children reach adulthood without
using illegal drugs, alcohol, or tobacco, they are unlikely to develop
a chemical-dependency problem. To this end, the Strategy fosters
initiatives to educate children about the real dangers associated with
drugs. ONDCP seeks to involve parents, coaches, mentors, teachers,
clergy, and other role models in a broad prevention campaign. ONDCP
encourages businesses, communities, schools, the entertainment
industry, universities, and sports organizations to join these national
anti-drug efforts.
Goal 2: Increase the safety of America's citizens by
substantially reducing drug-related crime and
violence
The negative social consequences of drug-related crime and violence
mirror the tragedy that substance abuse wreaks on individuals. A large
percentage of the twelve million property crimes committed each year
are drug-related as is a significant proportion of nearly two million
violent crimes. The nation's estimated 4 million chronic drug users
contribute disproportionally to this problem. Drug-related crime can be
reduced through community-oriented policing and other law-enforcement
tactics, which have been demonstrated by police departments in New York
and other cities where crime rates are plunging. Cooperation among
federal, state, and local law-enforcement agencies also makes a
difference. Operations targeting gangs, trafficking organizations, and
violent drug dealers have contributed to declining violence associated
with illegal drug markets. Equitable enforcement of fair laws is
critical. We are a nation wedded to the prospect of equal justice for
all. Punishment must be perceived as commensurate with the offense.
Finally, the criminal justice system must do more than punish. It
should use its coercive powers to break the cycle of drugs and crime.
Treatment must be made available to the chemically dependent in our
nation's prisons.
Goal 3: Reduce health and social costs to the public of
illegal drug use
Drug dependence is a chronic, relapsing disorder that exacts an
enormous cost on individuals, families, businesses, communities, and
nations. Addicted individuals frequently engage in self-destructive and
criminal behavior. Treatment can help them end dependence on addictive
drugs. Treatment programs, moreover, can reduce the consequences of
addictive drug use on the rest of society. The ultimate goal of
treatment is to enable a patient to become abstinent and to improve
functioning through sustained recovery. On the way to that goal,
reducing drug use, improving the addict's ability to function, and
minimizing medical consequences are useful interim outcomes. Treatment
options include therapeutic communities, behavioral treatment,
medication (e.g., methadone, levo-alph-acetyl-methadol (LAAM), or
naltrexone for heroin addiction), outpatient drug free programs,
hospitalization, psychiatric programs, twelve-step recovery programs,
and treatment that combines two or more of these options. Providing
treatment for America's chronic drug users is both compassionate public
policy and a sound investment. For example, the recent Drug Abuse
Treatment Outcome Study (DATOS) found that outpatient methadone
treatment reduced heroin use by 70 percent, cocaine use by 48 percent,
and criminal activity by 57 percent, and increased employment by 24
percent. The same survey also revealed that long-term residential
treatment achieved similar successes.
Goal 4: Shield America's air, land, and sea frontiers from
the drug threat
The United States is obligated to protect its citizens from the
threats posed by illegal drugs crossing our borders. Interdiction in
the transit and arrival zones disrupts drug flow, increases risks to
traffickers, drives them to less efficient routes and methods, and
prevents significant quantities of drugs from reaching the United
States. Interdiction operations also produce information that can be
used by domestic law enforcement agencies against trafficking
organizations. Each year, more than sixty-eight million passengers
arrive in the United States aboard 830,000 commercial and private
aircraft. Another eight million individuals arrive by sea, and a
staggering 365 million people cross our land borders driving
approximately 115 million vehicles. Ten million trucks and cargo
containers and ninety thousand merchant and passenger ships also enter
the United States annually, carrying some four hundred million metric
tons of cargo. Amid this voluminous trade, drug traffickers seek to
hide approximately three-hundred metric tons of cocaine, thirteen
metric tons of heroin, vast quantities of marijuana, and smaller
amounts of other illegal substances.
Goal 5: Break foreign and domestic drug sources of supply
The rule of law, human rights, and democratic institutions are
threatened by drug trafficking and consumption. International supply
reduction programs not only reduce the volume of illegal drugs reaching
our shores; they also attack international criminal organizations,
strengthen democratic institutions, and honor our international drug-
control commitments. The U.S. supply-reduction strategy seeks to: (1)
eliminate illegal drug cultivation and production; (2) destroy drug-
trafficking organizations; (3) interdict drug shipments; (4) encourage
international cooperation; and (5) safeguard democracy and human
rights. The United States continues to focus international drug-control
efforts on source countries. International drug-trafficking
organizations and their production and trafficking infrastructures are
most concentrated, detectable, and vulnerable to effective law-
enforcement action in source countries. In addition, the cultivation of
coca and opium poppy and production of cocaine and heroin are labor
intensive. For these reasons, cultivation and processing are relatively
easier to disrupt than other downstream aspects of the trade. The
international drug control strategy seeks to bolster source country
resources, capabilities, and political will to reduce cultivation,
attack production, interdict drug shipments, and disrupt and dismantle
trafficking organizations, including their command and control
structure and financial underpinnings.\1\
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\1\ Additional information about international drug-control
programs is contained in the Classified Annex to the Strategy.
---------------------------------------------------------------------------
Objectives.--The Strategy also presents thirty-one objectives that
are more narrowly focused than these five goals and stipulate the
specific ways in which the goals will be attained. Under the prevention
goal (Goal 1), for example, nine supporting objectives articulate the
specific ways that illegal drug use and underage consumption of alcohol
and tobacco products will be discouraged. Programmatic initiatives will
be tied directly to one or more of these objectives. The national youth
anti-drug media campaign, for example, supports objective 2 (``pursue a
vigorous advertising and public communications program'') and objective
7 (``create partnerships with the media, entertainment industry, and
professional sports organizations'') of Goal 1.
The Supporting Performance Measures of Effectiveness (PME) System
Strategy links ends, ways, and means. Progress toward a strategy's
goals and objectives must be constantly assessed in order to gauge
success or failure and adjust the strategy accordingly. ONDCP has
developed--in conjunction with national drug-control program agencies,
Congress, state and local officials, and private citizens with
experience in demand and supply reduction--a Performance Measurement of
Effectiveness (PME) system to orient drug-control efforts. This system:
assesses the effectiveness of the Strategy; provides information to the
entire drug-control community on what needs to be done to refine policy
and programmatic directions; and assists with drug program budget
management.\2\
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\2\ The overall performance system is described in details in the
companion volume to the Strategy--Performance Measures of
Effectiveness: Implementation and Findings.
---------------------------------------------------------------------------
The PME system identifies ninety-seven performance targets, of
which twelve indicate the impact of national drug-control activities on
the Strategy's five overarching goals. The other eighty-five measure
progress toward the Strategy's thirty-one supporting objectives. These
targets represent desired end-states for the years 2002 and 2007. They
are ``stretch targets'' in that they require progress above that
attained in previous years. This assessment is in keeping with
recommendations of the National Academy of Public Administration, the
General Accounting Office, and other organizations advocating good
government practices.
Progress toward each goal and objective will be gauged using
existing research and new surveys. Monitoring the Future and the
National Household Survey of Drug Abuse, for example, both estimate
risk perception, rates of current use, age of initiation, and life-time
use for alcohol, tobacco, and most illegal drugs. The Arrestee Drug
Abuse Monitoring System (ADAM) and Drug Abuse Warning Network (DAWN)
indirectly measure the consequences of drug abuse. The State
Department's annual International Narcotics Control Strategy Report
(INCSR) provides country-by-country assessments of initiatives and
accomplishments. INCSR reviews statistics on drug cultivation,
eradication, production, trafficking patterns, and seizure along with
law-enforcement efforts including arrests and the destruction of drug
laboratories. The Subcommittee on Data, Research, and Interagency
Coordination will consider additional instruments and measurement
processes required to address the demographics of chronic users,
domestic cannabis cultivation, drug availability, and data shortfalls
related to drug policy.
The relationship between goals, objectives, targets, and federal
and non-federal resources will be reassessed and refined continuously
to reflect the dynamic drug-abuse problem and progress in reducing its
scope. Non-achievement of a target over a period of time will trigger
an in-depth interagency program evaluation to identify problems and
recommend corrective action. Such measures might include a range of
options such as modifying programs, reinforcing them with more
resources, or eliminating them altogether. This ongoing review process
will also allow reinforcement of successful programs.
[GRAPHIC] [TIFF OMITTED] T13MA04.001
Figure 1. National Drug Control Budget: Funding Trend up Fiscal Year
1996-Fiscal Year 2000
iii. the supporting fiscal year 2000 federal drug control budget
In total, drug control funding recommended for fiscal year 2000 is
$17.8 billion, an increase of $735 million (+4.3 percent) over fiscal
year 1999 regular appropriations of $17.0 billion. In addition to
regular appropriations, federal drug control agencies received $844
million for emergency purposes in fiscal year 1999. With this emergency
funding, drug control appropriations total $17.9 billion in fiscal year
1999. Spending that supports drug education, prevention and treatment
programs increases by $210.0 million (+3.6 percent) in fiscal year 2000
over fiscal year 1999 regular appropriations. Spending that supports
drug law enforcement efforts increases by $524.8 million (+4.7 percent)
in fiscal year 2000 over fiscal year 1999 regular appropriations. Major
increases in the budget submitted by the Administration follow:
1. Youth Prevention
--School Coordinators: (Total $50 million, an increase of $15M).
These additional resources will expand the School Coordinator
program, started in fiscal year 1999. With this increase, total
funding for this initiative will be $50 million in fiscal year
2000. This program will support the hiring of drug prevention
coordinators in nearly half of the middle schools across the
country to help improve the quality and effectiveness of drug
prevention programs.
--National Youth Anti-Drug Media Campaign: (Total $195 million, an
increase of $10 million). This additional funding brings the
budget for ONDCP's Media Campaign to $195 million in fiscal
year 2000. With this money, ONDCP will continue its targeted,
high impact, paid media campaign designed to change naive
adolescent perceptions of the dangers and social approval of
drugs.
--Youth Tobacco Prevention. (Total $169 million, an increase of $61
million). The Centers for Disease Control and Prevention will
receive an increase of $27.0 million in drug-related funds to
extend state-based efforts to conduct comprehensive programs to
reduce and prevent tobacco use. The Food and Drug
Administration will receive an additional $34.0 million in
drug-related funding in fiscal year 2000 to expand
implementation of its final rule intended to halt the supply of
tobacco products to children.
2. Criminal Justice Programs
--Drug Intervention Program: (New program--$100 million). This
initiative, funded through the Office of Justice Programs, will
provide drug abuse assistance to state and local governments to
develop and implement comprehensive systems for drug testing,
drug treatment and graduated sanctions for offenders.
--Drug Courts: (Total $50 million, an increase of $10M). This program
provides alternatives to incarceration through using the
coercive power of the court to force abstinence and alter
behavior with a combination of escalating sanctions, mandatory
drug testing, treatment, and strong aftercare programs.
3. Treatment
--Treatment Capacity Expansion Grants: (Total $110 million, an
increase of $55 million). This additional funding will help the
Substance Abuse and Mental Health Services Administration
(SAMHSA) expand the availability of drug treatment in areas of
existing or emerging treatment need.
--Substance Abuse Block Grant Program: (Total $1.615 billion, an
increase of $30 million ($24.8 million drug-related)). This
increase for SAMHSA's Substance Abuse Block Grant will provide
funding to states for treatment and prevention services. This
program is the backbone of federal efforts to reduce the gap
between those who are actively seeking substance abuse
treatment and the capacity of the public treatment system.
4. Law Enforcement & International Programs
--Southwest border--INS: (Total $450.8 million, an increase of $50
million. ($7.5 million drug-related)). INS will continue to
deploy the Integrated Surveillance Information System (ISIS).
ISIS, which incorporates infrared and color cameras with ground
sensors, will aid Border Patrol enforcement efforts and drug
interdiction along the Southwest border.
--International Programs--State: (Total $265 million, an increase of
$29 million). These new resources over fiscal year 1999
(excluding emergency funding) are requested for the Bureau of
International Narcotics and Law Enforcement Affairs (INL). This
additional funding includes support for Andean countries,
Mexico, and assistance to international organizations.
--DEA Drug Intelligence: (Total spending for DEA is $1.469 billion.
Spending on intelligence will increase by $22 million) This
funding will provide $13 million to accelerate implementation
of DEA's FIREBIRD office automation system. FIREBIRD includes
e-mail, uniform word processing and other forms of office
automation that will provide DEA with more sophisticated
electronic investigative records. Once fully deployed, FIREBIRD
will allow DEA components located around the world to act as
one cohesive unit through instantaneous access to critical law
enforcement and intelligence information. In addition, $9
million will enhance DEA's Special Operations Division by
providing critical support for Title III investigations aimed
at dismantling drug trafficking organizations.
--Forward Operating Locations--DOD: (New program--$70.6 million). The
drug control budget for the Department of Defense includes
these additional resources in fiscal year 2000 for
restructuring SOUTHCOM's theater counterdrug architecture,
which will include the development of three Forward Operating
Locations (FOLs). These FOLs will support transit and source
zone air operations in SOUTHCOM's area of responsibility.
This Administration request for $17.8B represents a record budget.
If approved by Congress, federal drug control spending will have
increased by more than a billion dollars a year since fiscal year 1996
(for a total of 32 percent). Spending increase by broad category
follow:
Demand Reduction
--Prevention UP 55 percent (+ $776.3 million)
--Treatment UP 25 percent (+ $639.5 million)
--Research UP 35 percent (+ $175.1 million)
Supply Reduction
--Domestic Law Enforcement UP 24 percent (+ $1.768.5 billion)
--Interdiction UP 47 percent (+ $616.3 million)
--International UP 120 percent (+ $347.4 million)
The following shows how federal spending is distributed among the
Strategy's five goals.
Fiscal year 2000 Budget by Goal
Five Goals Percent
Goal 1............................................................ 11.8
Goal 2............................................................ 43.4
Goal 3............................................................ 19.8
Goal 4............................................................ 12.9
Goal 5............................................................ 12.0
iv. ondcp's coordinating role
The Office of National Drug Control Policy's statutory
responsibilities are established in the following laws and executive
orders:
The Anti-Drug Abuse Act of 1988. A key provision of that Act was
the establishment of ONDCP to set priorities, implement a national
strategy, and certify federal drug-control budgets. The law specifies
that the strategy must be comprehensive and research based, contain
long-range goals and measurable objectives, and seek to reduce drug
abuse, trafficking, and their consequences. Specifically, drug abuse is
to be curbed by preventing youth from using illegal drugs, reducing the
number of users, and decreasing drug availability.
The Violent Crime Control and Law Enforcement Act of 1994 extended
ONDCP's mission to assessing budgets and resources related to the
National Drug Control Strategy. It also established specific reporting
requirements in the areas of drug use, availability, consequences, and
treatment.
Executive Order No. 12880 (1993) and Executive Orders Nos. 12992
and 13023 (1996) assigned ONDCP responsibility within the executive
branch for leading drug-control policy and developing an outcome-
measurement system. The executive orders also chartered the President's
Drug Policy Council and established the ONDCP Director as the
President's chief spokesman for drug control.
The Office of National Drug Control Policy Reauthorization Act of
1998 expanded ONDCP's mandate and authorities and set forth additional
reporting requirements and expectations, including: Development of a
long-term national drug strategy; Implementation of a robust
performance-measurement system. Commitment to a five-year national
drug-control program budget; Permanent authority granted to the High
Intensity Drug Trafficking Areas (HIDTA) Program, along with
improvements in HIDTA management; Greater demand-reduction
responsibilities given to the Counter-Drug Technology Assessment Center
(CTAC); Statutory authority for the President's Council on Counter-
Narcotics; Increased reporting to Congress on drug-control activities;
Reorganization of ONDCP to allow more effective national leadership.
Improved coordination among National Drug Control Program agencies and
Establishment of a Parents Advisory Council on Drug Abuse.
v. ondcp's fiscal year 2000 budget request
Salaries and Expenses: $21.933 Million
ONDCP's budget provides $21.933 million for salaries and expenses
to support ONDCP's requested 158 Full Time Equivalents (FTEs)--128 full
time employees and 30 detailees. This $21.933 million for salaries and
expenses is the smallest programmatic component of the ONDCP budget.
However, this funding is the linchpin for all the other programs funded
through the ONDCP budget. Without a fully staffed and funded ONDCP,
none of these other initiatives can be carried out. ONDCP is an
organization of committed professional men and women. The fiscal year
2000 request for $21.933 million represents a $2.791 million increase
over the enacted fiscal year 1999 total of $19.142 million. Major
expenses include:
--$9.768 million for compensation of 128 FTEs. This represents an
increase of $822,000 over the fiscal year 1999 enacted total of
$8.946 million, to support pay raises, within grade increases,
and 4 additional FTEs for two growing areas within ONDCP.
--$2.210 million for total personnel benefits.
--$5.845 million for guard services, professional services contracts,
maintenance services, and related costs. Over the last year, we
have taken prudent steps to increase the security of both our
personnel and sensitive information within the office's
purview.
--$2.202 million for rental payments to GSA.
--$754,000 for travel and transportation costs.
--$847,000 for communications, utilities, printing, reproduction, and
related miscellaneous costs.
--307,000 for equipment, supplies and materials, and representational
allowance.
Educating America's Young People, Empowering Communities, and Advancing
Our Understanding of America's Drug Problem: $225.3 Million for
the Special Forfeiture Fund
The National Youth Anti-Drug Media Campaign
The President requests $195,000,000 for the National Youth Anti-
Drug Media Campaign. The anti-drug media campaign began in January 1998
in twelve test sites and was expanded nationwide in July. Once ads
began to run in the twelve test sites, anti-drug awareness increased
and requests for anti-drug publications increased by more than 300
percent. The campaign harnesses a diverse mix of television, video,
radio, Internet, and other forms of new media to deliver anti-drug
messages. Its objectives are ``universal,'' aiming at all adolescents,
parents, and primary caregivers. Messages and channels through which
they are being delivered are tailored for specific regional, ethnic,
cultural, gender, and age differences among members of the target
audiences. Advertisements are being prepared in eleven different
languages. Paid and public service advertising, news, public-affairs
programming, and entertainment venues are being used in the media
campaign.
So far, media outlets are matching paid advertisements with public-
service time for advertisements and pro-bono programming content on
more than a one-for-one basis. In the past year, we received $165
million in free public service announcement spots and $40 million in
corporate contributions. Public-service advertising space generated by
the paid campaign is being dedicated to messages that target underage
drinking and smoking, as well as other messages related to the
campaign's communications objectives. We have also developed
partnerships with a broad range of community and civic groups,
professional associations, government agencies, and corporations. The
entertainment industry is also responding favorably. In 1998, thirty
television programs focused on themes and messages supportive of the
campaign. While the campaign's goal was to reach 90 percent of the
target audience with four messages a week, by January 1999, 95 percent
of the target audience was receiving seven anti-drug messages a week.
The outstanding results attained during the first year of this
media campaign are a function of the outstanding support of the private
sector. The firm Porter-Novelli developed our strategic communications
plan. Bates Advertising and Zenith Media planned and bought ad time and
space in the initial phases of the campaign. Ogilvy and Mather is
ONDCP's long term contractor for ad planning and placement. Fleishman-
Hillard is our contractor for non-advertising media (entertainment
industry collaboration, Internet initiatives, partnerships with major
organizations serving youth and parents, and public education and media
outreach). The Partnership for a Drug-Free America continues to produce
most of the ads for the paid component of the campaign. The Ad Council
serves as a clearing house for public service ads which are supported
by campaign-generated ads. The American Advertising Federation and the
National Association of State Alcohol and Drug Abuse Directors
(NASADAD) form the core public service task force at the local level to
ensure local and community organizations are supported by matching
funds/air time. The support of most of the major television networks,
the Disney Corporation, America Online, and other multimedia companies
is indicative of the breadth of support this campaign has generated.
The Drug-Free Communities Program
The President requests $22,000,000 to continue the Drug-Free
Communities Program. Government response is only a small part of the
national effort to counter illegal drugs. Communities are significant
partners for local, state and federal agencies working to reduce drug
use, especially among young people and deserve continued support. This
program provides grants, information, and other essential support to
communities around the country as they organize to confront drug abuse.
Thousands of communities around the country have formed coalitions that
coordinate local reactions to the illegal drug problem. Coalitions
typically include schools, businesses, law enforcement agencies, social
service organizations, faith communities, medical groups, and youth
groups, as well as county and local government. Community Anti-Drug
Coalitions of America (CADCA) supports these organizations through
technical assistance, leadership development, and information
dissemination.
The Drug-Free Communities Act of 1997 provides vital support to
communities. The program's genesis and growth has been fueled by an
unprecedented level of bipartisan support. In fiscal year 1998, $10
million in grants were provided to 92 coalitions in 46 states. ONDCP
also conducted an initial training and technical assistance conference
and a presidentially appointed Advisory Commission was established. In
fiscal year 1999, we project that support will be provided to the
original 92 recipients and that an additional 119 communities will be
awarded grants. This fiscal year 2000 request will support the
coalitions that received grants in fiscal year 1998 and fiscal year
1999 and will fund an additional 68 grants. A key feature of this
program is ease of application and reporting requirements. Grants will
be made to coalitions of representatives of youth, parents, businesses,
the media, schools, youth organizations, law enforcement, religious or
fraternal organizations, civic groups, health care professionals,
state, local, or tribal government agencies, and other organizations.
The requirement for participating communities to match funding will
help ensure local initiatives, support, and accountability.
An Advisory Commission on Drug-Free Communities has been
established to advise, consult with, and make recommendations to the
ONDCP Director concerning activities carried out under the Program. In
addition to providing outright support for coalitions, ONDCP and its
partners--OJJDP and CSAP--are providing training and technical
assistance to individuals and groups to enable them to start up
coalitions in their communities.
Director's Discretion
The President requests $8,300,000 for the ONDCP Director's
discretion to enhance drug control activities and address emerging drug
threats. We believe that it is essential for the ONDCP Director to have
discretionary funds with which to respond to unforeseen contingencies.
We would be delighted to brief Congress on a regular basis concerning
programs funded and accomplishments.
At least $3.3 million will be used to improve the Federal Drug
Related Data Systems. This past February, ONDCP issued its first annual
report on the Performance Measures of Effectiveness (PME) system for
the National Drug Control Strategy. The PME is the first federal
performance measurement system cutting across departments and agencies
on a single area. It contains 97 performance targets for the 5 goals
and 31 objectives of the Strategy. We have conducted a gap analysis to
determine the number of targets for which data need to be developed.
ONDCP's Subcommittee on Data, Research, and Interagency Coordination
will review existing Federal data systems, within the context of the
gap analysis, to determine what additions/modifications can be made to
existing data systems to provide the measures for the PME system.
This funding request will provide support for agencies to modify or
add to their existing data systems. Some projects targeted include:
deriving annual estimates of the social costs of drug abuse; developing
SAMHSA's National Treatment Outcome Monitoring Study; and developing
estimates of drug availability. Funds will be transferred to agencies
once a plan to redesign/modify/add to an existing data system has been
submitted to and approved by ONDCP. Outyear funding is required to
support ONDCP's continual data development projects. Agencies will be
required to provide continuation funding in the out years through their
own appropriations.
Strengthening Law Enforcement: $185.777 Million for the High Intensity
Drug Trafficking Area Program
High Intensity Drug Trafficking Areas (HIDTA) are regions with
critical drug-trafficking problems that harmfully affect other areas of
the United States. These locations are designated by the ONDCP Director
in consultation with the Attorney General, the Secretary of the
Treasury, heads of drug-control agencies, and governors. There are
currently twenty-one HIDTAs. HIDTAs assess regional drug threats,
design strategies to address the threats, develop integrated
initiatives, and provide federal resources to implement these
initiatives. HIDTAs strengthen America's drug-control efforts by
forging partnerships among local, state, and federal law enforcement
agencies; they facilitate cooperative investigations, intelligence
sharing, and joint operations against trafficking organizations. In
1998, new HIDTAs were designated in central Florida (including Orlando
and Tampa), North Texas, the Milwaukee metropolitan area, and the
marijuana-growing regions of Kentucky, Tennessee, and West Virginia.
HIDTAs have been established in the following locations:
Since January 1990, counties in 21 areas across the United States
have been designated as HIDTAs:
1990
New York/New Jersey.
Los Angeles.
Miami.
Houston.
Southwest Border (which contains the five partnerships of the
California Border, Arizona, New Mexico, West Texas, and South
Texas).
1994
Baltimore/Washington, D.C.
Puerto Rico/U.S. Virgin Islands.
1995
Chicago
Atlanta
Philadelphia/Camden
1996
Rocky Mountain (Colorado, Utah, and Wyoming)
Gulf Coast (Alabama, Louisiana, and Mississippi)
Lake County (Lake County, Indiana).
Midwest (Iowa, Kansas, Missouri, Nebraska, and South Dakota).
Pacific NW (Washington Cascades).
1997
Southeast Michigan.
San Francisco Bay.
1998
Central Florida.
Kentucky/West Virginia/Tennessee.
Milwaukee.
North Texas.
This fiscal year 2000 request for $185,777,000 for HIDTA is $1.8
million greater than the fiscal year 1999 enacted HIDTA budget. The
additional funding is required to retain independent auditors to
perform financial and programmatic reviews of the HIDTAs. At least half
of the resources will go to state and local participants to support
more than 250 task forces and initiatives.
Deploying Advanced Technologies to Fight Drugs: $19 Million for the
Counterdrug Technology Assessment Center
The ONDCP Reauthorization Act of 1998 reestablished within ONDCP
the Counter-Drug Technology Assessment Center (CTAC) to serve as the
central counter-drug technology research and development organization
of the United States Government. CTAC's responsibilities include:
--identify and define the short-, medium-, and long-term scientific
and technological needs of Federal, State, and local drug
supply reduction agencies, including: advanced surveillance,
tracking, and radar imaging; electronic support measures;
communications; data fusion, advanced computer systems, and
artificial intelligence; and chemical, biological, radiological
(including neutron, electron, and graviton), and other means of
detection
--identify demand reduction basic and applied research needs and
initiatives, in consultation with affected National Drug
Control Program agencies, including: improving treatment
through neuroscientific advances; improving the transfer of
biomedical research to the clinical setting; and in
consultation with the National Institute on Drug Abuse, and
through interagency agreements or grants, examining addiction
and rehabilitation research and the application of technology
to expanding the effectiveness or availability of drug
treatment
--make a priority ranking of such needs identified in subparagraphs
(A) and (B) according to fiscal and technological feasibility,
as part of a National Counter-Drug Enforcement Research and
Development Program;
--oversee and coordinate counter-drug technology initiatives with
related activities of other Federal civilian and military
departments;
--provide support to the development and implementation of the
national drug control performance measurement system; and
--submit requests to Congress for the reprogramming or transfer of
funds appropriated for counter-drug technology research and
development.
CTAC is pursuing a comprehensive research and development (R&D)
program in support of the long-term National Drug Control Strategy.
This R & D program has three essential elements:
--Projects to support the development of federal law enforcement and
drug abuse treatment technology.
--Technical assessments and operational test and evaluation of
emerging drug detection and tactical counterdrug technology for
field transition.
--A program to transfer federal counterdrug technology directly to
state and local law enforcement organizations.
Supporting activities include a variety of regional one-day
workshops, technical symposia, and ad hoc studies to promote the
exchange of relevant information throughout the scientific and
technical community. These outreach activities serve to reduce
unnecessary duplication of effort and provide the mechanism for CTAC to
oversee and coordinate counterdrug technology initiatives with related
activities of other federal, civilian and military departments. This
oversight and coordination effort extends to include developments in
the industrial, academic and federal laboratory sectors, as well.
CTAC has organized its R&D program according to five technology
categories or areas of work:
--Non-intrusive inspection technology development.
--Tactical technology development for federal agencies.
--Demand reduction technology.
--Technical assessments and operational test and evaluation of
emerging technology.
--Transfer of federally developed technology directly to state and
local law enforcement organizations.
National laboratories, private industry and academic institutions
are the sources for the expertise needed for technology development
efforts and have performed the research within the R&D Program.
Standard and centralized test and evaluation activities performed under
CTAC sponsorship are used by the law enforcement community to validate
expected system performance in the field and assist in rapid transfer
of successful technology to the end-users.
Expanding Our Understanding of the Problem: $1.2 Million for ONDCP-
Coordinated Policy Research
The President requests $1,200,000 for policy research in fiscal
year 2000, an increase of $100,000 over fiscal year 1999. This increase
is primarily to provide funding for evaluations to be conducted in
support of ONDCP's Performance Measures of Effectiveness (PME) system.
ONDCP conducts policy research to develop and assess drug policy,
identify and detail changing trends in the supply of and demand for
illegal drugs, monitor trends in drug use and identify emerging drug
problems, assess program effectiveness, and improve the sources of data
and information about the drug situation. The requested funds will
support a wide range of policy research areas, such as:
--Drug-Flow Modeling.--ONDCP is currently leading an interagency
process to estimate the flow of drugs, from source country to
distribution in the United States. The four drugs of interest
are cocaine, heroin, marijuana, and methamphetamine. No single
agency provides the data for the entire process, rather many
agencies have key pieces. For example, the CIA's Crime and
Narcotics Center provides data on potential cultivation, the
Coast Guard and DOD provided data on events and seizures in the
transit zone, and Customs provide data on seizures at ports of
entry. We are working with the relevant agency staff to review
their data, improve their estimates, and fit their data into
the overall model. The resulting estimates will be used to
measure progress in achieving several of the targets in the
Performance Measures of Effectiveness system of the Strategy.
--Price of Illicit Drugs.--This yearly project generates quarterly
and annual illicit drug prices and purities for the United
States and selected cities. Results of the project are used to
monitor market trends and support other research projects
related to the illicit drug market. Statistical models based on
data from the DEA are used to estimate typical prices for
standardized purchases of heroin, cocaine, and marijuana. The
paper includes price trends for these standardized purchases
over time.
--Deterrence Study.--The purpose of this study is to develop a
reliable functional relationship between the allocation and
application of interdiction resources and the deterrence of
illegal drug smuggling. The analysis is principally confined to
deterrence associated with interdiction operations against all
routes and modalities of illegal drug smuggling in the Source,
Transit, and Arrival Zones. It addresses domestic U.S.
disruption activities only to the extent that these activities
affect interdiction operations or suggest changes in smuggling
routes likely to alter the flow of drugs in the Source,
Transit, and Arrival Zones. The first half of the study was
supported with fiscal year 1998 funds from ONDCP, the Coast
Guard, and Customs.
--Gallup--Consultation with America Survey.--This project is a follow
up of a similar survey conducted by the Gallup Organization for
ONDCP two years ago as part of ONDCP's Strategy consultation
process. The survey asks respondents their attitudes and
perceptions regarding a number of drug-related issues,
including their perception of the importance of the problem
relative to other national issues. The information obtained
from the survey will be useful to the development of the
National Drug Control Strategy and as a measurement source for
several PME targets.
--Federal Grant Directory.--The Directory produced every 2-3 years
assists state and local governments, community coalitions,
researchers, and others in identifying and applying for Federal
grants by cataloging Federal programs that award drug-related
grants. It also provides information on how to identify and
contact private foundations that also may provide valuable
resources in the field. The third edition of the Directory is
currently being prepared.
--Pulse Check.--This report, issued twice each year, provides details
on current drug use and emerging trends based on qualitative
information from the police, ethnographers, and epidemiologists
working in the field, and providers of drug treatment services
across the country. The report contains separate sections on
marijuana, cocaine, and heroin markets and patterns of use.
--Technical Paper: What America's Users Spend on Illegal Drugs.--The
report is prepared once every two years and estimates the
amount of drugs available in the United States and how much
Americans spend to purchase them. The report focuses on the
retail sales value of cocaine, heroin, marijuana, and other
illegal drugs. It currently provides ONDCP's estimates of the
size of the hardcore user population.
National Alliance for Model State Drug Laws--$1,000,000
State drug laws play a critical role in the effort to reduce drug
availability and use. In recognition of this fact, in 1988 Congress
mandated the creation of a bipartisan, presidentially appointed
commission to develop model state drug legislation. The resulting
President's Commission on Model State Drug Laws developed forty-four
exemplary drug laws. Since 1993, the Alliance for Model State Drug Laws
has been holding workshops throughout the country to focus attention on
state policies and laws concerning drugs. The adoption of the Model
State Drug Laws, and the continued efforts of the Alliance, are
important to national drug-control efforts. The National Alliance for
Model State Drug Laws (Alliance) encourages States to adopt and
implement model laws, policies, and regulations to reduce drug use and
its adverse consequences. The Alliance's success in promoting model
laws among the States has prompted interest in assessing outcomes
associated with such laws. The fiscal year 2000 request funds the
Alliances' administrative costs.
vi. conclusion
The Office of National Drug Control Policy's budget request of
$454.210 million is a modest component of the requested $17.8 billion
federal drug control budget. However, the importance of this funding
cannot be overstated. This support will provide ONDCP the resources
necessary to ensure the successful implementation of the 1999 National
Drug Control Strategy, which will have broad reaching, positive impacts
on this nation and its citizens.
All of us at ONDCP are proud of the growing partnership between the
Executive and Legislative branches on drug control issues. This
Strategy responds to long-standing congressional concerns over the
adequacy of the federal response to the drug problem. It provides
detailed long-term plans for addressing domestic and international
trends in drug use, production, and trafficking. This Strategy is
national in scope and purpose. The federal government cannot accomplish
the objectives laid out in this Strategy without the support of the
fifty states and four U.S. territories, as well as the thousands of
city, county, and local governments threatened by illegal drugs. This
Strategy also recognizes that it is only the federal government that
can undertake international drug-control efforts, consequently, it also
promotes vigorous international cooperation. Finally, the Strategy
addresses congressional concerns over lack of accountability of drug-
control programs by including specific benchmarks for a base year
(1996) against which to measure progress and hard data results for 1997
and 1998 (where such data is available).
We look forward to working with committee members and, indeed, the
entire Congress to ensure that the federal response to the nation's
drug problem is comprehensive, appropriately resourced, and completely
supportive of states, cities, counties, communities, families, and all
citizens who share our commitment who share our commitment to
confronting the cancer of drug abuse.
Senator Campbell. Thank you, General. I appreciated some of
your testimony, having visited with you to the drug court in
Denver a couple of years ago. I was very impressed and we
talked at that time about not only expanding drug courts, but
the juvenile drug courts. You said there were two?
JUVENILE DRUG COURTS AND HIDTAS
General McCaffrey. Break the Cycle. The juvenile drug
courts are more than that. I would have to give you a number.
There are 500 total drug courts either operating or in the
process of starting up.
Senator Campbell. A couple of pilot projects for juveniles
courts though, too?
General McCaffrey. Yes, absolutely.
Senator Campbell. I think they are in the right direction.
The HIDTAs, I think also are doing well. There was some
resistance early on to the growth of those. But the one that is
in our area in Colorado seems to be doing very well. I check
regularly with different departments, police department,
sheriff and so on, and they are very pleased with it. They
think it is really providing a service so they are not
duplicating efforts and it helps them coordinate their efforts.
I am also pleased that you are putting more emphasis too on
rehabilitation; something that we do not talk about often in
politics. We like to sound tough and tell everybody how we are
going to build bigger jails and put them all away. But I know
the revolving door problem we have with people that are
addicted, too, and until we break that cycle including helping
the ones that are already incarcerated getting away from it, it
will never put a big dent in the drug usage. So I appreciate
your comments.
Before I ask you some questions though, since this is the
first time our new ranking minority member, Senator Dorgan, is
here with us for this hearing, I would ask him if he had a
statement he would like to make.
PREPARED STATEMENT
Senator Dorgan. Thank you, Mr. Chairman. As you know I was
over at the Energy Committee and then I went to the wrong room
actually, so I was a bit delayed and would ask that my
statement be made a part of the record.
[The statement follows:]
Prepared Statement of Senator Dorgon
Thank you, Chairman Campbell. I also want to welcome you to the
subcommittee today, General McCaffrey. I appreciate having this
opportunity to discuss with you my concerns with drugs and their impact
on our society.
Over the past eight years, the Federal Government has invested more
than $165 billion in drug control strategies. This year $17.8 billion
is requested. And, certainly that is not too much to pay, if we are
making strides in stemming the supply of drugs entering the country and
reducing the level of drug usage, particularly of our youth. I am
confident that you, General McCaffery, will use today's hearing as a
forum to show us how we are succeeding in reaching these goals. And, I
know you will give us information that proves that our expenditures are
having a real impact.
I hope that during this hearing we can also explore some of the
very important programs you are involved with, such as the Drug Media
Campaign, International Drug Supply and Interdiction efforts, and the
reduction in overall drug usage.
The committee has provided $380 million for the Drug Media
Campaign. It is my understanding that this campaign includes not only
the T.V. ad's we are all familiar with, but it links these ads to
community partnerships, corporate sponsorships, and entertainment
industry's ``in-kind'' contributions. As a newcomer to the
subcommittee, I would like to take this opportunity to learn more about
this media campaign and its effectiveness.
International drug supply and interdiction efforts are another area
I am interested in discussing. The United States and its allies have
made gains in drug crop reduction. The continuing downward trend in
illicit coca cultivation has resulted in a reduction of 17 percent in
the overall coca cultivation in the Andean countries. However, in
Columbia we see a sharp rise in coca cultivation resulting in Columbia
becoming the premier coca cultivating country. Yet, in the last year,
the United States has more than tripled aid to Columbia.
We have again been asked to approve the President's certification
of Mexico. The certification process has been in effect for more than
twelve years. It is a good tool. It promotes openness and viability.
But, I am afraid we are going to eliminate the certification process's
ability to effect change in other countries' drug efforts--especially,
if we continue to certify countries that are obviously not making
strides in stopping the drug trafficking to the United States. Mexico
now rivals Columbia for dominance of the Western Hemisphere drug trade.
Drug corruption has reach unprecedented levels, and drug seizures by
the Mexican police have fallen significantly. I understand the politics
surrounding the certification issue, but I find it difficult to agree
with certifying that Mexico has been a fully cooperative ally in
fighting illegal drugs.
Finally, I want to discuss drug usage. Our primary concern is
seeing evidence that monies provided are leading to a reduction in drug
use. Current studies and the ``Data snapshot'' information do not
confirm reductions. In fact, your charts show that the current use
of"any illicit drug'' among youth is increasing. Use of marijuana is
the highest since 1985, and heroin use has increased by close to 700
percent.
I know these are areas you want to address General McCaffery, and I
look forward to your testimony.
Thank you very much, Mr. Chairman.
Senator Dorgan. But, General, thank you very much. I am
impressed with the work you and your agency are doing and am
interested in--I am new to this issue and new to this
subcommittee but I am interested in working with the chairman,
Senator Campbell, and you and others on these matters.
I have a number of questions I would like to ask, but a
couple of the things that I am especially interested in, one,
the drug media campaign. I happen to think it is an important
and useful tool. I also know that it costs a great deal of
money, and the management of it, and the measurement of results
from it I think are critical to determine whether this is an
investment that it is yielding the returns we expect.
I am also especially interested in the question of
addiction and the amount of money available for treatment
centers. You indicate in your statement, General, that there
are 4 million chronic drug users in this country. That does not
include alcohol I assume?
General McCaffrey. Does not include it, right.
Senator Dorgan. When you take a look at addiction to drugs
and alcohol and evaluate the amount of money available for
treating that addiction, we simply are not nearly where we
ought to be. We can interdict drugs, but if we do not interdict
the addiction we are going to have people out there committing
crimes to feed their addiction. So I want to talk to you a bit
about that today and think through how we can improve in that
area.
I noted in your statement also you talked about the success
of the methadone treatment programs and the reduction in
addiction, and also the reduction in crime resulting from those
programs. I was encouraged and heartened by that.
I am especially interested in one of the last points you
raised about Break the Cycle and other kinds of programs. It
seems to me that no one ought to leave prison who has not gone
through some sort of addiction counseling or addiction program
if they in their life of crime have been affected by drug or
alcohol addiction. I would like to talk about how we accomplish
that and I will do that during the question portion.
Mr. Chairman, you no doubt have some questions. Why don't I
defer to you and then I will ask a series of questions.
Senator Campbell. Okay, thank you.
General, let me associate myself with Senator Dorgan on the
concern that we had at the beginning, as you remember, about
putting all this huge amount of money into the media campaign.
I have been pretty supportive of it, as you know, but it has
been a chunk of money. As I mentioned in my opening statement,
as of this year, this budget will be something like $500
million in that program. I think it has been somewhat
effective, I am just not sure how much. But I think it has
headed in the right direction.
But I am a little bit concerned because, in my view, any
program is as good as the administrator of the program. And if
you are to have long term continuity of a new program then the
person who really energized it, which in this case is you,
General McCaffrey, I think the committee would like to be
assured that you are going to continue on with this thing.
I only mention this because I noticed in the newspaper, the
Washington Times, February 12th, that you were, according to
the Washington Times you were going to be leaving this office
and going to get a new job with the Red Cross. Of course, that
has changed now and the Red Cross has picked a new president
and it is obvious you are going to stay at least where you are
for the time being.
I notice this is maybe a little personal and you are
welcome to do what you want in your own personal life, but I
think you could reassure this committee that this kind of a
very expensive program is going to go on and continue what we
want it to do by putting that much money in it under your
leadership. I think it would make us very happy.
General McCaffrey. Senator, I told people--I called the
Washington Times, the Post, and had to explain this to the
President and to the Red Cross. I was flattered by the article
along with other speculation, but there was no substance to
those news reports at all. Although I was not a volunteer for
this position at all, I am honored to be part of it. I think we
are moving in the right direction, and as long as I retain the
confidence of the U.S. Congress and the President and my
associates, I am glad to continue to serve.
Senator Campbell. Thank you. There is something else that
is kind of close to my heart. As you probably know, since Bill
Bradley left the U.S. Senate, I am the only one here who was on
a U.S. Olympic team and still am very active in the Olympic
team. Your office has provided us with the estimates and costs
of your recent trip to the International Olympic Committee's
anti-drug conference.
And by the way, Senator Hatch and I have been working with
the Olympic committee on trying to resolve some of the problems
you have read about in the paper, and everybody has read about
in the paper of collusion and all kinds of mismanagement and
special gratuities and so on for some of the members of the
International Olympic Committee, which has nothing to do, by
the way, with the American Olympic Committee. That is a
separate issue.
But as I understand it, when you went over to Switzerland,
the four-day trip cost about $68,000 including an estimate of
$25,000 for administrative and logistic expenses for seven
attendees and seven marshals. That, as I also understand it, is
about 11 percent of your total travel budget. I would like to
know, which account is going to cover those costs, because as I
remember they were not anticipated before in last year's
budget?
INTERNATIONAL RESPONSIBILITIES
General McCaffrey. Senator, I do not have a clue about 11
percent. It doesn't sound likely. We spend a lot of money on
travel. What I essentially do is move around the country, the
Hemisphere, the Pacific Rim, and Europe acting both as
spokesman and organizer on the drug effort. Our presence at
Lausanne I think was timely. It was productive. We made a huge
impact, along with the European Union, the Brits, the Germans,
and particularly with the Australians and the Canadians.
It was, of course, a ``doping conference'' and I was
probably less concerned about 5,000 international world-class
athletes than I was the hundreds of thousands of kids all over
the world who model their behavior on getting to the top. So
that was our purpose in being there.
I think the trip was a tremendous expenditure of energy on
our part and I am very proud of what we were able to do. The
mechanics of how we paid for it; it was a tiny expense. I am on
the road almost one-third of the year.
Senator Campbell. It is an interesting area of discussion
and we will not have time to get into all of it. But having
been very active in the Olympic team, have you ever heard of
what they commonly call blood doping?
General McCaffrey. Sure, absolutely. When I went over there
I took along one of the country's leading experts on doping. I
had to get him under contract. He was our NIDA person. As you
know, NIDA funds 85 percent of the world's total expenditures
on drug abuse. I also took along my deputy, Dr. Don Vereen, who
is a nationally ranked drug abuse research expert, was the NIDA
Deputy Director.
So we had a series of meetings where ever we went. We were
working on this probably since last summer. We wrote a proposal
for the IOC in October and sent it to them.
Senator Campbell. And during that proposal, that is when
you proposed you would provide $1 million in funding to the
IOC?
General McCaffrey. Exactly. They started down the wrong
direction. They were going to do with Prince Maraud of the IOC,
an inadequate institutional approach, and we did not think they
were adequately serious about it. So we think we have got them
rethinking it, and I hope in the coming months we end up with
something that makes it appear as if we are acting to protect
the international Olympic movement.
Senator Campbell. I support it. I am just a little
concerned about the Federal Government's role in it since the
Olympic Committee does--they have a budget of something like
$400 million every quadrennial, every four years. I am just not
sure about how much the Federal money ought to be put in it.
But if you can justify that, I do not have a problem with it. I
just wanted to throw that out to you.
General McCaffrey. The $1 million really we are not going
to give them. We are going to do research which supports the
doping issue.
Senator Campbell. Where is that $1 million going to come
from, out of what part of your budget?
General McCaffrey. It is part of the CTAC. CTAC organized
that approach.
Senator Campbell. And you will be able to do that without
diminishing some of the other CTAC projects or areas?
General McCaffrey. Presumably.
Senator Campbell. Some of the things, by the way--Senator
Dorgan may already know this and you may, too. There are some
things that are against Olympic rules that are probably not on
anybody's law as being illegal.
General McCaffrey. Sure.
Senator Campbell. I mentioned blood doping.
General McCaffrey. There is no common standard. Not only in
the Olympic movement, but there is none here in the United
States. Certainly this Mark McGwire and andro and creatine
brings that to bear. He was not violating any U.S. standard nor
law by using andro, which is outlawed in other sports here in
the United States and also in some Olympic competitions.
Senator Campbell. Even some things like----
General McCaffrey. Artificial testosterone, blood packing,
human growth hormone.
Senator Campbell. Yes, and even withdrawing your own blood
over a period of time before you compete and then pumping your
own blood back into you, which is highly oxygenated which gives
you sort of a supercharged effect for two or three days. That
comes under the general classification as against the rules----
General McCaffrey. Methamphetamines, other stimulants.
Senator Campbell [continuing]. But it is probably not
against anybody's law.
General McCaffrey. Yes.
Senator Campbell. I got a little far away. Let me get back
to some specific questions. The current law requires that ONDCP
secure corporate contributions equal to 40 percent of the
appropriated amount of the campaign, which is roughly about $74
million. Could you give us the status of that effort? You
mentioned it in your opening statement.
CORPORATE INVOLVEMENT
General McCaffrey. Right. I was asked that yesterday by
Congressman Kolbe in the House hearing, and to be honest, I did
not have an answer. I am not sure either one of us knew what we
were talking about. So since then, last night I researched it.
During the omnibus appropriations act there were a series
of things that were proposed for that bill that we thought were
harmful. This was one of them, but it got in there. So it is in
the law right now, and essentially seems to mandate $40 million
corporate in-kind contribution to first year, growing by
percentages to 100 percent in 2002. It almost seems to imply
that it might be cash contributions.
Senator Campbell. No, it is in-kind.
General McCaffrey. Right. So as we look at it right now, if
you look at the enormous in-kind contributions of the
advertising world to both Partnership for a Drug-Free America
and the Ad Council, we have totaled up $41 million of in-kind
contributions. So we are achieving that goal as well as,
thankfully, the matching 100 percent requirement, which we have
exceeded.
On top of that, I would suggest that by May we will have
put the last contract into play. I will have a firm to work
corporate partnerships.
Having said that, Senator, I would ask us to look carefully
at that requirement. It may be that that is a very unwise
mandate.
Senator Campbell. That report was due at the end of January
and I do not think it is in yet. Could you give us a specific
date that you think you will have it to us?
General McCaffrey. Sure. We can give it to you right away.
I am not sure we really focused on that.
But again, if I may suggest, we will need to consider
whether this is feasible or desirable to have that as a
requirement in the law. It implies that by 2002 there would be
$185 million of corporate in-kind contributions. That, by the
accounts of those who do this for a living, is not even
beginning to be realistic.
Senator Campbell. Frankly, I am not sure it is realistic
either, but it was to really--if you remember, it was kind of
to alleviate the concern of the members, including me, that
thought the more Federal money we pour into advertising on
television, the less they might be inclined to donate if they
thought they had sort of a new cash cow. That is what brought
it about in the first place.
General McCaffrey. Yes. I think we are pleased and
encouraged by the response.
Senator Campbell. So your donated time has not decreased?
General McCaffrey. No. And we were worried about not only
the donated time, but also to not dry up other campaigns with
PSA access requirements. We have got a committee that verifies
these for the Ad Council. Ruth Wooden and her associates have
been tremendous about it, and so far I think we are doing good.
So Mothers Against Drunk Driving has got more access, not less.
Senator Campbell. That will be in your report, I assume,
good hard evidence of it.
The tech transfer that we did, I have gone to, I guess,
three of them around the country and they were very widely and
happily received by local departments. Originally, when we put
that in place there was some reluctance, as I remember, to
expand that. But it sure seems to be doing well out in the
local departments. In fact, this year I was happy to see that
that program requested under your salaries and expense account
is being supported.
It was supported, by the way, last year to the tune of
about $13 million, each of the last two years. But this year
you requested only $3 million. But we have roughly $30 million
in requests from different police departments. I would like to
know how you propose to meet those needs.
General McCaffrey. My records as of 1 March 1999 indicate I
have got $59 million plus in requests outstanding. This is
enormously popular. It is extremely useful, particularly along
that southwest frontier where we are asking local police
departments to help defend all of America. So I think it is a
wise use of Federal dollars. It ought to be looked at very
carefully by the Congress.
In a tight budget year OMB funded it at a lower level than
many of us would have wished to see. And I will listen very
carefully for your own views about this.
Senator Campbell. I think it ought to be funded to a higher
level and I would hope that you would see it that way, too.
Because I have been out there and I think that it has made a
tremendous difference. Local departments have no way of ever
being able to afford some of that technology that they can
access through this program. Some of that stuff, I mean to tell
you, it is just absolutely Buck Rogers things. I had no idea
the sophistication of some of the apparatus that they were
demonstrating.
The process by which it is explained to the local
departments as to how they can get it, how the training is
included with it, I mean it is just a widely popular program.
General McCaffrey. We have had Fort Wachuca managing that
program for us. They have done a splendid job, and I agree, I
think it is a big payoff program.
Senator Campbell. All right, I thank you.
I will ask Senator Dorgan if he has some questions. I want
to do another round of them, but I do not want to monopolize
all the time.
Senator Dorgan. Thank you, Mr. Chairman.
Again, General, let me tell you my admiration for you and
your agency and the work you do. But I do have a number of
questions because I am trying to understand what we are doing
and the effect of what we are doing. Let me start with the
national media campaign.
Obviously, when we spend as much money as we are spending
on that campaign, we want to try to understand what we are
accomplishing with it. This subcommittee, I believe, required
that evaluations be completed. For example, phase one, phase
two evaluations should be completed and submitted. My
understanding is we have not met those timelines.
I guess I would ask the question, if we are going into
succeeding phases with quantities of money in the hundreds of
millions of dollars without understanding what the consequences
or effects of the first phases were, are we able to assure the
taxpayers that we know what we are doing with that money?
MEDIA CAMPAIGN
General McCaffrey. Senator, again this came up yesterday
and I discussed this my own staff yesterday. We will be more
effective in horizontal communication with committee staffers.
Obviously there has been a shortfall here.
We have complied with the law. There is a Phase One
evaluation report. I have signed it out to all the governors in
the country, to Congressmen, to NGOs who follow this issue very
carefully. There is also additional work going on Phase One
evaluation looking at the survey. We are going to do a good
baseline. Those 12 cities, the 12 control cities were looked at
pretty carefully. There was extremely positive feedback.
We have moved forward into Phase Two expenditures of money.
We have gone nationwide, but we are not at 75 percent
expenditure rates.
In addition, I would suggest to you, I have got a packet up
there for you of information. One of them is a March 4 memo I
wrote, National Youth Anti-Drug campaign reviews and safeguards
and ad development. I can assure you, this is very carefully
monitored.
Thank God, we are beyond the Phase One where now I have got
three of the most knowledgeable, sophisticated firms in the
country. Ogilvy Mather is doing our advertising placement, $129
million. We have got Fleishman-Hillard doing the online
Internet and affecting program content in the entertainment
industry. We do have a NIDA watchdog, National Institute of
Drug Abuse. Westat Corporation is the evaluator external for
that program. We do have, Partnership for a Drug-Free America;
creative review committee, and we do have a scientific review
process.
Then finally, I personally approve and expect to be held
accountable for the execution of the program. All of that I
will provide to Congress so you can watch the evolution.
But the bottom line is, I would just suggest to you as
strongly as I can, we do know what we are doing, and we are
getting some pretty solid feedback. There is a lot to be
learned here now. We are on a new map sheet here, so we have
got to be prudent in safeguarding the public's money. I am very
aware that you have given me $1 billion campaign to carry out.
Senator Dorgan. I ask the question because I remember
reading recently about the wonderful milk check-off that we all
approved, so we see all of these ads all over the country with
people with milk mustaches. And then we start reading about how
much money has been available in these campaigns and how it has
been used, and it is very hard to control the use of money when
you have that quantity of money.
You talk about some of the biggest and best names in the
business. They would also probably be the most expensive in the
business. Do you have some good newer firms that are less
expensive and move more quickly and more innovatively to
develop ads and do those kinds of things?
General McCaffrey. These were partnerships. We bid them.
They get recompeted each year, so if they do not perform for me
they will lose the contract next year.
Senator Dorgan. You indicated you have support and
cooperation from the entertainment industry. What kind of
support? When you use entertainment figures in these ads--I do
not know that you do that, but if you do, do you get pro bono
services from entertainers?
General McCaffrey. Again, any time there is an Actors Guild
fee involved, they have waived it. There is also in the
matching component considerable amounts of Fox Family TV, ABC,
NBC, CBS, et cetera, who are producing PSAs themselves, in some
cases using their own talent. Univision. We have got a lot of
Spanish language ads on the air now. So, yes, there is
employment of visible figures in some of these ads.
But the appropriated piece of it, the centerpiece of that
is Partnership for a Drug-Free America and the advertising
industry. But we now give PDFA written guidelines and there is
a scientific, medical review process so that we ensure that
what is up there is not only persuasive, compelling, but will
be remembered. In other words, will hit all these advertising
requirements, but it is also scientifically accurate.
I think some of the anecdotal information is really quite
interesting. Are the ads being noticed? Yes. By the way, the
coming year is important to us because what we are using now is
existing stock that PDFA had. But now that the advertising
firms see that their material is on the air, and is being
viewed, the creative energy in this process has gone up. I have
just approved the second wave and the third wave of these
products. They are getting really first-rate.
Senator Dorgan. I just want to learn a little more about
them and I look forward to doing that in conversations with
you.
Two other quick areas. One is the addiction treatment
capabilities, and especially dealing with prisons. But let me
first ask, we have 4 million drug users in this country who are
addicted to drugs. How many slots are available? Let's assume
that someone is a heroin addict on the streets of New York
City. What is the likelihood of that heroin addict, if they
choose to want to get treatment, being able to access
treatment?
DRUG ADDICTION TREATMENT
General McCaffrey. Those are very difficult numbers to get
at. It has been interesting trying to pin people down, what is
a treatment bed, a slot? What is the addicted population? So
the numbers I will give you are a puzzle to varying responses.
Let me suggest what I think is an answer which have some value.
My associate just handed me the number. We believe that we
have probably got half of the treatment capacity that we need
for the chronic addict population. And I say that, that is sort
of sort data but it suggests--and we have closed it somewhat,
but it has gone down in three years by about 300,000 treatment
slots.
Part of the problem with my response is if you ask for an
ideal treatment response, right now probably the conclusion of
some of these people in the year would be this: Go for a year
of residential treatment followed by five years of follow-on
supervised care, with the one magic component of attendance at
NA and AA daily for the first year, and then two or three times
a year the following year. That would be the ideal.
We cannot afford that. I do not believe we will ever
provide a year of residential treatment in a campus-like
setting for 4.1 million chronic addicts. So we are not going to
get there, and we are not going to try and get there.
We are going to try and go to other community-based
approaches, and we are going to try to get the user, when he or
she show up in the criminal justice system, for sure, to get
into treatment.
Senator Dorgan. But that is not happening now.
General McCaffrey. A lot of it is beginning to happen--it
darn sure is. We have got enormously increased dollars in
Department of Justice and Health and Human Services programs
for drug treatment. As I reported, it has gone up 25 percent in
four budget years.
Senator Dorgan. Just on that point. Last year we funded
$4.5 million for a drug-free prison zone, to fund some
treatment programs in Federal prisons. Can you tell me how that
has been used or how that is structured?
General McCaffrey. By the way, I will give you a written
answer, because there is a series of programs, and although I
probably know more about it than most people in the country, I
would be hard-pressed to give you every one of Lori Robinson's
Department of Justice programs.
The Federal prison system is doing better than most.
Senator Dorgan. Right, and they have 5 percent or 8 percent
of the inmate population. Most of it is----
General McCaffrey. A tiny amount. They have got 105,000
people behind bars. There is 900,000 at State level. There is
600,000 at the local level.
The Federal programs will claim, I think it is 51
institutions, have some form of drug treatment. I believe that
most of them have modest capabilities and a few are beginning
to implement a comprehensive program.
But having said that, the prison-based component, if it is
done alone, is of little value. We have to follow the chronic
drug abuser back into community life and keep them under
supervised drug treatment, drug testing. That component has not
been implemented except in the State of Delaware is starting to
do it, California is beginning to do it, et cetera.
Senator Dorgan. But a prison program that does not exist is
of no value. My feeling is that there ought not be anybody that
goes into prison, especially violent offenders, but there ought
not be anybody that goes into a prison who has a drug problem
and comes out without having been forced into an addiction
treatment program.
General McCaffrey. I absolutely agree. I think you are----
Senator Dorgan. I will tell you, all over the country that
happens now.
General McCaffrey. Right. No, I am well aware of it.
Senator Dorgan. Some of that is changing, but not very
fast. I am interested in any strategies that we can use,
including mandates, which is a word that a lot of people do not
want to use around here, that would put in place the
requirement that if you have somebody in any prison in this
country, you do not let them out unless they are required to
have gone through these addiction treatment programs.
But let me turn back the time just to say this. I have
skipped a couple things. My understanding is that there are a
couple hundred thousand spots in treatment programs available
and if you are an addict, if you are a heroin or a cocaine
addict on the streets someplace, you have a devil of a time in
most cases getting access to--if you want to shed that
addiction, getting access to a good treatment program.
As we deal with all of this, one part is to try to stop
people from starting on drugs, and that is especially children.
The second part is to deal with these people who are on drugs
to try to get them off of drugs and shed their addiction and
stop the crime that results from it. I think on the addiction
treatment side, the chairman indicated and I fully support, we
are woefully short of the needed funds to provide addiction
treatment center spots for those who want to shed their
addiction.
General McCaffrey. I agree.
Senator Dorgan. We must address that. And if we do not
address that, we are going to continue to see this cycle of
addiction among those hard drug users that results in all of
the crime and all of the other related issues.
Now many of them go in and out of prison, so one of the
places we can at least begin to address it is to require them
to go through this counseling in prison, and then try to follow
them on the outside.
General McCaffrey. I agree.
Senator Dorgan. I have got some other questions, Mr.
Chairman.
DRUG TREATMENT AND PARITY
General McCaffrey. Senator, I wonder if I could just
respond. Secretary Shalala has $3.054 billion in the fiscal
year 2000 budget on drug treatment. That is a huge amount of
money. But it goes to one piece of the population. So if you go
to a lot of these treatment programs, it is very deceptive. You
will see an awful lot of minority people in publicly-funded,
supported drug treatment.
There are two other pieces of it. One is to get to the
criminal justice system. Whether you end up behind bars or not,
if I am using drugs I will end up in trouble with the law.
Physicians have one of the highest rates of drug abuse in our
society, and will end up in trouble with the law if they are
abusing drugs. They have got effective drug treatment if I am
an addicted medical person. And we have got to extend that.
One of the bills Senator Wellstone and others have
supported is a notion of health care parity for drug treatment.
I think in the coming year we are going to try and come down
and make a sensible argument on why we need to support that
approach as a taxpayer's relief to the damage done by me.
The number I use, if I am addicted to drugs and you do not
do something about it, or my family does not have access to
drug treatment, I will cost you $42,000 a year in damages
untreated. Then you can lock me up for $26,000 a year. And if
you add in the treatment component, it is a taxpayers' relief
payoff. So I think you are right on the correct answer.
Senator Campbell. I would like to welcome Senator Kyl. Do
you have some questions, Senator, before we begin our second
round here?
Senator Kyl. Thank you, Mr. Chairman, yes, I do.
I apologize for not being here during your testimony,
General McCaffrey. We have three different subcommittees going
on and I wanted to be able to be here to ask you some
questions.
The first has to do with the creation of a new HIDTA in
Arizona. You should be receiving this week the plan and the
budget for a new central Arizona HIDTA. You have been very
supportive of the existing HIDTA in Arizona. This one was just
newly created. It has the support of the existing HIDTA. It is
a new central Arizona HIDTA.
This will be especially important to our ability to combat
drug use both in the southern portion of the State where so
much of it comes in, but also in the central part of the State
where the bulk of our population is. I think you may recall
that in Arizona the drug use among kids is one-third higher
than the national average. So we have a huge drug problem with
our youth.
But I hope that you will look favorably upon the
designation of this new central Arizona HIDTA and that in
providing the funding will provide adequate new funding for
that second HIDTA rather than cutting up the existing pie for
the money that has been coming to Arizona so far.
If you have any comment on that, go ahead, but I wanted to
give you an advance notice that you should be receiving that
this week.
HIDTA
General McCaffrey. I think we talked earlier about the
growth in HIDTAs from six to 21. There are an enormous payoff.
This is a good concept. Smart prosecutors and law enforcement
understand the requirement to integrate local, State, and
Federal efforts. And I think the Southwest Border, and Puerto
Rico, Virgin Islands, the Gulf Coast States, South Florida have
a special responsibility since you are really acting in
protection of a lot of the rest of the country.
I also am concerned, as you are, that two years from now
there not be 40 HIDTAs with the same level of funding, or it
will just be another inconsequential Federal program. So we are
going to look very closely at that.
I have got a study due by this summer which will try and
overlay on a county-level analysis of the country where are
indications of drug abuse in the United States. I am reasonably
sure that that analysis will tell you what you already know
anecdotally and by Arizona data, that you have got a huge
problem which probably could be supported by HIDTA designation.
But we have to be a little careful. I have got nine regions
have now submitted applications for new HIDTAs.
Senator Campbell. How many was that, nine regions?
General McCaffrey. Nine more. So let me go look at them,
get an analytical response, and come down and give you my
recommendations. But I think basically this is a good payoff
for the American people.
Senator Kyl. I can tell you anecdotally, the law
enforcement community in Arizona, from all of the different
Federal agencies, to all of the different State and county
agencies have told me that they have never come together before
in the way that they have in support of the HIDTA. The HIDTA
program actually was the cause for them to come together really
for the first time ever in the cooperative, coordinated way
that they have.
It has been a tremendous benefit, and they all, I think,
have recognized that it was the HIDTA, the one HIDTA that we
have, that brought them together. So I can provide at least
that anecdotal support for the benefits of the program.
As I say, I hope you will look very carefully at the
recommendation for the second one. It was not done lightly. It
has the support, as I say, of the existing HIDTA. They simply
see it as a little better division of the responsibilities to
address the problem.
The second question I have results partially from meetings
that I just came from. I think it might be interesting for
Senator Dorgan, coming from a State that you do that is not
highly populated, on the Canadian border--and, incidentally,
you have talked about treatment. I share all of those thoughts.
Now here is another perspective of another area of the battle
that we have to fight.
In fact, General McCaffrey, you called it shield America's
air, land, and sea frontiers from the drug threat. Well, we
have got a very leaky shield, as you know.
On my border, the border with Mexico we have got a huge
problem, and here is just an illustration. I do not know the
population of some of your border communities in North Dakota
but think of this. Just in the month of February, the last
month that we had here, 49,000 apprehensions of illegal
immigrants just in one sector. This does not even count the
Yuma area, which is over by California. It is just the sector
south of Tucson.
Douglas, Arizona, a sleepy little town, is the hottest spot
for illegal crossing in the country now. And the people coming
across are carrying a lot more drugs than they ever used to.
Many of them are now being used by these coyotes to carry them
on their backs. And they are much more violent than they used
to be.
So 49,000 just in one month. Average daily, just in this
sector--not the whole border--in Arizona is over 1,500 a day.
And of course, there is no estimate of how many they miss, but
it is clearly at least twice that many. So we have a very
porous border.
Now, General McCaffrey, my question is this. Because you
have such an outstanding reputation as fighting for what we
need to win this war on drugs, and since a key component of it
is providing this shield on our border, I would like to know
your view of the Administration's budget request of exacting
zero funding for new Customs agents and new Border Patrol
agents.
I think you have stated in the past that our Border Patrol
levels, the quotation I have is, are completely inadequate to
patrol the 2,000 miles of U.S. border with Mexico. We are doing
better with the training of some new agents but it is still
very porous. And the statistics that I have here show that
between 50 and 70 percent of illegal drugs enter through the
southwest border.
So I would like to get your views on the Administration's
budget request that there be no new funding for Border Patrol
agents for fiscal year 2000, as is required incidentally by the
1996 law that we passed to train 1,000 per year, and no new
funding for additional Customs agents or inspectors.
BUDGET CHOICES
General McCaffrey. It is a question I rush to avoid. We
have obviously got a zero balanced budget. You know, there were
some hard budget choices made. I would be glad to provide this
committee with the budget I certified at agency level and the
budget I certified at department level by function. It is
clearly our own view--the Border Patrol requested initially
money for additional agents, and Customs Service in my
impression needs to be right-sized.
What we have completed is a study on how we provide a
better coherent defense of America on our southwest border. And
it is a bit stuck now in the interagency debate with two
components. One is the intelligence piece, which we have
completed. We have done the analysis. Director Tenet, the
Attorney General and I now owe the President our recommendation
on how do we get the intelligence system better support, Border
Patrol sector commanders, DEA SACs, Customs SACs, et cetera.
I think we know how to do that, but I am going to have to
get some kind of a package together and give it to the
President before summer comes around. Some different
viewpoints, but I think we will achieve consensus.
We also have a white paper on how to better organize the
southwest border. In my view, the Border Patrol and Customs
Service have to have the right technology, manpower, and
training, and organizational concept to do their job. There is
no sense in pounding on the Customs Service for failure to find
heroin and cocaine in trucks unless we give them the tools that
will achieve their purpose, which we have not done.
I do not think this budget necessarily reflects long term
wisdom, but I do believe we will be better off, and I finally
got a document to the President that says, here is what we
recommend you do. I have used some figures to finally stimulate
the debate which said the Border Patrol probably ought to be
20,000 people. It was 3,000 when we started. It is 7,000 now.
But that ought to be the product of analysis, not me asserting
that that is probably about the minimum size to protect 12,000
miles of U.S. frontier, to include Canada.
As we succeed in the south, drugs are going to get pushed
around. The Vancouver corridor now is a major drug smuggling
route. So we have got to look at this, and the amount of----
Senator Kyl. But, General, may I just interrupt you. I hate
to do it. But you have been so effective in cutting through the
baloney. You are a get-the-job-done guy, and I have supported
your efforts because you have the right attitude toward this,
you are committed to it, and you have done a lot of good, and
you have come up with some great, innovative programs.
But here is the situation where we do not need any more
analysis. You had it right. At 7,000 we do not have too many. I
mean, we do know that; we do not have too many.
We passed a law in 1996 that said we were going to train
1,000 per year for five years and then take stock of where we
were. The Administration put exactly zero money in to fund that
law.
Now their response is not that we need to do a white paper
or a study, or that we do not need the people. The response is
that it is hard to recruit that many people. So the answer is
to put zero money in the budget? How about taking an idea from
what we just passed last week with our Soldiers and Sailors
Relief Act, you could probably teach us all here a lot about
what it takes to recruit and retain top quality people in the
military to do the job. We finally figured out that we needed
to put some money against that problem, and we have taken our
first steps toward doing that.
So if $18,000 or $20,000 a year is not enough for a new
border agent--and it clearly is not--the answer is not to say,
we are not going to put any more money in the budget for
training anybody this year because it is awfully hard to
recruit them. We have just sort of run out of recruits. The
answer is, fine, does it start a $25,000 starting salary or a
$30,000 starting salary? How much more in a few millions of
dollars would that add to our budget? And therefore, how much
more successful could we be?
I know this is not your job. But I urgently request you, I
implore you, because your job is dependent upon the successful
funding of these other two programs, in part, to weigh in on
this and say, from my perspective it is not adequate to have a
zero funding for Customs and Border Patrol agents.
Now to the Administration's credit, there is money for
technology for Customs, which you rightly point out we need
more of. That is great. That is fine. But you need more agents
too. When we have a two-day wait on our border--two days--that
is not acceptable. And when we have the kinds of things going
on on our border that I just articulated, it is not acceptable
to say, we need a time-out until some more people decide that
they want to join the ranks of the INS or Customs Service.
So I urge you to go back and tell the Administration to
take another look at this and support our efforts to try to put
more money in. Here is our problem on the Appropriations
Committee. I go to Fritz Hollings and Judd Gregg on another
subcommittee and say, would you put some money in? Well, what
did the Administration request? They requested zero.
Well, Judd Gregg comes from a State, and Fritz Hollings
comes from another State that are not too tied in with the
southwest part of the border. But Senator Feinstein and I were
just having a meeting and we are going crazy trying to figure
out how to get a handle on this in our own States.
So I just have to ask you, would you please make a request
of the Administration to take another look at this and to
understand that they are not providing this shield that you
talked about if they have zero funding for two of these
critical elements of the effort.
BORDER ISSUES
General McCaffrey. Senator, one thing I think we ought to
underscore is this is not a problem of the four border States.
Colorado is on the front lines of drug smuggling out of Mexico.
Senator Kyl. Absolutely.
General McCaffrey. So I try to make the case, this is not
the four border States' problem.
Senator Kyl. Absolutely.
General McCaffrey. I think the second argument, perhaps
that has bothered me, is the notion of having the right culture
to these Federal law enforcement agencies that protect the
country. There is no reason we should ever say that there are
not lots of young Americans who would not be proud to serve in
uniform in the Border Patrol protecting America's frontiers,
and not just as an anti-immigration force. This is Federal law
enforcement, protecting U.S. laws along our frontiers.
So I do not believe that there are not lots of people who
would be glad to serve for five years in uniform in Eagle Pass,
Texas or in Douglas. I think part of it may be money. Part of
it is recruiting. Part of it is having their own identifiable
culture. Part of it is getting the Border Patrol having a
uniformed service staff here in Washington responsible to
civilian authority.
We have some work to do. And I agree with you, I do not
think the current approach is adequate and we had better
organize it in the two years we have remaining.
Senator Kyl. Thank you.
Thank you, Mr. Chairman.
Senator Campbell. I have gotten a little confused listening
to that dialogue. As part of last year's deal to strike an
effective budget deal there was a last minute push for a
significant amount of emergency drug funding. As you remember,
$280.7 million according to my notes. I understand agencies
like the Customs Service are still trying to figure out a plan
on how to spend it because they had not anticipated that
additional money.
Can you comment on that?
General McCaffrey. It is a little more than $800 million.
The supplemental appropriation, a little more than $800
million, of which we scored a little more than $600 million as
drug related. We were involved in some pretty intense
negotiations on that in the five or six days--the $870.2
million of which $843.9 million was scored as drug related by
us.
A lot of that is going to be a tremendous contribution of
the American people. So I finally signed up for it. It was done
hastily. It was ill-advised. It was not done with analysis by
the executive branch. Some of this concerns me. Money for
Customs P-3 aviation. The appropriations bill was okay. The
authorization bill put 30 P-3 aircraft into the Customs Service
in the coming three years.
Senator Campbell. That was additional aircraft?
General McCaffrey. Aircraft, Coast Guard ships, radars. We
got some of it diverted to the southwest frontier. We tried to
work with them. The appropriations was not completely out of
line, but let me just state that we are about to create the
second biggest air reconnaissance force on the face of the
Earth, will be the U.S. Customs Service. The biggest will be
the U.S. Air Force. The third will be the Soviet Air Force,
former Soviets.
Senator Campbell. Do you have the manpower to run all that?
General McCaffrey. I have asked them to show me their
basing concept, their operational concept, their maintenance
concept, their manning and training. Where are the MOUs to co-
base with the Navy? How much will they charge them?
Senator Campbell. Senator Kyl's problem is a manpower
problem. Cannot some of those resources be transferred under
your own authority to manpower from some of that hardware?
LOGISTICAL ISSUES
General McCaffrey. We put a piece of appropriations bill
out that can be worked with. I mean, again I did not feel that
this was a fall-on-your-sword issue, but this is not the way to
do public policy. I have asked the Customs Service--they have
had two briefings for me that I found inadequate--to go get
RAND Corporation or somebody and hire a bunch of Air Force
retired colonels to go do a study and tell them how they are
going to employ this amount of machinery.
Where is it going to be parked? What are you going to do
with it? How you are going to maintain it? How are you going to
train the manpower?
This is a huge operation. And oh, by the way, the drugs are
not in the air.
Senator Campbell. That is right.
General McCaffrey. If you gave me this amount of money in
cash, I would not have spent it on P-3Bs. The drugs are on
small boats going into the coastal Central America and coming
through Mexican-U.S. border.
So we just have a screwy way of doing public policy here
and we are going to need to be a little careful about it.
If you want to spend money, you need to buy $3.5 million
non-intrusive x-ray technology back scatter radar devices and
give the Border Patrol, the Customs Service, the DEA, the HIDTA
program, the manpower to do their job. That is not to argue
against a robust air interdiction effort, but there are
probably different ways we would go about it if you asked me
for a recommendation, which is really what we are supposed to
do.
Senator Campbell. Clearly, I am sure I can speak for
Senator Kyl and I both, that we need to work with you and the
Administration in supporting the Customs Service.
General McCaffrey. This was the Senator DeWine-Congressman
McCollum bill. Again, you know, they are good people but it was
done in haste with inadequate analysis.
Senator Campbell. Let me just ask you the last question and
that is the staff attrition rates within ONDCP. As I understand
it, your attrition rate is around 18 percent, which sounds very
high. What is the cause of that high attrition rate and how are
you going to address it, if you could tell me that?
ONDCP STAFFING
General McCaffrey. We are fortunate--we have 124 people;
124 civilian employees, 30 detailees. We have recruited
probably some of the best people I have never seen in
Government. There are 30 or more applicants for secretarial
positions in ONDCP. We are also a separate line item
appropriation. So we have had great results in the quality of
the people we get.
I think we have had 24 people depart. Half of them left
because they got promoted. We are a great place to go fish out
a GS-15 and----
Senator Campbell. They did not just leave Government, they
are working for other agencies now?
General McCaffrey. No, half of them got promoted. One got
pregnant, one was a termination, two retired----
Senator Campbell. What was the termination for?
General McCaffrey [continuing]. One died. So we are really
very blessed with the quality of the people. But we do not have
any upper growth potential is one problem. So if you want to be
an SES I have got to help you get a job in another agency.
Plus, it is pretty tough work. I mean, this is not a sleepy
hollow. We are working seven days a week, and this is tough
going.
Senator Campbell. Try running for office. [Laughter.]
Senator Dorgan, did you have any questions, that was the
last of my questions.
Senator Dorgan. Let me ask just a question. It is not about
funding but it is probably you expect on the issue of
certification, because that relates to the question of how much
money we need to spend and how we spend it. The certification
of Mexico and Colombia, you know, in the newspaper this morning
they were quoting the DEA Chief Constantine and his statements
about Mexico.
Are you comfortable with all of this? I know there is a lot
of politics about all of this. Some people kick this all around
for political reasons. Others kick it around for other reasons.
I think some of us just are curious whether this whole
certification process is good policy, number one. But second,
as long as we have it and are certifying countries like Mexico
and Colombia, whether it is on the level.
So are you comfortable with these certifications?
CERTIFICATION
General McCaffrey. It has been interesting to me. I have
worked the Latin American region off and on a good bit of my
life, and although I have a great sense of humility on what I
do not know, I have been every foot of the ground from
Patagonia to the U.S.-Mexican border. I speak atrocious
Spanish. I know all the political-military leadership.
The day I got sworn in at 9:00 in the morning, March 1
three years ago, at 10:30 we did the certification. And the
President, thankfully, appointed me the head of the U.S. High
Level Contact Group to go work the Mexican issues. I say that
because two years earlier Dr. Perry, who is one of the greatest
people I have met in public life, and I were the first two to
set foot in Mexico, the first SECDEF, the first U.S. CINC that
ever went down there, and against the advice of all U.S.
authorities. Said do not go there, there is tremendous official
animosity.
So I have worked this for five years now. And the
certification process, as a Federal law, is something I do not
comment on. I am going to comply with it. And there are two
pieces of it, and I have looked at the two pieces. You look at
a foreign majors list identified country, you say, are they
trying to achieve the objectives of the 1988 Vienna Convention,
number one? And number two, or are they trying to cooperate
with the U.S.? They do not have to do the second if they are
doing the first.
When you apply that standard, it is not how well are they
doing, it is are they trying to achieve those objectives?
By the way, if you applied the same rule to us you would
have to ask, is the U.S. serious about drug abuse? Of course we
are. Have we achieved drug eradication, drug abuse rates,
criminal conduct, et cetera?
Senator Campbell. That is exactly the point. They cannot
achieve theirs unless we achieve ours. We are the buyers.
General McCaffrey. There is a lot of creative hypocrisy in
this. We are the ones spending $57 billion a year on illegal
drugs, and the engine sucks drugs through Mexico and the
Caribbean. And the corrosive impact of violence and corruption
on democratic institutions in the hemisphere as well as our
own, in border communities in particular, is atrocious.
Now let me, if I can, give you two snapshots. When Dr.
Perry and I went to Mexico five years ago, I think it is not
much of an overstatement to say that--not in the economic and
political areas, but in drug cooperation, military to military
cooperation, there was zero. It was absolutely absent. And in
the space of five years we have gone to--Mexico has gone
through revolutionary change. It is incredible.
We now train military, navy, the Coast Guard and the
Mexican navy cooperate at sea. We exchange intelligence.
Although they are uncomfortable when I talk about this in
public, we have Customs aircraft parked on the ground flying
out of Mexico. They allow us to fly through their airspace with
their permission; 85 percent compliance rates. They let our
Coast Guard and Navy go in and refuel in their ports with less
than 24 hours notice. There is an enormous amount of
cooperative effort going on.
But unfortunately, Mexico is--President Zedillo and these
incredibly good people that are trying to reorganize Mexico's
future are pulling on levers that are attached to institutions
that are inadequate. So I have got some sympathy. The
cooperation at the highest levels is excellent. I have great
admiration for the Mexican police and army, who lost their
lives in trying to protect Mexico. But there is a lot of
problems.
Senator Dorgan. But, General, I respect that, and I also
respect the notion that the demand in this country is what
creates the giant sucking sound in this direction for drugs. I
respect that. But just two weeks ago in the Washington Post it
says, senior Administration officials said that drug corruption
in Mexico has reached unprecedented levels. The Mexican
government has made little progress in combating.
So when you are answering effort, I am asking what has been
the result.
General McCaffrey. The result is increased cooperation with
Mexico, almost dramatic in nature. But we are looking at
Mexican law enforcement and judicial institutions that are
threatened by incredible levels of violence and threatened by
internal corruption.
TREATMENT IN PRISON
Senator Dorgan. I appreciate your answer. Let me just ask
one quick small question that relates to the issue of drugs in
prison. If an addict, drug addict, heroin user is sent to a
Federal prison, any one of the Federal prisons today, will that
addict be required to take treatment for that addiction in a
Federal prison before the addict is released?
General McCaffrey. Let me give you a response in writing,
but the answer is yes, we have mandated that. The Department of
Justice Director has a mandatory drug testing program in the
Federal prison system, and in theory we have drug treatment
available. I do not believe though that that is an adequate
response. I think some of them have better programs than
others. Very few----
I would also caution you, Federal prisoners do not tend to
be the compulsive drug user. They are traffickers. So we have
got 60,000-some-odd people behind bars in the Federal system,
but a lot of them had a ton of pot. So the Federal prison is
not where these people end up. They end up in State and local
incarceration.
Senator Dorgan. The reason I was asking about the Federal
prison is if you are proposing a mandate on State and local
authorities, they will say, what are you doing at the Federal
level?
My thought is that States, all of the States provide good
time off for good behavior for all criminals, even violent
criminals, and many of them provide very generous good time
off, as you know. I have been trying for some while to connect
that good time to some positive result, one of which might be
that if you are addicted, you do not receive good time credits
unless you go through a drug treatment program.
General McCaffrey. Absolutely.
Senator Dorgan. End of story. Now that would be a mandate,
but a mandate it seems to me that would be very worthwhile.
General McCaffrey. Yes. There is considerable amount of
Federal money in there. One program, which is dying out, was
the Federal prison construction fund. That 10 percent of those
funds, if the State requested, could be diverted. But the
program is tapering to zero. So there is other money----
Senator Dorgan. We have other money with which to connect
that mandate. I know the Senate would have a significant debate
about that, but the question of whether we allow good time
credit against sentences in the entire criminal justice system
seems to me ought to relate to a couple things, one of which
ought to be if you are addicted, you have drug treatment before
you are able to be released early under good time credits.
Well, I appreciate your appearance and it is a pleasure to
have the opportunity to visit and work with you.
SUBMITTED QUESTIONS
Senator Campbell. I might mention before I ask Senator Kyl
for any closing questions that I introduced a bill dealing with
certification last year. We are trying to rewrite it this year,
and I have not been a real big supporter of this sort of
unconditional certification. The bill that I introduced would
have given a conditional certification but could be withdrawn
if they did not reach certain targets. We are trying to rewrite
that. You might want to look at that, Senator Dorgan, and work
with me, too.
Senator Kyl, did you have any additional questions?
Senator Kyl. No. Thank you, General.
[The following questions were not asked at the hearing, but
were submitted to the office for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
travel
Question. Which Specific Account Will Be Covering the Estimated
$68,000 in Costs Associated with Your Recent Four-day Trip to
Switzerland to Attend a Meeting at the International Olympic Committee
Anti-doping Conference?
Answer. All costs associated with my trip to Switzerland were paid
from appropriated resources in ONDCP's Salaries and Expenses account.
Question. While Attending this Conference, You Promised the Federal
Government Would Provide $1 Millon in Funding to Assist the IOC in Drug
Testing That Would Come from ONDCP. Is this $1 million Included in Your
fiscal year 2000 Budget Request, If So from What Account Is it Being
Funded?
Answer. No, the fiscal year 2000 request does not include a request
for $1 million. The $1 million we set aside from the fiscal year 1999
CTAC $16 million base R&D program. The $1 million will be used to study
innovative approaches to testing athletes for drug abuse and
performance enhancing drugs. The results of the research projects will
be made available to the USOC and the IOC. One extremely interesting
areas of research has already been identified the potential to develop
an assay instrument capable of indicating combinations of drugs which
were previously not known as performance enhancing drugs.
media campaign corporate sponsorship
Question. The Current Law Requires That ONDCP Secure Corporate
Contributions Equal to 40 percent of the Appropriated Amount of the
Campaign for That Year, or $74 million. What's the Status of this
Effort? How Does ONDCP Anticipate Meeting the Mandated Sponsorship of
40 percent? If So How?
Answer. Since the National Youth Anti-Drug Media campaign began,
ONDCP has received almost $218 million in public service and in-kind
contributions from corporate America. These contributions have come in
the form of media time and space, programming, ad creation and
production costs, educational materials, interactive services such as
design and maintenance of web sites, film, cash and other materials or
services.
While ONDCP believes corporate support of the media campaign will
continue to grow, we do not believe that it will reach levels recently
expected by Congress. We are also concerned about adding new
requirements in appropriation language after the campaign has been
planned and launched.
When Congress first appropriated funds for the media campaign in
fiscal year 1998, it identified seven concerns or stipulations that
were to apply to the operation of the campaign. One stipulation was to
ensure that ONDCP's campaign not undermine existing public service
contributions from media contributions which had been steadily
declining largely because of competitive and structural changes in the
television industry. To ensure that ONDCP's campaign would not further
contribute to this decline, ONDCP established the concept of a ``public
service match'' which became part of its negotiating position with each
media outlet. When media time or space is purchased on a network or
local outlet, the media must also provide an equivalent dollar for
dollar match in public service contributions. This can come in the form
of public service time or space, on-strategy programming, educational
programs or materials for youth and teachers, community anti-drug
events, etc. This past year, ONDCP's media buyers negotiated an average
of 107 percent value in public service contributions. All of the public
service time was shared with 33 drug-related non profit organizations
such as America's Promise, Mothers Against Drug Driving, The Fatherhood
Initiative, the National Crime Prevention Council, and the Partnership
for a Drug Free America.
We want to emphasize that the concept of a ``match'' was ONDCP's,
and it was created specifically to safeguard public service messages of
other organizations. Additionally, in initial appropriation language
there was not a specific dollar fundraising goal, nor even an
indication that the phase ``private sector participation'' meant cash
contributions.
The difficulty comes now when language in our appropriation calls
for very large sums of corporate support in addition to the support we
are also receiving from corporate America from the pro bono match. Each
of the several experts with whom we have consulted on this issue
believes the specific goals set in the most recent appropriations
language are not attainable without the pro bono match given the other
requirements and restrictions on the campaign.
ONDCP is however, issuing a Request for Proposals for a Corporate
Involvement contractor. This is expected to be announced in May with an
award in early fall. The contractor will develop a corporate
sponsorship effort (to raise funds), and a range of corporate
participation efforts. ONDCP believes that corporate participation is
often even more valuable in attaining the objectives of the campaign
than financial contributions. For example, reaching parents through the
workplace is a key strategy and campaign goal. If a large corporation
would agree to a drug prevention/parenting strategy education program
for its employees, it would be particularly effective from both a cost
and impact perspective, much more so than an equivalent cash
contribution.
pro bono match for campaign ad time
Question. In Your Budget Submission, You Listed That The Campaign's
Purchases of Ad Time Has Generate a 109 percent Match of Donated Public
Service Time Being Shared With Non-profit Organizations With Other
Drug-related Messages. Of This 109 percent Match, How Much of This Is
Resulting From Direct Intervention/activity by ONDCP? What Portion of
These Matches Have Been Non-paid Commercial Ads And What Is Their
Dollar Value? How Has This Effort by ONDCP Increased or Decreased The
Public Service Time in The Market And by How Much? How Do You Verify
this?
Answer. We have received well over 100 percent matching
contributions from media vendors from whom we have purchased ads. This
has ensured that the Campaign is helping public service efforts that
target the risk factors that make youth drug use more likely--such as
early alcohol use--and the protective factors that help prevent drug
use--such as mentoring.
The Campaign has provided Mothers Against Drunk Driving, the
National Council on Alcohol and Drug Dependency, and the Department of
Transportation with public service time, derived through the Campaign's
match component, to attack both underage drinking and drunk driving.
Since July of 1998, the National Council on Alcohol and Drug Dependency
effort against underage drinking benefitted from 2952 individual PSAs
(including network, local and cable TV, and radio), at a total value of
$1.17 million. Similarly, during this period the Council's effort
against drunk driving benefitted from 2,369 spots, at a total value of
$6.14 million.
Other organizations that help America's young people grow up safely
and lead productive lives are also seeing the benefits of the Campaign.
For example, the National Crime Prevention Council received 6,078
spots, at a total value of $8.3 million. General Colin Powell's
organization, America's Promise, dedicated to improving the lives of
our young people, benefitted from 1,014 spots, at a total value of $2.5
million. The 4-H's youth mentoring initiative has received 3,226 spots,
at a total value of $3 million. The ``I Am Your Child'' parenting
initiative saw 744 spots broadcast, at a value of $2.1 million. As
these results from just the last seven months clearly show, the
Campaign is increasing America's awareness about both the protective
factors that help our children grow up drug-free, and the risk factors
that can increase their chances of suffering a drug problem.
The only scientific measurement of PSA play is done by the AD
Council utilizing electronic monitoring. They have reported a
significant increase in the PSA play as a result of the media campaign.
Further, ONDCP media buyers indicate when they negotiate for time and
space that public service time for other issues must not diminish as a
result of ONDCP's media purchase. The purpose of this policy is to
further safeguard public service time for other issues.
technology transfer program to state and local law enforcement
Question. How Do You Propose to Meet the Outstanding Need of the
State and Local Law Enforcement Given the Request Is Only $3 million?
Can You Explain Why You Only Requested $3 million to Fund this Program
in fiscal year 2000?
Answer. State and local law enforcement officials become aware of
the technology transfer program through our one-day workshop outreach
program. The program's success can be measured by the enthusiastic
response of state and local law enforcement officials to the technology
demonstrated at the workshops. Understandably, it will be impossible to
satisfy more than $3 million of the applications processed from their
organizations. We will depend on the program's regional law enforcement
experts and technical review specialists to select the organizations
which will receive transfers of technology.
In fiscal year 1999, the President's budget request included
language acknowledging the existence of the technology transfer program
without requesting an appropriation. Congress responded with a $13
million appropriation. This year the President's fiscal year 2000
budget included $3 million for the program. While the President's
fiscal year 2000 budget submission was being prepared, several more
workshops were conducted which resulted in $59 million of applications
for technology to improve their capabilities to defeat drug crime. To
prevent raising expectations beyond the program's ability to meet them,
we will cut back holding workshops.
national drug strategy goal
Question. The current drug strategy goal is that the US, through
your office, will reduce drug use and availability by 50 percent by the
year 2007. Given this, has drug use and availability declined by 15
percent since 1997? At the current rates, are you on target to meet the
Strategy's goal of a 50 percent reduction by 2007? If you're not
meeting your goal, then how do you expect to make up any shortfall by
2007?
Answer. The two targets referred to are Impact targets that reflect
the overall effect of national drug control activities upon drug use
and availability. These are ``stretch targets'' representing normative
end states to motivate the drug control community to ``stretch'' beyond
previous performance levels. We have been developing action plans, with
over 200 interagency representatives, on how best to achieve each
target. We plan this year to incorporate state, local, and private
sector input into these action plans. By integrating the budget and the
evaluation, we will increase the likelihood of target achievement.
With respect to measuring progress toward achieving these targets,
we are using a variety of data sources. It is important to note that
for any data system there are lags in reporting. In most cases the most
recent data for a measure is 1996 or 1997. For tracking drug use, we
are relying primarily upon the National Household Survey on Drug Abuse
(NHSDA). The NHSDA is conducted annually by the Substance Abuse and
Mental Health Services Administration. Preliminary data for any given
year are typically available by August of the following year (e.g.,
Data collection for 1998 ended in December; preliminary data will be
available in August 1999). The most currently available data are for
1997. For drug availability we are developing estimates based on drug
flow models. We are developing estimates of the availability of
cocaine, heroin, marijuana, and methamphetamine, from cultivation/
production, through the transit zone, to the U.S. border, and
ultimately to distribution within the United States. We anticipate
having estimates based upon these models by the fall of 1999.
performance measures of effectiveness
Question. Last year, your office launched the Performance Measures
of Effectiveness to rate federal agencies ability to succeed in
national drug control efforts. As you've begun to put these measures
into place, are the measures assisting you in determining where further
work needs to be done and are the agencies you are rating both
receptive and compliant? What programs have you eliminated because they
are determined ineffective based on your standards? Which programs show
the most promise based on your rating?
Answer. The Performance Measures of Effective (PME) System
indicates the extent of progress made by the national drug control
community towards the 97 performance targets that reflect desired end
states for the Strategy. Since the system constitutes an aggregate
assessment of the entire drug control community, it does not separate
out the effect of federal, state, local, private or international
efforts. It does not, therefore, provide a report card on any
individual federal or non-federal agency (the Annual GPRA Progress
Reports submitted by each agency represent such reports.)
The PME System has begun showing where further work needs to be
done through the Action Plans that were drafted for the first time in
1998. For each target (or group of targets) a team of federal agency
experts determined, first, what factors were known to influence the
achievement of the target (for instance, peer pressure, media messages,
etc. known to affect youth perception of drug use.) This logic modeling
exercise then proceeded to identify efforts already in place (e.g., the
Media Campaign) and areas where further effort was needed (for
instance, to influence Internet messages.) These preliminary ``Action
Plans'' reflect the first time federal agencies have collaborated to
plan out the best way to achieve specific, measurable long-term
targets. This exercise will be further refined this year through the
explicit incorporation of state, local, and private sector ideas and
efforts. At the end of 1999, we will have intergovernmental action
plans that will lay out what needs to be undertaken by whom. Until this
is completed, agencies will not have reason to be compliant or
otherwise. This process should be greatly facilitated by the
integration of budget and evaluation this year.
In the meantime, we shall continue to monitor progress towards the
targets, initiating interagency program evaluations in situations where
trend data indicate that intended targets have not been met.
Performance measurement experts recommend a monitoring period of a few
years before action is taken so that we can analyze whether the data
indicates a trend or merely a random occurrence. It also reflects the
high expense of conducting in-depth program evaluations to identify
what led to failure: errors in the underlying logic, poor program
management, insufficient funding, etc. The decision to alter the
funding of a program is one that should be taken only after interagency
evaluation following accepted methodological standards.
shout program funding from fiscal year 1999
Question. In Last Year's Appropriation Bill, We Provided a Line
Item to The Shout Program Through Your Appropriation. Shout Stands For
Stay Healthy--oppose Using Tobacco And Is a Partnership Between
Schools, Students, Local Businesses And County Health Services to
Encourage Youth Between The Ages of 10 And 18 to Avoid Using Tobacco.
Can You Provide The Status of The Funding And What You Are Doing to
Resolve Any Outstanding Issues?
Answer. In last year's appropriation bill, the line item for the
SHOUT program could not be accommodated, as neither ONDCP not its
procurement agent have direct grant-making authority within the
salaries and expense account.
staff attrition rates at ondcp
Question. In last year's conference report, the Congress included a
provision for you to detail your attrition rates of employees at ONDCP,
which you have submitted and it shows your attrition rate is 18
percent. What is causing this high attrition rate? What are you doing
to address it? For example have you put a program in place to deal with
this problem?
Answer. It Is Accurate That ONDCP's attrition rate in 1998 was 18
percent. To provide some context for this figure, overall attrition
rate in the EOP for calendar year 1998 was 20.99 percent. ONDCP
accounts for just 6 percent of the overall rate.
We acknowledge that there is a threshold rate of attrition in any
demanding, highly-specialized agency like ONDCP. Given the robust
qualities of the economy in the greater Washington area, ONDCP
personnel are occasionally recruited to other professional
opportunities.
In this current fiscal year the ONDCP personnel selection process
is still moving forward in an aggressive manner and consistent with
Federal civil service laws and regulations.
drug free communities act (dfca) fiscal year 2000 request
Question. While The Budget Caps For fiscal year 2000 Severely
Constrain The Amount of Funding Available For Discretionary Programs,
The DFCA Warrants an $8 million Increase Over The President's fiscal
year 2000 Requested Level. The Community Coalition Approach Has Proven
Effective in Reducing Teenage Drug Use in Communities Around The
Country, And This Additional Funding Will Allow Hundreds of Additional
Communities to Build And Sustain Effective Efforts. If DFCA Has Proven
Effective, Why Are We Reducing Funding by $8 million?
Answer. During the preparation of the President's fiscal year 2000
budget, ONDCP requested the full authorized level--$30 million--for the
Drug Free Communities Program. Budgetary limitations necessary to meet
balanced budget legislation requirements and other competing priorities
led OMB to initially reduce that amount to $20 million. The Director
interceded directly with the President and the amount was ultimately
raised to $22 million, a $2 million increase of fiscal year 1999. ONDCP
shares the committee's view on the importance of the Drug Free
Communities Program and looks forward to working with the committee to
find opportunities for the program to reach its full potential.
drug free communities act grants
Question. With Regards to the Letter That Went out February 10,
1999 Announcing a 25 percent Reduction for Grantees Renewing Grant
Requests: Who Determined Their Would Be a 25 percent Reduction for 2nd
Year Grantees? Under What Authority Were These New Guidelines
Implemented? Was the Advisory Commission Consulted? How Can These
Reductions Be Explained If the DFCA, the Act Clearly Authorizes
Matching Grants of up to $100,000 for Communities That Can Raise the
Dollar for Dollar Local Match?
Answer. The policy of awarding second-year continuation grants of
up to 75 percent of the original award, and third-year grants of up to
50 percent is completely consistent with both the original authorizing
statute, congressional intent as represented in House report language,
and the recommendations of the Advisory Commission on Drug-Free
Communities. The law leaves to the discretion of the program
Administrator the amount of renewal grant award, as well as the
decision as to whether a renewal grant is to be made. Section 1032(b)
IA(3i) of Public Law 105-20 states that ``The Administrator may award a
renewal grant to a grant recipient under this subparagraph for each
fiscal year following the fiscal year for which the initial grant is
awarded in an amount not to exceed the amount of non-Federal funds
raised by the coalition, including in-kind contributions, for that
fiscal year, during the four-year period following the period of the
initial grant (italics added).''
Congress clearly envisioned hat the purpose of Federal support was
to leverage ongoing local support for community coalitions. In the
conference report accompanying H.R. 956, the Committee on Government
Reform and Oversight stated, at page 19:
``The Committee wants to maximize the utility of Federal resources
so that a smaller amount to Federal support tracks strong local
commitment and financial support. The Committee believes that the
Federal government should be providing support to those communities
that have efforts that are effective and substantial, not be a
substitute for local community effort. It is hoped that Federal
financial support will act as a catalyst to enhance what communities
are already doing well an to spur the creation of other sustainable
community anti-drug efforts.''
The Advisory Commission on Drug-Free Communities discussed the
issue of continuation grants at their inaugural November 23, 1998
meeting. At that meeting the members of the Commission heard a
presentation by Shay Bilchik, Administrator of the Office of Juvenile
Justice and Delinquency Prevention (OJJDP), ONDCP's interagency partner
responsible for the execution of the grant program. Mr. Bilchik
recommended to the Commission that renewal grants be funded at 75
percent of the initial grant. After some discussion, the Commission
advised the Director, ONDCP, that, in the words of the minutes: ``The
award should decrease each year and the match should increase each
year.'' ONDCP agreed with this recommendation, and so informed the
Commission in a February 17, 1999 letter from Deputy Director Donald
Vereen. We subsequently receive no correspondence or phone call from
Commission members indicating either that we had mischaracterized their
recommendation, or that the continuation grant policy was unwise.
In addition to encouraging coalitions to leverage sustainable non-
Federal support for their activities, our continuation grant policy
frees up Federal resources with which to assist other coalitions. For
example, in fiscal year 1999 we will be able to fund an estimated 26
additional community coalitions over and above what could have been
funded if continuation grants were at the full first-year levels. This
approximately 25 percent increase in the number of grants awarded
would, over the five-year authorization of the program, result in overs
180 additional coalitions receiving support. Each state potentially
will benefit from this greater number of Federally-assisted coalitions.
Smaller grant awards would be unaffected by the continuation grant
policy. Awards of $50,000 or less would not be reduced in the second
and third year, and awards of between $50,000 and $66,000 would be
reduced to no less than $50,000.
Our goals for the Drug-Free Communities Program are identical to
those of the Congress: to strengthen and proliferated effective, broad-
based community anti-drug coalitions throughout the country. We believe
that the policy on continuation grants will serve those ends.
fiscal year 1999 emergency drug supplemental
Question. The President's Budget Does Not Provide For Funding to
Hire Personnel to Operate Additional Customs P-3s And Citations as
Authorized in The Western Hemisphere Drug Elimination Act. If We Don't
Have The Money to Fund The Personnel to Fly The P-3 Aircraft, How Do
You Intend to Perform Goal 4 Interdiction Mission That Is Stated in The
ONDCP Drug Strategy?
Answer. The Western Hemisphere Drug Elimination Act (H.R. 4300 Sec
101.a.1-11) authorizes $886 million for the addition of 20 P-3 aircraft
to the Customs fleet. It also provides for an additional $71 million
for various purposes including the delivery of 10 Citation aircraft per
year in fiscal year 1999-01. The act clearly contributes to the
continued progress of U.S. efforts in the areas of Goal 4 (Shield
America's air, land, and sea frontiers from the drug threat) and Goal 5
(Break foreign and domestic drug sources of supply) of the President's
National Drug Control Strategy.
ONDCP supports the additional funding authority in the Western
Hemisphere Drug Elimination Act and the appropriations for six
additional P-3 aircraft contained in the fiscal year 1999 Emergency
Supplemental. These six P-3 aircraft are scheduled for delivery
beginning in fiscal year 2001 and ending in fiscal year 2002. ONDCP has
been assured that the fiscal year 2000 President's budget included the
necessary follow-on funding for implementation of policies and
operation of assets that were appropriated in the fiscal year 1999
Emergency Supplemental. OMB recently agreed to allow Customs to use the
fiscal year 1999 emergency supplemental money to hire needed new air
crews. The fiscal year 2001 President's budget is anticipated to
include funding to support the additional personnel that Customs may
require to operate the new P-3s as they join the Customs fleet.
The National Drug Control Strategy's Goal 4 interdiction mission of
shielding America's air, land, and sea frontiers from the drug threat
is being accomplished through the continuance and enhancement of U.S.,
bilateral, and regional interdiction operations. Initiatives are
underway to harness the potential of new technologies to improve
interdiction performance. Along the Southwest Border, U.S. interdiction
personnel are benefitting from the addition of new equipment, including
devices that employ non-intrusive inspection technologies. A
Relocatable Over-The-Horizon Radar (ROTHR) system is being installed in
Puerto Rico to augment our counter-drug surveillance capabilities in
the Caribbean and the Andean Ridge. Podded radar technology is being
developed for use by partner nations to improve their own drug
trafficking detection capabilities. These types of new technologies are
expected to have a significant positive impact on interdiction efforts
supporting the Goal 4 mission.
______
Questions Submitted by Senator Shelby
national media campaign
Question. Could You Please Tell Me Why ONDCP Has Selected Channel
One as a Main Outlet for the Anti-drug Message? Could You Please Tell
Me the Amount of Money That ONDCP Is Spending on the Channel One
Advertisements? Are the Prices for Air Time on Channel One Competitive
with Those of Other Advertisements? Are You Aware of Concerns Regarding
the Presence of Channel One in the Schools? In Light of the Fact That
Many Parents Are Troubled by Channel One, Troubled by the Presence of
Commercials in the Classrooms, Do You Think That it Is Appropriate for
ONDCP to Continue to Use Taxpayer Funded Resources in this Manner?
Isn't There Another Means That You Could Choose to Get Your Important
Message to School Kids Without Taking Time That Could Be Spent on
Academics. Couldn't ONDCP Target its Advertising in a Manner That
Compliments Rather than Competes with Our Schools? Rather than ``Bump''
Geometry with One of Your Commercials Couldn't You Interrupt Some
Commercial Television Programming in Order to Reach Kids?
Answer. ONDCP selected Channel One as a media outlet for our media
campaign for several reasons. First of all, it is perhaps the best
targeted of potential media vehicles: 8 million young people and
400,000 adults see the program every day. No other media vehicle (other
than the Super Bowl) reaches as great a number of youth in our target
age range. Moreover, because students watch Channel One in a school
environment, we believe they are more likely to take the message
seriously than if they were watching many of the shows on broadcast or
cable television, which may offer mixed messages and images about
illegal drugs. The context of a news program helps as well. For some
youth, the 10 minutes of current events they receive each day on
Channel One may be the only such information they receive, since they
do not read newspapers or watch TV news or public affairs programming.
Students discuss much of the material they see on Channel One with each
other and their teachers, a fact substantiated by the 99 percent
renewal rate among schools and other surveys. Additionally, Channel One
is very well represented in rural and inner city schools.
Although Channel One is economically competitive with major network
and cable stations, it in fact is a particularly effective use of
public funds since there is no ``waste.'' On Channel One, 100 percent
of the viewing audience is in the key target age ranges for the media
campaign; on commercial television there is always large portions of an
audience that are either younger or older than our age targets. Channel
One is in only middle and high schools and we are not paying a premium
for a wider, non target viewer group. Channel One cost per thousands
(CPM) of $34.73 is one of the most cost efficient broadcast CPMs (for
teens 12-17) when compared to Fox Broadcasting's $105.36 or WB's
$43.15.
We are aware that there are some groups that have taken issue with
the concept of putting commercials in the classroom. It is our
understanding, however, that from a national perspective most educators
who work with Channel One highly approve of the programming. The 10
minutes of current events, along with two minutes of commercials (many
of which are for health or other public programs) appear to be a minor
trade off for the benefits received. Further, the Channel One ``feed''
is typically seen during homeroom which has minimum impact on purely
academic subjects. While we do advertise on broadcast and cable
channels as well, we find Channel One particularly effective for the
purposes of this campaign. To us, anti-drug messages are as important
as other educational lessons and we do not see our effort negatively
impacting the education of youth. Each Channel One school receives
televisions for each classroom, videotape recorders and a satellite
dish to download a range of high quality educational programs for use
at the discretion of each teacher, including 250 hours of commercial
free Channel One programming each year. ONDCP has worked with Channel
One on some of these programs and we think the work is very accurate
and high quality. Additionally, for many schools in the nation,
particularly those in areas struggling with tight education budgets,
the services and facilities made available by Channel One make the job
of teaching easier since teachers can use the televisions and VCRs for
any educational purpose.
We are not aware of any current national studies that document
parents' attitudes about Channel One, however we believe most parents
support having our anti-drug messages in schools. Since Channel One is
an effective means of communicating such messages to kids, we believe
ONDCP's use of that delivery mechanism is an appropriate use of
taxpayer funds.
Last year ONDCP spent approximately $8.2 million on Channel One.
This was matched by 100 percent in public service, including some
outstanding programming on youth drug use issues. In the last year,
Channel One has produced six different 20 minute anti-drug feature
videos and 16 substances abuse news stories. Finally, on March 17,
Director McCaffrey participated in a Channel One Town Hall meeting
exclusively on illicit drugs. It was seen by the entire Channel one
audience and took the place of the regular 12 minute feed. A 45 minute
form of this session is available to any school in the county.
______
Questions Submitted by Senator Dorgan
drugs
Question. Do You Believe That the Report Compiled by the National
Institute of Medicine Will Radically Differ from the International
Narcotics Control Board's Recommendation?
Answer. Both reports are complimentary to each other. In February
1999, the INCB issued a report and renewed its call for additional
scientific research on the use of cannabis for certain medical
purposes.
Question. Isn't it True That Licensing and Other Control Methods
Used for Other Narcotic and Psychotropic Substances Would Move
Marijuana into a Pharmaceutical? Wouldn't That Eliminate the Issue You
Raise That Medical Use of Marijuana Would Send a Message to Our Youth
That Marijuana Is Good for You?
Answer. The active ingredient in marijuana is 9-tetrahdrocannabinol
(THC). If this drug or any other cannabinoid were re-scheduled as a
pharmaceutical and its delivery was provided in an appropriate clinical
setting via a medically approved device, the risk of sending the wrong
message to our youth might be minimized. On the other hand, if the
medicine is smoked marijuana itself, and the appropriate regulatory
processes for determining whether it was safe and suitable for medical
use are not followed, then ONDCP would be concerned about the message
that we are sending then to our youth.
Pharmaceutical development rests on a basis of sound basic and
clinical research before any drug can be deemed safe and suitable for
medicinal use. This research and development process is within the
purview of the Department of Health and Human Services.
Question. In the Director's written statement, he states that over
the past two years, youth drug rates have leveled off and, in many
cases fallen. However, ONDCP's document, Pulse Check National Trends in
Drug Abuse, reports an increase in young users of marijuana and a
continuing rise in the number of new, young users who snort or smoke
heroin. In addition, the Director's statement says that trends in drug
use indicate that 1997 drug usage is statistically unchanged from
fiscal year 1996.
Can ONDCP clear up what appears to be conflicting information? The
Director often suggests marijuana is a gateway drug--leading youth to
other ``harder'' drug usage. We have information that one-third of all
clients receiving treatment for marijuana abuse in all regions of the
country are under the age of twenty. Is this treatment effective? Are
there sufficient facilities providing this treatment? Is ONDCP
including treatment information in the materials you provide as part of
the media campaign?
Answer. Conflicting Information. The apparent conflicting
information stems from the fact that the information is drawn from
various sources that have differing methodologies, purposes, and time
frames. There are two main sources of youth drug use data in the
general U.S. population, the National Household Survey on Drug Abuse
(NHSDA) and the Monitoring the Future (MTF) study. Both are probability
based nationally representative surveys. The NHSDA, conducted each year
by the Substance Abuse and Mental Health Services Administration,
collects data on the noninstitionalaized U.S. population 12 and older.
Data are presented by age category, including ages 12-17. Data are
collected continually throughout the year. Preliminary data for a given
year are typically available in August of the following year (e.g., the
1998 NHSDA data will be available in August 1999). The MTF, conducted
each year by the University of Michigan through a grant from the
National Institute on Drug Abuse, collects data on 8th, 10th, and 12th
graders. Data are collected in the first quarter of each year.
Preliminary data for any given year are available by December of that
year. The most recent data are for 1998. Relevant data from each year
are:
--The most recent year for which data are available from the NHSDA is
1997. Data from the NHSDA indicate that past month use of any
illicit drug by youth 12-17 rose from 9.0 percent in 1996 to
11.4 percent in 1997. This increase was driven mainly by an
increase in marijuana use--from 7.1 percent in 1996 to 9.4
percent in 1997.
--The most recent year for which data are available from the MTF is
1998. Data from the MTF indicate that past year use of any
illicit drug use decreased among 10th graders (from 38.5
percent in 1997 to 35.0 percent in 1998) and remained level
among 8th and 12th graders. Additionally, past year use among
8th graders is down significantly from 1996 (from 23.5 percent
to 21.0 percent). This is the source for the Director's
comments that drug use among youth has leveled off and in many
cases fallen over the past two years. We shall have to wait
until August 1999 to see whether the NHSDA parallels these
trends.
--Data from the 1997 NHSDA also indicates that past month use of any
illicit drugs among the U.S. general population 12 and older
remained unchanged between 1996 and 1997 (from 6.1 percent in
1996 to 6.4 percent in 1997, not a statistically significant
change)--the increase in drug use compared to 1996 was seen
only for youth. This is the source of the Director's statement
that drug use in 1997 was statistically unchanged from 1996.
ONDCP's Pulse Check, unlike the NHSDA and the MTF study, is not a
probability-based, nationally representative survey. Rather, it is a
report based upon structured interviews with police officers, treatment
providers, and street ethnographers in selected metropolitan areas. Its
purpose is to provide current information on trends in drug use, drug
markets, and emerging drugs. It provides ONDCP with a more ``real-
time'' snapshot than the more methodologically rigorous surveys, which
typically take 9 to 12 months after then end of data collection to
report out. Information from the Pulse Check is often later confirmed
by the NHSDA or MTF (e.g., the appearance and subsequent spread of the
use of ``blunts''--cigars that are unwrapped, the tobacco removed, and
replaced with marijuana). Pulse Check sources have reported that
marijuana use among youth is widespread and increasing. These are the
impressions of professionals who have direct contact on a daily basis
with the heaviest drug using portion of the population. The NHSDA and
the MTF, on the other hand, are surveys of the general U.S. population.
Trends observed among the heavier using population may signal trends
that are about to emerge in the general population. The Pulse Check's
finding that marijuana use among youth is increasing is not
inconsistent with data on marijuana initiates from the NHSDA. The 1997
NHSDA reports that between 1991 and 1996 (the last year for which data
on initiates is available), marijuana initiation increased from
1,376,000 to 2,540,000, an increase of 85 percent. However, initiation
as measured by the NHSDA indicates the time when a person first used
marijuana. This measure includes those who used it once and never
again, those who used it a few times, but stopped, as well as those who
continue to use. This helps explain why initiation may be rising, yet
past month use may not be going up as sharply or remaining unchanged
from year to year.
Treatment Effectiveness.--The effectiveness of treatment is usually
measured by assessing positive changes in client characteristics such
as illicit drug use, involvement in criminal activities, employment,
physical and mental health, and other socio-economic status. Results
from treatment studies for overall illicit drug use, including
marijuana, declined. Clients improved in a range of other life factors
as a result of their treatment and reduced substance use. Specifically
for marijuana, clients studied in one outcome study, the Services
Research Outcome Study (SROS), showed a 28 percent decline in marijuana
use five years after treatment. SAMHSA has not analyzed the marijuana
data specifically for the under 20 year olds age group.
Nationally for all age groups, including the under 20, there is
insufficient treatment capacity to address the need for treatment.
ONDCP's Performance Measures of Effectiveness system contains targets
that calls for the reduction in the number of people that need
treatment and those that receive it (the so-called treatment gap) by 20
percent by year 2002. A 50 percent reduction is required by year 2007.
Closing the treatment gap will require substantial funds from Federal
and State Government and the private sector. The Federal drug control
community has developed a plan to assess funding requirements that
includes the role of parity in insurance coverage, and for better
disseminating research findings that report improved treatment
efficiency and effectiveness.
National Youth Anti-Drug Media Campaign.--Some of the Media
Campaign's ads contain a ``call to action'' encouraging viewers/readers
to call a toll-free number to obtain prevention materials published by
either HHS or DOE. A caller might also ask the information specialist
at the SAMHSA Clearinghouse (which mans the toll free number for the
media campaign) for treatment information, though our ads don't direct
them to do so. Also, some of the locally tagged ads list local
prevention coalition numbers that also serve as treatment referral.
Lastly, our television pro bono match reel (administered for ONDCP by
the Ad Council) includes ads that are treatment oriented.
Question. What Can We Do to Stop These Drugs at the Source, Before
They Take Hold?
Answer. Understanding that the some of the chemical components of
certain synthetic drugs (i.e. methamphetamine) are readily and easily
attainable as legal products, the current measures being undertaken are
an answer to how we stop the production of these drugs. As you are
aware the Chemical Diversion Trafficking Act of 1989 provided a list of
regulated chemicals (i.e. ephedrine, pseudo-ephedrine, etc.) whose
production and distribution is closely monitored. The same law gave the
Drug Enforcement Administration (DEA) the authority to add to the list
after following the established procedure of announcing it in the
Federal Register and soliciting comments. Subsequent acts, such as the
1996 Comprehensive Methamphetamine Control Act, further restricted the
amount of ``dosage units'' that could be sold in a pharmaceutical
product containing any of several precursor chemicals. This control is
still one of the best methods to stop synthetic drugs at the source.
DEA continues to monitor precursor chemicals through its Chemical
Diversion Unit as well as their agents in the field.
Additionally through aggressive enforcement action, DEA along with
state and local law enforcement agencies are responding using task
force tactics to seize active clandestine drug labs before the product
reaches the distribution network. Although law enforcement operations
are risky because of the hazards involved, clandestine methamphetamine
labs continue to be seized as well as the products being prepared.
Question. What Measures Is ONDCP Taking to Combat the Epidemic
Spread of Methamphetamine Through the Midwest? How Effective Have These
Efforts Been in Term of Methamphetamine Usage and Distribution?
Answer. The Midwest HIDTA, designated in 1996, has placed a special
emphasis on the explosive problems of methamphetamine usage and
distribution in a five-state region consisting of counties in Iowa,
Kansas, Missouri, Nebraska, and South Dakota. The State of North Dakota
has just recently been added to the Midwest HIDTA. The Chicago HIDTA,
designated in 1995, has also created special initiatives to attack the
methamphetamine problem in the City of Chicago, Cook County and the
surrounding areas. The importation and distribution of methamphetamine
is common in all of these states; however, the clandestine
manufacturing phenomenon is currently concentrated in Missouri, Kansas,
and of late, Iowa. Local methamphetamine production is considered the
single most important public safety and health hazard to citizens in
the Midwest HIDTA region. Related violent crime is increasing at
alarming rates.
The following initiatives are being implemented as part of the
Midwest HIDTA strategy to address the methamphetamine problem:
Midwest HIDTA Investigative Support Center.--Assists HIDTA task
forces and other federal, state, and local enforcement agencies within
the region in exchanging information/intelligence by linking each of
the five states electronically.
Co-Located Task Forces.--The Iowa Division of Narcotics
Enforcement/State Fire Marshal/Division of Criminal Investigation have
been co-located at a HIDTA site to focus on the methamphetamine problem
in that state. During the past year, 118 clandestine methamphetamine
labs have been seized in Iowa.
High Impact Area Task Forces.--The HIDTA Program has allowed for
the enhancement of task forces in Muscatine County and the cities of
Des Moines and Sioux City to serve as the focal point of HIDTA
activities in areas impacted most by methamphetamine trafficking.
Drug Enforcement Task Forces.--Two multi-agency task forces provide
operational support for the narcotics units of the Kansas Bureau of
Investigation and investigate methamphetamine producers and traffickers
in the state of Kansas. For the period 6/1/97 to 5/31/98, 150
methamphetamine labs were seized in Kansas. Highway interdiction
seizures of methamphetamine attributed to the HIDTA effort increased
from 96.9 pounds in CY 1997 to 144 pounds in CY 1998.
Missouri Task Force Initiatives.--Collocated and multi-agency task
forces targeting the methamphetamine problem were responsible for
seizing 436 clandestine labs from June 1997 to May 1998. During this
same time period Missouri recorded 679 methamphetamine-related arrests,
with 502 classified as clandestine lab operators. The U.S. Attorney
obtained 173 convictions on 178 methamphetamine-related cases with
assistance provided from the various HIDTA task forces.
Nebraska Law Enforcement Enhancement.--The HIDTA Program provides
direct support to four of Nebraska's drug task forces whose mission is
to measurably reduce methamphetamine drug trafficking and related
criminal activities. As a result of this initiative 50 pounds of
methamphetamine was seized between January and May 1998. The HIDTA
enhancement has also provided numerous intelligence gathering training
activities for the Nebraska State Patrol, the Nebraska Crime Commission
and various local law enforcement organizations.
South Dakota Statewide Drug Task Force.--Numerous ``hotspot''
counties in South Dakota have been designated as part of the Midwest
HIDTA initiative. Due to the rural nature of the state the South Dakota
initiative includes specific elements to provide local assistance
overtime, augmentation of personnel and equipment, an Intelligence
Analyst and specialized training for a variety of federal, state and
local law enforcement officers. During 1998 there were 61 federal state
and local agencies participating in the HIDTA Program.
North Dakota.--Has recently been added to the Midwest HIDTA. Two
elements will be introduced into North Dakota to help in the battle
against the spread of the methamphetamine problem. First is increased
training for law enforcement officers to provide them with the basic
skills to translate street contacts into workable intelligence, leading
to increased seizures and arrests. The second is a sharing of
intelligence/information among and between law enforcement
organizations operating in the state of North Dakota.
In addition, a supplement to the fiscal year 1998 HIDTA Program
budget provided $8.8 million in special funding to specifically address
methamphetamine reduction. Information available to ONDCP indicated
that the top methamphetamine production and distribution areas are
California, Missouri, Arizona and Utah/Colorado. This HIDTA effort was
to concentrate on the most critical areas first and address other areas
in the outyears. The emphasis was on the development of a centerpiece
task force in the most critical areas and a network of task forces in
the next most critical areas. The centerpiece HIDTA task force
developes and shares state-of-the-art investigative methodologies to
reduce methamphetamine trafficking. The following HIDTAs were funded in
this first phase in the following amounts: Las Angeles HIDTA ($2.25
million), Midwest HIDTA-Kansas City ($1.5 million), Rocky Mountain
HIDTA-Utah & Colorado ($1.5 million), San Francisco HIDTA ($.75
million), Southwest Border HIDTA-Arizona ($.75 million), Southwest
Border-California ($.75 million), HIDTA Assistance Center ($.75
million), EPIC-National Database ($.55 million). The HIDTA
methamphetamine task forces will be electronically tied to the National
Clandestine Laboratory Database at EPIC. The HIDTA Assistance Center
established a methamphetamine reduction ``best practices'' evaluation,
collection, and dissemination capability and support for mobil training
teams to all HIDTAs.
Available information and trend patterns indicate that the Midwest
HIDTA region will continue to experience an increase in the clandestine
manufacturing and importation of methamphetamine. Intense efforts by
the various HITDA task forces, coupled with harsher penalities in
recently enacted legislation have impacted the clandestine lab
situation in Missouri. The Midwest HIDTA continues to adjust to the
importation of Mexican methamphetamine as well as the displacement of
local methamphetamine production operations. However, these positive
forces have caused the clandestine lab operators to become more mobile,
increasing the number of labs in other states in the region.
government-wide drug budget
Question. There is a disparity between the amount dedicated to law
enforcement ($11.74 billion or 66 percent) and the amount provided for
education, treatment, and prevention ($4.6 billion or 34 percent).
ONDCP supports both components, supply reduction and demand
reduction, but requests funds indicating that supply reduction has
twice the level of impact on the nation's drug abuse problems.
Please provide the committee with some statistics that quantify the
benefits received from the increased spending on law enforcement
activities.
Answer. For the fiscal year 2000 budget request, the supply/demand
reduction split is $11.74 billion (66.0 percent) vs. $6.04 (34.0
percent). Of the $11.74 billion for supply reduction, $9.16 billion
(51.5 percent) is for domestic law enforcement.
We have seen significant benefits from the funding of domestic law
enforcement. There is a clear and substantial nexus between crime and
drugs. The FBI reports each year on crime in the United States through
its Uniform Crime Reports (UCR). The UCR data includes the Crime Index,
a summary of seven selected offenses: murder, forcible rape, robbery,
aggravated assault, burglary, larceny theft, and motor vehicle theft.
While it is not known what proportion of these offenses are drug-
related, police and researchers acknowledge that drugs play a major
role. Between 1996 and 1997 there was a 3.2 percent drop in the rate
per 100,000 population of Crime Index offenses (from 5,086.6 per
100,000 to 4,922.7 per 100,000). This decrease in Crime Index offense
rates was led by murders (down 8.1 per 100,000 population) and robbery
(down 7.8 per 100,000 population). The arrest rate for drug abuse
violations increased from 594.3 per 100,000 population in 1996 to 601.6
per 100,000 population in 1997. Arrests for drug abuse violation in
1997 are up 48 percent from 1988, 38 percent from 1993, and 2 percent
from 1996.
national media campaign
Question. How Much of the ONDCP'S Media Campaign Resources Are
Dedicated to Methamphetamine? How Does ONDCP Provide Coverage in the
Sparsely Populated Midwestern Areas, Where Methamphetamine Is
Experiencing Some of its Largest Growth?
Answer. Approximately one-third of ONDCP's local media
communication in areas where methamphetamine usage incidence is above
national norms is dedicated to an anti-methamphetamine message. Since
local delivery represents half of the youth-targeted effort (as opposed
to adult-targeted efforts which are national for reasons of cost
efficiency), the total resources dedicated to anti-methamphetamine
advertising represents roughly 8.3 percent of the aggregate adult and
youth budget in these markets. In general, however, the campaign is
designed to address entry level drugs (primarily marijuana and
inhalants) for young teens.
All available statistical studies have been employed to target the
methamphetamine message. The markets which receive special anti-
methamphetamine emphasis are as follows: Phoenix and Tucson, Arizona;
Sacramento, California; Denver and Colorado Springs Colorado; Honolulu,
Hawaii; Indianapolis, Indiana; Des Moines, Cedar Rapids and Davenport,
Iowa; Kansas City, Kansas; St. Louis and Springfield, Missouri; Omaha
Nebraska; Albuquerque, New Mexico; El Paso, Texas; Salt Lake City,
Utah; and Milwaukee, Wisconsin.
Question. Were there any methodological data collection or analysis
limitations or problems that have affected the Phase I report?
Answer. No, there have not been any methodological data collection
or analysis limitations or problems that have affected the Phase I
report. The evaluation has employed standard data collection and
analysis procedures that have yielded a thorough and informative
evaluation of Phase I. Briefly, the ONDCP evaluation used a matched
comparison design wherein the 12 target sites were matched with 12
comparison sites on the basis of region, size, demographic composition,
drug problems, and level of prior anti-drug advertising. Data were
collected through school-based surveys (for youth and teens) and
telephone interviews (parents). Analyses focused on net differences
(i.e., the difference between the target and comparison sites on pre/
post measures) in awareness of the campaign, particularly recall of
specific ads. The results were consistent with media data indicating
the reach and frequency of the advertising. A detailed description of
our methodology is presented as an appendix in the evaluation report.
Question. When will the final Phase II report be available to the
Subcommittee? Your report on the Phase I evaluation states ``due to
cost constraints, qualitative data will be collected during Phase II in
12 markets areas only. Why are you experiencing cost constraints in the
evaluation of the program?
Answer. ONDCP anticipates submitting the Phase II report to the
Subcommittee by May 1999. Baseline data for Phase II were collected in
May and June, 1998. Followup data for Phase II were collected in
October and November, 1998. The evaluation contractors are currently
analyzing the quantitative (nationally representative surveys of youth,
teens, and parents) and qualitative (focus groups and key informant
interviews in 12 selected metropolitan areas) data, after which they
will draft the report.
For the first year of the Media Campaign (fiscal year 1998)--the
period that included Phase II, Congress appropriated $195 million, $17
million of which could not be obligated until September 30, 1998.
During Phase II $145.656 million was spent, $140 million on advertising
and $5.546 million on nonadvertising components (clearinghouse
activities, consultants, invoicing support, travel, and the
evaluation). Of the $5.546 million in nonadvertising costs, $2.4
million was spent on the evaluation. It has always been ONDCP's
priority to use as much of the congressional appropriation as possible
to get ads in front of the American public. To do so requires that we
hold the costs down for items not directly related to placing the
advertising. The budget of $2.4 million for the Phase II evaluation was
considered sufficient to fund the national surveys of youth, teens, and
parents, visit 12 sites around the country to collect qualitative data,
and produce the report. Conducting the site visits in the selected
metropolitan areas is labor intensive (two contractor staff spend
approximately one week at the site conducting focus groups and
interviews with key community leaders). Typically several teams of
evaluators cover the 12 sites within a 2 to 3 week window. In order to
have sufficient funds to conduct the surveys and produce the report, it
was determined that we could include 12 sites for qualitative data
collection in the evaluation.
Question. Will the delay of Phase I report have any impact on the
completion of Phase II or in the ``start-up'' of Phase III?
Answer. The fiscal year 1999 appropriations bill required ONDCP to
submit to Congress a report on the evaluation of Phase I of the Media
Campaign prior to obligating up to 75 percent of the fiscal year 1999
funds. This report was submitted on October 1, 1998; it presented the
results of focus groups conducted with youth, teens, and parents and
interviews with key community leaders in the target and comparison
sites 8-10 weeks into the Campaign. ONDCP prepared a second or final
report for Phase I, submitted to Congress on March 22, 1999. This
report presented the results of the surveys of youth, teens, and
parents. It was originally scheduled for submission in to Congress in
December 1998. The delay in submitting this report has been due
primarily to ONDCP's efforts to cooperate fully with the ongoing audit
by the General Accounting Office (GAO). We have been working closely
with GAO to ensure an accurate, thorough, and timely report. We have
provided GAO with full access to our evaluation contractors and to the
data and drafts of the report as they were being analyzed and prepared,
and devoted considerable time responding to GAO's technical questions.
This has been a very helpful process in focusing and clarifying our
description of the evaluation methodology and results. It also has
unavoidably delayed the submission of the final report to the
Committee. However, we believe the final report has benefited greatly
from this process.
We anticipate that the delay in submitting the Phase I final report
will have minimal impact on the submission of the Phase II report.
Followup data collection was completed in November 1998. Since that
time the contractors have been analyzing the data. This task is nearly
complete, after which the report will be drafted. ONDCP's schedule is
to submit the report to the Committee by May 1999.
The delay in submitting the Phase I final report will have no
impact on the start-up of the Phase III evaluation because the two
evaluations are being conducted by separate contractors, and the Phase
III evaluation is not the primary focus of the GAO audit. The Phase III
evaluation is currently in the final stages of planning. Draft survey
instruments are being tested prior to submission to OMB for approval.
Upon OMB approval the instruments will be pilot tested. Assuming a
successful pilot test, the Phase III baseline data collection will be
fielded in August/September 1999.
Question. Will the evaluation of any of the phases specifically
address documented changes in national drug use rates and attitudes?
Answer. The underlying concept of the Media Campaign is that
through intensive targeted paid advertising, supported by community and
corporate involvement, we can affect changes in people's attitudes
toward drug use and subsequently their drug use. The first step in this
process is to increase the target audience's (in our case, youth,
teens, parents, and other adult influencers) awareness of the messages.
With effective and memorable advertising, this can be done within a few
months. Because Phases I and II were test phases lasting only 6 months,
the only outcome measure for which we expect to be able to detect
changes is awareness. In fact, for Phase I we have found significant
levels of awareness among the target audiences. Phase III marks the
implementation of the fully integrated Media Campaign. We expect to see
changes in attitudes within 1 to 2 years of the start of Phase III.
These changes in attitudes will be followed by changes in behavior,
which we expect to see within 2 to 3 years of the start of Phase III.
It is only in Phase III, which is scheduled to run for the next 4
years, that the Media Campaign will have been in place for a sufficient
length of time to affect changes in attitudes and behavior (i.e., drug
use).
Question. Will ONDCP be able to provide quantitative results from
its surveys or will it have to rely on qualitative (anecdotal)
information?
Answer. ONDCP's evaluation plan for the Media Campaign calls for
the collection of both quantitative and qualitative data. The
quantitative data includes surveys of youth (9-11 year olds), teens (12
to 18 year olds), and parents. The qualitative data includes focus
groups with youth, teens, and parents and interviews with key members
of the community. It is inaccurate to describe the qualitative data as
``anecdotal''. Qualitative evaluation data are collected in a
systematic manner by trained researchers so that data across sites can
be compared. The resulting data are analyzed using sophisticated
content analysis computer software. Collecting both types of data is
standard evaluation methodology. The two types of data compliment one
another; the qualitative data provides detailed insight from
respondents that helps to illuminate and provide context for the
quantitative data. A detailed description of the evaluation methodology
accompanies each evaluation report.
For Phase I, we surveyed approximately 18,000 youth and teens and
4,200 parents. We conducted 384 focus groups composed of approximately
2,300 youths, teens, and parents. We conducted approximately 1,200 key
informant interviews. The quantitative data were collected at two
points, baseline (November 1997 through February 1998) and followup
(May and June 1998). The qualitative data were collected at three
points, baseline, intermediate (8-10 weeks into the campaign), and
followup. The intermediate data were collected in order to provide a
quick snapshot of the early impact of the campaign. Our primary outcome
measure for Phase I was awareness of the campaign, which advertising
experience tells us can be achieved within a few months with an
effective campaign. Results from the intermediate data collection were
presented in the Phase I, Report No. 1 issued in September 1998. This
report was followed up by the results from the quantitative, survey
data collection, which are presented in Phase I, Report No. 2, issued
in March 1999.
For Phase II, we are conducting nationally representative surveys
of youth and teens and parents. We also conducted a similar number of
focus groups and interviews with key community members in 12 cities as
we did in Phase I. The quantitative and qualitative data were collected
at two points, baseline (May and June 1998) and followup (October and
November 1998). The Phase II report will be submitted by July 1999.
For Phase III, we are conducting nationally representative surveys
of youth and teens and parents. The youth and teen surveys will be
linked with the parent surveys in that a parent and one youth or teen
from the same household will be surveyed. We also will be collecting
detailed longitudinal (i.e., the same people will be surveyed once a
year for four years) data in four sites. Data collected at these four
longitudinal sites will be both quantitative and qualitative. Data for
Phase III will be collected every 6 months, starting with baseline data
collection in August/September 1999. Reports will be issued every 6
months starting in May 2000.
Question. Given ONDCP's Milestone Schedule, Was There Sufficient
Time to Implement the Lessons Learned from Phase I into the Program and
Evaluation Component of Phases II and III? (What Was the Purpose of
Having Three Phases If You Were Not Going to Incorporate the Findings
of Phase I or II into III?)
Answer. Because the Media Campaign was implemented in three
distinct phases, ONDCP decided to conduct three distinct and
independent evaluations. Additionally, since the plan was to have the
phases run one after another without interruption, it was not intended
that the evaluation for one phase be completed prior to the start of
the next phase. However, the Phase I evaluation was able to inform the
planning for the Phase III evaluation. The primary lesson learned from
Phase I was that school-based surveys have several severe limitations,
including active parental consent requirements, schools refusing to
participate due to being over-surveyed, and district or individual
school scientific review boards that require prior approval of survey
methodology and instruments. These limitations affect access to
schools, cause delays in implementing surveys, and tend to reduce
response rates. As a result of ONDCP's experience with school-based
surveys in Phase I and following the recommendation of an expert panel
of survey design experts convened by NIDA, ONDCP decided for Phase III
to switch from a school-based survey to a household-based survey.
The purpose of having three Phases was to use Phase I and Phase II
to test the implementation of the advertising component. The first
Phase gathered data from twelve cities. This provided the opportunity
to gather information on copy rotation, served as the impetus for
feedback on ads, allowed us to learn more about the advertising's
effects on communities. Phases I and II also improved communication
between ONDCP and its drug abuse constituencies.
Question. Media Campaigns Can Be an Effective Way of Selling a
Product. And, The Committee Understands That These Ads Target
Behavioral Changes Which Are More Difficult That Just Getting Someone
to Buy a Product. But, Is ONDCP Providing The Target Audience Enough
Information to Make Informed Decisions About The Next Steps or Where to
Go For Help And/or Assistance? The Already Know Drugs Are Bad, But Do
The Ads Give The Viewer Enough Information, Such as a Phone Number or
Locations, Where They Can Receive Additional Information?
Answer. All locally targeted messages in any medium provide a phone
number or location where viewers or listeners can receive more
information. In addition, we have requested that PDFA include phone
numbers on a greater percentage of ads, including all numbers on all
messages directed at parents and other adult influencers of youth.
Other components of the media campaign (interactive, public education,
partnerships, and collaborations with entertainment industry) also
provide comprehensive information to both youth and parents. The most
recent examples are the Parent Resource Center on SOL and Disney's
youth oriented freevibe.com which are exclusively devoted to providing
information on drugs to these audiences. The response to the media
campaign has been extraordinary. Calls to the National Clearinghouse
for Alcohol and Drug Information are up 318 percent. Calls to many
local prevention or treatment organizations have also approached that
level.
Question. According to GAO, at least some of the Phase I ads did
not get aired in the media at the appropriate times nor with the
appropriate frequencies. Can you explain this situation? Do you have
any information about how this impacted the evaluation of Phase I? What
about for Phases II or III?
Answer. It is inaccurate to say that some of the Phase I ads did
not get aired at appropriate times and frequencies. Phase I of the
Media Campaign consisted of over 60 individual advertising messages for
television, radio, newspapers, and billboards. These messages were
targeted at three general audiences, youth, teens, and parents, and
both African American and Spanish language media outlets. For Phase I,
60 percent of the advertising was directed at youth and teens. Parents,
at 40 percent were a secondary target, particularly for television;
therefore, parent ads had a lower frequency and reach that did teen
ads, by design. For parents radio and newspapers played a more
prominent role in delivering the message. Because parents were a
secondary target, with fewer television ads aimed at them, the
increases in awareness were smaller as measured by the evaluation.
However, responses to other questions that asked parents about their
perceived effectiveness of anti-drug messages (including radio and
newspapers) suggest that parents were receiving the messages and found
them to be effective. We do not anticipate this being a problem in
Phases II and III. For these Phases, parents and other adult
influencers will be targeted with 50 percent of the advertising,
including an increase in television ads. As the Campaign enters the
fully integrated phase, all audiences will be receiving the Campaign's
messages through television, radio, print, newspaper, outdoor, and
newspaper ads, over the Internet, and through programming.
Question. How Can You Be Sure Whether Reports on Increases in Ad
Awareness Are Due to The National Anti-drug Media Campaign as Opposed
to Some Other Extraneous Events or Conditions?
Answer. This is one of the key questions for the Campaign
evaluators--how do we know whether observed changes in outcomes are the
result of the Campaign. There are three key outcome measures for the
Campaign: awareness of the Campaign's message, anti-drug attitudes
(e.g., perceived harmfulness of drugs, and disapproval of drug use),
and drug use. ONDCP expects to be able to detect changes in awareness
within a few months of the implementation of the Campaign, changes in
attitudes within 1 to 2 years, and changes in drug use within 2 to 3
years. Given the short time periods of both Phases I and II (i.e., 6
months), the only outcome measure for which we expect to observe change
is awareness. This indeed has been the case for Phase I (we are
currently preparing the final report for Phase II). If all ONDCP was
interested in was whether the outcome measures improved over the period
of the Campaign, we could simply track annual data from the National
Household Survey on Drug Abuse and the Monitoring the Future Study.
However, that is not all that ONDCP is interested in; we want to know
whether any observed improvements in the outcome measures are
attributable to the Campaign rather than other ``extraneous events or
conditions.''
ONDCP has taken a number of steps in designing the evaluations for
the three Phases of the Campaign to ensure that we have this ability.
For Phase I, which was implemented in 12 cities across the country, we
matched the 12 target (treatment) sites with 12 control sites. This is
the classic experimental design of matched treatment and control
groups. The underlying theory is that, all things being equal between
the target (treatment) and control sites, then any differences observed
between the two after the implementation of the program (the
intervention), can be attributed to the program. This design is the
only methodological approach that can demonstrate cause and effect; it
is typically used in clinical trials where conditions between the
treatment and control groups can be manipulated by the researcher. When
applied to a social experiment, as with the Media Campaign, it is
considered a naturalistic experiment in which the conditions between
the target and comparison sites cannot always be manipulated and
controlled by the researcher. To compensate for this limitation, the
researcher attempts to match the target and control sites as closely as
possible. For the Media Campaign, we attempted to match sites on the
basis of region, population size, population demographics, level of
prior anti-drug media activity, and drug problem. Additionally, we
conducted extensive site visits to identify any local activities, such
as local anti-drug media campaigns, increased police activity directed
toward drug dealing/use, and overdose deaths, that may have impacted
results. As a result of this methodology, ONDCP is confident that the
positive outcomes of increased awareness of the anti-drug message
observed for Phase I can be attributed to the Campaign. For Phase I we
consistently observed increases in awareness outcome measures in the
target sites from baseline to followup and either decreases or no
change in the control sites.
For Phases II and III, the Campaign is national in scope;
therefore, we do not have the ability to use control sites.
Consequently, ONDCP employed other means to attribute positive outcomes
to the Campaign. In Phase II we selected 12 sites to conduct extensive
site visits to identify possible competing explanations for observed
outcomes, similar to the approach used in Phase I. For Phase III, which
is being managed for ONDCP by NIDA, we convened a panel of survey and
instrument design experts to advise on this and other issues. Based
upon their recommendations, ONDCP and NIDA have incorporated two design
elements that, in the absence of matched treatment and control sites,
will provide assurance that future increases in anti-drug attitudes and
decreases in drug use can be attributed to the Media Campaign. First,
ONDCP and NIDA are implementing a nationally representative household-
based survey that will sample a parent/guardian and one child from the
same household, thereby linking parent and child responses. This will
enable the evaluators to associate responses between parents and their
children on the perceived and observed impact of Campaign messages.
This analytic capability will strengthen our ability to attribute
outcomes to the Campaign. Second, ONDCP and NIDA have selected four
sites around the country in which to collect extensive longitudinal
data (i.e., we will be surveying the same individuals each year) over
the course of the Campaign. This approach will enable researchers to
ask respondents from year to year whether they believe the Campaign was
responsible for any perceived or observed changes in their attitudes or
behavior. ONDCP is very confident that with this methodological
approach, we will be able to attribute changes in the outcomes to the
effect of the Media Campaign.
international--mexico
Question. The Current Law States That Countries That Do Not Fully
Cooperate in Fighting Illegal Drugs Will Be Decertified. However, it
Appears That the Decertification Process Is Losing Some of its
Credibility. What Should Be Done to Ensure That the Threat of
Decertification Remains a Real One? Should the Standards for Evaluating
Countries and the Penalties Be Changed?
Answer. The certification process has been a valuable tool in the
past. In 1998 alone, we have seen major performance improvements in
several countries, including Peru and Bolivia--based upon a concerted
USG effort utilizing certification in conjunction with other tools.
However, the following shortfalls in the current certification process
have been identified:
--Certification encourages confrontation.--Many countries resent the
idea of the United States unilaterally ``grading'' their
performance on drug control, particularly when the demand for
drugs in the U.S. is so great. The certification process is, in
effect, an annual public airing of these most sensitive issues.
Resentment and concerns about national sovereignty--both of
which damage counterdrug cooperation--are the inevitable
result. Certification promotes an ``us versus them'' mind set
which is damaging to common efforts against drug trafficking.
--Certification as a foil for nationalism/anti-Americanism.--In many
countries, opposition parties seek to cast the government as
the lackeys of the U.S. The directive nature of the
certification process (i.e. the U.S. issuing an annual demarche
with specific steps to be taken and then assessing compliance
with the demarche) is certainly not in keeping with the concept
of a community of nations united in pursuit of a common goal.
There is a very real threat that the certification process will
lead to the popular association abroad of counter drug
activities with servility to America and, conversely to the
popular association of drug trafficking with independence and
rejection of U.S. domination. Most states on the majors list
have a long and unhappy familiarity with colonialism and great
power intervention. The current flawed certification process
conjures up these unhappy memories more readily than it does
the ideals of multinational alliances.
The solution would be a certification system that maximizes the
following principles:
--Accountability.--Americans have a right to demand results of the
efforts of their government. Results must be determined from
objective indicators as well as from the subjective evaluations
of policy makers, law enforcement personnel, diplomatic and
intelligence analysts and other informed observers. These
indicators must be constant and evaluated in the same manner
over time so as to allow the drawing of valid comparisons and
conclusions.
--Flexibility.--The issues and concerns surrounding drug abuse are
multifaceted, and must be dealt with in different manners. An
effective joint campaign against drug production and
trafficking must take the unique circumstances and
characteristics of each nation into account. Any certification
or alternative process must allow the U.S. government to
respond to drug production and trafficking with agility and
adaptability.
--Cooperation.--The United States cannot solve the problem of drug
abuse singlehandedly. The use of our allies and multilateral
organizations is key. We must continue to convince the rest of
the world to see drug abuse as a shared problem. We must
continue to work cooperatively with other nations in developing
criteria in which to assess drug control programs, such as the
joint U.S.-Mexico performance measures of effectiveness.
--Complimentarity.--Certification or post-certification should be
structured so as to enhance, rather than degrade, existing and
proposed international counter-drug efforts.
ONDCP looks forward to working with Congress on implementing a more
effective certification process which maximizes each of these
principles.
Question. Is Mexico Concerned That the U.s. Demand for Extradition
Is Impinging on Mexico's Sovereignty?
Answer. Mexico is always very sensitive to issues involving
national sovereignty. However, in recent years the government of Mexico
has worked closely with the government of the United States in
extradition cases. Twelve fugitives were physically extradited from
Mexico to the United States in 1998, including three Mexican nationals
(two accused child molesters, one accused narcotics trafficker/murderer
of a Border Patrol agent). By comparison: 1997, 13 extradited (no
Mexican nationals); 1996, 13 extradited (five for narcotics offenses,
one Mexican national, and one dual U.S./Mexican national on non-
narcotics offenses); and 1995, Five extradited (none for narcotics
offenses, no Mexican nationals)
In 1998, the Mexican Foreign Secretariat (SRE) entered extradition
orders against 19 fugitives, including 10 for serious narcotics
offenses and also including five Mexican nationals. Of the total of 19,
six have already been surrendered; the others are appealing their
extradition, serving sentences on Mexican charges, or had their
extradition cases overturned by the Mexican courts.
Progress in the area of extraditions and deportations between
Mexico and the United States has been sustained and productive over the
past three years. Although no major Mexican narcotics trafficker has
yet been extradited, there have been favorable signs, at least from the
Foreign Ministry, that one would eventually pass through the long
Mexican judicial process and be turned over to U.S. authorities. Recent
judicial decisions in Mexico pose potentially serious threats to our
expectations, in particular because the limited capacity of the
Executive branch to influence court decisions.
Question. Does ONDCP Think the Threat of U.S. Economic Sanctions
Has Had an Impact on Mexico's Efforts to Reduce the Supply of Drugs
into the U.S.?
Answer. The threat of economic sanctions resulting from
decertification has probably influenced Mexico to attempt spectacular
actions in time to influence the certification decision. It is not
clear if this influence on the timing and profile of Mexico's efforts
has had much of an impact on real reduction of drug production or
impact against drug trafficking organizations.
President Zedillo and his government recognize the threat that
drugs poses to Mexican institutions, and have made combatting drugs
their top priority. To this end, they have focused their military
efforts and geared their institutional reform efforts to combatting
drugs. It is difficult to separate the influence of the threat of U.S.
economic sanctions, but it is hard to believe that the threat of
sanctions was ever a major factor. Geography and a recognition of the
importance of Mexican economic development to the United States
dictates that sanctions were never a real possibility.
Question. There Have Been Questions about Whether the Certification
Process Is Good Foreign Policy. Isn't it Possible That Decertification
of a Country Could Lead to an Economic Situation Where Drug Production
Would Be More Attractive?
Answer. Congress granted the President sufficient discretion in
administering the certification process--to include imposing economic
sanctions that could actually harm our counterdrug interests. There are
mandatory penalties associated with decertification. Most of these
penalties are economic in nature, and could harm business and
infrastructure development in the decertified country. These penalties
include: Denial of sales or financing under the arms export control
act; Denial of non-food assistance under Public Law 480; Denial of
financing by the Export-Import Bank; Withholding of most non-
humanitarian assistance under the Foreign Assistance Act and U.S. must
vote against proposed loans from six multilateral development banks.
The President also has the discretion to avoid these penalties by
granting a country a Vital National Interest Certification. In such
cases, the country has not made sufficient progress to be certified,
but applying the penalties inherent in decertification would damage
U.S. interests. For example, this year Haiti received VNIC. The law as
enacted grants the President the discretion to manage the certification
process to avoid the situations described in the question.
Question. In February, the Mexican Government Announced a $400
Million Three-year Anti-drug Plan. As Part of the Program, Mexico Will
Buy Counter-drug Equipment Such as Infrared Cameras for Airplane
Surveillance, Special X-ray Machines at Border Crossings, and Encrypted
Satellite Communications Gear. They Said 40 New Speed Boats and Three
New Airplanes Will Be Added to the National Anti-drug Fleets. Does
ONDEP Believe That Increased Spending on Technology Will Increase
Mexico's Viability as a Partner in the War on Drugs, or Do You Think
the Overall Strategy must Be Revamped Before the Mexican Government
Invests in Technology?
Answer. The Government of Mexico informs us that the current
initiative builds upon President Zedillo's August 1998 call for a
National Crusade Against Crime and Delinquency. The August plan is a
more general move against crime, it is not focused on drug trafficking
and thus may have received less attention in the United States than the
February 1999 announcement. The National Crusade initiative provides
for: Better training of judicial police officers, public prosecutors
and expert investigators; Expanding preventative coverage, and
improving crime investigation and criminal arrest capabilities;
Establishment of modern communications, information and intelligence
systems; Improving equipment and infrastructure; Improving the legal
framework; Strict control over private security services and Promoting
civic participation.
The February 1999 plan focuses on drug trafficking and
technological enhancements. It also includes increased personnel
vetting and performance monitoring for the counterdrug law enforcement
officials.
Increased spending on technology can be effective against drug
trafficking. Whether technology will have the desired effect in this
case cannot be known in advance. The decision to spend such a large
amount of money in a time of declining resources is clearly one that
the government of Mexico has considered carefully and one in which it
has considerable confidence.
international--colombia
Question. What guarantees does the committee have that the funds
provided are actually being used to reduce drug supplies?
Answer. Colombia has long been the processor and transshipper of
about 80 percent of the cocaine entering the United States. In the
past, Colombian drug traffickers imported the majority of their coca
base from growers in Peru and Bolivia. Over the last several years,
however, successful counterdrug programs in Peru and Bolivia have
disrupted trafficker activities there resulting in significant
decreases in the amount of coca cultivation. This, in turn, caused the
traffickers to grow more and more coca in Colombia so that they have
more control over the supply of their raw material. Colombia's coca
cultivation has doubled since 1992, and, beginning in 1997, Colombia
became the leading coca cultivator in the world. (It is important to
note, however, that overall coca cultivation has decreased 11 percent
in the Andean Region since 1995, and overall potential cocaine
production dropped from an estimated 750 metric tons in 1995 to an
estimated 550 metric tons in 1998.)
Colombian heroin is an increasing problem in the United States as
well. Though Colombia accounts for only a small percentage of the
world's heroin supply (potentially 6 metric tons annually), DEA reports
that, in 1997, 75 percent of the heroin seized and acquired in Federal
undercover buys was identified as Colombian heroin. The prevalence of
Colombian heroin in the US market can be explained in part by the high
purity of the product combined with aggressive marketing techniques
that ``piggyback'' on already-established cocaine distribution
networks.
Given that Colombia has become the center of gravity for drug
production and distribution in this hemisphere, our cooperative
counterdrug programs have been designed to attack Colombia's drug trade
in a comprehensive manner. The vast majority of the support provided
directly to Colombian counterdrug forces goes to the Colombian National
Police who are responsible for the eradication of both coca and opium
poppies, lab interdiction, chemical control, disruption of trafficking
organizations and arrest of major traffickers, registration and
inspection of general aviation aircraft, and other programs. The USG
also provides funds to train and support prosecutors and judges to
assist them in carrying out their duties such as prosecution of drug
traffickers and handling money laundering and asset forfeiture cases.
We also provide some funding to support alternative development
projects that help give the small drug crop farmers licit alternative
means to make a living. The Colombian military also receives some
direct counterdrug assistance because they have counterdrug
responsibilities such as air interdiction; riverine, coastal and sea
operations; lab interdiction; and support to the National Police,
especially in areas controlled by the heavily-armed guerrilla or
paramilitary groups that are involved in narcotrafficking. The USG also
provides some indirect assistance such as detection and monitoring
assistance and the development of target packages for counterdrug
operations.
All USG support to the Colombian government is governed by
memoranda of understanding (MOU) or other agreements between our
government and the entity receiving the support. These agreements state
clearly that the assistance is for counterdrug purposes. We have worked
extensively, both within our government and with the Government of
Colombia, to create programs targeting the most critical and vulnerable
nodes of the drug industry. We have end-use-monitoring program in place
to ensure compliance with the terms if the MOUs. We also monitor these
programs to ensure that they are working well and that we can adapt to
the ever-changing drug trafficking trends.
Question. The fiscal year 1998 Supplemental Included $96 Million
for Black Hawk Helicopters; $40 Million for Upgrading and Arming 34
Huey Helicopters; Gun-ships; and $40 Million for Helicopters, Transport
and Surveillance Planes, Patrol Boats and Weapons and Equipment for the
Colombian Military and National Police. What Commitment Is the United
States Getting for That Level of Investment? How Much Is Being Provided
for Crop Eradication and Agricultural Research and Education?
Answer. The USG has historically had a good and mutually
cooperative relationship with Colombian counterdrug entities at the
tactical level even in the worst days of our bilateral relationship.
The police, military, prosecutors and judges have long demonstrated a
commitment to fighting the drug industry and its corrupting influence,
often paying with their lives. Hundreds of police and military
personnel have been killed, wounded or captured in the course of
performing counterdrug operations, and many remain in the hands of
their guerrilla captors.
In 1998 the combined Colombian National Police/US State Department
eradication program sprayed a record number of hectares of coca, often
receiving ground fire from guerrilla groups protecting their
investment. An eradication surge campaign against opium poppy was
started in November 1998 with the goal of completely eliminating
Colombian opium poppy, and therefore Colombian heroin, in the next two
to three years. The National Police continue to pursue trafficking
organizations aggressively; they arrested several major traffickers in
1998. In 1998, the police seized over 57 metric tons of coca products,
57 tons of marijuana, and 418 kilograms of heroin, most of which was
destined for the United States. The also destroyed 145 cocaine base
labs, 40 cocaine HCl labs, and 10 heroin labs. In addition, the police
seized or grounded over 80 aircraft, 300 vehicles, and 300 boats, and
they destroyed 39 illegal airstrips. More than 1,400 persons were
arrested on drug trafficking charges in 1998.
The Colombian military have shown great commitment to counterdrug
efforts. The military forces carried out 9,970 counterdrug operations
in 1998 resulting in the seizure of 27 metric tons of cocaine, 174
vehicles, 24 airplanes, and 38 boats. They also destroyed 229 cocaine
laboratories and 75 illegal airstrips. The Colombian Air Force
increased fourfold the number of successful end games against drug
trafficker flights over the previous year. The Colombian Navy continues
to cooperate with the USG in maritime search and seizure operations.
The Navy also significantly increased (almost wholly at their own
expense) the number the number of riverine combat elements which are
responsible for patrolling the extensive river network in search of
traffickers, drugs, and precursor chemicals. The creation in March 1998
of the Joint Task Force at the Tres Esquinas Base in southern Colombia
was an important step in establishing enhanced military/National Police
cooperation in counterdrug efforts. The Army is in the process of
establishing a dedicated counterdrug battalion to further increase
their participation in counterdrug efforts.
Since the Pastrana administration took office in August 1998,
cooperation with the USG and unilateral counterdrug efforts at all
levels of the Colombian government have improved. President Pastrana
signed a ``Declaration of Alliance Against Illicit Drugs'' with
President Clinton during the State Visit in October 1998. President
Pastrana has put together an honest and competent team committed to the
fight against drug trafficking, and his administration produced a
national counterdrug strategy that creates a framework for aggressive
action against the narcotraffickers. We continue to work with the
Government of Colombia to ensure that our counterdrug assistance is
used appropriately and effectively.
INL will provide approximately $43 million in fiscal year 1999
funding to the Colombian National Police to support the aerial
eradication program which, is the cornerstone of our program in
Colombia. That amount includes funds from the Colombia country program
and INL air wing support to the Colombian eradication program. It is
difficult to quantify exactly how much goes to the program, since both
eradication and interdiction operations use many of the same air assets
and host nation personnel, and the program can be adjusted throughout
the year to adapt to changing trafficker patterns and trends. The $43
million figure does not include the funding from the Emergency
Supplemental Bill earmarked for acquisition and upgrade of aircraft and
base construction, most of which is directly related to the eradication
program.
The State Department's Bureau of International Narcotics and Law
Enforcement Affairs (INL) provided $500,000 to the Government of
Colombia in 1998 to assist them in developing an alternative
development plan. Additionally, INL will provide $15 million over the
next three years to implement the program which will be designed to
provide licit alternatives to small farmers currently engaged in
cultivation of illicit crops.
SUBCOMMITTEE RECESS
Senator Campbell. General, we appreciate you being here
very much. I know you have a tough job to do and I think you
have found a lot of support with this committee. I look forward
to working with you for the remainder of this Congress.
General McCaffrey. Yes, sir. Thank you.
Senator Campbell. Thank you. This subcommittee is recessed.
[Whereupon, at 11:11 a.m., Thursday, March 4, the
subcommittee was recessed, to reconvene at 10:04 a.m.,
Thursday, March 25.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2000
----------
THURSDAY, MARCH 25, 1999
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:04 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Kyl, Stevens, and Dorgan.
DEPARTMENT OF THE TREASURY
Office of the Secretary
STATEMENT OF ROBERT RUBIN, SECRETARY
ACCOMPANIED BY NANCY KILLEFER, ASSISTANT SECRETARY
OPENING REMARKS
Senator Campbell. The Subcommittee on Treasury will be in
order. Good morning, Mr. Secretary. We appreciate your being
here today.
The Treasury Department has a unique role in the Federal
Government. Though the overall budget may be small in
comparison to some of the other appropriations bills, I cannot
think of another agency with such a variety of
responsibilities, printing money, minting coins, protecting the
President, ensuring a sound domestic financial market,
regulating and monitoring the banking industry, collection of
taxes, fighting financial crimes, combating the drug trade, and
a number of other things it is probably the broadest mission in
the Government today. That is just to name a few.
While the Treasury's responsibilities are limitless,
available resources are not, as everyone knows, regardless of
the need or worthiness. Therefore, it is our responsibility as
appropriators to seek a way to do all we can to further the
work of the department and still stay within our fiscal
constraints. This requires us to make tradeoffs, sometimes most
of us would prefer not to do. As you know, every tradeoff has a
consequence and I think that we need to be able to understand
the full impact of the choices that we have to make.
The fact that the Administration is proposing to fund the
salaries of approximately 4,000 Customs personnel already on
board with a user fee bothers me. I think it is a budget
gimmick, very frankly, and nothing more. I do not understand
how the Administration expects Congress to respond to that.
Essentially, what they are telling us is that Congress has to
either enact new fees or extend the existing fees to cover
these salaries, or force the Customs Service to lay off the
workers.
Coming from a State which is near the southwest border, I
am sure Senator Kyl would agree with me, that is a political
game of chicken that has no positive future for this country.
Mr. Secretary, I look forward to your testimony and thank
you for being here.
RANKING MINORITY MEMBER'S OPENING REMARKS
Senator Dorgan, did you have an opening statement?
Senator Dorgan. Mr. Chairman, let me just ask to submit my
entire opening statement. I want to say to the Secretary that I
especially appreciated his stewardship at the Department of the
Treasury.
I noted in one of our national magazines his face
prominently displayed in the context of the success of our
economy. It is probably not accidental that we have the world's
strongest economy at this point, but our strong economy exists
in a world of great uncertainty with plenty of challenges in
Asia, Russia and Brazil. I know the Secretary spends much of
his day with his staff working on these challenges.
The day to day issues in Treasury, I was surprised to learn
when I became ranking member of this subcommittee, includes a
substantial responsibility for law enforcement. As much law
enforcement exists in the form of resources in the Treasury
Department as it does in Justice.
Also the Customs Service is a very important function. I am
especially interested in making certain that we have the
resources and the capability in Customs to protect our economy
and border, not in a manner that is exclusive to fair
competition, but in a manner that does prohibit the import of
unsafe food, pornography, products produced with children's
forced labor in other countries. Those are the kinds of things
that are very important in the conduct of our economic affairs
and the Treasury Department is pivotal and central to all of
those issues.
I want to say that I have in my career in Congress, had the
opportunity to really hit very hard the Secretary of the
Treasury when he would come to the Congress. I can recall one
Secretary of the Treasury who said, this junk bond situation--
this is in the late 1980s now--this junk bond situation is just
fine. Do not worry about it, Mr. Dorgan. If there are any
problems, they will be self-correcting.
Well, that Treasury Secretary did not last all that long.
Secretary Rubin. Nor did a lot of the junk bonds.
Senator Dorgan. Nor did a lot of the junk bonds. And the
hood ornament of that excess, of course, was that the United
States Government ending up owning much of the non-performing
junk bonds that were parked in savings and loans, and that was
precisely the case I was making to the Treasury Secretary. I
will not revisit all that.
But my point is, that while I have had a lot of trouble
with some Treasury Secretaries, I think that your stewardship
at the Department of Treasury is something that this country
can feel very good about. Let us hope that you will stay around
for a while and that our economy will remain strong.
But I will want to talk about Customs and some other
issues.
I would say to the chairman that I believe I am the second
amendment after the Kennedy amendment on our side, so at some
point I will have to go to the floor to offer an amendment to
try to strengthen the farm program.
One final point. While our country is doing very well, in
the center part of our country we are being depopulated. I
should show you the chart on that. But people are just leaving.
Senator Kyl. We appreciate that, by the way.
Senator Dorgan. We do not, as a matter of fact. It is true
that some of them end up in Arizona. But the fact is our farm
program is a terrible failure and we have just desperate
conditions, Depression-era farm prices at the moment with
massive failure ahead of us unless we do something, and that
will be the subject of the amendment I offer in the next hour
or so. But we also have to work very hard on that. I know the
Secretary is well aware of that.
PREPARED STATEMENT
Mr. Chairman, thank you, and I will have some questions.
[The statement follows:]
Prepared Statement of Senator Dorgan
Thank you Mr. Chairman. Secretary Rubin, it is pleasure to have you
appear before us today. There are a number of issues I would like to
discuss with you, Mr. Secretary, and I appreciate having this forum for
that discussion.
Over the last few years we have seen the economic turmoil that can
occur when the fiscal stability of a nation changes. Understanding the
world's economy requires a detailed understanding of the behavior of
financial markets and how they can cause and direct capital changes.
I believe that the continuing strength of the Department of the
Treasury will be based on it's ability to focus on both the financial
markets of the major industrial nations and on emerging market
economies. But, the international expertise must be balanced by
providing the appropriate level of resources to formulate and recommend
domestic financial, economic, and tax policies.
I hope we will discuss the Department's resource requirements while
we discuss the resource requirements of Russia and their request for
renewed funding from the International Monetary Fund.
As you mentioned in your written statement, the need to provide
resources to allow the Internal Revenue Service to comply with the
requirement of the Restructure and Reform Act of 1998 is an important
part of the Treasury's fiscal year 2000 request. Those requirements
along with the need to increase IRS's customer services, particularly
in the rural states, are areas I am very concerned about, and are ones
that I hope we have an opportunity to discuss during this hearing.
During our discussions on the IRS, I also hope to address transfer
pricing. As you may know, this committee instructed the IRS to study
this issue and to determine the amount of revenue lost as a result of
abuses by multinational companies. Transfer pricing is a problem I am
planning to address in this year's appropriation bill. And, I hope that
you, Mr. Secretary, will take a personal interest in this issue.
The very important issue of Y2K compliance must also be discussed.
Setting policy, directing programs, and having reliable information
systems are all important components of successfully managing the
financial operations of the Department of the Treasury. The Office of
Management and Budget's Report ``Progress on Year 2000 Conversion''
stated that certain IRS and Financial Management Service systems may
not meet the government-wide goal. I want to make sure this is not a
pervasive problem or one that will negatively impact Treasury's ability
to fulfill it's mission in fiscal year 2000.
Finally, I want to discuss Treasury's law enforcement agencies and
the need to continue our support of these activities. I know there has
been a lot of debate on whether Treasury has received the same level of
resources as the Justice Department for its law enforcement activities.
I am not interested in that argument. What I want to know is whether
the resources provided the Treasury law enforcement agencies is
adequate to perform their mission.
In particular, I want to be sure that Customs has adequate
resources to enforce our laws and strengthen our borders against the
importation of child pornography, unsafe foods, and products made by
forced labor. I want to know that ATF can provide children with the
necessary training to avoid the violence of guns or gangs. And, I want
to be sure that Secret Service and FinCEN can protect our citizens
against credit card and other financial frauds.
Mr. Secretary, I look forward to having a discussion on these and
other Treasury related topics. Thank you Mr. Chairman.
TRADE FACILITATION
Senator Campbell. Thank you.
Senator Kyl, did you have a statement?
Senator Kyl. Mr. Chairman, yes. I did not mean to make
light of specific economic conditions in any region of the
country. As a matter of fact, because of the strong performance
of the economy, as you know, we have a wonderful, robust trade
between the United States and Mexico.
My own State of Arizona, however, lags far behind in the
infrastructure capability of handling that two-way trade. As
much in the way of imports from Mexico as exports to Mexico.
Our border stations are totally inadequate in Nogales and Yuma
to handle the traffic. Douglas is also very difficult. And the
request of zero funding for new Customs agents is simply
totally unworkable, and I will be asking you some questions
about that.
Thank you, Mr. Chairman.
Senator Campbell. With that, Mr. Secretary, if you would
like to proceed, we will be delighted to hear from you. Your
complete written testimony will be included in the record. If
you would like to abbreviate or expand on that, please do.
TREASURY'S BUDGET REQUEST
Secretary Rubin. Thank you, Mr. Chairman. Let me make a few
comments if I may, and then why don't we discuss whatever you
would like.
As you know, our overall request is for $12.659 billion. We
can get into a discussion later, Mr. Chairman, about the offset
with respect to the Customs fee. I agree with you that the fee
is a difficult offset, and it is not clear to us exactly how
this is going to work its way through. But we have had similar
situations in the past. Somehow or other, Congress is going to
have to deal with the fact that there is more need for non-
defense discretionary spending than the caps allow.
I do not know how that is going to be dealt with. We
thought this fee was a way to try to deal with this. But I do
not disagree with your comment that it is a very difficult way
to go, and there may be other, better ways. My instinct is to
think that just as happened last year, this debate will go on
until the end of the year and then Congress and the
Administration together are going to have to find some way to
fund these programs.
The thing we wanted to get on the record was the full
program, particularly the full request for Customs, for the
reasons that you all have discussed.
There is also an offset from the forfeiture fund, as you
know. The net appropriation is $12.205 billion. There are
detailed presentations in the materials in our request. I will
not go into those. I will comment very briefly on five items:
reforming the Internal Revenue Service, international economic
affairs, law enforcement, financial systems, and Y2K
conversion.
IRS MODERNIZATION
With respect to the IRS, I think under our new commissioner
there really has been a remarkable job done on the path back,
but that path is going to be a long path, and none of us have
any illusions about that. There are, as you know, substantial
mandates in the IRS Restructuring and Reform Act, which turned
out to be a good piece of legislation. We had a lot of back and
forth on that through its life and there were a lot of
problems, at least in our judgment, and Senator Dorgan was very
helpful in trying to get this into a decent place.
I think we actually wound up with a good piece of
legislation. But there are a lot of mandates in there and we
have to implement those mandates, and the funding for that
implementation plus commitments more generally to reform the
IRS are an important part of this budget.
There is $197 million requested for both implementation and
other aspects of moving forward and reforming the IRS. We focus
particularly on taxpayer protection, on improving customer
service.
Let me emphasize a third focus, transforming the
organization. Charles Rossotti, our new commissioner, who is a
businessman out of the private sector, created a new structure
which realigns the IRS to be in accord with the taxpayer groups
that it serves. It is our judgment that this will be a far more
efficient and far more effective way to function, and also far
better serve taxpayers. But it does take money to accomplish
that.
Secondly, the legislation requires us to have to have a
separate Treasury inspector general for tax administration. We
have now gone through setting that up, but that will require
funding to carry forward with.
Finally, there is modernizing information systems. We have
now awarded our PRIME contract. We did that in December of
1998. I think we now have a very effective systems management
program in place between our assistant secretary, Nancy
Killefer, Charles Rossotti, and the others in the IRS.
We have requested funds for Y2K for the IRS in our budget,
roughly $250 million as I recollect it. We did not request
additional money this year for the modernization program
because we have an ITA fund set up and we can use that. But we
are requesting advance funding for next year.
Senator Dorgan said, Mr. Chairman, that while our economy
is doing very well, we do exist really in a global economy,
unfortunately, of considerable uncertainty. We are the only
major part of the global economy right now that has strong
domestic demand-led growth.
DEPARTMENTAL OFFICES BUDGET
The Treasury Department is critically involved in providing
leadership not just for this country but really for the world
in many ways on dealing with these issues over the last year
and-a-half. We are asking for 14 additional FTEs in our
international group in the departmental offices.
What they will do is work across country lines so as to
bring the analysis of the different countries together so that
we can have cross-country analysis more readily available. I
think that is a very important function. In addition, some of
them will function like a SWAT team that can move to whatever
issue they are most needed at a particular time.
CUSTOMS BUDGET REQUEST
In terms of drugs and crime, a lot of our focus here is on
Customs, as you have suggested. There is focus on additional x-
ray equipment, because that is a very effective way of trying
to deal with drugs coming into the country, and also x-ray
equipment to deal with money laundering with cash that people
are trying to take out of the country.
In our Customs request we also request additional money for
training and to focus on internal affairs and integrity, and
there is an IG request that relates to putting more IG
capability in the areas that Customs is most active in.
SECRET SERVICE AND ATF
We have a Secret Service request that relates to the year
2000 campaign and the need for additional protection for
candidates, and additional security measures at the White
House.
Then finally, the fourth key area is the reduction of
criminal misuse of firearms, and that basically builds on the
work that the ATF does in preventing violent crime with
firearms, including ATF's youth crime gun interdiction
initiative, which is a very good program, the Brady law, and
various and other matters.
I would like to mention two other features of the law
enforcement budget, if I may. Number one, ATF needs a new
building, and the consideration here is safety. In this budget
we have $15 million in our budget to acquire a site, and then
the GSA budget has, I believe, $85 million, if I remember
correctly--$83 million. That is an advance appropriation for
next year, for 2001, so that we can get this building done.
That is a safety----
Senator Campbell. Will that be here in Washington?
Secretary Rubin. Yes, it will be in D.C., and that is
driven predominantly by safety concerns.
AUTOMATION ISSUES
The other law enforcement item I would like to mention is
the automation system within Customs. The existing automation
system is woefully inadequate and it breaks down from time to
time. We strongly endorse a new system, ACE, but we propose
spending this year working to develop a sound system. We are
going to learn from what happened to the IRS. We do not want to
have another IRS modernization effort. We want to develop a
sound system this year and then we will begin implementing it
next year.
A fourth major priority in the budget is modernizing
governmental financial systems, and that includes the Bureau of
Public Debt and FMS.
Then finally, there is Y2K. We expect to have virtually all
of our major critical systems completed by the end of March;
that is, by the end of this month. Obviously, testing and so
forth will lie ahead. In the year 2000 itself there will still
be some additional work to do, and there will be testing, and
then of course, there will be contingencies to deal with
anything that might not be functioning correctly.
Let me just conclude, if I may, by saying that, having been
at Treasury now a little over four years, I think we have a
truly remarkable group of people. I had that impression when I
was in the White House, and even when I was in the private
sector for that matter. But it really is a remarkable group.
This is one, and there may well be others--I do not know. But
this is one agency of Federal Government that really is able to
attract extremely good people, and retain them.
As a consequence, Mr. Chairman, Senator Dorgan, I think all
of us can feel very comfortable about the hands into which we
are putting the funds that are appropriated. I think the key
for us is to continue to build on this excellence. One of the
highest priorities that we have had is to focus on the
management of the institution and maintain its excellence going
forward.
We have worked very well with this committee in the years
that I have been Secretary. We look forward to working with you
this year.
PREPARED STATEMENT
Nancy Killefer, our assistant secretary for management, and
I would be delighted to respond to any questions.
[The statement follows:]
Prepared Statement of Robert E. Rubin
Mr. Chairman, Senator Dorgan, and members of the Committee, I
appreciate the opportunity to testify on the Treasury Department's
fiscal year 2000 budget request.
Mr. Chairman, for fiscal year 2000, Treasury is proposing a program
level that totals $12.659 billion for all operations. This level is
offset by $454 million from proposed fees as well as the use of
Treasury Forfeiture Fund, resulting in a net appropriation request of
$12.205 billion. Our request is critical to supporting Treasury's
important and wide-ranging mission.
As you know, the Treasury plays a key role in the core functions of
government, including tax administration, revenue collection, law
enforcement, financial management, tax policy, banking policy,
international economic policy and domestic economic policy. Our budget
supports Treasury's core current service requirements, maintaining a
balance of restrained staffing growth with enhanced technological
investments and capital support to strengthen Treasury's ability to
manage its programs efficiently and effectively.
We have provided the Committee detailed presentation materials on
our fiscal year 2000 budget request. Let me now highlight five major
priorities in the budget: reforming the Internal Revenue Service;
exercising leadership in international economic affairs; strengthening
our ability to fight drugs and crime; modernizing our financial
systems; and Y2K conversion.
Let me begin by discussing the IRS. Last year, Congress passed the
IRS Restructuring and Reform Act, building on the process of reform the
Administration began nearly four years ago. This legislation mandates
changes to tax laws and procedures, and the modernization of IRS's
organization and systems. In addition, in this spirit, IRS, Congress
and the Administration have pledged to the American people to reform
the IRS RR-3038 and give taxpayers the service they deserve and have
come to expect from the private sector. To follow through on this
commitment and to implement the Act, the IRS budget supports a major
investment of $197M to meet the reform and restructuring goals.
IRS restructuring and reform is centered on four areas.
First, protecting the taxpayer: The Reform legislation includes
more than 70 tax law changes to improve taxpayer protections. The Act
also strengthens the Taxpayer Advocate's organization and has
provisions to help ensure internal accountability and integrity.
Second, improving customer service: The Reform Act mandates efforts
to increase electronic filing and improve assistance to taxpayers. This
budget supports 24 hour-7 days a week phone access, expanded walk-in
service, enhanced service to small business, and Spanish language
telephone assistance.
Third, transforming the organization: The IRS has in place a new
management team with a new mission and vision. In 1998, the IRS
Commissioner unveiled a new IRS structure which focuses on service from
the taxpayer's point of view. IRS will be organized around specific
taxpayer groups, consistent with the mandates of the Reform Act. In
addition, the Restructure and Reform legislation established the
Treasury Inspector General for Tax Administration. The budget supports
the independence of this organization through transfer of funding from
the IRS, as directed by the legislation.
Fourth, modernizing information systems: In December 1998, IRS
awarded its PRIME systems contract for systems modernization. IRS is
currently working in partnership with the PRIME contractor to revamp
the systems modernization blueprint to reflect organizational changes
and business process re-engineering. Concerning technological needs at
the IRS, the IRS request funds the continuation of the Y2K program.
Recognizing the difficult funding restraints present this fiscal year,
we are also foregoing a deposit into the IRS Technology Account in
fiscal year 2000 because we believe we have sufficient funds in this
account to fund system modernization through fiscal year 2000. Instead,
we are asking for an advance appropriation for fiscal year 2001 of $325
million to continue funding for this multiple year program of systems
modernization.
The second major priority in the budget is to continue exercising
leadership in international economic matters. Treasury plays a critical
role in domestic and world economic affairs by providing expertise and
analysis vital to formulating sound economic policy. Never has this
role been more important than during the last year and a half, when we
at Treasury have been enormously focused on and involved in the effort
to restore stability and growth in countries affected by the
international financial crisis B which in turn very much affects our
own economic well being. To strengthen these efforts, this budget
expands the market analysis capability in the Office of International
Affairs.
Our third major priority in the budget is to strengthen our ability
to fight drugs and crime. As this committee well knows, Treasury has
critical and extensive law enforcement responsibilities in a number of
agencies including Customs, the Secret Service, the Bureau of Alcohol,
Tobacco and Firearms, the IRS, FINCEN, and the Federal Law Enforcement
Training Center.
To strengthen these critical efforts, our budget requests moderate
increases to support the Administration's major law enforcement policy
emphases. Specifically, our budget is focused on four key law
enforcement areas.
The first key area is the reduction of trafficking, smuggling and
use of illicit drugs. The Customs Service is committed to improving the
efficiency and effectiveness of its drug interdiction at U.S. ports.
This budget supports additional x-ray and telecommunications equipment
to examine suspected drug couriers in a less intrusive and more
effective fashion. In addition, the request of Customs, the IRS, and
FINCEN all support efforts to combat money laundering, which often
provides an effective means for prosecuting drug traffickers. Customs
continues to improve its interdiction of the illicit proceeds of drug
sales and the budget funds additional x-ray inspection equipment for
use at border crossings to prevent the exit of drug proceeds.
Second is the integrity of law enforcement operations. As part of
Treasury's ongoing effort to improve law enforcement effectiveness,
this budget supports Customs' goal of strengthening its integrity
awareness and operational oversight activities. The Customs request
also supports the establishment of a comprehensive education, training,
and workforce development program which covers the entire cadre of
Customs personnel, with a special emphasis on law enforcement
personnel. Furthermore, this budget also supports strengthening of
Treasury's Inspector General's investigative unit.
Third is protection of high-level U.S. and foreign officials. The
Secret Service continues efforts to ensure that protectees are safe
from increasing threats of counter-terrorism. This budget supports
protection for candidates and nominees in the 2000 campaign and
additional security measures at the White House complex.
The fourth key area is the reduction of the criminal misuse of
firearms. The budget continues to build on Departmental and ATF
initiatives started during the past two years to prevent violent
firearms crimes, including those committed by the nation's youth. This
efforts include expansion of ATF's Youth Crime Gun Interdiction
Initiative; full implementation of the Brady Law; and strengthened
efforts to investigate and help prosecute persons who illegally attempt
to purchase firearms at gun shows and similar venues.
Let me mention two other features of our budget related to law
enforcement. For several years, Treasury has understood the need to
provide a safe headquarters building for ATF employees and the budget
supports funding in GSA for this effort. In addition, funding is also
included in this budget to shore up Customs' current system for
commercial processing, which is struggling to meet the needs of today's
modern trade community. We support the need to replace Customs' aging
system and intend to use fiscal year 2000 to develop an integrated plan
for a new system, and then launching implementation of that plan in
2001.
Our fourth major priority in the budget is modernizing government
financial systems, including re-targeting and realigning existing
resources to meet workload changes at the Financial Management Service,
and upgrading financial technology and systems infrastructure at the
Bureau of Public Debt.
The final major priority in the budget is completing system
conversion to operate smoothly in the Year 2000.
As the agency responsible for the distribution of most government
payments, the collection of most government revenue, and with
operations that affect virtually every aspect of government and the
private sector, we at Treasury are enormously focused on the Y2K
problem. We have made a great deal of progress; February, for example,
marked the fifth month in a row that distribution of Social Security
payments were Y2K compliant.
However, there is still much to do. At Treasury, every mission
critical system is being upgraded or replaced to ensure smooth
operations in the year 2000. The IRS is the largest part of the date
conversion effort. The bulk of its fiscal year 2000 activities will
involve the completion of its data center consolidation and the last
three months of preparation before the end of the century, including
end-to-end system testing, as well as any contingencies that must be
implemented to deal with potential but unexpected failures.
I would like to bring to your attention to one final item that has
been of great interest to the Department, and that is the North
American Development Bank. We have been working hard to make the
domestic window of the North American Development Bank fully
productive, and I urge you to support this year's request.
Mr. Chairman, let me conclude on a personal note. Throughout my
four years as Secretary of the Treasury, I have been continually
impressed by the intelligence, professionalism and dedication of the
Treasury people with whom I've had the opportunity to work. I think
this should give you and the Committee confidence in the uses that are
being made of taxpayer's funds. In that spirit, I ask that you approve
our fiscal year 2000 budget request to support the work of the Treasury
Department in fulfilling its wide range of responsibilities in serving
the American people. The Treasury Department has had a very productive
relationship with this Committee and we look forward to working with
you throughout this year. Thank you very much.
Senator Campbell. Thank you. I might say from my own
perspective, it has been difficult for the Federal Government
to attract people of Mr. Rossotti's credentials, and yours too,
and I have enjoyed working both of you. I have heard some
gossip, for whatever it is worth, that sooner or later people
go back to their private life, and you may be going to it
sometime. I just want to tell you that we certainly wish you
good luck whether you stay with the agency or go back to your
private life. I think you have made the Nation a little better
by deciding to do some public service.
I guess it is out of the question to ask you if we can have
that ATF building in Colorado, so let me ask you something else
that is within----
Secretary Rubin. We will take it under advisement, Mr.
Chairman. You could speak to Eleanor Holmes Norton about that
if you would like.
Senator Campbell. Right. I understand the tug of war on new
buildings.
GUN VIOLENCE
President Clinton announced this past weekend during his
radio address that the Treasury and Justice Departments are
working together on a plan to reduce gun violence, and I am
sure all of us, on both sides of the aisle, really support the
reduction of gun violence. Have you begun to develop the plan
that he mentioned in his radio address, and do you envision any
further restrictions on private gun ownership?
Secretary Rubin. My recollection is the radio address--and
correct me if I am wrong--focused on gun shows where I think
they do----
Senator Campbell. It may have.
Secretary Rubin. I believe that there is a view that there
is a real problem and a problem that needs to be dealt with.
And also on minors who have a history of violence having access
to guns. Those were, as I recollect at least, were the two
focal points of the radio address.
Senator Campbell. There are a lot of places where guns are
bought and sold in America that do not come under the purview
of many of the bills that have been passed and signed into law,
including classified ads, in newspapers and things of that
nature, which are private sales, and so on.
The Project Exile in Virginia, are you familiar with that
by any chance?
Secretary Rubin. I am not, but----
Senator Campbell. It is a process to utilize existing law
to get criminals off the street that have used guns. But if you
are not familiar with it, I will not ask any questions about
that.
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
The office of the Treasury inspector general for tax
administration was established as part of the IRS Restructuring
and Tax Reform Act. Many of us here on Capitol Hill applaud
that effort, and feel it has really been a step in the right
direction. I want to make sure that we support the new tax IG
any way we can. We do have one concern, and that is the issue
of overlapping responsibilities.
Can you explain how the role and responsibilities of that
office will relate to the Treasury IG and how are you going to
keep them from duplicating their efforts?
Secretary Rubin. That is a good question. As you know, we
now have two IGs. In fact, under Nancy Killefer's aegis I met
with the new tax IG and his top management. There are about
1,000 people in that group. It is really a very large group. It
almost doubles the size of the departmental office.
In any event, what has been done is to lay out a distinct
list of responsibilities for each of the two, the regular IG
and the Tax IG. But, as you correctly say, some of these may
overlap, and where they overlap they have agreed to coordinate
and to work together to figure out how to do this right. Nancy
can expand on that, but I think I at least am satisfied, having
discussed this----
Senator Campbell. Do you have some type of working group
now to define what may be the overlap?
Ms. Killefer. Yes, immediately after the bill we set up a
task force to set up the new IG. It went into effect, as you
know, in mid-January. So, a joint task force worked together
and laid out the issues. We actually transferred many of the
cases that were in the Treasury IG on January 18th over to the
tax IG. They have clearly delineated responsibilities in terms
of the handling of cases, as well as the audit function.
I think what the Secretary refers to is that the work has
already been done. What the Secretary is referring to is,
invariably other issues may arise over time. The Treasury IG
and the Tax IG are working together and have a joint meeting
weekly to resolve any issues that may arise. We have actually
arranged for them to be co-located in one office. It is not
their permanent offices, but an office in the Treasury building
to ensure that communication happens as necessary.
Senator Campbell. With the tax IG, will people be able to
send complaints or problems directly to them?
Ms. Killefer. Yes.
FISCAL YEAR 2000 IMPLICATIONS OF FISCAL YEAR 1999 EMERGENCY FUNDING
Senator Campbell. Thank you. The Senate budget resolution
also assumes that emergency spending programs funded by the
fiscal year 1999 omnibus bill late last year will not continue
unless the funding is again designated as emergency funding. As
you are aware, the Secret Service received $80.8 million for
antiterrorism, much of which was for additional personnel.
The fiscal year 2000 budget for the Secret Service requests
a continuation of $30.6 million of that amount as part of their
base appropriations. What would be the impact to the Secret
Service if that funding is not available as part of the fiscal
year 2000 budget?
Secretary Rubin. My recollection--but Secretary Killefer,
correct me if I am wrong--is that we included $54 million, but
we did it within the caps. So we did not do it on an emergency
basis because we felt it was requisite to perform their
protective functions with respect to terrorists.
Ms. Killefer. We have included it in caps because it does
allow for additional agents for protection in terms of
antiterrorism and the additional threats that we are seeing.
Secretary Rubin. But we took it out of the emergency status
and put it in, as Secretary Killefer said, under the caps.
Senator Campbell. Fine. By the way, I just had an
opportunity about an hour ago to spend some time with Brian
Stafford, the new head of the Secret Service. A very fine man
and I commend you for having him on board. The only complaint I
have is that you cut short his Daytona bike week vacation.
Secretary Rubin. He was on a motorcycle down there. It
occurred to me that you might relate to that.
CUSTOMS AUTOMATION AND FEE FUNDING
Senator Campbell. Yes, that is what he told me. He had to
leave it at the airport to fly back for his appointment.
Mr. Secretary, the Congress has provided approximately
$66.8 million for the Customs automation effort. As you are
aware, there have been numerous GAO reports confirming
Congressional concern relating to the development, the timing,
and the cost of this project. In your fiscal year 2000 budget
submission there is appropriated funding for the Customs
automation effort. Instead, as I have it, you have proposed the
enactment of a user fee to offset the program's cost.
How does the Treasury and Customs expect to meet those
demands if the user fee is not enacted by the authorizers?
Secretary Rubin. Could I ask just one question, if I may,
for clarification? Are you talking about the general fee right
now, the $312 million fee or the ACE fee?
Senator Campbell. Staff tells me that it is not the general
fee.
Secretary Rubin. You are talking about the ACE fee? I think
we have got a very difficult problem. The ACE fee was fenced
off for use next year.
Let me tell you our overall approach to this. Having
suffered through a very difficult situation which some of your
staff are familiar with with respect to the Internal Revenue
Service systems modernization, the conclusion, and I think
rightly, that we drew here was that we wanted to go about this
very carefully and make sure we had a plan that not only worked
as a systems plan but also was congruent with the business
needs of the Customs Service.
That work is going on right now, and it is really a joint
project, if you will, between the Customs people and Treasury.
It is a Customs project, but the systems people at Treasury,
and Assistant Secretary Killefer, are very much conversant with
systems problem. The systems people at Treasury are working
with the Customs people on that.
We do not need any funding for the ACE this year, but we
are seeking the fenced-off fee for next year. If we do not get
it, then we are going to have to figure out some other way to
fund this. But I do not think there is any question, zero
question if you speak to people who are involved in trade in
this country, cross-border trade, that the existing system is
breaking down and we have to have a new system.
Senator Campbell. All right. I have some other questions,
but I know Senator Dorgan has to leave.
Secretary Rubin. By the way, I might add, Mr. Chairman, the
private sector is going to participate with us in developing
this system which, number one, will give us access to their
capabilities. And number two, it may give them more of a sense
of investment in and ownership of the system, which might help
get support for the funding.
Senator Campbell. Thank you.
Senator Dorgan.
CALLABLE CAPITAL
Senator Dorgan. Mr. Chairman, thank you very much.
Mr. Secretary, last night the U.S. House passed their
version of the emergency supplemental, and it is critical that
this thing get completely through Congress. We have got ag
loans, emergency loans for producers, family farmers who need
to get some short term loans to buy some fuel and some seed to
get in the field this spring in just a matter of weeks. The
Agriculture Secretary says they have got 13,000 loans--they are
not making any loans--13,000 loan requests that are unfunded.
Now this is critical in the next 24, 48 hours that this thing
get done.
Now last night the U.S. House passed their version and they
used as an offset $648 million in reduction in callable
capital, or the money that is set aside to guarantee loans by
international development banks. We have an aggressive debate
here in the Senate about whether emergency funding should be
offset. I happen to think that it is a terrible precedent to
set, to decide that emergency funding must be offset. We
specifically provide in law that it need not be. But those who
suggest it always must be, one day are going to get caught in
an awful bind with this precedent.
But having said all that, tell me what the impact of the
House action would be on the $648 million they are using on
this reduction in callable capital. Does that have
consequences? If so, what are they?
FINANCIAL MARKET REACTION TO CALLABLE CAPITAL RESCISSION
Secretary Rubin. I think it does have consequences,
Senator. I think it has very substantial potential
consequences. It is deeply disturbing to me. I spoke this
morning to the president of the World Bank, Jim Wolfensohn, who
is, to say the least, at least equally disturbed. And I spoke
to their chief financial officer, whom I knew when I was in the
private sector, and he was in another private sector
institution. He too is very deeply disturbed.
The problem is that the AAA rating and the view of the
World Bank by the underwriters and the creditors are very much
affected by the appropriated callable capital of the United
States. They do not look at the total callable capital. There
is a skittishness about U.S. support for international
institutions. So they limit their focus to the appropriated
callable capital.
It is the view, and it is a view I share, of several people
I spoke to who are familiar with the financing of the World
Bank--something that I used to do when I was in the private
sector, or at least I did some of it--that the skittishness is
such that even a small rescission could be viewed, and might
well be viewed by those who provide credit, as foreshadowing a
much larger withdrawal of appropriated callable capital. Such a
rescission could have a substantial impact on the cost of money
to these institutions, which in turn would adversely affect
what they can do in the world.
I think it is a very serious problem. We sent a letter to
the effect that the senior advisors to the President would
recommend a veto based on this item.
But we agree with you about the importance of the
supplemental, and I think the thought has really been to get
this issue into conference, and then work and find a solution.
We also agree with you, by the way, that the emergency should
not be offset. In 1997, as you well said, in the balanced
budget agreement, there was specific provision for not
offsetting emergency funding.
But leaving that aside, our view is to deal with this in
conference in some acceptable fashion.
NO TAX RETURN FILLING SYSTEM
Senator Dorgan. Mr. Secretary, let me talk to you just
about two policy areas. I know we are talking about
appropriations here, but the two policies are, first, the IRS.
I am not going to talk to you about formulary apportionment and
all those issues which you feel so strongly about and which I
feel we are not doing well on.
But let me talk to you about the area--I have introduced
legislation in past Congress and will reintroduce it, on the
opportunity to create a no tax return filing system. Some 30
countries have variations of systems where you do not have to
file an income tax return.
Now there is a way for us to allow 70 million, 80 million
Americans to not have to file any tax return. I have described
it to you where when you check in at your workplace you file a
W-4. You add about two boxes to the W-4 and it becomes a rough
justice form of an income tax system. But you say, I am in the
$40,000 bracket, I own a home; a couple extra checks. I have
less than $2,500 in capital gains and interest income.
Therefore, my withholding becomes my exact tax liability and I
do not have to file a tax return.
You could have 70 million to 80 million people achieve that
form of rough justice, which would be a much better tax system,
and have 80 million fewer tax returns, 80 million fewer people
worrying about audits. It is a remarkable way to simplify
dramatically the income tax system for tens of millions of
Americans.
I know that you are working on electronic filing down at
the IRS. I hope you will work with me to see if we can create
some variation of what 30 countries already have, a no tax
return filing system, using the W-4. The fact is, we could use
the W-4 with very few variations that would not impact
businesses. I have met with many of the business groups and
they do not have any heartburn about it. We could, with one
stroke, dramatically simplify the income tax system by
eliminating the requirement to file a return at all for some 70
million Americans.
Secretary Rubin. Do you know offhand, Senator, whether that
would have a budgetary--whether on net we would collect less
money or more money or the same?
Senator Dorgan. Those are details. [Laughter.]
I am talking policy, Mr. Secretary. It is a fair question.
Secretary Rubin. But it may not have a negative effect.
Senator Dorgan. You are right.
Secretary Rubin. It actually sounds like a very
constructive idea to pursue.
Senator Dorgan. It is a fair question. You do have some
small effect, because in order to achieve rough justice you
would have to say there is a threshold of both capital gains
and interest income below which you do not have to report. The
reason for that is, if you are trying to track every penny that
someone has in other than wage income, you cannot use a W-4 for
a rough justice tax system and a no return filing system.
But I was not trying to be funny. The details, obviously,
are a little more complicated than I have described. But this
is a very achievable system. I have talked to folks at the
White House about it. I have talked to some of my colleagues
about it. We could do this. If ever we had a notion that we
could dramatically simplify the income tax system, this is one
way to do it.
IRS
Ms. Killefer. I think one of the things that will help this
is, when we move to what I describe as a business unit
structure at the IRS aligned with taxpayers. What I would
describe as the wage and income group, which are those people
that largely receive wages from an employer that are reported,
80 million taxpayers, will actually be a single unit. That unit
will focus on actually how to ensure compliance, but also make
the job easier for these taxpayers in terms of complying with
the law.
I think this is an important point to look at. I know a
study is being done that was actually requested by Congress and
we will be working with you on that. I would only point out
that there is experience in other countries such as the U.K.
that is not positive, where they are thinking about going back.
There are complications to this.
So I think it is an interesting idea. We are certainly
desirous of making filing easier for people, and I think many
of the electronic programs have done exactly that. But I think
we need to be cautious about this program.
Senator Dorgan. There are some other experiences that are
very positive, and I think there is a way to make this----
Secretary Rubin. The answer is we would be delighted to
work with you in a constructive way, because if you can make it
work it would be a terrific thing to do, as Secretary Killefer
said, if Great Britain is pulling back, their reasons and so
forth. But we would be delighted to work together.
Ms. Killefer. Yes, and we are.
Senator Dorgan. Great Britain is not a repository of
progressive thought, as you know, in a lot of areas. But this
is something----
Secretary Rubin. We will pass that on to them.
THE TRADE DEFICIT
Senator Dorgan. With my compliments.
Let me just ask about one additional area, and that is
trade. Mr. Secretary, you are in the pivotal position of
dealing with this country's economic policy. I have always
found it interesting, the trade deficit, which is the one dark
spot on the horizon. It is record high, growing nearly every
month, expected to be much higher.
The numbers that the Washington Post reports, of course,
really minimize it because they do, rather than the merchandise
trade which I am much more interested in. The merchandise trade
describes what is happening to the productive sector of our
economy. That merchandise trade deficit is going to be probably
what, $250 billion, $280 billion in this coming year?
So I am wondering, some economists have said, the reason we
have a trade deficit is because we have a fiscal policy
deficit. That is what they used to say. And if we just balance
the budget we will not have a trade deficit any more. Now the
same economists are still making money downtown giving advice,
but we have largely dealt with our fiscal policy problem and
our trade deficit is getting worse.
I want to ask you this question. Are you concerned about
the size of the trade deficit? And will it continue to get
worse? And are there things we can do to make it better?
Secretary Rubin. I think my answer would be fourfold, if I
may, to your three questions. I think what economists were
saying several years ago was that if you increase the national
savings rate then you will reduce the trade deficit. And at the
time we had a fiscal deficit constituted Federal dissaving.
Yes, I think that the trade deficit is sustainable for some
period of time. You and I have had this discussion before. But
I think over time it is clearly a problem. And the larger it
gets, the larger that foreign claims become as a percentage of
our economy, the more of a problem that could become.
Having said that, I do think we can sustain it for quite
some period of time. And at this particular moment in history,
with respect to the global economy that you and I were
discussing before, since we are the only part of the world's
economy that has robust, domestic demand-led growth, I think
what we need to do is to continue to grow, to continue to
maintain our open markets, to work with the countries that are
in trouble and try to help them get back out.
Unfortunately, countries that have crises initially do have
to export their way out. I think when people engage in unfair
trade practices we should be enormously vigorous in using our
trade laws. And I think that we should work with the industrial
countries, the G-7, particularly Japan and Europe, to do
everything we can to encourage them to do two things. Number
one, increase domestic demand-led growth. And number two, to
open their markets.
The one silver lining in what I agree with you is, in a
long run sense, a problem is that unlike the 1980s when the
deficit was going predominantly to fund consumption, investment
in equipment and machinery is either at record highs, or close
to record highs as a percentage of GDP. So we are funding
investment, and assuming that the judgments being made are
reasonable, then the return should exceed that which we have to
pay back.
But your point, nevertheless, is still a valid one in the
long run sense. I think it is a concern. But I think the
absolutely wrong thing to do would be to close our markets as a
result.
Senator Dorgan. I would just observe that----
Senator Campbell. We are getting pretty far outfield from
this budget request.
Senator Dorgan. I understand, but I did not ever think I
would meet a Secretary of the Treasury in my lifetime, and
having the opportunity----
Senator Campbell. Now that you have him.
Senator Dorgan. Coming from a town of 300, and having the
opportunity to visit with him about policy is important.
Secretary Rubin. I never thought I would meet a senator.
CUSTOMS' TECHNOLOGY, TRADE FACILITATION, and Fee-Funding
Senator Dorgan. Let me just ask one additional question
about the Customs Service. Their job is a pretty awesome job,
given the increasing global economy, the globalization of our
economy and the amount of goods moving in and out. Are you
pretty satisfied at this point that we have the resources that
we need to deal with the issues confronting Treasury on the
quantity of goods coming in, and meet their responsibilities?
Senator Kyl asked a question that kind of related to that,
or made a comment about that. Are you pretty confident that we
have the resources that are required at that point?
Secretary Rubin. Let me give you several pieces to the
answer. One is that we do have the problem the chairman raised,
that part of our funding this time comes from a fee that is not
universally popular. And on the off chance that that fee is not
enacted, we are going to have to find some other way to provide
the funding. I think that problem, it seems to me, permeates
the entire budget and that this is a broader appropriations
question that is going to have to be dealt with somehow or
another.
There is tremendous promise in technology that is already
being used to do things more efficiently and more effectively.
I have actually seen, these x-ray machines at the border, both
the coming in and the going out. So there is a lot to be gained
there.
Having said all that, I do think the Customs does have a
very difficult job. What we did, the Administration functions
on--I serve as Secretary of Treasury in terms of our budget.
But then we have a small group around the White House, which I
am on, that does the overall budget, and we try to make
judgments within the constraints that we have. I think Customs
could use more resources.
But on the other hand, I think within the constraints we
had, and weighing and balancing everything, the Administration
made the best judgment they could as to how to allocate its
very scarce resources, and that is how we came up with this
number for Customs. But they are clearly hard-pressed. They
have got a very strong new leader, and I think that is very
constructive. But I agree with you, they are hard-pressed.
Senator Dorgan. Mr. Chairman, thank you.
Senator Campbell. Senator Kyl, I just bet you have some
questions about Customs.
COMPETING INTERESTS OF TRADE FACILITATION AND CONTRABAND INTERDICTION
Senator Kyl. Yes, and it goes right to the point that
Senator Dorgan just raised.
In your statement, Mr. Secretary, you said the third major
priority in the budget is to strengthen our ability to fight
drugs and crime. The first key area is the reduction of
trafficking, smuggling, and use of illicit drugs. The Customs
Service is committed to improving the efficiency and
effectiveness of its drug interdiction at U.S. ports.
Now from fiscal year 1997 to fiscal year 1998, the number
of inspectors in Tucson, Customs inspectors I am talking about,
is reduced, not increased. I know that in your budget, in the
2000 budget request to Treasury, the Customs Service requested
506 full-time equivalent inspectors for land ports of entry.
But OMB reduced that to zero. No increase in Customs
inspectors.
The wait times at the ports of entry in San Luis, south of
Yuma, Nogales, Douglas, if we could get it down to two hours
people would be happy. For commercial traffic, they have to
wait overnight in many cases. Talk about an inefficiency in
commerce.
Then we talk about the drugs. The State Department's 1999
international narcotics report says Mexico is the principal
transit route for cocaine produced in South American countries.
Estimated that 60 percent, several hundred metric tons of the
Colombian cocaine that makes its way to the U.S. passes through
Mexico, and it is coming in more creative ways than ever.
Containerized cargo, commercial trucks, rail, automobiles, off-
road vehicles, as well as the individuals.
I could ask you why the Administration zeroed it out. You
would answer, well, they had to balance interests. But what I
really want to ask you is this. Do you believe that a zero
increase in Customs agents is good policy? If not, will you
work with us to restore the funding at least for the request of
Customs for 506 new Customs full-time equivalent inspectors?
And will you do so by helping us find offsets so that we do not
have to get to the end of the year with an omnibus
appropriation bill and fund the new programs that the
Administration took money out of Customs and INS to fund?
For example, there is about $600 million in new cops
programs. Now cops are local responsibilities, and State
responsibilities. We may have a national crime problem, but
that is not a Federal crime problem. Whereas, the control of
our borders is a Federal issue. We are the only ones with
responsibility. And you have part of that responsibility with
respect to Customs.
So what we need is your support in restoring the funding
and finding the offsets in other requests that the
Administration has made. There are about three major questions
in there, and I will engage you in a dialogue on them.
ALTERNATE APPROACHES TO FUNDING SUFFICIENCY FOR CUSTOMS
Secretary Rubin. Let me see if I can pick them up in
response. I do think that Customs, if the resources were
available, could use additional resources very effectively.
I do think the Administration made very difficult judgments
in choosing amongst different possible uses of resources, and
we could disagree about them. I was part of the group that was
originally involved in the 100,000 new cops decision. It seemed
to me a very sensible decision. Law enforcement people seemed
to think it was a very useful addition.
Senator Kyl. I supported that original program.
Secretary Rubin. Yes, it was a good program. So then the
question is, do you continue this in the manner we just
described or do you allocate the resources someplace else; for
example, Customs. I personally think we made a pretty sensible
decision myself.
I think we are going to come out, Senator--this is my view
and time will tell whether it is right or it is wrong. I think
across the whole budget you find similar kinds of problems. The
non-defense discretionary part of the budget is a part of the
budget that has very little political appeal to people. It is
the part of the budget that people very often will most quickly
diminish in order to accomplish various other purposes. But as
your comments made clear, and I think you are absolutely right,
it is a part of the budget that serves the American people very
well.
I think what is going to happen at the end of the year is
in some fashion or other, the Congress and the Administration
working together are going to have to find more resources for
the non-defense discretionary area. That is my view.
LAW ENFORCEMENT POLICY CHOICES
Senator Kyl. Here is the point. The Administration created
new programs. This $600 million is a new program. And part of
the reason for it was that there were reports that some police
reports had some ethical problems, some public relations--well,
they were more than public relations. They were not treating
people properly, for example. And the President said, we need
more police training to ensure that people's civil rights are
not degraded in any way by our law enforcement.
Now at the border we have Customs agents who are harried
from the moment they take their station to the moment they
leave. They have an impossible job to do, and frankly, a lot of
them get frustrated and I hear stories from my constituents who
say they got harassed. I hear a lot more reports of harassment
by Customs agents than I do of local police in Arizona.
So if we are going to pay attention to harassment of
people, and if we are going to try to increase, as you said,
our ability to fight drugs and crime--and we know that they are
coming across the border. And if--and I know you share this
goal--we are going to try to enhance our commercial
opportunities, it is absolutely impossible to do all of those
things without an increase in Customs agents.
So I am stunned by your comment that you agree with the
Administration's decision to have zero increase in Customs
agents, and that you think it is better to balance these needs
by having Federal dollars go to local cops programs, and that
you support that Administration decision. I am stunned by that,
given your responsibilities to protect the border, to enhance
trade, and to prevent drugs coming in.
Secretary Rubin. Senator, I take very, very seriously our
responsibilities with respect to Customs and we have, I think,
done a great deal to try to make Customs a stronger
institution. I might have--I will get to the last piece of your
question in a second. And I might point particularly in this
budget to the places we most need help. We need to have the x-
ray technology because that is a more efficient way of doing--
--
Senator Kyl. I am going to get to that in just a minute. I
agree with you.
Secretary Rubin. And we need to have it going in both
directions. We also need to have additional resources to deal
with training and internal affairs, because these are both
issues in which there are difficulties in Customs.
I would very much like to see Customs get additional
resources. But I think within the existing caps you do get
competing priorities, and one has to make a judgment. These are
the judgments the Administration made. You may disagree with
them. You may be right, you may be wrong.
I think, as I said a moment ago, that that is not where the
debate--at least in my opinion, that is not where the debate is
going to end because I think the Nation needs more in terms of
the kinds of services that get covered in the non-defense
discretionary part of the budget and that a budget allows. So I
think somehow or other, just as we did last year, this year
there is going to have to be some way of dealing with that at
the end of the year. At that point, it seems to me, we can
address the kinds of issues that you are raising.
Senator Kyl. I will just say it one more time. I think the
time to address it is in the budget. Now it is true that----
Secretary Rubin. I agree you need to deal with it in the
budget. I just do not think that these caps can be the way this
budget ultimately gets resolved.
TREASURY RESPONSIBILITY FOR BORDER ENFORCEMENT ISSUES
Senator Kyl. I agree with you that reasonable people can
differ about where to put the money and how to create the
budget. But you have the responsibility on the border, and that
is why I am stunned that--and you have a tremendous amount of
authority in this Administration and influence. You are deemed
to have successfully presided over a department and been
responsible for successful--been part of our successful
monetary and economic and trade policy. So I am just greatly
disappointed that you are not acting as an advocate here.
Secretary Rubin. Do not misunderstand me, Senator. Within
the debates within the Administration, I am, and we are, very
strong advocates for----
Senator Kyl. Well, you got zero. You requested 506 and you
got zero.
PURPOSE OF CUSTOMS FUNDING INCREASE
Secretary Rubin. No, I think we had about a 5 percent
increase in funding, did we not?
Senator Kyl. I am not talking about overall funding, I am
talking about for Customs.
Secretary Rubin. No, in Customs we had about a 5 percent
increase.
Senator Kyl. I am talking about for Customs agents.
Ms. Killefer. Not agents; funding.
Secretary Rubin. They are not agents. We decided to use the
money for technology and other things. That is another debate.
Senator Kyl. How many new x-ray machines are going to be
put on the border in the Tucson sector as a result of the
funding?
Secretary Rubin. I do not know. Do you know, Nancy?
Senator Kyl. What is the request?
Ms. Killefer. No. As you know, Nogales has just put in
theirs. I have been down and visited and I know what you are
talking about. I think about 8 x-ray systems are going to the
Arizona border.
Senator Kyl. But the point is that x-ray machines--I mean,
I would love to see new x-ray machines in San Luis and Douglas
as well as a sufficient number in Nogales. It is fine to have
more x-ray machines because there are new, unique ways of
bringing this stuff in, and you need the handheld units as
well. I mean, all of these things are very useful.
But you need people to operate them. And it is unacceptable
to have two-hour lines as the norm, to have overnight stays for
commercial truck traffic. This is an emergency situation. Even
if we put in money right now, we could add 500 Customs agents a
year for five years and still not have enough. That is why I am
just so disappointed that essentially your answer is, you think
you would like to have more resources too and maybe at the end
of the year we will all agree to a big omnibus bill
appropriation bill so we can fund everything.
GOVERNMENT-WIDE COMPETITION AMONG MERITORIOUS PROPOSALS WITHIN FUNDING
CAPS
Secretary Rubin. No, that is not my answer, Senator. No,
that was not my answer. My answer is that I think the Customs
could very effectively use additional resources. When we have
our discussions within the Administration we are very strong
advocates for Customs and I think we have been very effective
advocates for Customs. In a budget that overall has very little
room we are increasing funding for Customs by about 5 percent.
I think within Customs you can argue what the money should be
used for.
What I said was, and I do believe it is the case, that the
Customs instance is a good example, and there are large numbers
of similar instances all over the Government, of various
important public needs of the kind that you have identified
that cannot be met within these caps. That is why I believe
that in the final analysis when this all gets resolved, as we
did last year, something is going to have to be done so that
the non-defense discretionary part of the budget has funds in
addition to those that are permitted by these caps. That is my
view.
I can assure you that in that context we will continue to
be very strong advocates, if that happens, to make sure the
Customs is appropriately treated at that time.
Senator Kyl. Mr. Chairman, what we have here is a budget in
which Customs asked for 506 new Customs agents. You have the
department saying one of their top priorities is to improve the
drug interdiction at the border as well as--you did not say it
but I am sure you would add the commercial needs at the border
as well. We all agree on that. Yet when the budget comes out it
has zero money for new Customs agents.
I have been trying to get the Secretary to say he will help
us fight for that. I do not have a specific answer, but we have
a general answer that by the end of the year there will be more
money for everything, and therefore, we will not have to make
difficult offsets, I guess.
Secretary Rubin. No, that was not my answer. Let me, just
to characterize my own answer. My answer was that you have
identified a very important public need. This was weighed and
balanced against a lot of other important needs. We were
extremely strong advocates for Customs within our budget
process.
When I then changed hats from the advocate for Customs to
part of this small group in the Administration that does make
the ultimate decisions about budgets, I was part of the group
that arrived at these decisions and all of us support the
decisions that the Administration made.
I think that the public needs that are not met within the
current caps are such that at some point there is going to have
to be, just as there was last year, some way to find additional
resources to meet public needs. And I would, once again, be an
extremely strong advocate for Customs sharing appropriately in
those funds because I think what you said is absolutely
correct.
COST OF 500 NEW CUSTOMS AGENTS
Senator Kyl. Just one more. Do you have an idea off the top
of your head about how much it would cost? Is it about $50
million for 500 new Customs agents?
Secretary Rubin. The $50 million for 500 agents comes out
to $100,000 agent. The cost per agent in the first year is
closer to $130,000 when you consider the equipment and other
items required to support an agent. If 500 agents came on the
rolls, the cost in the first year would be approximately $65
million.
Ms. Killefer. The $130,000 figure is an all inclusive
figure for the agent. 500 additional agents would require some
additional support personnel and additional supervisory
personnel.
Senator Kyl. Thank you.
Senator Campbell. Let me defer to the chairman of the full
committee. Did you have any statement or any questions?
Senator Stevens. I do not want to interrupt the process.
Senator Campbell. Go ahead.
INTERNATIONAL--OFFSETS AND OUTLAYS
Senator Stevens. I am concerned, Mr. Secretary, as I am
sure you are, about the overall process that we are going
through right now in terms of offsets for the emergency bill. I
think that has a lot to do with the end game that you were
talking about with the senator from Arizona. I would be pleased
to have your comments before we go to conference on some of the
items that are in that bill.
There is no question that the House has targeted some of
the IMF funds and other funds. I am going to have a meeting
with Mr. Griffin, and the head of CBO, and Senator Gramm this
afternoon to go over the principles involved in that bill.
The difficulty is that we have a series of senators who
believe that when we reprogram emergency money for expenditure
in the same year that there has to be reanalysis of the outlays
of the expenditures on the program to which the funds are
transferred. There was no analysis in the first instance of the
funds as they were appropriated. Both outlays and budget
authority were outside the confines of the budget process and
therefore, deemed an emergency, approved by the President as
well as the Congress as an emergency.
And now that we want to reuse them within the same year for
another prospect, they say that we must now take into account
the outlay scoring. That is what really has led us into the
quagmire we are in now, because we have one amendment that cuts
$2.9 billion off the omnibus bill of last year. It has the
unfortunate consequence of having such a large offset that all
these other amendments were offset, so I could not oppose them.
We were taking a lot of things to conference that would
otherwise not be in conference because of that one amendment.
But I do need your guidance in terms of some of those
monies. It may be that some of those monies will not be
obligated this year. And if they are not going to be obligated,
our deferral is just the same as a total offset. We can defer
funds to the next fiscal year, or even the following fiscal
year if it is possible. I do not know what the obligation rates
might be in terms of some of those funds, and I would seek your
assistance before we go to conference on how the outlay problem
affects your monies.
Secretary Rubin. I cannot give you an answer offhand, but
we can certainly have somebody take a look at it and I will
continue to work with you to reach a solution in conference.
But which offsets are you thinking of specifically, Mr.
Chairman?
Senator Stevens. IMF and those accounts that they just
offset last night.
DEFERRAL OF CALLABLE CAPITAL AVAILABILITY
Secretary Rubin. You are talking about the callable capital
issue?
Senator Stevens. Yes.
Secretary Rubin. Let me say, Mr. Chairman, if I may--and I
think you and I briefly discussed that--I think that is an
enormously serious problem and it goes much beyond the money
that----
Senator Stevens. I understand that, and I agree with you.
Secretary Rubin. But there is no outlay.
Senator Stevens. What is the effect then of saying there
cannot be an outlay until October 1? Up here they score it.
This is a problem of scoring on the chart. What is the effect
of saying--they offset it by saying, we are going to cut that
amount. What is the effect if I just changed that and say, you
cannot change it--in any event, you cannot spend it until
October 1?
Secretary Rubin. I understand. In other words, instead of
rescinding the BA, you would say we will defer it, the
appropriated callable capital, so it cannot be used until
October 1.
Senator Stevens. That way there could be no outlays, and
that way it is an offset.
Secretary Rubin. I understand the question. I think it
raises roughly the same problem that you had--in fact, really
just about the identical twin of the problem you have right
now. The problem that you have in the World Bank the other
multilateral development banks is that there is a serious
skittishness. I spoke to President Wolfensohn about it this
morning, actually. There is a serious skittishness amongst
underwriters, creditors, and to some extent, the rating
agencies with respect to American commitment to the
institutions, rightly or wrongly, based on the length of time
it took to get the IMF funding, and the fact that we are still
in serious arrears to the United Nations.
And the concern that the financial officials at the World
Bank have--and I have spoken to a few of the people in the
financial community so I think this is a valid concern--is that
any sort of a rescission or a withdrawal--and I understand you
are talking about a deferral rather than a rescission, or I
guess it is technically a deferral de facto rather than a
rescission--I think anything that looks like we may be pulling
back could have--I am not saying it necessarily would have, but
I think could have, Mr. Chairman, a very serious negative
impact on these institutions in terms of their ability to raise
money.
The concern that I had when I first heard about this, which
I guess was two weeks ago or thereabouts, was that if members
of Congress felt that there was some $12 billion, which is the
total amount--$12 billion of appropriated callable capital out
there that was easier to use because very few people support or
understand the importance of these multilateral development
banks--I know you do because we have discussed it a lot, but
very few people do--that there might be a tendency to look much
beyond just the $600 million or $700 million that the House was
looking for.
Senator Stevens. I understand what you are saying, but----
Secretary Rubin. I think the deferral would have an effect
not very different than the rescission, because I think people
would be afraid that if you defer it once----
The glitch here in using callable capital as an offset is
not in terms of budget authority, it is in outlays. There are
no outlays. In terms of needing offsets, we just have a
tremendous problem this year and probably next year, and then
the pressure is gone.
But I think the problem that you are going to run into with
the deferral approach, Mr. Chairman--or I should say, we are
going to run into, we being the world--is that if we do this I
think that it is then going to resubject us to a congressional
process, even though it is a deferral to a date certain. After
all, access to the callable capital could be then deferred
again. I think the effects would be not very different from----
Senator Stevens. There may be some other funds that are
there that have already been appropriated that are not going to
be used this fiscal year, if there is any at all that you can
identify that we could put behind a wall to defer until October
1st it would have the same effect.
OTHER OFFSET OPTIONS TO BE EXPLORED
Secretary Rubin. Let me say this. I know, because I have
talked to Jack Lew about this a lot of times, and you know this
because you have spoken to him a lot too. In fact, I was with
him this morning. OMB is very intently focused on trying to see
what they can do once they get to conference. I would very
strongly urge----
Senator Stevens. They are very innovative right now, I know
that.
Secretary Rubin. Well, the innovativeness----
Senator Stevens. I am having a hard time finding some of
the money they say I have got to spend.
Well, I do look forward to working with you on that. I am
constrained to say I think it might be better to talk about
some of these things around the 4th of July when the chairman
here and I try to do a little marine research up our way. Maybe
you ought to come join us.
Secretary Rubin. Are you going fishing?
Senator Stevens. Yes. We will talk about that later.
Secretary Rubin. There is a thought, Mr. Chairman, that is
worthy of consideration. [Laughter.]
Senator Stevens. Nice to see you. And I am anxious to say
hello to your colleague. Your last name, Killefer, is the same
as one of my great friends for a long, long time. So I need to
find out where you are from.
But I thank you very much, Mr. Chairman.
Senator Campbell. Thank you.
JUSTIFICATION FOR ADDING POSITIONS TO DEPARTMENTAL OFFICES
Mr. Secretary, the Congress, funded 47 new positions within
main Treasury during the last fiscal year, and this year you
are asking for 18 more. Will this meet your goals for fiscal
year 2000? And what is the status of those positions, the ones
last year and this year? What are they doing, the 47 you asked
for last year?
Secretary Rubin. The 47 I think became 33 on a full-time--
--
Senator Campbell. Say that again.
Secretary Rubin. I think on a full-time basis there are
about 33 or so. I can give you the answer on the 18. I do not
know the answer on the 47 or 33, whichever you call it.
Ms. Killefer. I want to thank you for supporting us last
year. The positions we requested last year actually ranged
across the department to address a variety of needs. Based on
what you did for us last year we were able to allocate those
out to the offices and they are now in the process of hiring to
fill those positions.
What we are asking for this year, as opposed to last year,
which really put us in reasonable shape, is a very targeted
request for international affairs and four people in tax policy
for e-commerce issues. We have some requirements in
International Affairs that are country-specific. There was a
whole range of need last year and they are in the process of
hiring.
Senator Campbell. The second part of my question, is this
going to meet your current needs, the 18 that you need?
Secretary Rubin. Yes; 14 of them, as I mentioned before,
will be in the international area, and they will do the cross-
border stuff, plus there will be a SWAT team. The other four
will be in tax policy, and that is really predominantly--or
maybe, I think, totally--for this electronic commerce
initiative.
It will meet our needs, given that we define our needs in a
very constrained fashion because of the caps we are operating
under.
Ms. Killefer. I must say, people had many more requests
than this. These are the critical requests that we narrowed it
down to.
EFFECT OF HIGHER PAY RAISE ON PERSONNEL RETENTION
Senator Campbell. At one of our other hearings a week or
two ago we heard some testimony that there is some problem with
retention in some of the agencies within Treasury such as
Customs and I wanted to ask you a little bit about that. The
budget resolution is currently working its way through the
Senate this week and it assumes that the historic pay parity
between Federal and civilian and uniformed military employees
will be maintained, and that any increase over 4.4 percent
provided in the President's budget would be absorbed within
existing budgets.
Assuming that the uniformed military receives a 4.8 percent
increase in their pay--that is in the defense authorization
bill which passed the Senate--what would be the impact of the
pay parity on Treasury agents? Would that help your retention
problem?
Secretary Rubin. I imagine if you have a larger increase, I
presume any larger increase would help retention. The problem
is it costs us about $24 million, and we do not have an ability
to absorb that. So somebody is going to have to find some money
to pay for it.
CDFI-Native American Lending Study
Senator Campbell. Let me ask you a question that was
submitted by one of my other committees, Indian Affairs, that
deals with the Community Development Financial Institutions
Act.
Secretary Rubin. CDFI, yes.
Senator Campbell. The requirement of the Department to
study the barriers to lending and capital development in Indian
country. Do you know what the status of that effort is?
Secretary Rubin. Yes, I do, Mr. Chairman. The CDFI program
is a terrific program. It really is, and something that was
started about--it was put in place about three or four years
ago. It is up and running. It is providing capital to
distressed areas across the country. And unlike much of what is
done in the Government, we are even now trying to evaluate the
results so that we can determine how effective it is and make
course corrections if need be.
We either have two or three--Secretary Killefer advises me
it is two. We have two full-time people now at CDFI who are
focused on the exact question you are raising, barriers to
lending in Indian territories.
Senator Campbell. I know that CDFI is very important to
Senator Dorgan's State as well as in Indian country, so could
you give the committee a written report on what progress they
are making, what they are doing, if you would?
Secretary Rubin. We will absolutely do so.
[The information follows:]
Progress Report on the CDFI Fund Native American Lending Study
Congress directed the CDFI Fund under the Riegle Community
Development and Regulatory Improvement Act of 1994, Public Law 103-325
to conduct a study on lending and investment practices on Indian
reservations and other land held in trust by the United States.
The components of the study were to:
--Identify the barriers to private financing;
--Identify the impact of such barriers on access to capital and
credit for Native American populations;
--Make recommendations with respect to any necessary statutory and
regulatory changes to existing Federal programs;
--Make policy recommendations for community development financial
institutions, insured depository institutions, secondary market
institutions, and private sector capital institutions; and
--Submit a final report to the President and Congress.
CDFI FUND PROCESS
To assist in completing the study, the Fund has incorporated a
strategy and action plan process to address key financing issues as
defined by the local community. This plan will be developed through 13
regional workshops.
PARTICIPANTS
At each workshop, Tribal leaders, Tribal economic development
professionals, U.S. government officials (federal financial supervisory
agencies, other federal agencies, secondary market organizations),
commercial banking organizations, and state agencies will identify
barriers to private financing, and describe the impact of such barriers
on access to capital and credit. In addition, the participants will
create strategies and actions to address these barriers.
SCHEDULE
The workshops will:
--Be conducted over a six-month period starting in mid-March 1999
--Be held in 13 locations in the continental U.S., Alaska, and Hawaii
PROGRESS TO DATE
The CDFI Fund has hired two full-time experts in economic
development in Native American communities to design and conduct the
lending study. As noted above, the lending study has incorporated a
workshop process to assist in accessing local and regional information
concerning the barriers to lending in Native American communities. Two
workshops have been conducted in Seattle, Washington and Phoenix,
Arizona. The next scheduled workshops will be in Albuquerque, New
Mexico on April 28-29, 1999 and in Reno, Nevada on May 12-13, 1999. The
response by local participants has been very good. At this point, we
have just begun to collect data and have not arrived at any study
conclusions. After all the workshops have been conducted, the data
collected will be synthesized and included in recommendations in the
final report.
As the Fund conducts the lending study, it is anticipated that the
following outcomes will be accomplished:
--Through the workshop process, the Fund will be working closely with
local organizations seeking their recommendations and adding
value to their initiatives.
--The Study/Action Plan process will provide a vehicle to elevate
local concerns to the National policy arena.
--The Study/Action Plan process will integrate local recommendations
and ideas into a National strategy to expand lending and
investment in Native American communities.
Senator Campbell. All right, I appreciate that. The
remaining few questions I have, I am going to submit to you in
writing, if you would get back to me on those.
Secretary Rubin. Thank you, Mr. Chairman.
FUNDING PRIORITIES WITHIN SPENDING CAPS
Senator Campbell. Senator Dorgan, do you have any
additional questions?
Senator Dorgan. Mr. Chairman, I waited to make a comment. I
was hoping my colleague Senator Kyl would stay. I frankly would
have been stunned if you had come to this committee and not
supported the President's budget. I am sure he was tongue in
cheek saying he was stunned that you would not somehow be
critical of the budget. But he could not be stunned by that.
The point you made about caps is an important point. The
priorities that we determine important are going to have to be
fitting in some set of circumstances, given all the other needs
and all the other interests that we have. The budget is on the
floor right now, and I was hoping to say to my colleague that
my understanding is the budget resolution on the floor right
now provides $1.5 billion less for fiscal year 2000 than fiscal
year 1999. So the place to take this case is right to the floor
right now.
The budget resolution contains $400-some million for
courthouses that the Administration did not ask for. So the
place to go get the $400-some million--if one says, my priority
is Customs officers to deal with these issues, go get the $400-
some million from courthouses that are stuck in this budget
resolution, build back the number a bit, and put it into
Customs.
The question of priorities is a function of the
Administration budget, yes. And I respect you waged a fight and
lost it in the Administration. Nothing wrong with that. But I
would be surprised if you would come up here and trash the
Administration budget. That is not what you are hired to do.
But the place to resolve these issues is to go over to the
floor and deal with the budget resolution that now exists in
which Congress says, not only are we not going to give you more
Customs agents, we are going to take $1.5 billion out of your
hide and we are going to build $400-some million worth of
courthouses to boot at the same time. So I would just say to
all my colleagues, if you have a problem with the priorities
here, rush to the floor right now. This is the time. This is
the moment; 24 hours remain before we finish this budget bill
and now is the time to go take that case and see what one's
colleagues would say about it.
I would say to you, Mr. Secretary, keep waging the fight.
You win some and lose some, I am sure. But I am not stunned
that you would not come to this table and be critical of the
President's budget. You are part of that team and I assume you
come to support a budget that was put together with your input.
Secretary Rubin. Might lose my year-end bonus. [Laughter.]
Senator Dorgan. But let me just finish by saying, Senator
Kyl's points are passionate and important. All of us would like
to see more resources. But the fact is, you cannot add $100-
some billion to defense and say, by the way, we are going to
hold the caps where they are, and we are going to take it out
of the hide of the rest of the discretionary programs. That is
not going to work. This is all going to come to a screeching
halt at some point.
The question of priorities is going to force a choice for
every single one of us. Do you want it all? If you want it all,
then the caps are going to have to change somehow. But you
cannot say, let us keep the caps because we are fiscal
conservatives, let us increase defense and say that we want
more Customs agents, and then also stick something in to build
$500 million worth of courthouses.
All that does not add up. Somehow, something is going to
give. And I think I agree with you, later this year the forced
reconciliation between our wants and needs, and the resources
that exist to satisfy those, are going to come crashing down on
us and we are going to have to figure out a way all of us,
Republicans, Democrats, to reconcile the current circumstance
that we find ourselves in.
Secretary Rubin. Senator, I agree with what you said. I
actually think you could be a very serious fiscal
conservative--not fiscal conservative, but very seriously
focused on fiscal responsibility, as I know you have, and still
believe that while this should be capped, these caps simply are
not going to--are not the right balance between fiscal
responsibility and the needs of the public. And as you say, the
budget resolution that is pending right now would substantially
reduce discretionary spending, so it takes it in exactly the
wrong direction.
Senator Dorgan. Thank you, Mr. Secretary.
Senator Campbell. Thank you, Mr. Secretary. Speaking of
courthouses, if I am not mistaken, two are in North Dakota and
one in Colorado. [Laughter.]
Senator Dorgan. Let the record show that the only
courthouse in America that has been built in a manner in which
the senator from that State required that half of the money be
cut out was built in Fargo. A $46 million courthouse was cut in
half because I insisted that $46 million was about twice as
much money than ought to be spent, and I cut the appropriation
from $46 million to $23 million, and made a lot of people
unhappy. Now they have a wonderful $21 million courthouse, and
I have no idea what they would have done with the other $23
million had I let them spend it.
But I truly am a conservative when it comes to those
issues, even in my home State.
Senator Campbell. He surely is. He is not much fun, but he
is a conservative. [Laughter.]
Senator Dorgan. It was therapy to be able to say that, Mr.
Chairman.
SUBMITTED QUESTIONS
Senator Campbell. Good, and for the record now, too.
Mr. Secretary, we have additional questions for the
Department and we would ask that you respond as quickly as
possible.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Department of the Treasury
Questions Submitted by Senator Campbell
year 2000
Question. The Office of Management and Budget has just released the
latest quarterly report to Congress on efforts to address Year 2000
(Uk) computer conversion issues. According to MOB, the Department of
the Treasury is still listed in Tier Two--making progress but there are
still concerns.
While the Department is making good progress in some areas, and
most bureaus have achieved compliance, concern was expressed about the
IRS and the Financial Management Service. What are you doing to make
sure that these agencies are ready?
Answer. The Department has been closely monitoring the Year 2000
progress of these Treasury bureaus. Treasury maintains ongoing, daily
communications with them from the Executive levels through the Year
2000 Program Offices and staffs. For example, the Assistant Secretary
for Management and Chief Financial Officer, and two Deputy Assistant
Secretaries including the Chief Information Officer, participate in the
monthly Year 2000 executive sessions chaired by Commissioner Rossotti.
The Department coordinates with FM to facilitate addressing external
interface requirements and cross cutting revenue issues. Treasury is
confident that these bureaus will be prepared to continue providing
uninterrupted services in the Year 2000 and beyond.
Question. Concern was also expressed that there be a Department-
wide business continuity and contingency plan. What is the status of
that plan?
Answer. Each bureau is developing Year 2000 Business Continuity and
Contingency Plans (BCCP) consistent with guidelines issued by the
General Accounting Office (GAO). The Departmental Offices (DO) BCCP
will address unified or Department-wide Year 2000 continuity and
contingency planning. The DO BCCP will also encompass bureau issues and
provide the linkages required with the bureau plans. Working drafts of
the DO BCCP have been developed, and the final plan is scheduled to be
completed by the end of May. The BCCP is being developed by the
Department's Office of Emergency Preparedness and Automated Systems
Division in conjunction with the Treasury Year 2000 Program Office and
the bureaus.
reduce gun violence
Question. President Clinton announced over the weekend that he has
instructed the Departments of Treasury and Justice to work together to
develop a plan to reduce gun violence. He specifically mentioned
``Project Exile,'' a program in Richmond, Virginia designed to
prosecute those who use firearms in the commission of a crime under the
most stringent laws, usually ATF Federal statutes, in order to get
violent offenders off the streets.
Have you begun developing that plan?
Answer. Yes. ATF is working with Treasury Under Secretary James
Johnson and the Department of Justice to develop documents that will go
to ATF Division Directors and United States Attorneys. These documents
will direct these officials to develop plans tailored to the firearms
violence problems in their geographic areas.
Question. Do you envision recommending further restrictions on gun
ownership?
Answer. No. This initiative involves the development and refinement
of strategies to enforce current law. However, the President has made a
number of legislative proposals to deal with the unauthorized access to
firearms by youth. One of these proposals would ban the possession of
semi-automatic assault weapons by anyone under 21 and raise the age of
the youth handgun ban from 18 to 21.
Question. How much emphasis will be placed on utilizing existing
law to get criminals off the streets much like ``Project Exile?''
Answer. The thrust of the initiative is to have local ATF
officials, working with their United States Attorney, as well as State
and local officials, develop strategies appropriate to the problems of
the area. Project Exile might be appropriate in Richmond but in other
areas another approach might be best. In all cases the use of existing
laws to get criminals off the streets will be the overall goal.
There is a continuing interest in having ATF get more involved in
making sure that the rightful, legal owner of a stolen registered
firearm is notified when that weapon has been recovered. As you know,
last year the Senate report directed ATF to work with State and local
law enforcement to ensure that the legitimate owner has been notified
when the firearm turns up.
electronic funds transfer act
Question. The Electronic Funds Transfer Act requires that by 2000
all Federal payments are to be made electronically, and so the
recipients must have a bank account or a designated agent to receive
the funds. The Act allows for waivers for Native Americans--is it the
Administration's policy to simply provide these waivers and not work to
make sure Indians have access to banking services?
Answer. The Debt Collection Improvement Act of 1996 requires that
most Federal payments be made electronically by January 1, 1999,
subject to waivers granted by the Secretary of the Treasury. A hardship
waiver is available to any individual who receives a Federal payment
and determines that payment by electronic funds transfer would impose a
hardship due to a physical or mental disability or a geographic,
language, or literacy barrier or would impose a financial hardship.
Treasury's EFT rule also establishes that any Federal benefit payment
recipient is eligible to open an ETA (electronic transfer account) at
any Federally-insured financial institution that offers ETAs. The ETA
will be made available to maximize opportunities for Native Americans
and other persons receiving Federal payments electronically to have
access to an account at reasonable cost and with the same consumer
protections as other account holders. Treasury believes that financial
institutions of all sizes will likely offer the account--including
financial institutions that serve Native Americans.
Secretary Rubin is committed to helping transition Native Americans
and other persons without an account at a financial institution into
the financial services mainstream. Treasury considers the ETA to be a
critical stepping stone to more full service banking relationships and
will conduct a comprehensive ETA public education and outreach program
targeted at key constituencies, including Native Americans.
southwest border
Question. The Southwest Border of the United States is where a lot
of illegal drugs and illegal immigrants cross our borders. Is there any
Federal-Tribal-State coordinated effort to join forces and resources to
create a seamless border?
Answer. Yes. The Border Area Narcotics Network (BANN) is a task
force headquartered in Sells, Arizona, on the Tohono O'Odham Nation.
Participants include Customs; the Tohono O'Odham Tribal Council,
Department of Public Safety, and police; DEA; and Arizona state law
enforcement officers. The task force works to investigate and control
smuggling along the 150-mile long Tohono O'Odham Nation-Mexico border,
and engages in coordinated law enforcement and community outreach
throughout the Nation's lands.
BANN is but one example of multi-agency coordination in drug
interdiction and enforcement activities along our border with Mexico.
The two principal agencies responsible for drug interdiction, however,
are the U.S. Customs Service and the U.S. Border Patrol. Coordination
among the various organizations involved in drug interdiction is
accomplished through the multi-agency Operation Alliance, the regional
High Intensity Drug Trafficking Areas (HIDTA), several Organized Crime
Drug Enforcement task Forces (OCDETF), and the joint Customs-Border
Patrol Border Coordination Initiative (BCI).
Under Operation Alliance, the HIDTAs, and the OCDETFs, several
multi-agency multi-jurisdictional task forces which include state and
local agency representation cooperate to ensure that agencies work
together on major investigations, coordinate and deconflict enforcement
operations, and share intelligence and resources.
In August 1998, the Departments of Treasury and Justice established
the BCI. BCI is a strategic plan to coordinate efforts between INS and
Customs to increase cooperation along the Southwest border to interdict
drugs, illegal aliens, and other contraband. BCI is a commitment from
INS and Customs to create a seamless process at and between the border
ports of entry by building a comprehensive, integrated border
management system that effectively achieves the mission of each agency.
This includes intelligence sharing, integrated communications, joint
air and maritime support, and joint enforcement operations. The 24 BCI
Field Areas along the border are linked to each other, as well as to
other federal, state, and local agencies through the HIDTAs and
OCDETFs.
indian arts and crafts
Question. Into the U.S. each year comes an estimated $500 million
in fake Indian arts and crafts. What role does the Customs Service play
in protecting Native American artists?
Answer. Title 18, Section 1158, Counterfeiting Indian Arts and
Crafts Board Trade Mark, is the statute that concerns counterfeiting
Government trade marks that have been devised or used by the Indian
Arts and Crafts Board in the Department of the Interior.
Despite several allegations over the past five years that imitation
Native American goods are entering the U.S. without the country of
origin markings required by law, Customs has found the great
preponderance of these goods to be in compliance. In June 1997, Customs
initiated a 60 day Cargo Selectivity criteria operation against
importers and exporters identified by the Indian Arts and Craft
Association and another source as dealing in imitation Native American
jewelry, arts and crafts. Customs established 117 separate criteria for
this operation, yielding a total of 230 hits. Of these hits, only 4
detected marking violations, the balance being ``clean on
examination.'' With a compliance rate in excess of 98 percent, the
criteria were canceled after the 60 days.
If the country of origin markings are being removed after
importation, such allegations should be referred to the appropriate
Special Agent in Charge office for possible investigation. We believe
the U.S. Attorney in Arizona is knowledgeable in this area as well.
imf gold sales
Question. I understand that the Treasury Department has expressed
support for a proposal to sell a portion of the International Monetary
Fund's gold reserve to support the IMF's Heavily-Indebted Poor
Countries (HIPC) initiative. As you are aware, there is a statutory
requirement that the U.S. representatives to the IMF receive formal
Congressional authorization in order to vote in favor of transactions
involving gold. Will the Treasury Department seek this formal
authorization? If so, how and when can we expect to receive this
request.
Answer. The Treasury Department is seeking formal Congressional
authorization in order to vote in favor of a sale of IMF gold, for
which the earning on the invested profits of such sales would be
directed to the ESAF/HIPC Trust of the IMF. We expect to provide to the
Congress a letter requesting such authorization, with draft legislative
language, in the near future.
Question. The United States ranks second behind South Africa among
the gold producing nations. Gold mining is an important part of the
rural economics of thirteen of our western states. The current price of
gold is at its lowest point in twenty years and the major mines in
rural Nevada and elsewhere in the west have had to lay off thousands of
workers. What consideration has the Department given to the effect of
this proposal on our own domestic gold mining industry?
Answer. We are reasonably confident that any sales of gold would be
conducted in a manner that would minimize any adverse impact on gold
holders, producers, and the gold market. The amount of sales that is
currently under discussion--five to ten million ounces, with sales
spread over a number of months or years, as warranted--represents a
small part of the 100 million ounces or so that come on the gold market
in a typical year.
performance-based management
Question. What specific steps have you taken as the head of the
agency to achieve performance-based management within your agency, as
required by the Government Performance and Results Act?
Answer. Treasury has taken several steps to institute performance-
based management throughout the Department:
--The Secretary and Deputy Secretary were personally involved in
development of Treasury's Strategic Plan during 1997, and will
lead the process to update the next version of the plan.
--Beginning in fiscal year 1997, we integrated both the Annual
Performance Plan and Annual Performance Report into our budget
justification documents, thus ensuring that performance data
and resource data are presented in tandem and readily available
to Congressional decision-makers.
--We have just instituted a new budget formulation process focused on
using our strategic plans and priorities to guide the
development of the budget. The process incorporates reviews of
bureau program performance and progress toward achieving
results in considering resource requests.
--We are piloting a web-based Performance Reporting System, a
department-wide tool to eventually allow for frequent reporting
of performance data from all of Treasury's bureaus. This system
will bring current information to the fingertips of the
Secretary and other policy offices to help track performance
more regularly and systematically. The Department's longer-
range goal is to link performance and financial data under a
comprehensive financial analysis and reporting system.
Question. How are your agency's senior executives and other key
managers being held accountable for achieving results?
Answer. Treasury has taken a number of steps to ensure
accountability for achieving results:
--We have developed (and are about to implement for fiscal year 1999)
a mandatory Results Act element in all SES performance
standards sets. This element addresses 1) program performance
as measured by the relevant published performance targets; 2)
the timeliness of performance information; and, 3) data
accuracy and validity issues.
--Senior policy officials were assigned by the Secretary as ``lead''
officials in overseeing the implementation of Treasury's
strategic objectives. They reported on their progress as part
of the fiscal year 1998 Annual Performance Report (included in
the budget justification documents and the Budget in Brief) and
the Department's fiscal year 1998 Accountability Report.
--The new Performance Reporting System should also improve
accountability, allowing for regular, standard and customized
progress reports on performance.
Question. How is your agency using performance information to
manage the agency?
Answer. Treasury is using performance information in several ways
to manage the Department:
--As part of our new budget formulation process, mid-year performance
reviews are held between the Deputy Secretary, the Assistant
Secretary for Management and CFO, and the Bureau Heads. During
these mid-year reviews the performance of the bureau is
discussed and assessed against its year-end target. Mid-year
performance that indicates year-end goals will not be achieved
is highlighted and alternative approaches are discussed and
agreed upon.
--Bureau year-end performance is reported to Treasury's senior
leadership by means of the Annual Performance Report. This
report is integrated with our budget justification document. As
out-year budget and resource allocation decisions are being
made at both the bureau and Department level, prior year
performance is assessed via the Annual Performance Report.
--Treasury's Performance Reporting System is designed to provide more
regular program performance reporting, with the goal of
improving overall program management.
Question. How did program performance factor into your decisions
about the funding you are requesting in fiscal year 2000? Please
provide examples.
Answer. Treasury presented to OMB all new resource proposals for
fiscal year 2000 separated out by Mission areas and Goals in accordance
with the Strategic Plan for fiscal year 1997-2002, which was submitted
to the Congress on September 30, 1997. Those mission and goal areas
that related to resources requested in the Budget Request are shown
below. The summary justification materials to the Congress also
includes a presentation of fiscal year 2000 initiatives linked to the
Strategic Plan in this manner.
Mission.--Economic
(1) Goal: Promote Domestic Growth
(2) Goal: Maintain U.S. Leadership on Global Economic Issues
Mission.--Financial
(1) Goal: Collect Revenue Due to the Federal Government
(2) Goal: Manage the Federal Government's Accounts
Mission.--Law Enforcement
(1) Goal: Combat Financial Crimes and Money Laundering
(2) Goal: Reduce the Trafficking, Smuggling, and Use of Illicit
Drugs
(3) Goal: Fight Violent Crime
(4) Goal: Protect our Nation's Leaders and Visiting World Leaders
(5) Goal: Provide High Quality Training of Law Enforcement
Personnel
Mission.--Management
(1) Goal: Improve Management Operations
(2) Goal: Improve Program Performance
The deliberative process with OMB to determine final request levels
to be included in the President's Budget was sensitive to concerns
about unmet performance expectations. For example, many of the Internal
Revenue Service (IRS) Customer Service initiatives use performance
measures to benchmark current levels of service (phone coverage in
hours and numbers of calls received) and explain how much more would be
done with additional money. Other request items focused primarily on
the large number of program stakeholders and constituents, who are
principally concerned about program coverage levels (in terms of
staffing, level of effort, and major equipment deployment), and view
level of effort as a proxy for expected outcomes. Consequently, budget
decisions and outcomes were balanced to include performance assessments
and measurable outcomes, as well as responding to stakeholder concerns
about equitable resource deployment. Treasury will continue to pursue
opportunities to meld performance information with resource decision-
making.
Question. What specific program changes have you made to improve
performance and achieve the goals established in your strategic and
annual plans?
Answer. The primary focus of Treasury's strategic management
process is performance improvement. This process includes goal-setting,
periodically measuring our progress, and using performance information
to make necessary adjustments in order to meet our stated goals and
objectives. Some examples of changes that have been made to improve
performance are presented below:
--IRS expanded the availability of its toll-free telephone service to
make filing easier (which supports the IRS Strategic Goal of
``Service to Each Taxpayer''). To be available when customers
want or need to contact the IRS, they went to a full-service
mode of 7 days-a-week/24 hours-a-day availability in 1999.
--In support of that same strategic goal, and to make filing easier
and more convenient for taxpayers, IRS put an emphasis on
Electronic Tax Administration (ETA). As of April 23, 1999, 29
million individual taxpayers filed their tax returns
electronically, a 19.1 percent increase over the same period
last year. Over 1 million taxpayers participated in signature
alternative pilots, which provided a paperless filing
experience for those taxpayers who were eligible. And over
53,000 taxpayers charged their balance due using a credit card.
--The Financial Management Service (FMS) manages the Department's
debt collection responsibilities under the Debt Collection
Improvement Act. To achieve its strategic and performance goal
to ``concentrate Federal delinquent debt collection efforts and
produce improved results,'' FMS worked with the IRS to merge
the Tax Refund Offset program into the Treasury Offset Program.
Tax refund collections for CY 1999 already exceed those for CY
1998. FMS also improved system functionality that allows
matches against multiple taxpayer identification numbers.
Question. How does your budget structure link resource amounts to
performance goals?
Answer. Treasury's budget structure, as presented in the
justification of appropriations, consists of one or more budget
activities described under each appropriation. Budget activities
roughly equate to major programs within each bureau. Beginning in
fiscal year 1997, Treasury defined performance goals for each budget
activity and integrated into our budget justification the proposed
performance plan for the budget year, and the final performance plan
for the current year. Therefore, in the budget justification document
itself, the resources requested under each budget activity are linked
to their respective performance goals and supporting performance
measures.
Question. What, if any, changes to the account and activity
structure in your budget justification are needed to improve this
linkage?
Answer. Treasury annually asks its bureaus to review budget
activity structures, in light of new programmatic emphases or
stakeholder concerns. Any contemplated changes to budget activities are
considered in light of financial management and accounting issues to
ensure that over time bureaus have the capacity to account for
appropriated dollars accurately and consistently. While budget activity
structure improvements that respond to emerging concerns are generally
desirable, we also discourage frequent successive changes, so that
Congress can see and review reliable historical information. This is
because budget activity restructuring may require complex analytical
crosswalks to the former structure if funding decisions require
comparisons with prior year levels of effort.
Question. Does your fiscal year 2000 Results Act performance plan
include performance measures for which reliable data are not likely to
be available in time for your first performance report in March 2000?
If so, what steps are you planning to improve the reliability of these
measures?
Answer. We expect reliable data to be available for most, if not
all, of our measures in March 2000. In our fiscal year 2000 budget
submission, bureaus were asked to rate their performance data as having
either ``reasonable accuracy''--meaning the data is accurate enough to
be used for programmatic decision-making or as having ``questionable or
unknown accuracy.'' Nearly all measures received a ``reasonable
accuracy'' rating. Measures for which data has been identified as
questionable or unknown, either through self-reporting or by external
review entities, are being evaluated to determine what needs to be done
to improve the reliability of the data.
Question. How will your future funding requests take into
consideration actual performance compared to expected or target
performance?
Answer. As the amount and quality of performance data grows more
robust, Treasury will continue to deliberate its budget proposals based
on performance gap concerns. The perennial dilemma is whether
performance improvements respond better to funding incentives or
penalties, or whether funding should be reallocated to a competing
activity that might be achieving better results but is less compelling.
In many cases, demand-driven workload may be challenging the capacity
to achieve acceptable results. Those cases may justify resource
enhancements for sensible investments in technology that improve
productivity while also improving quality (e.g., non-intrusive
inspection equipment for ports and border crossings).
Question. To what extent do the dollars associated with specific
agency performance goals reflect the full costs of all associated
activities performed in support of that goal? For example, are overhead
costs fully allocated to goals?
Answer. In budget presentations for most Treasury bureaus,
administrative overhead and policy oversight are embedded in
programmatic budget activities, typically through a pro-rata formula
based on program staffing or funding. Hence, those activities reflect
the full cost of proposed or realized performance levels. However,
there are instances, such as the IRS Rent and Utilities budget
activity, where funding magnitude and stability is so critical that it
is important to provide explicit information for appropriators and
stakeholders. The performance goals for that activity have to do with
efficient use of available space rather than with agency program
performance goals.
Question. What specific performance goals and measures has Treasury
established in the fiscal year 2000 performance plans for its major
bureaus and offices to resolve major management challenges and high-
risk areas identified by GAO and its Inspector General?
Answer. The Department and the heads of the three principal bureaus
with high-risk areas or major management challenges (IRS, the U.S.
Customs Service, and FMS) recognize the need to resolve the issues
raised by GAO and the Office of Inspector General (OIG) and have
developed and are implementing action plans to do so. In some cases,
the performance plan contains a specific measure and target related to
the high-risk area. In others, the bureau has taken steps to address
the problem.
One FMS challenge, for example, is to effectively fulfill its
responsibilities under the Debt Collection Improvement Act. The FMS
performance plan includes two related measures:
--Increase collection of the debts referred to Treasury from fiscal
year 1998 baseline ($1.988 billion) by $8.5 million in fiscal
year 1999 and $93.1 million in fiscal year 2000 through the
addition of more Federal payment types and agency referrals
into the centralized administrative offset program by fiscal
year 2000.
--Increase the amount of delinquent debt that is referred to Treasury
for collection, as compared to the amount of delinquent debt
that is eligible for referral. Total percentage will reach at
least 75 percent by fiscal year 2000. Baseline is fiscal year
1997 (32 percent).
IRS has taken steps to correct management and technical weaknesses
in its systems modernization program:
--In December 1998, IRS awarded a prime contract for its major
systems modernization program, and the Commissioner hired a new
Chief Information Officer to work with him on this program. The
use of a prime contractor to serve as the developer and
integrator for the IRS represents a significant departure from
past IRS practices.
--In addition, the Commissioner set up a management structure that
includes an executive oversight board. GAO and the Treasury
Inspector General for Tax Administration have been invited to
all the board's meetings to provide input on ways to improve
the process. IRS expects to submit a plan to Congress in
September for the first release under the prime contract.
The U.S. Customs Service over the last year made significant
management improvements that resulted in Customs being removed from
GAO's high-risk list. Customs now has initiatives underway to address
its management challenges, such as short-and long-term plans for
controlling access to sensitive data in the Treasury Enforcement
Communications System (TECS) and Seized Assets and Case Management
Tracking System (SEACATS).
Question. Does your agency have the means to capture accurate and
useful performance data?
Answer. Capturing performance data that is both accurate and useful
is critical to implementing GPRA. All Treasury components are required
in their performance plan to state how they collect their data and to
verify and validate the accuracy of the information. The Office of
Budget and the Office of Strategic Planning and Evaluation review
information provided by the components, raising questions where
information is either unclear or questionable. Additionally, the
Treasury OIG plans to review data reliability in a number of our
bureaus this year to determine whether sufficient systems are in place
to accurately report on performance measures.
______
Questions Submitted by Senator Dorgan
international
Question. Last year's global financial market crisis, particularly
in Asia and Russia, has appeared to have a more limited effect on the
U.S. economy than was initially expected. Although U.S. manufacturing
and commodity sectors remain weak, it has been offset by strength in
consumer spending and growth in the service sector.
Are the economy's resilience linked to the self-correcting nature
of long-term interest rates?
Answer. Some financial market observers feel that such an effect
has become more prominent in recent years. On this view, interest rates
have responded more quickly and predictably to economic conditions than
in the past. When the economy has speeded up, interest rates have
risen, and dampened the increase in activity. When the economy has
slowed down, interest rates have fallen, and provided some positive
cushioning effect. The clearest example of such a mechanism may have
emerged in the housing sector with the securitization of the mortgage
market and the growing sensitivity of homeowners to refinancing
possibilities.
While these developments are interesting and important in their own
right, they may not have played a major causative role in the seeming
imperviousness of the U.S. economy to financial turmoil late last
summer and into the early fall. In the wake of the Russian devaluation
and effective debt default at mid-August, there was a massive shift in
investor preferences toward less risky assets. In this country,
Treasury yields dropped sharply. At the same time, businesses with the
lowest credit ratings faced substantially higher costs of borrowing.
And across a wide range of credit ratings, the spread between private
rates and the rates on Treasuries widened sharply. These developments
raised fears of a credit crunch that might slow the U.S. economy in a
significant way. In response, the Federal Reserve cut the Federal funds
rate by 25 basis points at the FOMC meeting at the end of September, by
25 basis points again in an unexpected intra-meeting move in October,
and by another 25 basis points at its November FOMC meeting.
Also during this period, there was a temporary substitution of net
lending by the commercial banking system for direct financing in the
credit markets. In the first three quarters of 1998, the net lending of
the commercial baking system averaged about $225 billion at a
seasonally adjusted annual rate, or about 11\1/2\ percent of total net
lending. In the fourth quarter, commercial bank lending more than
doubled to about a $555 billion annual rate, or about 22 percent of
total net lending.
In summary, Federal Reserve policy actions and a shift of credit
demands to the commercial banking system seem to have been the major
factors shielding the economy, rather than a self-correcting adjustment
in long-term interest rates.
Question. What about the equity markets? Last fall, the economists
predicted a market plunge would generate negative wealth effects
lowering the stock market values. With so many consumers participating
in the market, that lowering could have created a noticeable drop in
consumer confidence. What occurred to avert that situation?
Answer. The stock market reached its 1998 peak in mid-July of that
year at about 9340 on the Dow-Jones industrial index. The growing
financial turmoil in the late summer and early fall contributed to a
correction the dimensions which suggested to some that a bear market
had begun. The Dow reached nearly 7600 by the early fall, a downward
move of close to 20 percent from the high in July. It was during the
late stages of this process that there was considerable discussion in
the financial press of the negative wealth effects that might be
generated by a plunge in the market. The chief factor that occurred to
avert even more serious discussion of that possibility was the return
of the market to a strong upward trend, which has continued in 1999 and
carried the market to new, higher levels.
Most studies of the wealth effect suggest that the effects of a
change in stock market values on consumer spending would be spread out
gradually over time. Short, temporary drops in the market seem to have
very little, if any, measurable effect on consumer spending. Farther
back in time, the drop in the market of more than 20 percent on a
single day in October, 1987 and the market uncertainty that followed
led many to fear that the economy might be affected seriously. Growth
in real consumer expenditure flattened out temporarily in the fourth
quarter of 1987, but there was a renewed burst of consumer spending in
the first quarter of 1988, suggesting only transitory effects and
little lasting impact on consumption from the market decline.
The most encouraging feature of the current situation is the good
economic fundamentals that have persisted during the current expansion.
Solid economic growth continues to be combined with a very subdued rate
of inflation.
imf loans to russia
Question. At the House Appropriations hearing the Secretary said
that much of the $4.8 billion in loans sent to Russia last summer by
the International Monetary Fund ``may have been siphoned off
improperly.'' And, in a recent U.S. News editorial Morton Zuckerman
said that the IMF cannot be expected to advance more money to Russia,
since the IMF's credibility as a lender has been hurt by the way Russia
has flouted to conditions attached to its loans. Zuckerman said the IMF
aid to governments should be tied to economic and political reforms and
earmarked for projects that can be monitored. IMF funding decisions are
made in response to financial crises.
Isn't it true that a requirement to conduct a programmatic review
have a detrimental impact on the need to dispatch funds rapidly?
Answer. The need to formulate a program that will be successful in
fostering the needed adjustment of the economy and the ability of the
country to repay the IMF cannot be avoided. Every effort is made in
urgent cases to expedite the process. In the case of the 1997 programs
for Asian countries, they were negotiated very quickly. And the IMF has
in place procedures to expedite Executive Board review in crisis cases.
However, every effort is and should be made within these constraints to
develop a thoroughly well-grounded program.
imf voting procedures
Question. The U.S. has about 18 percent of the IMF votes and
provides about 22 percent of the money.
Does any other country have enough votes to veto a U.S. decision?
Answer. The United States cannot by itself decide all issues before
the IMF Executive Board. Board decisions on country programs require
approval by a 50 percent majority of voting power (decisions on certain
policy issues require larger majorities). Thus on routine issues no
country by itself can either effect a Board decision or block such a
decision. On those major policy decisions requiring an 85 percent
majority of voting power, the United States can block a Board
decision--no other country by itself holds sufficient voting power to
block such decisions.
monitoring imf funding to russia
Question. Is there some way the U.S. can ensure the funds are being
used appropriately without structuring a number of bureaucratic
requirements that could result in slowing down the distribution of
funds?
Answer. When a borrower country agrees to an IMF program, the bulk
of IMF financing provided is tranched in phased disbursements so that
later disbursements can be made based on the country's adherence to the
conditions set forth in the underlying arrangement and associated
commitments. These commitments range from general undertakings (e.g.,
to cooperate with the IMF in formulating and implementing policies) to
specific, quantified plans for macroeconomic and structural policies.
IMF staff closely monitor a country's observance of the qualitative and
quantitative performance criteria and overall implementation of its
program. This is accomplished through visits of staff, resident
representatives (present in over three-quarters of the countries that
have IMF arrangements), and frequent communications with the countries'
authorities. Periodic reviews of countries' programs are reinforced by
selective audits of central banks, such as that being conducted
regarding the placement of Russian Central Bank funds in 1994-96. This
monitoring does not serve to slow down disbursement of financing unless
the conditions set forth in a program are not met and agreement cannot
be reached on how to deal with the problem.
With strong U.S. support, the IMF has recently undertaken a number
of steps to promote greater openness in public sector activities and
other measures that will help ensure that official resources are being
used appropriately. Also, the Treasury Department is in the process of
exploring the desirability and feasibility of a number of further
enhancements to the IMF's traditional means of assuring compliance with
the conditions of IMF programs and safeguards on the use of IMF
resources, and has discussed the general issues with IMF staff.
russia imf program
Question. Russia's Prime Minister Primakov was scheduled to visit
the U.S. this week seeking an IMF agreement to borrow enough to cover
$4.5 billion in Russian loan repayments due to the IMF this year.
Russia's total debt due this year is $17.2 billion or 80 percent of it
national budget.
What level of resources should the U.S. be providing Russia at this
time?
Answer. The U.S. has not and is not contemplating any direct budget
support loans for Russia. As regards IMF funding to Russia, the
appropriate amount of lending is still being negotiated. The eventual
amount agreed by the parties will reflect the level of Russian economic
reform and the country's financial situation. Any disbursement will be
contingent on the IMF's being satisfied that funds will be used for
their intended purpose.
Question. Is it possible that the delay could increase Russia's
chances of winning approval for reinstating its IMF loans at this time?
Answer. The delay in Prime Minister's Primakov's visit to
Washington should not affect Russia's chances of securing an IMF
program. An IMF program for Russia depends on Russia's willingness to
agree to a set of economic measures that will stabilize the economy and
lay the groundwork for economic growth. IMF Managing Director Camdessus
traveled to Moscow in late March where he and Prime Minister Primakov
agreed on a framework for an IMF agreement. An IMF mission continues to
negotiate with Russian officials on remaining issues.
Question. If we do not provide these resources what will be the
cost of bailing out an economically devastated Russia?
Answer. The implications of a full-scale economic breakdown in
Russia are extremely serious and would be detrimental to a range of
U.S. interests, including our security interests. Economic breakdown
and the possibility an associated political backlash could increase the
threat of weapons proliferation, international organized crime, and a
humanitarian crisis.
That said, resources alone cannot assure long-term economic
stability in Russia. That is why IMF resources provided to Russia must
be associated with a program of economic reform and fiscal adjustment
coupled with strong implementation.
international financial architecture
Question. Last year, discussions were being held on changes to the
architecture of the international financial system--changes that would
have provided for greater transparency and disclosure of the
International Monetary Fund and other international systems.
Are these discussions continuing? When can the committee expect the
recommendations and the implementation plan?
Answer. We have been working with our G-7 colleagues on a broad
range of potential measures to strengthen the international financial
system. This is an extremely complex issue which will take a sustained
effort to resolve in all its facets. Our approach has been to press
forward with concrete steps in line with the framework set out in
October of last year by G-7 Leaders.
At a meeting on April 26th of this year, G-7 Finance Ministers and
Central Bank Governors assessed progress we have made so far on the
broad agenda outlined in October:
--The IMF has adopted a comprehensive format for disclosure of full
information on reserves as part of the strengthening of its
Special Data Dissemination Standard (SDDS). This enhanced
reporting of reserves and related liabilities will go into
effect on April 1, 2000. To strengthen the SDDS further, the G-
7 has called on the IMF to enhance the requirements for
disclosure of external debt data and for release of information
on financial sector soundness.
--The IMF Board has agreed to establish a Contingent Credit Line,
which will help countries with sound policies insulate
themselves from contagion. We believe that the CCL will help to
encourage prompt and effective measures to ward off contagion,
with appropriate private-sector involvement, and promote
adoption of sound policies in areas that we see as crucial for
avoiding susceptibility to crisis, notably, debt management,
sustainable exchange rate regimes, transparency, a strong
financial sector, and adherence to internationally agreed codes
and standards.
--We have established a new group, the Financial Stability Forum,
which will provide a vehicle for the regular exchange of
information on systemic vulnerabilities in the financial
system. The Forum held its first meeting on April 14th. Working
groups are being established on highly leveraged institutions,
to address implications from their role as both lender and
borrower; offshore financial centers; and short-term capital
flows' effect on global financial stability. We have emphasized
the importance of including representation from a broad range
of relevant countries in this work.
--The World Bank is making progress in distilling a set of general
principles of good practice in social policy aiming to promote
social cohesion, make economies more robust and provide a
structure to make countries more resilient to financial crisis.
We encourage the World Bank to take forward its work, in
cooperation with the IMF, to develop a set of policies and
practices that can be drawn upon, by donors and borrowers
alike, in the design of adjustment programs to ensure
protection of the most vulnerable, particularly during crisis
periods.
The United States has also pressed to include a wide range of
countries in the discussion of the reforms to the international
financial architecture. Two seminars have been held (on March 11 and on
April 25) to exchange ideas on economic architecture issues with a
diverse group of economies. Representatives of 33 governments and
central banks participated in the discussions of a broad range of ideas
and initiatives. These seminars have been valuable, and we have
emphasized the need for inclusive dialogue and broad consultation on
issues of systemic importance.
The G-7 Finance Ministers and Central Bank Governors will report to
G-7 Leaders on progress to date and recommendations for the
implementation of further reforms at the Cologne Summit in June. We
expect this report will be endorsed by the Heads of Government and made
public at that time. Our work between now and then will continue to
focus on the broad range of issues we have identified, including: the
scope for strengthened prudential regulation and supervision in
industrial countries; further strengthening of financial systems in
emerging market economies; sustainable exchange rate regimes in
emerging market economies; crisis prevention and response, including
proposals for ways to improve IMF programs and procedures in this area;
and minimizing the human cost of as well as improving the social policy
response to financial crisis.
In addition, as required by statute, we will provide a written
report to Congress on these efforts by July 15.
Question. Are the resources requested in the fiscal year 2000
budget (e.g. 14 FTE and $1.1 million) going to address the changes in
the architecture of the international financial system?
Answer. The 20 additional positions (14 FTE and $1.1 million,
annualized to 20 FTE in fiscal year 2001) are needed to improve
coverage of emerging markets; expand macroeconomic analyses of country
and regional economies; and broaden Treasury's expertise to monitor
financial and economic transactions between and among foreign countries
including direct capital flows, financial reform, structural integrity,
openness and transparency, and crisis resolution. Treasury's Office of
International Affairs is the primary organization in the Executive
Branch tasked with understanding and responding to international
financial complexities and with developing and articulating global
economic development policy. This increase will reverse a decline in
staff of 10 percent since 1993. The 20 additional positions will help
Treasury implement reforms in the architecture of the international
financial system, as initially outlined in October 1998 by the G-7.
Question. What kind of change will be made? Will the Office of
International Affairs be working on plans to bring the private sector
into these discussions on how to structure aid requirements or to take
up specific ventures that would be guaranteed by the U.S. government?
Answer. Our recommendations for reforms of the international
financial architecture will focus on the key areas outlined by the G-7
for work in October, 1998. They are: the scope for strengthened
prudential regulation and supervision in industrial countries; further
strengthening financial systems in emerging market economies; exchange
rate regimes in emerging market economies; crisis response and greater
participation by the private sector in crisis containment and
resolution; proposals for strengthening the IMF and the Interim and
Development Committees; and minimizing the human cost of financial
crisis.
The appropriate form of private sector involvement in the
resolution of crises will depend on the circumstances. In response to
the particular needs of the Asian economies hit by the financial
crisis, the United States has played a key role in formulating the
Asian Growth and Recovery Initiative, which is designed to help
revitalize private sector growth. One aspect of the initiative, the
Asian Growth and Recovery Program, envisages use of credit enhancements
by bilateral or multilateral donors to help governments in the region
in financing the cost of bank recapitalization. However, the United
States government does not plan to act as a guarantor under this
program. The U.S. Export-Import Bank and Overseas Private Investment
Corporation are supporting the initiative through the provision of
trade finance, risk insurance, project financing and other traditional
products that help to mobilize private sector finance.
resignation of german finance minister
Question. German Finance Minister, Oskar Lafontaine resigned on
March 11th. Mr. Lafontaine dominated Germany's financial policy, was
instrumental in shutting down the voice of pro-business moderates, and
was instrumental in reducing the value of the Euro by demanding the
European Central Bank lower its interest rates and campaign for
controls over exchange rates.
What kind of changes can be expected in German financial policies
now that Chancellor Schroder has the opportunity to develop pro-
business financial policies?
Answer. The Schroder government, elected September 27, 1998, is
still relatively new. Policies are evolving. The new Finance Minister,
Hans Eichel, officially assumed his post on April 12. While it is too
early to anticipate the direction German financial policies may take, a
number of analysts anticipate a more moderate policy stance and
relationship with the business community.
internal revenue service
The Internal Revenue Service Restructuring and Reform Act of 1998
requires a number of changes in the way the IRS does business. The
initiatives include implementing additional taxpayer protection
provisions, expanding electronic filing, and modernizing the IRS. To
accomplish these requirements the IRS has requested $197 million with
approximately $140 million required for a series of organizational
investments to restructure, reorganize and retain the workforce.
Question. How will the IRS of the future be different from the IRS
today?
Answer. The Restructuring and Reform Act of 1998, provided the IRS
with a clear direction: it must do a better job in meeting the needs of
the taxpayers. This direction is expressed in the new IRS mission
statement:
``Provide America's taxpayers top quality service by helping them
understand and meet their tax responsibilities and by applying the tax
law with integrity and fairness to all.''
The concept for a modernized Internal Revenue Service revolves
around the following guiding principles:
--Understand the customer's point of view, and use this understanding
to prevent and solve problems and provide quality service
Enable managers to be accountable with the requisite knowledge,
responsibility and authority to take action to solve problems
and achieve IRS goals Align measures of performance at all
organizational levels Foster open, honest communication Insist
on total integrity
The goals are:
Top Quality Service to Each Taxpayer
--Make filing easier
--Provide first quality service to each taxpayer needing help with
his or her return or account
--Provide prompt, professional, helpful treatment to taxpayers in
cases where additional taxes may be due
--Increase fairness of compliance
--Increase overall compliance
Productivity Through a Quality Work Environment
--Increase employee job satisfaction
--Hold agency employment stable while the economy grows and service
improves.
To move us towards our new mission, the Service has also identified
five levers of change to modernize the agency. They are:
Revamped Business Practices.--Business practices will be geared
toward understanding, solving and preventing taxpayer problems.
Emphasis will be placed on customer education and service. Compliance
efforts will be forward-looking to prevent most common taxpayer
problems and geared toward early intervention to keep taxpayers
compliant. These changes will enhance the many customer service
initiatives already begun this year. For example, telephone customer
service will be available 24 hours, seven days a week and e-file
services will be expanded.
Four Operating Divisions.--The IRS will reorganize into four
customer segments with end-to-end responsibility for serving taxpayers
with similar needs. They are: Wage and Investment; Small Business &
Self-Employed; Large & Mid-Size Business and Exempt Organizations
Balanced Measures of Performance.--Current IRS performance measures
are oriented toward IRS internal operations. The new measures will be
externally validated and entail a balanced system tied to the agency's
goals. The new measures will take into account business results,
customer satisfaction, employee satisfaction, and the agency's
continuous improvement.
Management Roles with Clear Responsibility.--Managers in the new
organization will have end-to-end responsibility for meeting the needs
of their customers. The new organization will have fewer management
levels.
New Technology.--the IRS is committed to move forward on upgrading
and improving its technology. The award of the PRIME contract
identifies those private-sector organizations IRS will partner with
over the next 10-15 years to build the new technology. While it will
take the better part of a decade to modernize our fundamental computer
systems, taxpayers will be able to see results as early as calendar
year 2000.
The benefits of this modernization apply to taxpayers as well as to
IRS employees. For taxpayers, the benefits are:
--More useful help in understanding and filing their taxes
--Fast, accurate service if they have a question about taxes they owe
or their refund
--Professional, courteous help if they fall behind in paying their
taxes
--Professional, courteous treatment if their return is selected for
examination
--Greater confidence that their fellow citizens are paying their
taxes as required by the tax law in the same way they are,
regardless of their occupation, location, type of business or
income level
--Clear, effective means of identifying problems of law or regulation
that cause unfairness or disproportionate administrative
burdens on particular groups of taxpayers and communicating the
information to the right level of authority to fix the problem.
For IRS employees, the benefits are:
--Greater respect from the public
--Balanced measurements comprising three categories--customer
satisfaction, employee satisfaction, business results
--Flatter organization structure will connect them better
--Stabilization of work force Increased emphasis on training and
quality
Question. Ultimately, how much will it cost to move the IRS into
that improved position?
Answer. The IRS has not yet determined the total cost of
organizational modernization as the final design is still under
consideration.
The Reform Act includes other tax law changes to improve taxpayer
protections. The Act also strengthens the Taxpayer Advocate
organization and has provisions to ensure internal accountability and
integrity.
Question. What steps are being taken to ensure these requirements
are being met? In other words what changes have been made to fulfill
the Act's requirements?
Answer. The IRS is vigorously working on the implementation of the
Restructuring and Reform Act of 1998 (RRA98). Extraordinary steps have
been taken to ensure the process is managed and appropriate actions are
taken throughout the agency.
RRA 98 includes 143 provisions, of which 115 require IRS action. 87
percent of the provisions were effective within six months of
enactment; 20 percent were retroactive, 47 percent were effective on
date of enactment (July 22, 1998), 20 percent were effective by January
19, 1999. The remaining 13 percent become effective between February 1,
1999 and 2007. 432 amendments were made to the Internal Revenue Code.
75,000 employees are receiving technical training and all employees
are receiving training on section 1203, Termination of Employment for
Misconduct. 132 million taxpayers were affected.
On July 24, 1998, an RRA98 Executive Steering Committee (ESC) was
established and began bi-weekly meetings to review implementation
progress and resolve issues.
The IRS has identified approximately 1300 actions required to
implement all of the provisions in the Act, many of which have been
completed. The actions are grouped by provision. The actions include
the development of 2 new forms (706C/706D); the revision of 153 forms;
and the modification of 39 publications. Chief Counsel has published 30
items (14 regulations, 5 revenue procedures, and 11 notices/
announcements). To date, 66 guidance memoranda have been issued to the
field.
With respect to the Taxpayer Advocate's organization a number of
actions have been taken. Local taxpayer advocate telephone numbers have
been placed in telephone directories or are scheduled to be listed
pending updates of those directories. The Taxpayer Advocate's program
and new toll-free telephone number have been highlighted in the 1998
Tax Packages and in national publicity. Advocates have been designated
for each state and reporting has been established through the Taxpayer
Advocate organization independent of District or Service Center
Directors. A web site ``National Resource Center'' has been created to
answer field questions on RRA98, and new TAO procedures have been
developed and training for all employees is in process
Question. Great strides are being made in electronic filing and I
give you and your staff tremendous credit for moving the IRS in that
direction, but, what about walk in service, particularly in rural
areas. North Dakota has lost a number of customer service
representatives. Does the IRS have any new plans for expanding that
face to face contact? I have heard that the IRS leases three mobile
units (taxmobiles) that provide customer assistance in Georgia,
California and the Pacific Northwest. Has any thought been given to
leasing additional units to provide these types of services to rural
states, such as North Dakota? How much could those leases be $19 or $20
thousand--that plus the cost of a couple revenue agents and maybe
someone from the tax advocates office? It sounds like a cost-effective
way to provide customer services?
Answer. As part of modernizing America's Tax agency, we intend to
significantly expand walk-in assistance by redirecting in excess of 500
staff years to this operation. Not only will we be adding employees, we
will provide service utilizing new and improved methods. A key
component of our strategy will be the use of mobile vans staffed by
trained personnel that can not only assist our customers in the
preparation of their tax returns/answer tax law questions, but also
enter into payment agreements and/or resolve examination issues. We
believe the mobile van initiative will be particularly helpful in our
effort to provide assistance in less populated, rural areas.
Additionally, we intend to offer service through kiosks in retail
locations. We believe the kiosk concept will enable our customers to
conduct their transactions with IRS, and, at the same time, allow them
to complete other commercial interactions. We also envision renting
space for temporary offices, which would make us far more accessible to
our customers. Such temporary office space may be open for a portion of
the year and/or for certain days of the week.
All three of these avenues (mobile van, kiosk and temporary space)
will enable us to spread our staff over more locations thereby
providing greater access to our customers. While these initiatives will
benefit all of our customers, we believe they will be of particular
interest to individuals in rural areas.
We have gathered some preliminary data on the number of taxpayers
served by these mobile units: The Georgia District ``We're on Wheels''
project assisted 1,574 taxpayers during the first two weeks of
operation (February 1-12, 1999). The Pacific Northwest (PNW) Taxmobile
assisted 1,490 taxpayers from February 1 through March 12, 1999. We are
waiting for the data from the remaining PNW tours and the final results
will be evaluated at the end of this filing season.
One of the key components of the design team vision for Walk-In
will be the expanded use of mobile vans in an effort to provide
assistance in less populated, rural areas.
Question. In order to meet both the concept of providing walk-in
service and to move toward expanding electronic filing, can you outfit
the mobile units (taxmobiles) with computers that would show people how
to file electronically?
Answer. We will look into the cost and feasibility of providing
computers for electronic filing demonstrations in future taxmobile
units.
transfer pricing
Question. Last year, this committee, instructed the IRS to report
back to the committee after determining the amount of revenue lost by
transfer pricing, to determine if adequate systems are in place to
prevent transfer pricing abuses by multinational companies, and to make
recommendations for improving IRS enforcement tools to ensure that
multinational companies doing business in the United States are paying
their fair share of United States taxes.
Answer. IRS appreciates and understands the ongoing concerns the
committee has with the issue of transfer pricing. In response to these
concerns, and in accordance with a specific directive found in IRS's
fiscal year 1999 Appropriations legislation, the Service is currently
preparing a report to the Congress on transfer pricing which will
address the specific areas raised by the committee. This report should
be ready by the middle of April 1999, and will focus on estimates of
potential tax revenue lost due to transfer pricing, detailed
information on IRS's current administration of Internal Revenue Code
section 482, and suggestions for improving transfer pricing
enforcement.
year 2000
Question. In fiscal year 1999, $570 million was provided to the
Department of the Treasury from the Emergency Reserve to resolve Y2K
problems. The Department's fiscal year 2000 budget requests an
additional $255 million to meet the continuing requirements. We have
constantly been assured that the Department would be able to meet the
Y2K validation and implementation deadlines. On March 19th the Office
of Management and Budget issued its quarterly report on the ``Progress
on Year 2000 Conversion''. According to the report: ``The rate of
renovation, validation, and implementation must improve if IRS and FMS
(Financial Management Service) are to meet the Government wide goals.
Treasury must continue to work toward a unified Department-wide
business continuity and contingency plan.'' In addition, the report
states that three systems with the Bureau of Alcohol, Tobacco and
Firearms (ATF) will miss the March 31st deadline for implementation.
What is Treasury's plan for meeting the government-wide goals for
Y2K compliance?
Answer. The following by March 31, 1999 Treasury bureaus and
offices met the goal of attaining Year 2000 compliance for their
mission critical systems: Office of the Comptroller of the Currency,
U.S. Customs Service, Departmental Offices, Bureau of Engraving and
Printing, Financial Crimes Enforcement Network, U.S. Mint, Bureau of
the Public Debt and Office of Thrift Supervision.
The following bureaus are projected to complete compliance for
their mission critical systems by the end of April: Financial Crimes
Enforcement Center, Office of the Inspector General and Secret Service.
Treasury has 328 mission-critical systems, nine of which are being
retired and 298 (91.3 percent) of which are Year 2000 compliant as of
March 31. The three bureaus above are projected to implement 11 of the
remaining 26 systems by the end of April. The remaining 15, belonging
to the Bureau of Alcohol, Tobacco and Firearms, the Financial
Management Service and the Internal Revenue Service, are expected to be
implemented by mid year, with the exception of two new IRS systems that
will be implemented in the fall. Treasury has consistently monitored
the progress of the systems and is confident that they will be
operational in a compliant mode well before the year 2000 rollover. In
addition, Treasury is continuing with an aggressive approach in
addressing Non-IT devices that contain embedded chips and
telecommunications systems. To date, Treasury is over 90 percent
compliant in our Non-IT mission critical systems and expects to be
fully compliant by mid June. We expect to complete interoperability
testing and analysis, and independent verification and validation
(IV&V) of Treasury's corporate voice telecommunications systems in May,
and of the data network, the Treasury Communications Systems, shortly
thereafter. Contingency planning and continuity of business planning
have long been an area of emphasis by Treasury. As we near completion
of achieving Year 2000 compliance for the mission critical systems,
Treasury is focusing more on the development of contingency and
business continuity plans to ensure that all of Treasury's key
processes will function normally on January 1, 2000 and thereafter.
Question. Has the department developed unified contingency plans if
the agencies do not meet the government deadlines?
Answer. The Departmental Offices (DO) Business Continuity and
Contingency Plan (BCCP) will address unified or Department-wide Year
2000 continuity and contingency planning. The DO BCCP will also
encompass bureau issues and provide the linkages required with the
bureau plans. Working drafts of the DO BCCP have been developed, and
the final plan is scheduled to be completed by the end of May. The BCCP
is being developed by the Department's Office of Emergency Preparedness
and Automated Systems Division in with the Treasury Year 2000 Program
Office and the bureaus.
Question. The Financial Management Service oversees the collection
and the processing of more than $2 trillion in federal revenues and
issues over 869 million payments a year. What is the status of these
tax collection and FMS payment systems?
Answer. FMS manages the collection and processing of more than $2
trillion in federal revenues each year. The Electronic Federal Tax
Payment System (EFTPS) through which FMS collected $1.1 trillion or 56
percent of the government's total collections in fiscal year 1998 was
determined to be compliant in December, 1998. The collection systems,
including the Internal Revenue Service (IRS) Lockbox, General Lockbox,
Plastic Card Network and other collection systems, that account for the
remaining 44 percent in federal government revenue were compliant as of
the end of March, with the exception of one of the 25 IRS Lockbox
applications, one plastic card application, and two applications in the
Electronic Data Interchange System. Three of these applications are
expected to be compliant by the end of April, and the fourth will be
implemented in June 1999.
As of March 31, 1999, FMS is able to make 90 percent of its
payments--over 775 million annual payments--using Year 2000 compliant
and tested systems. This includes monthly Social Security and
Supplemental Security Income payments, Veterans' benefit payments, IRS
tax refunds, Railroad Retirement Board annuity payments, Federal salary
payments, and vendor/miscellaneous payments. The remaining payment
systems are on target for implementation in April, including the Office
of Personnel Management Payment System through which FMS issues Federal
annuity payments. The system is already compliant but cannot be
implemented until mid-April due to a dependency on required interface
control changes.
______
U.S. Customs Service
Questions Submitted by Senator Dorgan
user fees
Questions. Under the various user fees legislation, the Government
collects a separate fee to pay the cost of inspecting arriving
international passengers by three Federal Agencies. Although the three
agencies (Customs/INS/Agriculture) user fee legislation was enacted at
different times for different reasons, they are all similar as to
purpose and collection process.
The Office of Inspector General conducted an audit of the Customs
Passenger User fees. The audit, published last spring, indicated that
the government could have realized nearly $49 million of additional
user fees revenue if the agencies had applied a coordinated single
audit approach to the user fees over a five-month period. Customs would
benefit the most, with recoveries increasing from $7 million to over
$30 million. Customs agreed with the audit and said they would take
action to implement the recommendation.
What actions has Customs taken to correct this system?
Answer. Customs finalized a Memorandum of Understanding (MOU) with
the Agriculture Plant and Health Inspection Services (APHIS) and the
Immigration and Naturalization Service (INS) in which the agencies
agreed to share information regarding the collection of air passenger
fees. Customs signed an Interagency Agreement with APHIS in which APHIS
will perform a total of twenty-six (26) air passenger fee audits on
behalf of Customs. Sixteen (16) audits have been completed as of March
22, 1999.
Question. What increase in recoveries has been realized?
Answer. The total findings to date--from 16 air passenger fee
audits by APHIS--are approximately $5,962,215 with actual collections
of $3,429,302. The realized return on investment for this agreement is
3,760 percent with an overall potential return of 6,537 percent.
Customs has collected $57,990,846 in delinquent air passenger fees
due from fiscal years prior to fiscal year 1998. Estimated receivable
for air passenger fees due prior to fiscal year 1998 total $10,432,177
(16 percent). This represents 16 percent of the total estimated air
passenger user fees due as of the close of fiscal year 1998. The
estimated receivable for air, vessel, and rail user fees was reduced
from a fiscal year 1997 receivable of $101,116,074 to an estimated year
end receivable for fiscal year 1998 of $68,838,323. This represents a
32 percent reduction in the estimated year end receivable from fiscal
year 1997 to fiscal year 1998.
funding the ace system
Question. The fiscal year 2000 budget proposes a fee for the use of
Customs automated systems. The fee would be charged to users of the
Customs automated system and would be based on the amount of user data
input. This fee would offset the cost of modernizing the automated
system.
Has the authorizing legislation to establish these fees been
transmitted to the appropriate authorizing committees?
Answer. No, the authorizing legislation has not yet been
transmitted to the committees.
Question. When will that legislation be transmitted to Congress if
offered by the Department?
Answer. The Administration is preparing a package to be sent to the
Congress which includes proposed legislative changes and new user fees
to support all the fee proposals included in the President's Budget.
international trade data systems
Question. The International Trade Data System (ITDS) is a Federal
government information technology initiative to implement an
integrated, government-wide system for the electronic collection, use,
and dissemination of international trade and transport data. What is
the problem with the current environment that the ITDS will correct?
What trade agency missions will ITDS support? How will ITDS be funded?
Answer. There are several problems with the current environment.
One is that multiple agencies of the federal government, in carrying
out their enforcement or regulatory responsibilities at the border,
impose paperwork (data reporting and record keeping) requirements that
duplicate requirements of other agencies. The cumulative effect of
these requirements, imposed in an uncoordinated manner, places a
substantial burden on private commercial parties and on the economy as
a whole. The duplication of efforts also causes unnecessary costs for
the Federal government.
A second problem is that the lack of coordination among agencies in
collecting and using information reduces their effectiveness in
carrying out their enforcement and regulatory missions at the border.
Some of the methods by which agencies compensate for these limitations
create yet more burdens on the trade.
Finally, the current environment does not produce for Congress, the
Executive Branch, or the public the kind of consistent, timely data on
international trade that they need to make policy and business
decisions.
ITDS is aimed at (1) reducing the cost and burden of processing
international trade transactions and transport for both government and
the private trade community by substituting standard electronic
messages for the multiple and redundant reporting-often on paper form-
that occurs today; (2) improving administration of laws and regulations
that apply at the border to carriers (for example, highway safety and
vessel clearance), people (drivers and crews of commercial
conveyances), and goods (several hundred laws including those
addressing public health and safety, animal and plant health, consumer
protection, enforcement of trade agreements, etc.); and (3) providing
convenient access for Congress, Executive Branch agencies, and the
public to international trade data that are more accurate, complete,
and timely.
ITDS will support the missions of all Federal agencies that have
responsibilities for regulating the movement of goods, people, or
carriers into or out of the United States. It will also support the
missions of Congressional and Executive Branch staff who need
convenient access to better and more timely data in order to make
decisions about legislation or other policymaking.
Development of the ITDS to date has been paid for out of direct
appropriations to the Treasury Department. The fiscal year 2000 Budget
proposes to fund ITDS through user fees in fiscal year 2000 and fiscal
year 2001.
______
U.S. Mint
Questions Submitted by Senator Dorgan
lewis and clark commemorative coins
Question. What is the status of the legislation issuing a Lewis and
Clark commemorative coin?
Answer. The Lewis and Clark Commemorative Coin legislation is
currently pending before the House Banking Subcommittee on Domestic and
International Monetary Policy.
Question. Last year there were some problems on the mintage level.
Have those problems been resolved?
Answer. These issues have been resolved. The current legislation
calls for 500,000 one-dollar silver coins, which is within the
specified guidelines of the Commemorative Coin Reform Act of 1996.
dollar coin
Question. How are things proceeding on the dollar coin? Have the
designs been confirmed?
Answer. The Mint is on schedule to have the new dollar coin
available to be distributed for public use in early 2000.
Transitioning from the Susan B. Anthony (SBA) dollar to the
Sacagawea dollar is expected to be successful. Minting this new dollar
coin presents the same level of difficulty as the SBA, but the
challenges are in different areas of production. According to a dollar
coin study performed by Oxford and Associates, the vast majority of
current SBA dollar coin usage is associated with the automated vending
industry (i.e., vending machine operators, mass transit systems, car
washes, automated postage stamp machines). The greatest challenge is to
design an alloy with a magnetic signature that cannot be economically
duplicated in slugs, but can be easily accommodated by vending
machines. There are two possibilities: the Mint could develop an alloy
that matches the SBA's magnetic signature exactly or the Mint could
create a hard-to-duplicate signature that is completely distinct from
the SBA. We continue to partner with the vending industry to ensure
that the industry is ready to accept the new dollar coin alloy.
The Secretary of Treasury charged the Dollar Coin Design Advisory
Committee with developing a single design concept recommendation for
the obverse of the new dollar coin. The Dollar Coin Advisory Committee
sought public input, conducted hearings, reviewed historical United
States coin designs, and ultimately recommended that the obverse of the
new dollar coin bear a design of Liberty represented by a Native
American woman, inspired by Sacagawea. The Secretary accepted their
recommendation and asked the Mint to proceed with creating a coin
design representing Sacagawea. The Mint commissioned over a dozen
outside artists and Mint engravers to prepare sketches. A public
viewing was held to narrow down the design alternatives. We solicited
and received over 120,000 emails as well as other comments and
preferences, including comments from the Commission on Fine Arts. This
response rate from the public represents more input than the Mint has
received for any other coin design. After receiving this input, several
designs were recommended to the Secretary, who is expected to announce
the final design decision this Spring, 1999.
Question. When and where will they be publicly announced?
Answer. These plans have not been finalized pending various
scheduling requests. We anticipate that the designs will be unveiled by
late Spring of this year.
Financial Management Service
individual indian money account litigation
Question. As part of Treasury's statutory responsibilities they
report the balance of the Individual Indian Money (IIM) account to
Congress. The Interior Department who has primary fiduciary
responsibilities for this account, selects the investment vehicles and
make the distributions from the central account to the individual
Indians. On June 10, 1996, a class action suit was filed by
approximately 300,000 beneficiaries that have alleged that the
Secretaries of Interior and Treasury have mismanaged the account.
What are the respective roles of Interior and Treasury in
overseeing the Individual Indian Money account? Does Treasury control
the debits and credits made by Interior to the IIM account?
Answer. By statute, the Secretary of the Interior has complete
responsibility for managing the IIM funds. Since the IIM account at
Treasury is a deposit fund account, Treasury does not control whether
funds are deposited into or withdrawn from the account. Therefore,
Interior deposits funds received from outside sources, for example,
from leases and royalties, into either the IIM deposit fund account at
Treasury or into accounts held outside of Treasury. Interior also has
statutory authority to disburse payments from the IIM deposit fund
account at Treasury to individual Indians and issues Treasury checks to
individual Indians. In addition, Interior determines how funds in the
IIM deposit fund account should be invested and either directs Treasury
to invest in Government securities with a maturity specified by
Interior or Interior invests the IIM funds itself outside of Treasury.
Treasury has three roles with respect to the IIM deposit fund
account. First, as part of Treasury's statutory responsibilities to
provide central accounting and reporting to Congress, Treasury reports
to Congress the total IIM deposit fund account balance. The total
balance is based on information Treasury receives from Interior which
reflects net withdrawals from and deposits to the IIM deposit fund
account. Second, at the direction of Interior, Treasury invests IIM
funds in Government Account Series securities. Third, Treasury reports
to Interior--as it does for all Government agencies--the status of
outstanding checks, that Interior writes on the IIM deposit fund
account which are not negotiated within one year from date of issuance.
Treasury recredits unnegotiated funds to Interior, and all other
Government agencies, through Limited Payability Cancellations. Funds
are recredited because the payee's entitlement to the funds still exist
and the agency is responsible for maintaining records on the recredited
funds.
Question. What is the status of the litigation?
Answer. On February 22, 1999, the court issued an order after a
contempt hearing held in January 1999, that held the Secretary of the
Treasury, the Secretary of the Interior and the Assistant Secretary for
Indian Affairs at Interior in civil contempt based on the failure to
substantially comply with the Court's November, 1996 document
production order.
The court acknowledged that Treasury was not asked to produce
canceled checks until early November 1998 and that Treasury's
compliance is dependent on receiving certain prerequisite information
from the Department of the Interior.
A trial date has been set for June 10, 1999, to address the issue
of ``fixing'' the Interior trust accounting system. A second trial date
will be set at a later time to address the issue of providing a proper
accounting to the IIM beneficiaries.
Question. What has Treasury done to bring itself into compliance
with the court's order?
Answer. Treasury has produced and delivered to the Department of
Justice all information that it can identify as being responsive to the
Court's discovery order. However, in response to the Court's contempt
order, Treasury has filed a document production protocol with the
Special Master appointed by the Court to oversee document production.
The protocol provides that when the prerequisite information is
received from Interior, Treasury will search its systems to determine
if the checks were negotiated.
In addition, Treasury has selected an individual to serve as
project manager for document production in this litigation. This
individual's responsibilities include working with the Legal Division
and the Special Master to ensure that, with respect to Treasury,
discovery in the litigation proceeds promptly, efficiently, and without
inadvertent destruction of relevant records.
Question. What agency is responsible for auditing the account? Does
Treasury have responsibility for independently auditing the account
balance?
Answer. The Department of the Interior is responsible for auditing
this account because this account is included on the Department of
Interior's financial statement.
Treasury does not have responsibility for independently auditing
the account balance.
SUBCOMMITTEE RECESS
Senator Campbell. Mr. Secretary, thank you very much for
appearing.
Secretary Rubin. Thank you, Mr. Chairman.
Senator Campbell. This subcommittee is recessed.
[Whereupon, at 11:11 a.m., Thursday, March 25, the
subcommittee was recessed, to reconvene at 9:33 a.m., April
15.]
TREASURY AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL YEAR 2000
----------
THURSDAY, APRIL 15, 1999
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
presiding.
Present: Senators Campbell, Kyl, and Dorgan.
DEPARTMENT OF THE TREASURY
STATEMENT OF JAMES E. JOHNSON, UNDER SECRETARY OF THE
TREASURY (ENFORCEMENT)
OPENING REMARKS OF SENATOR CAMPBELL
Senator Campbell. Good morning. The Treasury Subcommittee
will be in session. This is the final hearing of the Treasury
and General Government Appropriations Subcommittee for this
fiscal year. Today we will hear from the Department of the
Treasury law enforcement bureaus, including Customs, ATF,
Secret Service, FLETC, and FinCEN.
There are a number of new people with us here this morning.
But before I talk about them, I would like to welcome a very
special group of guests in our audience. If they would stand
up. They are the students from the Academy of Law, Justice, and
Security at Anacostia High School. We are very happy to see
you.
This academy provides these students with an in-depth study
of law enforcement and the criminal justice system in
partnership with many of the law enforcement agencies that are
here testifying this morning. For you young people, as you look
towards your future in law enforcement, I would suggest you
consider the Secret Service. Who knows, you may go from there
to being the heads of some of the agencies that you see sitting
here, and then you can sit in front of this committee and be
scalded regularly about the budget. [Laughter.]
In any event, we are very happy that you are here this
morning, and I would like to welcome you and recognize LaKeda
Martin, Michael Matthews, David Craddick, Kelly Bryant, Al
Ashby, Mary Watson, Andrew Washington, and Cameron Shield.
Thank you.
I would also like to welcome Mr. Johnson, who has been at
Treasury for quite a while. I think it has been about three
years, Mr. Johnson, but this is the first time that he has
appeared in front of this committee, and we will be looking
forward to talking to him.
The new director of the Secret Service, Brian Stafford, who
has been the director for about a month and-a-half. I
understand Brian, by the way, to my colleagues, that our new
head of the Secret Service is a big biker, as I am. So I am
looking forward to going riding with him.
Jim Sloan, who was sworn in as the director of the
Financial Crimes Enforcement Network, or FinCEN, just about
three days ago, so we will be rather gentle for your first
appearance here.
And John Magaw, my friend who has been here so many times
before us, the director of the Bureau of Alcohol, Tobacco, and
Firearms. Welcome back.
Ralph Basham, who has taken over the responsibility for
FLETC. We met with you once last year. Glad to have you back.
And Ray Kelly, who switched roles and is now the
commissioner of Customs.
Today is tax day in this committee, and as I was preparing
for this hearing it occurred to me that many of our Treasury
law enforcement agencies work hand in hand in trying to reduce
the individual tax burden. As an example, the Customs Service
is responsible for collecting about $22 billion in revenue. ATF
collects $12.5 billion in taxes and fees.
The consolidation of the majority of Federal law
enforcement training under the FLETC umbrella saves an
estimated $160 million a year, not to mention that all the
Federal law enforcement agencies are helping to protect
taxpayers from losing some of their hard-earned money because
of schemes, frauds, misrepresentations, thievery, and assorted
efforts by those people that would rather prey on their fellow
man than work for a living.
This is going to be a difficult bill. The needs are great.
Resources are not there as much as we would like them to be.
But it is not a matter of deciding whether to fund it or not,
or to go with some kind of whiz-bang technology or some
important initiative. It will simply come down to trying to
decide what programs have to be reduced or eliminated to stay
within our caps and to accommodate greater needs.
In any event, I am looking forward to all the testimony
here and I will ask Senator Dorgan if he has an opening
statement.
Senator Dorgan. Mr. Chairman, thank you very much.
I would say to Mr. Stafford that I traveled all of last
week with Senator Campbell, and it did not matter where we were
in the world, he was looking for a Harley Davidson.
I appreciate very much the appearance of the students.
Welcome to Capitol Hill this morning. And welcome the
witnesses.
Most Americans, I believe, have scant understanding that a
substantial portion of our Federal law enforcement is in the
Treasury Department. Our job, of course, as appropriators, is
to make certain that the money we appropriate here is used for
good purpose and to accomplish important goals for our country.
I would say from the review that I have done, Mr. Chairman,
that the agencies before us here have a proven track record in
combating crime, and I am very appreciative of their efforts
and the efforts of their many agents, the men and women around
this country who do dedicated work often at risk to themselves.
I think it is important for us to say we appreciate that work.
The initiatives that will be discussed today and for which
we will appropriate money are as diverse as investigations into
forced and child labor. That is done over in the Customs
agency. Youth crime gun interdiction initiative, which is ATF.
And so many others. I know that each of these agencies have
some very valuable and some very important programs to discuss
with us today. I look forward to hearing from them.
My hope is that we can once again, through these hearings,
not only determine what kind of funding we want for the current
initiatives, but to evaluate with these agencies what kind of
additional initiatives might be appropriate to further complete
their mission. So I want to thank them.
Mr. Johnson, welcome to you. And Mr. Kelly, Mr. Magaw, and
Mr. Stafford, thank you for appearing today.
Senator Campbell. Senator Kyl, I know you can only be with
us a short time this morning because of a conflict. Did you
have some comments?
Senator Kyl. Yes, thank you, Mr. Chairman. I would advise
the witnesses, unfortunately, that we are marking up the
bankruptcy bill in the Judiciary Committee and that is a big
deal and I am going to have to go in just a few minutes to
that. But I thank you very much, Mr. Chairman. I will look
forward to reading the testimony.
Senator Campbell. Okay, with that we will go ahead and
start. The first panel will be the Honorable James Johnson,
Under Secretary of the Treasury, the Honorable Ray Kelly,
Commissioner of the United States Customs Service, John Magaw,
the director of the BATF, and Brian Stafford, director of the
Secret Service. So why don't we just start in that order with
Mr. Johnson first.
UNDER SECRETARY'S OPENING STATEMENT
Mr. Johnson. Thank you, Mr. Chairman, Senator Dorgan,
Senator Kyl. It is a pleasure for me to be able to appear
before you this morning to support the fiscal year 2000 budget
for Treasury's law enforcement bureaus and offices. With me are
the heads of each of Treasury's law enforcement bureaus, John
Magaw, the director of the Bureau of Alcohol, Tobacco, and
Firearms; Ray Kelly, the commissioner of the U.S. Customs
Service; Ralph Basham, the director of FLETC, the Federal Law
Enforcement Training Center.
And we are pleased, more than pleased, to be joined by two
new members of the Treasury enforcement team, Brian Stafford,
the director of the U.S. Secret Service, and James Sloan, the
new director of the Financial Crimes Enforcement Network. I
believe as you get to know the new members of the team you will
find that we have strengthened Treasury's enforcement team with
the addition of these two members. Both were appointed by the
Secretary within the last month. Both bring a wealth of law
enforcement experience to the challenge of their new roles.
Mr. Chairman, I would ask that my full written statement be
entered into the official record of these proceedings.
Senator Campbell. Without objection, all statements will be
included in the record. You may all wish to abbreviate.
TREASURY LAW ENFORCEMENT MISSION
Mr. Johnson. What I would like to do is take the remainder
of my time to share briefly with you my thoughts summarizing
that statement. And of course, I would be available for
questions and to discuss the issues as we proceed.
Each year, as the world becomes a more complex place,
Treasury's law enforcement mission grows in complexity, and
scope, and in importance. Secretary Rubin has repeatedly noted
that our bureaus must continue to meet these challenges as they
perform their critical role in advancing America's law
enforcement priorities, which include but are not limited to,
as you noted in your opening statements, protecting our
leaders, protecting our borders from drug traffickers, and our
streets from the threats of bombs, arson, and gun violence,
safeguarding our financial institutions from money launderers
and fraud, and importantly, collecting revenue.
To ensure excellence in achieving these missions and in
keeping with the spirit of the National Performance Review and
the Government Performance and Results Act, Treasury continues
to engage in a comprehensive, strategic management process to
enhance and improve the results we deliver every day to the
American people. Overall, the bureaus performances against
established strategic plans have been excellent, and while not
every goal was met, our results were very significant.
With the objective in mind of continuing to perform our
varied mission at the highest level of excellence, the
President's fiscal year 2000 budget seeks a Treasury
enforcement program level of approximately $3.5 billion, which
would support 27,422 direct FTEs. This excludes, of course, the
Internal Revenue Service criminal investigative division. They
perform an integral role in Treasury law enforcement and their
budget request is $384.3 million which would support
approximately 4,049 FTE.
We believe these budget requests take a pragmatic approach
to two goals, contributing to balancing the Federal budget and
supporting effective approaches to law enforcement. It is also
important to note that the requested Treasury program level
allows us to combat crime while depositing more than $34
billion in revenues collections into the U.S. Treasury. This is
a tremendous return on investment.
OFFICE OF ENFORCEMENT STRATEGIC PLAN
Mr. Chairman, I will focus in the remainder of my time on
two things. First, the Office of Enforcement and the goals of
our five-year strategic plan developed by the bureaus in
conjunction with the Office of Enforcement. This format
highlights our bureaus specific requests and areas of
expertise, as well as our cross-cutting expertise on financial
crimes matters.
As you know, through the strategic management process,
Treasury Enforcement, all of us together have developed a set
of five goals that provide a comprehensive overview of our
bureaus' mission: reducing the trafficking, smuggling, and use
of illicit drugs; combating financial crimes and money
laundering; fighting violent crime; protecting our Nation's
leaders and visiting world leaders; and providing high quality
training for law enforcement personnel. The Office of
Enforcement's goal is to assist our bureaus in enhancing their
performance in the context of these overarching goals.
What do we do in the Office of Enforcement? We recognize
that the role of our enforcement bureaus is enhanced through
the support, oversight, and policy guidance provided at the
departmental level. In this regard, I am pleased to report that
the Office of Enforcement has worked diligently over the past
year to fulfill these responsibilities.
OFFICE OF ENFORCEMENT--SUPPORT
I will talk first about support. As Senator Dorgan
mentioned, it is often the case that the substantial contingent
of Federal law enforcement within the Treasury Department is
not always given as high a prominence in discussions about law
enforcement. So part of our goal is to provide support for
these bureaus.
Over the past year we have worked in support of each of our
bureaus individual goals as well as for the advancement of
issues of significance to all of the enforcement bureaus. We
have done this by bringing together working groups including
bureau personnel to work on challenging issues. Such working
groups have addressed issues ranging from the development of a
fleet management policy, to the development of an
implementation plan for the demonstration pay project.
We also provide and need to provide oversight. During the
course of the last year we have worked with our bureaus to
identify issues before they have become problems, and to work
on problems before they become crises. This subcommittee's
support of the Office of Professional Responsibility is helping
us to meet this goal.
Since receiving funds in the fiscal year 1998
appropriations bill, we have made considerable progress in
staffing this unit, which assists in the provision of oversight
on such important issues as internal affairs, training, and
inspection.
OFFICE OF PROFESSIONAL RESPONSIBILITY
Among other things, OPR has carried out work begun by
former Under Secretary Raymond Kelly by continuing to make
integrity a priority. Indeed, last February, fulfilling a
Congressional request, OPR issued a report on Customs' Office
of Internal Affairs. This study represents a thorough and
comprehensive analysis and reflects the important oversight
role this subcommittee and Congress envisioned for OPR.
Additionally, during the past year OPR has worked with ATF
to enhance its enforcement of firearms laws, and operations at
the National Tracing Center. We have analyzed EEO and diversity
issues at all of the Treasury bureaus, and participated in the
implementation committee overseeing the renewal of the Federal
Law Enforcement Training Center.
OFFICE OF ENFORCEMENT--POLICY GUIDANCE
A third major function of the Office of the Enforcement is
providing policy guidance, providing leadership in the
formulation and coordination of policy for Treasury
Enforcement. In the last year, we have convened the financial
crimes policy steering committee, which again brings together
the bureaus as well as Office of Enforcement personnel, to look
at financial crimes policy across our bureaus. This group is
developing a strategic response to what we believe to be a
dangerous and highly profitable money laundering system, the
black market peso exchange, which is a process by which
Colombian narcotraffickers, drug kingpins, convert their ill-
gotten dollars into ostensibly clean pesos.
The financial crimes policy steering committee is also the
primary vehicle by which the Office of Enforcement is leading
the development of a national strategy against money
laundering.
We have taken other steps to enhance our support and
oversight missions. Among other activities, we continue to work
closely with Customs, with ONDCP and others, to ensure close
cooperation on anti-narcotics matters. We have maintained a
lead role within the Administration on the national church
arson task force. And in conjunction with the ATF and the
Department of Justice we have responded to the President's
directive to analyze the problems on a variety of firearms
issues.
On the trade and regulatory side, the Office of Enforcement
has taken the lead in initiatives to streamline and modernize
the regulatory and trade law enforcement operations of the
enforcement bureaus.
HIGHLIGHTS OF LAW ENFORCEMENT BUREAU MISSIONS
You have before you the bureau heads who will go through
and detail their missions. I would just like to highlight how
their missions fit into our overall strategic plan.
Goal one of the strategic plan is to reduce the
trafficking, smuggling, and use of illicit drugs. The Customs
Service has the primary role for the Treasury Department and
one of the primary roles for the Nation in interdicting drugs
and other contraband at the border, and in ensuring that all
goods and persons entering and exiting the United States do so
in accordance with the law.
The Customs Service discovers or seizes more illegal drugs
than all Federal authorities in the United States combined
every single year. Customs seized over 1 million pounds of
cocaine, heroin, and marijuana in fiscal year 1998, exceeding
its target of 953,000 pounds.
Goal two, combating financial crimes and money laundering.
One of the Treasury Department's most important missions is the
fight against money laundering and financial crimes. In
addition to its substantial efforts to counter illicit drugs,
Customs also plays a vitally important role in combatting money
laundering.
The Financial Crimes Enforcement Network also plays a
significant role in Treasury's efforts to fight financial crime
and to fight money laundering. As a network, FinCEN is a vital
link between the law enforcement, financial, and regulatory
communities. It brings together Government agencies and the
private sector in this country and around the world to maximize
information sharing among these communities, and thereby
further efforts to prevent and detect money laundering
activities.
Your support for FinCEN's fiscal year 2000 budget request,
as well as your support for the Customs Service's fiscal year
2000 budget request will further strengthen the quality of our
efforts in this area.
Goal three, fighting violent crime. One of the goals of the
Clinton Administration has to be to reduce violent crime on our
Nation's streets. During fiscal year 1998, ATF received over
180,000 gun trace requests from Federal, State, local, and
international law enforcement agencies.
It also expanded its youth crime gun interdiction
initiative from 17 to 27 cities. We are grateful for the
support that this committee has already provided to that very
important program which is designed to supplement and
strengthen ATF's illegal firearms trafficking program. We ask
that you support the expansion of the program for an additional
10 cities for a total of 37 cities in fiscal year 2000.
I would also like to note in this context that the efforts
to fight violent crime in Treasury Enforcement bureaus extend
beyond the ATF: To provide effective responses to fighting
terrorist attacks; guarding against the smuggling of weapons of
mass destruction; enforcing laws directed at the most common
instruments of terror; protecting potential terrorist targets;
and enforcing economic sanctions against countries and groups
that promote terrorism.
Treasury's central role in the counter-terrorism effort is
performed by the ATF, by the Secret Service, by the Customs
Service, by the Office of Foreign Assets Control, by FinCEN,
and by FLETC; all of our enforcement bureaus.
Our fourth goal is to protect our Nation's leaders and
visiting world leaders. During fiscal year 1998, the Secret
Service successfully managed protective service for its
protectees as well as for several major events. In the last
year, the President signed Presidential Decision Directive 62
which names the Secret Service as the lead agency for security
design, planning, and implementation at designated national
special security events.
During fiscal year 2000, the Service will continue its
preparations for the 2000 presidential campaign and has
budgeted $35.247 million to come from the department's asset
forfeiture fund to cover the cost of providing protection for
the candidates and nominees involved in campaigns and the two
national party conventions.
Finally, all of this would not be possible without meeting
our fifth goal, which providing high quality training for law
enforcement personnel. One of the reasons that the Treasury law
enforcement is so successful is the quality of training that
its agents receive and its inspectors receive at the Federal
Law Enforcement Training Center.
Currently, 71 agencies participate in more than 200
different training programs at the FLETC. Additionally, FLETC
has been involved in providing law enforcement training
overseas for 20 years and has trained more than 5,000 foreign
law enforcement officials for more than 102 different
countries.
As reflected in this overview of bureau activities, the
responsibility of Treasury law enforcement is wide-ranging.
Guided by the five strategic goals set forth previously, we in
our bureaus remain committed to ensuring that Treasury
Enforcement remains at the vanguard of Federal law enforcement
into the 21st century and beyond.
The President's budget request will enable Treasury law
enforcement bureaus to work toward meeting the challenges that
we all face together. I am confident that you will find this to
be a responsible budget as it considers the growing demands of
law enforcement in the constrained budget environment.
PREPARED STATEMENT
I would like to express my appreciation for all the support
this committee has provided to Treasury Enforcement in the
past, and I would be pleased, Mr. Chairman, to answer any
questions that you and members of the committee have at this
time or after you have heard from the Treasury Enforcement
bureau heads. Thank you very much.
[The statement follows:]
Prepared Statement of James E. Johnson
Thank you Mr. Chairman, Senator Dorgan, and members of the
Subcommittee. It is a pleasure for me to be here today to support the
fiscal year 2000 budget for Treasury's law enforcement bureaus and
offices.
With me today are the heads of the Treasury law enforcement
bureaus: John W. Magaw, Director of the Bureau of Alcohol, Tobacco and
Firearms (ATF); Raymond W. Kelly, Commissioner of the United States
Customs Service (USCS), and W. Ralph Basham, Director of the Federal
Law Enforcement Training Center (FLETC). We are pleased to be joined by
two new members of the Treasury Enforcement Team: Brian L. Stafford,
Director of the United States Secret Service (USSS), and James F.
Sloan, Director of the Financial Crimes Enforcement Network (FinCEN).
Both were appointed by Secretary Rubin last month. Both bring a wealth
of law enforcement experience to the challenges of their new roles.
I welcome this opportunity to share with you my thoughts on
Treasury Enforcement's mission today and into the 21st century, and on
how President Clinton's fiscal year 2000 budget request supports us in
achieving this mission.
Each year, as the world becomes a more complex place, Treasury's
law enforcement mission grows in complexity, scope and importance.
Secretary Rubin has repeatedly noted that our bureaus must continue to
meet these challenges as they perform their critical role in advancing
America's law enforcement priorities, which include, but are not
limited to, protecting our leaders, protecting our borders from drug
traffickers and our streets from the threat of bombs, arson, and gun
violence, safeguarding our financial institutions from money launderers
and fraud, and collecting revenue.
To ensure excellence in achieving these missions, and in keeping
with the spirit of the National Performance Review and the Government
Performance and Results Act, Treasury continues to engage in a
comprehensive strategic management process to enhance and improve the
results we deliver to the American people. Overall, the bureaus'
performances against established strategic plans were excellent. And
while not every goal was met our results were very significant.
With the objective in mind of continuing to perform our mission at
the highest level of excellence, the President's fiscal year 2000
budget seeks a Treasury Enforcement program level of $3.5 billion and
27,422 direct FTE, excluding the Internal Revenue Service Criminal
Investigation Division (IRS/CID). IRS/CID, however, does play an
integral role in Treasury law enforcement efforts with its fiscal year
2000 $384.3 million and 4,049 FTE request. We believe the President's
budget request takes a pragmatic approach to two goals. On one hand, it
permits Treasury to contribute substantially towards balancing the
federal budget. On the other, it supports effective approaches to law
enforcement. Also, it is important to note that the requested Treasury
program level allows us to combat crime while depositing more than $34
billion in revenues and collections into the U.S. Treasury. This is a
tremendous return on investment.
My remarks today will focus on two things: the role of the Office
of Enforcement and the goals of our five-part strategic plan that was
developed by the bureaus working with the Office of Enforcement. This
format highlights our bureaus' specific areas of expertise, activities
and budget requests, as well as our cross-cutting expertise on
financial crimes matters. During my testimony, I will highlight several
key initiatives that Treasury is undertaking in the law enforcement
context.
office of enforcement
We recognize that the role of our enforcement bureaus is enhanced
through the support, oversight and policy guidance provided at the
Departmental level. In this regard, I am pleased to report that the
Office of Enforcement has worked diligently over the past year to
fulfill these responsibilities, and has a plan in place for maximizing
such efforts over the next year.
Support
Over the past year, we have worked to support each of our bureaus'
individual goals, as well as for the advancement of issues of
significance to all of the enforcement bureaus. We have often done this
by bringing together working groups including bureau personnel, to work
on challenging issues. Many of these efforts are led by bureau
personnel either dedicated to the project or detailed to the Office of
Enforcement to work on such matters.
For example, working groups consisting of personnel from the Office
of Enforcement, the Office of Management and the enforcement bureaus
developed a fleet management policy that balances the needs of law
enforcement with Congressional concern for assurance that vehicles are
being used in conformity with sound management principles. A combined
team of Enforcement and Management staff recently reported to the
Subcommittee on the results of those efforts. Similarly, a working
group was formed to develop an implementation plan for the
demonstration pay project. It is our hope that the use of personnel
interventions identified by this working group will enable us to
improve our capacity to recruit, develop, and retain high-caliber
employees. Finally, the Office of Enforcement, Office of Management,
and enforcement bureau representatives have jointly undertaken a major
effort to respond to the Congressional request that we analyze the
implications of the imminent agent retirements.
Oversight
Over the last year we have worked with our bureaus to identify
issues before they become problems, and work on problems before they
become crises. The Office of Professional Responsibility (OPR) is
helping us to meet this goal. Since receiving funds in the fiscal year
1998 appropriations bill, we have made considerable progress in
staffing this unit, which assists in the provision of oversight on such
important issues as internal affairs, training and inspection. Among
other things, OPR has carried on work begun by former Under Secretary
Kelly, by continuing to make integrity a priority. Indeed, last
February, fulfilling a Congressional request, the Office of Enforcement
issued an OPR report on Customs' Office of Internal Affairs. This study
represents a thorough and comprehensive analysis and reflects the
important oversight role envisioned for OPR.
Additionally, during the past year, OPR has worked with ATF to
improve enforcement of the firearms laws and operations at the National
Tracing Center, analyzed EEO and diversity issues at the Treasury
bureaus, and participated in the Implementation Committee overseeing
renewal of the FLETC. OPR also conducted an assessment of training at
the Customs Service. Its findings and recommendations fully support
Commissioner Kelly's decision to establish an Office of Training at the
Assistant Commissioner level.
Policy Guidance
A third major function of the Office of Enforcement is to provide
leadership in the formulation and coordination of policy for Treasury
Enforcement. In this regard, in the past year, we convened the
Financial Crimes Policy Steering Committee which consists of
representatives from all of the Treasury Bureaus and offices, at the
Assistant Director level, who are tasked with helping to formulate
policy in the area of Treasury's financial crimes jurisdiction. Among
other things, I have tasked this group with the development of a
strategic response to what we believe to be an insidious money
laundering system, the Black Market Peso Exchange, which is a process
by which Colombian narcotraffickers convert their ill-gotten dollars
into ostensibly clean pesos. On a broader level, this group is the
primary vehicle by which the Office of Enforcement is leading the
development of a nationwide strategy against money laundering.
As a former prosecutor, I understand that the effectiveness of our
bureaus is constrained by the legal and administrative infrastructure
under which they operate. We are working to ensure that those rules
function to make our bureaus work as effectively as possible. For
example, the impact of successful investigation may be undercut by
Sentencing Guidelines that do not adequately reflect the severity of
the crime. The Office of Enforcement and General Counsel within
Treasury have been working with our bureaus to formulate and recommend
to the Sentencing Commission certain changes in the Guidelines.
The Office of Enforcement also has taken other steps to enhance its
support and oversight missions. Among other activities, we continue to
work closely with Customs, ONDCP, and others to ensure close
cooperation on anti-narcotics matters; we have maintained a lead role
within the Administration on the National Church Arson Task Force; and
in conjunction with ATF and the Department of Justice, we have
responded to the President's directive to analyze the problem of the
gun show loophole, and remain at the forefront on firearms issues.
On the trade and regulatory side, the Office of Enforcement has
taken the lead in initiatives to streamline and modernize the
regulatory and trade law enforcement operations of the enforcement
bureaus. In recent years, Treasury has been a major force behind
changes to the way the alcoholic beverage industry and the firearms
industry are regulated by ATF, re-organization of the Customs Service
to provide better service to the public, re-invention of Customs'
business processes for both import and export transactions, and
Customs' enforcement of intellectual property laws.
More globally, the Office of Enforcement represents the United
States in an initiative by the G7 governments to develop standard
electronic documentation for trade among the G7 countries. This
initiative will greatly simplify the experience of exporting for small
U.S. companies, and it will reduce the expense of international
transactions for all U.S. businesses.
Providing key support, sensible oversight, and sound policy
guidance are the principles that govern the work of the Office of
Enforcement. I trust they will become clear as we discuss in greater
detail the implementation of Treasury Enforcement's strategic plan.
Goal: Reduce the Trafficking, Smuggling and Use of Illicit Drugs
Treasury brings essential counter-narcotics and money laundering
expertise to the implementation of all aspects of the President's
comprehensive anti-drug strategy. Customs plays a leading role in the
fight against illicit drugs through our anti-smuggling efforts at the
border and our substantial air support to interdict illegal narcotics
at the source. Treasury's anti-narcotics role is also pursued through
anti-money laundering activities, efforts to reduce narcotics-related
violent crime, and demand reduction programs. The following examples
highlight in greater detail the roles our individual bureaus play in
Treasury's efforts to achieve the goal of reducing trafficking,
smuggling, and use of illicit drugs.
The Customs Service has the primary role for the Treasury
Department--and one of the primary roles for the United States--in
interdicting drugs and other contraband at the border, and in ensuring
that all goods and persons entering and exiting the United States do so
in accordance with the law. The Customs Service discovers or seizes
more illegal drugs than all federal authorities in the United States
combined each year.
Customs has tremendous responsibilities. As you know, Customs must
deal with significant challenges in its efforts to execute its drug
interdiction mission. For example, the Customs Service processed over
460 million people, over 139 million land, air and sea carriers, and
$955 billion worth of imported merchandise. Customs performed the
initial checks, processes, and enforcement functions for over 40
federal agencies and applied hundreds of laws and regulations. It
performed these tasks by servicing more than 300 ports of entry
sprawled across 7,000 miles of land border, and also provided air
support to the U.S. Government's source control efforts in South and
Central America. Customs pursued all of these enforcement missions
while collecting approximately $22 billion in revenue for the United
States in the form of duties, taxes, and fees.
Customs constantly strives to improve its ability to stem the flow
of drugs while dealing with the increasing volumes of cargo and
passengers into and out of the United States. Indeed, the number one
operational priority for the Customs Service is preventing the
smuggling of narcotics into the United States. It pursues this mission
through interdiction, intelligence and investigative capabilities that
disrupt and dismantle smuggling organizations. Customs seized 1,116,000
pounds of illegal drugs in fiscal year 1998, exceeding its target of
953,000 pounds. Customs' increase in seizures resulted, in large
measure, from Operation Brass Ring, a six month effort to increase the
amount of narcotics seized.
Customs will continue to develop the capabilities to meet the
ongoing smuggling threats on our southwest land border, in the
Caribbean, and at all borders and ports of entry across the country.
Customs also remains an active participant in multi-agency criminal
investigations, and continues to strengthen its partnerships with the
private sector, cooperative foreign governments and other federal
agencies in order to continue its active role to counter narcotics
smuggling.
Customs' fiscal year 2000 budget proposal includes increases for
integrity awareness and training initiatives, and non-intrusive
inspection technology and automation, all of which will help us achieve
our goal of maintaining the best possible workforce while reducing the
trafficking and smuggling of illicit drugs in an effective and
efficient manner.
We also are proud of such efforts as ATF's campaign against armed
narcotics traffickers, through its Achilles Program, and Youth Crime
Gun Interdiction Initiative, the work of all of our bureaus on HIDTA
and ICDE task forces, the use of our financial crimes expertise to
attack the financial underpinnings of the drug trade, and valuable
prevention efforts such as ATF's GREAT program.
Goal: Combat Financial Crimes and Money Laundering
One of the Treasury Department's most important missions is the
fight against money laundering and financial crimes. Treasury's unique
structure permits us to use both our regulatory and investigative
expertise to follow the money trail and thus undermine criminal
enterprises. Since our last appearance before you, there have been
several developments in this area. For example, as mentioned earlier,
the Treasury Department, in conjunction with federal, state, local and
private sector entities, is now in the final stages of developing a
national money laundering strategy as directed by the Money Laundering
and Financial Crimes Strategy Act of 1998. The Office of Enforcement
has taken the lead role in this effort. We have reached out to other
agencies as we have worked to develop the strategy, and we look forward
to continuing work on its further refinement and, ultimately, its
implementation. Indeed, we believe that the strategy will make an
important contribution to the battle against money laundering.
We have continued to press forward with international efforts
against money laundering. Last May, President Clinton announced the
Administration's International Crime Control Strategy (ICCS), which
includes as one of its goals countering international financial crime.
Treasury's Office of Enforcement and its law enforcement bureaus played
an active role in the development of the ICCS and continue to play
important roles in its implementation. As advances in technology and
the removal of other barriers allow money to move with increasing speed
among nations, an effective, long-term anti-money laundering strategy
will require other nations to adopt strong anti-money laundering
measures in the legal, regulatory, and law enforcement areas. This,
too, is a component part of the ICCS and an area in which FinCEN, in
particular, is actively involved. Also, we have continued to strengthen
the capability of our bureaus to fight money laundering in a
coordinated fashion. Treasury Enforcement's Financial Crimes Steering
Committee, established in 1998, brings together the full spectrum of
Treasury agencies that play a role in efforts to combat financial
crime. This group currently oversees an interagency working group that
is developing an action plan to combat an insidious form of drug money
laundering--the Colombian Black Market Peso Exchange.
In furtherance of our goal of protecting the integrity of our
nation's financial systems, we are also focused on continuing to
develop anti-counterfeiting strategies that employ all appropriate
technological and investigatory methods to combat designers and
traffickers in counterfeit currency and instruments. Working with the
State Department, we are expanding the Secret Service's overseas
presence to combat more effectively the burgeoning international
criminal threat to our financial systems. We are also enhancing our
leadership role by continuing to develop partnerships with the
financial community and others in the private and public sectors.
Recognizing the importance of our combined efforts to combat this
problem, in 1998, Secretary Rubin asked Attorney General Reno and the
Justice Department to coordinate with Treasury in working with the
Sentencing Commission to review and enhance the guideline ranges for
imprisonment in counterfeiting cases.
Some of our bureaus' individual efforts in the fight against money
laundering and financial crimes include:
customs service
In addition to its substantial efforts to counter illicit drugs,
Customs also plays a vitally important role in combating money
laundering. During fiscal year 1998, Customs' money laundering
investigations resulted in 1,035 arrests and 928 criminal indictments.
Its investigative strategy is focused on disrupting two key business
functions that are necessary for sophisticated international money
laundering operations to function: laundering profits and investing the
proceeds of their criminal activity. In this context, I note the
significance of Operation Casablanca, the largest drug money laundering
investigation in U.S. history, which to date has resulted in the
arrests of 168 individuals. While I will defer to Commissioner Kelly to
discuss the public details of this ongoing investigation, I note that
this case represents a fine example of the important work that Customs
is doing to eliminate the scourge of money laundering.
secret service
The Secret Service is the nation's lead agency in investigating
counterfeiting, forgery, and access device fraud. As the nation's
counterfeiting expert, the Secret Service has investigated fictitious
financial instruments, counterfeit currency and credit card schemes
both domestically and internationally. Because United States currency
is counterfeited around the globe--approximately 70 percent of all
counterfeit currency detected domestically is of foreign origin--the
Secret Service devotes a large portion of its investigative resources
to battling international counterfeiting issues.
The Secret Service has learned through experience that the best
method to manage this problem is to address counterfeit issues at their
source, with the permanent stationing of Secret Service agents at
foreign posts. In addition, the Secret Service leverages its resources
by enlisting international law enforcement agencies to identify
counterfeit currency and suppress counterfeiting plates. These efforts,
primarily carried out through counterfeit detection seminars, have
promoted a cooperative international law enforcement effort to detect,
suppress and prosecute counterfeit violations.
Moreover, to prevent financial fraud schemes, the Secret Service
has developed and implemented longstanding and effective partnerships
with private industry to better understand various financial systems
and combat significant losses. Assisting the industry and their
financial systems with ``systemic fixes,'' aggressive analysis, and
proactive security enhancement measures has increased the overall
security of these financial systems. Proactive joint initiatives with
the industry, such as public awareness campaigns, media programs,
speeches, seminars, and security training are having a positive impact.
These partnerships have reduced the ability of criminal organizations
to target financial institutions.
In addition to its work with the private sector, the Secret Service
plays an active role in law enforcement task forces aimed at
identifying and targeting fraud schemes intended to victimize
individuals, banks, credit card issuers, or other financial
institutions.
fincen
While Customs, Secret Service and IRS-CID are the financial crime
investigators, the Financial Crimes Enforcement Network serves as
Treasury's principal support arm for such investigative efforts. As its
name states, FinCEN is a network, a link between the law enforcement,
financial, and regulatory communities. It brings together government
agencies and the private sector, in this country and around the world,
to maximize information-sharing among these communities, and thereby
further efforts to prevent and detect money laundering activities.
FinCEN's fiscal year 2000 budget request focuses on those programs
that are at the core of its support to law enforcement: the Gateway
system; direct case support to law enforcement; sophisticated research
and analysis support to the regulatory and law enforcement communities;
expanding the use of technology tools to research Bank Secrecy Act
databases; expansion of secure communications; financial intelligence
unit development; and a study to gauge the magnitude of money
laundering. Your support for FinCEN's fiscal year 2000 budget request--
which reflects a commitment to essential programs rather than an
expansion into new initiatives--will strengthen the quality of the
support that it provides to law enforcement.
irs-cid
Although IRS-CID is not a part of this appropriations hearing, I
want to say a few words about its important contribution to Treasury's
law enforcement efforts. Fighting financial crime is a job well-suited
for the special agents of IRS-CID. They are known for their ability to
``follow the money trail'' and stop the criminal when no one else can.
IRS-CID agents are financial experts in combating money laundering and
tax evasion. Their expertise is sought in investigations of all types
of financial crimes, including health care fraud, pension fraud,
insurance fraud, bankruptcy fraud, telemarketing fraud, gaming,
narcotics, and public corruption. IRS-CID continues to play an
invaluable role in Treasury Enforcement's efforts to combat the range
of financial crimes facing us, and we look forward to our continued
partnership with them.
Goal: Fight Violent Crime
One of the goals of the Clinton Administration has been to reduce
violent crime in our nation's streets. Treasury is working to fight
violent crime by arresting the most violent armed offenders, denying
criminals and juveniles access to firearms, reducing the risk of
violent crime in our communities, safeguarding the public from arson
and explosive incidents and strengthening our capability to fight
terrorist threats to the United States. During fiscal year 1998, ATF
received over 180,000 gun trace requests from federal, state, local and
international law enforcement agencies. It also expanded its Youth
Crime Gun Interdiction Initiative (YCGII) from 17 to 27 cities,
focusing on the sources of firearms recovered from juvenile and
youthful offenders.
To safeguard the public from arson and explosives incidents, ATF
maintains the highest standards of investigative expertise and state-
of-the-art technology to respond most effectively to those incidents.
We endeavor to prevent criminal misuse of explosives in crimes of arson
through enforcement, regulation, and community outreach and investigate
thefts and illegal diversion of explosives.
On the international front, we continue to work to maintain
appropriate firearms importation and international illegal firearms
trafficking policies and to share crime gun tracing and anti-smuggling
expertise with the international community in order to combat illegal
firearms trafficking.
atf
As will be clear from Director Magaw's testimony, ATF plays the
leading role for Treasury--indeed for the entire federal government--in
the fight against armed violent crime. ATF is responsible for
enforcement of the federal firearms laws as well as for regulation of
the firearms and explosives industries. It investigates some of the
most destructive, dangerous, and controversial crimes in the United
States, including bombings of abortion and family planning clinics,
church arsons, illegal firearms trafficking, and other firearms and
explosives violations.
In an effort to reduce violent crime, ATF focuses its investigative
efforts on violent criminals, career criminals, armed narcotics
traffickers, violent gang offenders, and domestic and international
firearms traffickers that supply the illegal firearms market. It
strives to deny criminals, gang members and juveniles access to
firearms, safeguard the public from bombings and arson, and imprison
violent criminals.
Through its Violent Crime Coordinators (VCCs), ATF is focusing its
investigations on armed recidivist and violent career criminals. The
VCCs will continue to assist in removing the armed criminals that pose
the greatest threat to society by identifying and investigating the
most violent offenders, analyzing the best route to prosecution and
working closely with the United States Attorneys' Offices to maximize
the effectiveness of our investigative efforts.
Through its YCGII, which was launched by President Clinton, ATF
continues its efforts to further reduce the illegal trafficking of
firearms to gang offenders and juveniles. As we reported to you last
year, due to the positive reception of the program in the 17 pilot
cities and to ATF's first comprehensive trace analysis report designed
for agents and police departments, the 10 additional cities were added
to the program in fiscal year 1998. We are grateful for the support you
have already provided to this program, which is designed to supplement
and strengthen ATF's illegal firearms trafficking program, and ask you
to support expansion of the program for an additional 10 cities (total
of 37) in fiscal year 2000.
In addition, as recently announced, the Administration is working
to deny prohibited persons access to firearms, including those sold at
gun shows. The President's fiscal year 2000 budget includes additional
resources for enhanced overall firearms law enforcement.
ATF is also renowned for its expertise in the areas of arson and
explosives. Through its certified fire investigators, National and
International Response Teams, accelerant and explosives detection
canine program, its accredited laboratory, its arson and explosives
repository, and numerous other programs, ATF maintains its role as the
leader and innovator in these areas. Its expert work on the National
Church Arson Task Force has helped produce a 34 percent clearance rate
for the arsons under investigation, a rate that is more than twice the
average rate for arson crimes in general. In late 1998, the Attorney
General established the National Task Force on Violence Against Health
Care Providers. This joint effort is required to effectively address
the recent increase of violence against women's health care clinics and
their providers nationwide.
ATF, having the largest contingency on the Task Force, contributes
its expertise in arson, explosives and firearms and brings 16 years of
investigating abortion clinic bombings and arson incidents. It is also
an active participant in the Southeast Bombing Task Force, which is
investigating, among other things, the 1996 bombing at Olympic Park in
Atlanta.
ATF assists state and local authorities with arson investigations
falling under federal jurisdiction and having a significant impact on
their community, particularly when the nature or extent of the problem
extends beyond the available resources or expertise of the locale
involved. ATF also provides training to other federal, state, and local
enforcement agencies in the detection and investigation of arson,
particularly arson-for-profit, and post-blast bombing investigation.
To ensure that its vital work continues in as safe and secure an
environment as possible, the President's budget supports the proposed
new ATF headquarters building. We ask you to support this request.
Overall, the President's fiscal year 2000 budget request will enable
ATF to continue its critical work in the battle against violent crime.
Counterterrorism
One essential aspect of our anti-violent crime efforts is
Treasury's contribution to our nation's antiterrorism fight. Treasury
enforcement bureaus have the legal authority and the essential
expertise to perform missions that are critical to the success of the
counterterrorism effort. Treasury's counterterrorist activities are not
new, but derive from authority that Treasury has exercised for decades
and from expertise developed in the course of Treasury's longstanding
performance of its missions.
Treasury enforcement bureaus provide immediate and effective
response to terrorist attacks, guard against the smuggling of weapons
of mass destruction, enforce laws directed at the most common
instruments of terror, protect potential terrorist targets, and enforce
economic sanctions against countries and groups that promote terrorism.
Treasury bureaus are equipped not only to respond to specific threats
and attacks, but also to conduct the proactive operations within their
areas of expertise that help defeat terrorist plans.
Treasury's central role in the counterterrorism effort is performed
by ATF, Customs, the Secret Service, the Office of Foreign Assets
Control (OFAC), the FinCEN and the FLETC. As set forth above, ATF
investigates bombing and arson cases. Customs, as the lead agency
responsible for enforcement of anti-smuggling laws, is charged with
preventing the illegal import or export of nuclear, hazardous, or
otherwise illegal materials. OFAC enforces sanctions laws, including
those directed at governments that sponsor terrorism. The Secret
Service is responsible for protecting the President, the Vice
President, foreign dignitaries, and other designated protectees.
In addition, Treasury's unrivaled expertise on financial crime
investigations provides an invaluable mechanism for sanctioning those
who commit terrorist acts. The IRS/CID, the Secret Service and FinCEN
figure prominently in the discovery and analysis of financial
information about terrorists and their organizations. The IRS is also
the sole agency responsible for investigating income tax violations,
commonly committed by groups that advocate violence against the U.S.
Government.
Coordination among agencies is crucial to the fight against
terrorism, and law enforcement agencies throughout the federal
government have always recognized and relied upon the essential work of
Treasury's law enforcement bureaus. As evidenced by the response to the
World Trade Center bombing, Oklahoma City bombing, and Unabomber
investigation, Treasury closely coordinates with Justice and other
federal, state, and local law enforcement. This coordination continues
into the policy making arena, where Treasury works closely with Justice
on the Attorney General's Core Agency Group against terrorism, and
participates actively in the NSC's coordination groups on Weapons of
Mass Destruction and counterterrorism.
Goal: Protect Our Nations Leaders and Visiting World Leaders
As I noted at the outset of my testimony, as the world becomes an
increasingly more complex and dangerous place, Treasury's law
enforcement mission grows in complexity as well. Treasury is striving
to manage the ever-changing nature of threats by developing, acquiring
and deploying necessary countermeasures. The Secret Service, as
described below, continues to carry out its critical responsibility of
protecting the President, the Vice President and other specially
designated protectees against any potential threat.
secret service
The Secret Service must accomplish its protective and investigative
missions in an increasingly dangerous society--and it has done so quite
effectively. During fiscal year 1998, the Service successfully managed
protective security for its protectees as well as for several major
events. Importantly, last year, the President signed Presidential
Decision Directive 62, which names the Secret Service as the lead
agency for security design, planning and implementation at designated
national special security events.
The Service has also continued its efforts to combat the increasing
threat from weapons of mass destruction, and is working to develop
measures to ensure the safety of the President and other protectees
against the threat of such weapons. In fiscal year 2000, the Secret
Service looks forward to training additional chemical/biological teams
to support its protective responsibilities.
Also during fiscal year 2000, the Service will continue its
preparations for the 2000 Presidential campaign and has budgeted
$35,247,000 to come from the Department's Asset Forfeiture Fund to
cover the costs of providing protection for the candidates and nominees
involved in the campaign and the two national party conventions. The
Secret Service's budget request will further advance its ability to
maintain the highest level of physical protection possible for its
protectees through the effective use of human resources, protective
intelligence, risk assessment and technology.
Goal: Provide High Quality Training for Law Enforcement Personnel
Assuring the excellence of training of federal law enforcement is
of vital importance to the future effectiveness of our law enforcement
efforts. As the training agent for the majority of all federal law
enforcement agencies, we currently have 71 agencies participating in
training programs at the FLETC. We are committed to enhancing basic and
in-service training programs to meet the changing needs and increasing
demands of federal law enforcement as we combat increasingly
sophisticated, technologically advanced and globally linked crime. Our
objective is to develop and operate state-of-the-art facilities and
systems responsive to interagency training needs.
To meet the goal of quality training while keeping within a limited
budget, to meet current training needs and to prepare for the future,
we will maintain and improve FLETC's physical plant by implementing the
master plan to guide the expansion of facilities to meet projected
training needs. We will also develop alternative training delivery
systems, such as distance learning capabilities, thereby effecting long
term cost savings. Additionally, the Office of Enforcement is working
with FLETC to expand the use of advanced technology in training and
support, especially in the areas of computer-based training and
simulation, to provide not only state-of-the-art training but long-term
budget savings as well. We will also continue to provide international
training in support of the International Law Enforcement Academies.
fletc
One of the reasons that Treasury law enforcement is so successful
is the quality of training that its agents and inspectors receive at
the FLETC. Since its establishment by a memorandum of understanding in
1970, FLETC has built a reputation for providing high quality, cost
effective law enforcement training. As you know, there are many
advantages to consolidated training for federal law enforcement
personnel, not the least of which is an enormous cost savings to the
government. Currently, 71 agencies participate in more than 200
different training programs at FLETC. Additionally, FLETC has been
involved in providing law enforcement training overseas for over 20
years and has trained more than 5,000 foreign law enforcement officials
from more than 102 different countries. We expect this growth to
continue as more agencies recognize the many benefits of consolidated
training. Through the National Center for State and Local Law
Enforcement Training, FLETC also has been an excellent resource for
providing over 50 highly specialized advanced training programs to
State and local law enforcement officers within the United States.
These programs include training related to hate-bias crime issues,
computer and financial fraud and rural drug enforcement matters.
Over the last several years, the FLETC has seen an unprecedented
increase in its workload. Current projections indicate continued
workload growth for several more years. During fiscal year 1998, FLETC
graduated 25,762 students representing 120,399 student-weeks of
training, the largest workload in the history of the Center. In fiscal
year 1999 the workload is expected to grow to 35,315 students. As
Director Basham notes in his testimony, the majority of this increase
is attributable to recent Congressional and Administration initiatives
to control immigration along our nation's borders. Other contributing
factors include counter-terrorism activity and security enhancements at
federal facilities and new federal prisons coming on line.
To permit FLETC to train the law enforcement agents in the skills
needed for the future, it has continued to implement its master plan
for facilities. This plan was first introduced in 1989 and when fully
implemented, will permit FLETC to achieve its goal of further
developing, operating, and maintaining state-of-the-art facilities and
systems responsive to interagency training needs.
In addition to relying on temporary training facilities to
accommodate the increased workload, the Center has also implemented a
dual-shift schedule at Glynco in order to accommodate the training
being requested in fiscal year 1999.
In addition to its domestic training responsibilities, the FLETC is
also being called upon to play a larger and more important role in
support of the Administration's and Congress' foreign policy
initiatives involving the training of foreign law enforcement
officials. Indeed, as Director Basham reports, foreign training
requests have grown substantially in recent years, with student weeks
of training increasing by almost 200 percent since 1994.
Conclusion
In summary, the Treasury Department is proud of the contributions
that its law enforcement bureaus have made and continue to make to this
nation. Treasury and its bureaus have defined goals and objectives to
ensure our excellence in protecting our borders, fighting violent
crime, defeating financial crimes and training our law enforcement
agents for the challenges of countering increasingly sophisticated
criminals. The fiscal year 2000 President's budget request will enable
Treasury's law enforcement bureaus to meet the current challenges and
to begin preparations for the challenges of the 2lst century. I am
confident you will find this to be a responsible budget, as it
considers the growing demands of law enforcement in a constrained
budget environment.
I would like to express my appreciation for all the support the
Subcommittee has provided us. With your permission Mr. Chairman, I
would like to ask the Directors of the Treasury law enforcement bureaus
to describe in more detail those strategies and goals we see as playing
a key role in the coming fiscal year, as well as our recent
accomplishments. After which we would be pleased to answer any
questions you or Members of this Subcommittee may have.
Thank you.
Senator Campbell. Thank you, Mr. Under Secretary. You have
not appeared here for a few years, but I am sure you are aware
that this committee has been very supportive of all of the
agencies. Since you are also on the second panel, you will just
be there as support for FLETC and FinCEN, but your complete
statement pretty much is the one you finished; is that correct?
Mr. Johnson. Yes, and it is a summary, believe it or not,
of the statement that I have submitted for the record.
REVIEW OF THE INTEGRITY ISSUES
Senator Campbell. I am sure glad of that.
Well, I think what I am going to do then is ask you a few
questions, and ask Senator Dorgan to also ask some before we go
to the other agencies, since your missions are all a little bit
different, if that is all right with you.
Let me start by asking you about the--tell us a little bit
about the office's review of integrity issues as it relates to
Customs. I understand that you carried out a review independent
of Customs internal review. Can you tell us about that a little
bit?
Mr. Johnson. The review was conducted by the Office of
Professional Responsibility, which is an institution within
Treasury Enforcement that was initially designed by now-
Commissioner Kelly. The review of integrity issues was a review
that was commenced under the leadership of Ray Kelly when he
was under secretary. The goal of the review, and the goal in
part of all of Treasury Enforcement is to ensure that when the
public interacts with us, when the public is concerned about
our mission, they know that our law enforcement officers are
proceeding with integrity.
There were issues raised about the management and structure
of the Office of Internal Affairs, and the review primarily
focused on the Office of Internal Affairs and how it carries
out its functions within the Customs Service.
There were several significant findings of the review
ranging from the leadership of the Office of Internal Affairs,
to its interaction with the Office of Investigations and other
components within the Customs Service. Its structure and
location within the Customs Service management structure,
initially it did not report to the commissioner of the Customs
Service. It now does.
The report was transmitted not only to the Hill, but
clearly to Commissioner Kelly, who continued after he moved
from the position of under secretary to be very much a part of
the review process. Many of the recommended changes were
undertaken by Commissioner Kelly before the report was issued.
But we continue to work with the Customs Service. We
continue to support Commissioner Kelly's efforts to make strong
changes within the Office of Internal Affairs. For a period of
45 days I detailed a member of our staff to the Customs Service
to assist with the ongoing efforts to make the Office of
Internal Affairs a top flight organization.
FIREARMS VIOLENCE
Senator Campbell. All right. On March 20th, President
Clinton issued a memo to the Secretary of the Treasury and the
Attorney General directing them to develop an integrated
firearms violence reduction strategy, and he specifically
mentioned ATF's Project Exile as an example of Federal, State,
and local cooperation. In 30 seconds or less, I would like you
to answer a couple of questions about that.
First of all, what is the status of the development of the
plan?
Mr. Johnson. Right after the review was required, or rather
the directive was issued, Treasury and Justice have come
together, along with ATF, to continue to develop the plan based
on the principles set forth in the President's directive.
Senator Campbell. It is ongoing. When do you think that the
final status will be completed?
Mr. Johnson. We were instructed to finish it within 90 days
and I am going to try to meet that deadline.
Senator Campbell. As you might guess, here on the Hill
there is always an ongoing discussion about guns, some wanting
to put more emphasis on the people owning them, and others of
our colleagues wanting to put more emphasis on the people who
use them. I am sure you are aware of that discussion.
I would like to know, do you envision recommending further
restrictions on gun ownership?
Mr. Johnson. What we are looking towards and what we have
done is two things. One, enhance enforcement, and the
President's instruction to us asked us to enhance enforcement.
Two, there are areas, for instance, with respect to gun
shows, that form a loophole by which people that we would none
of us would like to see handling guns, can get guns, and we are
looking to that particular problem.
TREASURY/JUSTICE FUNDING
Senator Campbell. When we look at the funding request for
Treasury law enforcement compared to the Department of Justice
law enforcement, in the President's fiscal year 2000 budget
request, Justice has an increase of 10 percent over last year
while Treasury has been reduced by 8 percent. Do you have any
suggestions for ways to encourage greater parity between the
agencies?
Mr. Johnson. This subcommittee's concern with the issue of
parity is something that we have been concerned about for a
long time and have fought to see that the issue of parity was
injected in the budget-making process. If you look at Secretary
Rubin in his testimony, if you look at the program levels of
comparable functions within Treasury and Justice, there has
been an effort to achieve parity between comparable program
levels between Treasury and Justice.
Senator Campbell. FLETC has a temporary training center
that opened in Charleston, South Carolina and was supposed to
be operational for three years. But the INS and the USBP
demands are greater than the Glynco facility can handle so they
are going to continue the operation of that facility, as you
know. Let me ask you, what is being done to ensure the closure
of that as it was originally planned?
Mr. Johnson. We are working with, and Director Basham have
been working closely on this issue, not only with the INS but
also with interested members of Congress who are interested in
the Charleston facility.
Senator Campbell. Interested in closing it or keeping it
open?
Mr. Johnson. Who have an interest in the issue on both
sides. Our goal is to close the facility.
Senator Campbell. The fiscal year 2000 budget request
assumes that $140 million will be in the Treasury's forfeiture
fund. How confident are you that that level of funding will be
available? And what happens if the funds are not available?
Mr. Johnson. There is concern about various levels, issues
within the budget, one of which is the funding on the
forfeiture level. Our goal, as Secretary Rubin testified, in
putting together the budget was to at least do our very best to
make sure that the program levels are sent forward from the
Administration, and the asset forfeiture figures are part of
that overall process. But there is, obviously, some risk to our
programs if we do not get the funding levels.
Senator Campbell. Do you have some alternative plan in
place if the funding level is not met?
Mr. Johnson. We will have to work, I believe, with the
committee to go through our priorities.
Senator Campbell. The FBI has requested additional funding
for fiscal year 2000 for technology and personnel to accelerate
investigation into computer crimes. The investigations have
been conducted by the Secret Service since 1981. Does the
Secret Service have sufficient resources to carry out that
responsibility?
Mr. Johnson. The Secret Service's resources have many
pressures on them. They have been carrying out this mission
very effectively, and to the extent that there is concern about
overlap between the FBI and the Secret Service on this
particular issue, there are ongoing efforts to make sure that
our two missions are not overlapping.
PASSENGER INSPECTIONS
Senator Campbell. All right, one last question before I ask
Senator Dorgan. I happened to see this on the news, but I am
reminded by my notes here too, there have been some reports and
allegations regarding racially biased passenger inspections by
Customs inspectors, and personal search too for targeted
individuals. Can you address that and tell us if those are
really valid reports, and what has Customs done to remedy that?
Mr. Johnson. As a general matter, within Treasury
Enforcement we are going to make sure that all citizens are
treated fairly and appropriately and that we are not biased.
Commissioner Kelly recently announced the formation of a panel
that is going to address these issues, conduct fact-finding,
and ensure that our passenger processing is within the highest
tradition to our approach to processing----
Senator Campbell. But you are reviewing it and looking at
it?
Mr. Johnson. Yes.
Senator Campbell. I probably should have referred that to
Mr. Kelly, but that answer is fine.
Senator Dorgan, did you have some questions?
COUNTER-TERRORISM
Senator Dorgan. Mr. Chairman, just a couple of questions.
Mr. Secretary, you mentioned counter-terrorism and you
indicated that the counter-terrorism enforcement activities are
spread across several agencies. Can you describe for me the
kinds of resources we commit to counter-terrorism and the
effectiveness with which we commit those resources? And is the
threat of terrorism growing? Obviously, the activities in
counter-terrorism are critically important to respond to that
threat.
Mr. Johnson. The resources that we have run the gamut of
our bureaus. Within the Secret Service you have really the
world's premier agency that is designed to prevent terrorist
activity before it has happened, particularly as it targets our
Nation's leaders, as well as visiting foreign dignitaries.
What the Secret Service does is provide safety and security
at the White House, safety and security of the President and
the Vice President, and the First Families when they leave
their residences. The Secret Service, as a result of PDD-62 is
now charged with the prevention aspect, that is terrorist
prevention aspects of national security events.
Within the Customs Service you have an entity that is
designed to, one, preventing terrorist materials from coming
into the United States. And two, preventing weapons of mass
destruction, whether or not they are military equipment, from
being exported from the United States.
You have, within the ATF, a bureau that has responded to
the major terrorist events that have struck the United States
along--working closely with, obviously, the FBI, State and
local authorities. In the World Trade Center bombing, the law
enforcement officer that found the crucial piece of evidence
which was a small piece of a VIN number, vehicle identification
number, for the truck bomb that created that horrific damage
was an ATF agent. They responded in full force to the bombing
in Oklahoma City.
In the Office of Foreign Assets Control we attempt to block
the assets of terrorist organizations so that they cannot be
used in the United States. The Federal Law Enforcement Training
Center provides training to deal with--to enhance our counter-
terrorism effort.
CUSTOM BUDGET REQUEST
Senator Dorgan. Thank you. Let me ask about the Customs
budget just for a moment. The Customs budget request, even if
you consider the emergency supplemental $276 million, but take
that out as a one-time appropriation, the Customs' request I
think about 10 percent below the previous year. Is that a
sufficient request to fund the initiatives at Customs that we
want completed?
Mr. Johnson. Within the challenges of this budget process,
that is the request level that we could try to attempt to meet
our law enforcement mission and our desire to balance the
budget.
Senator Dorgan. I am going to ask Commissioner Kelly about
it. And I would not expect you to come up here and not support
the President's budget request, but in terms of the
requirements and the mission, it just seems to me that a
reduction in Customs funding is probably not what we ought to
be doing at this point. But I will ask further questions of
Commissioner Kelly.
COUNTERFEITING
One last question, if I might. The new currency that we
have put in circulation, Mr. Secretary, your role is also with
your agencies to deal with the counterfeit activities. Are we
seeing some significant difficulties with counterfeiters with
the new currency? What is your impression of that?
Mr. Johnson. We think the new currency contains some very
important security devices to help defeat counterfeiters. That
does not mean that people will not attempt to counterfeit the
currency, but we think that the security devices from the color
shifting ink, to the imbedded threads, and the security threads
will effectively deter, or at least enable us to detect
counterfeiters.
SUBMITTED QUESTIONS
Senator Dorgan. Mr. Johnson, thank you very much.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Dorgan
general law enforcement
vehicles
Question. Customs is requesting $8,6000,000 and ATF is requesting
$6,300,000 from the Treasury Forfeiture Fund for vehicle replacement. I
assume that if these requests and all other agencies' requests for
vehicle funding is approved the acquisition will be consistent with the
vehicle management systems being established by your office. According
to the last report on the vehicle management system, your office hoped
to have a contractor on board by March 30, 1999 to analyze Treasury's
motor vehicle program.
Please provide a progress report on the contract.
Answer. On April 13, 1999 a contract was awarded to review and
analyze the Treasury Department's law enforcement fleet motor vehicle
programs in order to make recommendations concerning the functional
design, implementation and operation of a Departmental vehicle
management system.
international trade data system
Question. What kind of trade related questions will the Federal
Government be able to answer after ITDS is developed that we cannot
answer now? Will ITDS provide data that can help in trade negotiations
or in identifying potential business opportunities?
Answer. By creating a standard set of trade data elements for
imports and collecting data in a standard time frame, ITDS will allow
comparisons of data that cannot be made now for purposes of better
policy and economic analysis, and more effective and efficient
administration of trade laws. Currently, agencies' data collections
differ in definitions, timing, and format, thus preventing comparisons
and aggregation of data.
ITDS will allow fully electronic filing of data at the level of
detail normally carried in commercial documents rather than requiring
its aggregation into tariff categories. This will have two benefits:
(1) questions about trade can in many cases be answered at the level of
detail of a commercial invoice, the level at which the commodities are
traded, and (2) accurate answers can be developed about what happened
this month, this week, or yesterday, without waiting for the
compilation and publication of monthly or quarterly statistics.
ITDS's use of the same data elements for both exports and imports
will eliminate data incompatibility that has complicated analysis of
the composition of the U.S. trade balance. In combination with
agreements with other countries on standardization of data, ITDS's use
of streamlined electronic data reporting mechanisms will help to reduce
the under-reporting of U.S. exports that has distorted measures of the
U.S. trade balance.
With respect to trade negotiations, the Office of the United States
Trade Representative and the Congress would have access to the ITDS
database, and the greater precision, accuracy, and timeliness it will
offer. Current trade data are not ideally structured for analytical
uses, and there is no single source of trade information. In the
current environment, USTR and congressional staff may be required to
search several different sources in order to obtain the information
they need, and will encounter data incompatibilities that make it
difficult to develop a coherent picture.
The need to protect confidential data from disclosure will
necessarily obscure some of the finest details from business users, but
the potential for improved timeliness and precision of the data for the
analysis of business opportunities is still considerable. Additionally,
the ITDS will provide a single window to web sites at the Department of
Commerce and elsewhere with information on potential business
opportunities.
Question. A funding request of $5,400,000 is being requested for
the International Trade Data System as part of the Customs budget. Why
has funding been tied to a project that is currently experiencing some
setbacks?
Answer. The fiscal year 2000 budget for ITDS is included in the
Customs Service budget because the Administration's air and sea
passenger processing fee proposal offset the appropriation for the ITDS
as well as certain Customs Service operations. Although the ITDS
complements Customs' ACE system, it is not tied to it.
Question. Can ITDS be funded as a stand-alone system? What is the
total cost of the ITDS system?
Answer. Yes, ITDS can be funded as a stand-alone system. ITDS is
designed to serve a single data collection mechanism (a common ``front
end'') for automated systems in several Federal agencies, but it is not
intended to be an integral part of any of those systems. Therefore,
ITDS could serve as the data collection mechanism for the current
Customs' automated commercial system, as well as the new ACE system
when it comes on line. However, the overall performance of the Federal
government's border clearance process, and the benefits to the trade
community, will be greater if agencies to which ITDS sends data are
able to build modern automated systems, such as ACE, to process the
data.
The ITDS was initially projected to cost around $250-260 million
over the first five years, including both deployment, and operation and
maintenance. However, the interagency ITDS board of directors is
considering other options for deploying ITDS that could significantly
reduce this cost.
financial management acts
Question. Neither the Secret Service nor the Customs Service have
substantially complied with the Federal Financial Management
Improvement (not Integrity) Act (FFMIA). Is the oversight adequate to
ensure that the financial compliance of the law enforcement agencies is
adequate?
Answer. As is required under FFMIA, both the Customs Service and
Secret Service have developed specific remediation plans to bring about
full compliance with the law. The lack of compliance at Secret Service
was brought to management's attention in late calendar 1998, a formal
plan was submitted to the Department in March 1999, and suggested
modifications to that plan are scheduled for completion by June 30,
1999. Full compliance should be achieved by the end of fiscal year
2000. The remediation plan prepared by Customs has been affected by
funding issues attendant to development of its Automated Commercial
Environment, and full compliance with FFMIA will not be possible until
some level of funding has been restored. In the interim, Customs is
making progress on its financial management situation as resources
allow.
Yes, we believe oversight of our law enforcement bureaus is
adequate to achieve compliance with FFMIA. Levels of oversight include:
1) executive management in each bureau and enforcement entity; 2)
offices under the Department's Deputy Chief Financial Officer, which
track progress on remediation plans to address financial management
deficiencies; and 3) offices under the Under Secretary for Enforcement,
which have fairly continuous involvement with all enforcement entities,
as well as with other Departmental management offices, on FFMIA and all
other significant issues.
Questions Submitted by Senator Campbell
u.s. customs service asset forfeiture program
Question. Asset forfeiture programs, administered by the Customs
Service and Justice, have been on GAO's ``high-risk'' list since the
inception of the list in 1990. These programs continue to have
significant weaknesses.
What is the status of Customs efforts to resolve this high-risk
problem?
Answer. In the January 1999 GAO High Risk Series Update GAO cited
three reasons Treasury remains on the high-risk list in the area of
Asset Forfeitures (A through C below).
A. Treasury reported material weaknesses relating to seized
property in its fiscal year 1997 Accountability Report. Customs is
accountable for two--``Data in Customs Seized Property Accounting
Systems are unreliable'' and ``Customs has problems with the integrity
of data in its Fines, Penalties, and Forfeiture (FP&F) files''.
Action: Customs expects to close both of these material weaknesses
by implementing numerous enhancements to its Seized Asset and Case
Tracking System (SEACATS) which will significantly improve the existing
currency and property records and complete the remaining case,
financial, and reporting functions necessary for data integrity in the
FP&F file. The target completion date for these enhancements is
September 1999.
B. For fiscal year 1997, SEACATS did not contain accurate and
sufficient data to prepare the analysis of changes in forfeited and
seized currency and property without substantial manual intervention
and reconciliation.
Action: Customs was able to produce the analysis of changes in
seized and forfeited property disclosure from SEACATS for fiscal year
1998, reducing the number of manual adjustments to prepare the
disclosure. Information provided from SEACATS will be used to produce
currency disclosure at the end of fiscal year 1999.
C. GAO continues to recommend Treasury and Justice consolidate the
management and disposition of all noncash seized property to reduce
administration costs.
Action: No action is being taken. Customs and Justice have argued
against GAO's position. Current policy, as established by Congress with
the creation of the Treasury Forfeiture Fund (1992) is clear that
Treasury and Justice asset forfeiture programs should be managed
separately. With separate and distinct financial, management, and
contract structures in place for each department, consolidation would
be significantly more complicated, disruptive, and costly today than in
1991.
Question. Have Customs and Justice found a way to cooperate in the
management of their respective funds?
Answer. Please see response 1C above.
Question. Are any specific goals and measures in Customs fiscal
year 2000 performance plan to resolve any remaining problems?
Answer. Customs expects the enhancements it plans to implement by
September 1999 to resolve its problems which have contributed to
Treasury remaining on the high-risk list. Please see response 1A and 1B
above.
information technology
Question. An incomplete systems architecture hinders Customs
ability to manage information technology investments, particularly
large, mission-critical systems such as its Automated Commercial
Environment system. How does Customs fiscal year 2000 performance plan
specifically address this problem?
Answer. The focus of Customs' performance plan is on improving the
overall performance of mission critical areas. This is consistent with
the goals and requirements of the Government Performance and Results
Act. Customs considers the management of information technology
investments to be a management control issue. Material weaknesses in
management control areas are addressed through other reporting vehicles
such as the Customs Service Accountability Report. This report
addresses requirements associated with evaluative mechanisms such as
the Federal Managers Financial Integrity Act (FMFIA), the Chief
Financial Officers Act, and material weaknesses identified by GAO and
Inspector General audits. The Accountability Report is a public
document and can be found on the Customs Service web site.
The organizational approach to measurement is that measures within
the performance plan must be clearly focused on the key missions of the
organization. By clearly focusing the performance plan on the mission
areas, management can determine the overall mission health of the
organization and use the plan to better manage mission related
programs. Proliferating the performance plan with extraneous non-
mission related measures and management control issues would only serve
to dilute the plan's usefulness and deviate from its intended purpose.
U.S. Customs Service
STATEMENT OF RAYMOND W. KELLY, COMMISSIONER
Senator Campbell. Since we are dealing with Customs,
Commissioner Kelly, why don't you go ahead and proceed?
Mr. Kelly. Chairman Campbell, Senator Dorgan, it is a
pleasure for me as well to appear before the subcommittee once
again, this time as the commissioner of the U.S. Customs
Service. I too have an opening statement which I ask to be
included in the record in its entirety.
Senator Campbell. It will be included in the record, and if
you will just go ahead and abbreviate your comments.
Mr. Kelly. Thank you, sir. I want to thank the committee
for its consistent support of the U.S. Customs Service. Both
the members and staff have been extremely helpful in making
sure that Customs gets the resources it needs to carry out its
mission.
SEIZURE DATA
Last year, Customs seized more illegal drugs than any other
Federal law enforcement agency, 1.35 million pounds. That is
more than one million pounds of cocaine, heroin, and marijuana
that will not find its way onto our streets, or into our
schools and communities.
TRADE AND PASSENGER PROCESSING
Our trade and passenger processing numbers continue to
soar. Last year, Customs processed 19.7 million trade entries,
460 million passengers and pedestrians, 135 million
conveyances, and $955 billion worth of goods. Customs is
getting the job done, but we are by no means resting on these
positive results.
The demands of global trade and a relentless assault from
drug smugglers require us to stay one step ahead in all that we
do. As we look toward the future, Customs has laid out an
ambitious agenda, equal to the trade and enforcement challenges
of the new century.
With your help, Customs will continue to build upon the
successes it has achieved over the past year. Allow me to
elaborate briefly on just a few of these.
OPERATION BRASS RING
On the narcotics front, we learned many lessons from the
success of Operation Brass Ring, our major counter-smuggling
initiative in 1998. Customs set a new precedent for
interdiction efforts with this operation which wove together a
series of innovative tactics devised by our field personnel to
surprise and catch unsuspecting drug smugglers. We want to
replicate the methods pioneered in Brass Ring with the $725,000
we have requested to conduct blitz type operations at land
border ports. These rapid, unpublicized deployments of teams of
inspectors, enforcement officers, and special agents not only
catch drug smugglers off guard, they are also an effective
deterrent against potential corruption.
OPERATION CASABLANCA
Customs concluded Operation Casablanca almost a year ago,
the largest, most comprehensive drug money laundering case in
the history of U.S. law enforcement. The investigation spanned
five years and involved the work and dedication of more than
200 Federal agents. Casablanca resulted in 168 arrests and the
indictment of three Mexican banks. Along the way, Customs
seized more than $100 million in laundered money and a combined
six tons of cocaine and marijuana.
OUTBOUND TECHNOLOGY
For fiscal year 2000, Customs has requested an additional
$2 million for outbound technology enforcement, to obtain the
tools we need to detect drug proceeds heading out of the
country. Due to constrained resources, examinations are
currently conducted on a very limited basis. Despite this fact,
we still managed to seize more than $68 million in outbound
currency last year. The funds requested for fiscal year 2000
will help us get far more.
OPERATION CHESHIRE CAT
Customs is also breaking new ground in other enforcement
areas. Operation Cheshire Cat led Customs agents via the World
Wide Web into the diabolical world of international child
pornography and sexual exploitation. What we uncovered in
Cheshire Cat was an international alliance of approximately 200
sexual predators operating in 47 countries. Thirty-five search
warrants were executed in this operation resulting in 13
arrests and more arrests are currently pending.
ACTION PLAN
As proud as we are of our enforcement accomplishments, we
believe that there are some areas within our organization that
need to be strengthened. We have developed a document we refer
to as the action plan for 1999. It identifies the actions
underway to improve Customs management and procedures in areas
ranging from integrity, to training, to automation. I believe
the subcommittee and subcommittee staff has copies of the
action plan, but we certainly can provide updated copies if
anyone wishes to see it.
INTEGRITY
First on our agenda is the issue of integrity, a foundation
of all that we are doing at Customs. Integrity begins in our
internal affairs office where we have made major changes over
the last year. We named a new assistant commissioner for
internal affairs; a career prosecutor with strong credentials
in public integrity. Led by his office, we have established new
discipline policies that will be administered in a fair,
uniform, and consistent manner across Customs. Under this new
system we are holding people accountable at the highest levels
of the agency for disciplining employees for misconduct.
TRAINING
Integrity, however, cannot be instilled through discipline
alone. It must be reinforced through training and leadership.
Customs has created a new office of training which will be led
by an assistant commissioner. Standardized training signals our
commitment to provide all our employees with the skills and
expertise they need to perform their jobs in accordance with
the best practices we have set for them. The $5 million
training initiative in the fiscal year 2000 budget request will
cover the cost of instituting these programs for all Customs
employees throughout their career cycle.
PERSONAL SEARCH
The issue of personal search is high on our action agenda.
Last year, more than 71 million passengers passed through
Customs at our Nation's airports. Customs conducted
approximately 51,000 personal searches of passengers. This is a
very small number in percentage terms. But anyone who is
subjected to a personal search is likely to find the experience
very intimidating and disturbing.
One of the first steps I took after becoming Customs
commissioner was to identify ways to make the personal search
process less unpleasant. Technology has played a key part in
this effort. Customs has already gone online with non-intrusive
body scan technology at two of the Nation's busiest airports,
JFK, and Miami. These devices limit, or abolish in some cases,
the need for physical contact during the personal search.
To further our efforts we are requesting $9 million in
fiscal year 2000 for additional personal search technology.
This new funding will permit Customs to obtain more mobile x-
ray facilities which will be placed in or near the
international arrival area of our airports.
In addition, just last week, as Under Secretary Johnson
said, we announced the formation of an independent commission
to review our passenger search procedures. We took this action
due to allegations of racial bias in the way Customs selects
travelers for personal search. Customs personal search review
commission, made up of prominent public leaders in race
relations and Government affairs will have unfettered access to
Customs personnel and facilities. The commission will spend the
next three months gathering the information it needs to assess
these allegations and make published recommendations to me by
July 15th.
I take this matter very, very seriously. There is simply no
place for bias, or even the perception of bias, in the U.S.
Customs Service.
Our ongoing efforts at internal reform are taking place
against the backdrop of constant efforts by drug smugglers to
introduce their contraband into this country. These groups are
as resilient as they are insidious. Successful dismantling of
such criminal enterprises requires a balanced and comprehensive
strategy; one that integrates all Customs enforcement
disciplines, investigations, intelligence, air, marine, and
border interdiction.
I want to thank the committee for the substantial
additional funds provided in fiscal year 1999 for counter-drug
operations. The funding for non-intrusive inspection
technology, air, and marine interdiction, and investigations
gives Customs the long overdue resources to carry out the job
that Congress and the American people expect.
AUTOMATED COMMERCIAL ENVIRONMENT
Having said that, the initiative most important to managing
Customs trade and enforcement responsibilities is in an era of
exploding global trade is what we call ACE, the automated
commercial environment. Our current automated system, the
automated commercial system is what we call it, ACS, is simply
not up to the task. It is outdated and technologically
inferior; inadequate for the trades fast-paced needs. ACS must
be replaced.
Our answer is the automated commercial environment. We
spent the last several years working with the trades to develop
the system both Customs and business need; fast, totally
electronic, and in-step with industries' just-in-time demands.
ACE will manage soaring volumes of goods while also ensuring
improved compliance. It all adds up to better results for
business, safer products for consumers, and fewer drugs
crossing our borders.
ACE represents a sizeable investment and has received
considerable scrutiny. We want to remove whatever doubts remain
as to Customs' ability to manage and maintain this system.
To this end, we have put all the necessary safeguards in
place. We have appointed a highly respected chief information
officer to manage the agency's information technology
operations. We have restructured our office of information and
technology. We have enlisted private consultants to validate
our cost estimation methods. We are now seeking the funding for
a prime contractor to manage and develop an implementation of
ACE. And we have engaged a congressionally-chartered Federally-
funded research and development center, the Mitre Corporation,
to help guide this project.
Our top priority right now is to keep the current automated
commercial system operational until ACE comes online. But make
no mistake about it, we need the new system and we need it
soon. Nothing less than the unhindered flow of trade across our
borders is at stake. We hope the committee will work with us to
find a way to ensure that funding is made available for both
ACS and ACE.
PREPARED STATEMENT
This concludes my remarks. Thank you, Mr. Chairman. I will
be happy to answer any questions.
[The statement follows:]
Prepared Statement of Raymond W. Kelly
Good morning, Mr. Chairman and Members of the Subcommittee. It is a
privilege to appear before the Subcommittee today to present to you our
recent accomplishments, future plans, and the fiscal year 2000 budget
request. Before I begin though, I would like to personally thank you
for the strong support you have continued to provide to Customs. It has
been a challenging year for us and I am proud to play a part in the
effort we share to protect the Nation's borders and ensure the Nation's
prosperity.
Customs is an agency with a long and rich history, many proud
traditions, and an extraordinary record of achievement. We recognize
that our mission is not an easy one--standing as the front line of
defense at the Nation's borders--but we continue to find ways to rise
to the challenges that we face every day.
accomplishments
Operation Casablanca
In May 1998, Customs concluded Operation Casablanca, the largest,
most comprehensive drug money laundering case in the history of U.S.
law enforcement. This 3-year investigation conducted by our Los Angeles
office exposed a relationship between a large number of Mexican banks
and the Cali and Juarez drug cartels. This relationship allowed the
drug cartels to launder their U.S. drug proceeds through accounts
opened by corrupt bankers.
The case was made possible because of the extraordinary undercover
work performed by Customs special agents. They posed as money couriers
and Cali Cartel operatives. They were so convincing that members of the
Juarez and Cali Cartels introduced them to corrupt Mexican and
Venezuelan bankers, who, in turn, introduced the undercover agents to
other corrupt bankers. Members of the Juarez Cartel were so confident
in the undercover special agents that they introduced the agents to
high level members of the Juarez Cartel.
When it was over, 26 Mexican banking officials from 12 commercial
Mexican banks were indicted on charges of money laundering. Three
Mexican banks, Confia, Banca Serfin, and Bancomer, and five associates
of Venezuelan banks, were also indicted on money laundering charges.
Through the course of the investigation, Customs special agents
arrested 168 people and seized over $100 million. In addition, Customs
special agents seized over four tons of marijuana and two tons of
cocaine from both cartels.
Operation Cheshire Cat
Operation Cheshire Cat, a Customs-initiated worldwide investigation
into the diabolical world of international child pornography and child
sexual exploitation, exposed to the world the dark side of the
Internet--a side that is invasive, insidious and incalculable. This one
investigative action uncovered an international alliance of
approximately 200 sexual predators in 47 countries including Australia,
Great Britain and the United States.
Before Operation Cheshire Cat, many people in the U.S. had a
tendency to think of child pornography and child sexual exploitation as
random acts involving nameless victims in some places far away from
where they live. Operation Cheshire Cat proved those thoughts to be
false. Forty-one search warrants were executed in big cities and small
towns throughout the U.S. To date, 16 suspects have been arrested and
more are anticipated. Four suspects committed suicide prior to arrest.
One of the most gratifying results of this operation was that 18
children who had been sexually molested by strangers, neighbors and
even their own relatives, were located and referred to social services
for counseling. The ring of sexual predators identified during
Operation Cheshire Cat is indicative of the level of computer expertise
possessed by criminals encountered by Customs in cyberspace. This
particular ring utilized advanced communication methods and even an
encryption technology, developed by the KGB for use during the Cold
War, to distribute its morally abhorrent smut. Such expertise and
technology have greatly complicated law enforcement's activity in this
area.
Operation Brass Ring
Operation Brass Ring was a 180-day enforcement effort intended to
dramatically increase drug seizures and the outbound illicit proceeds
generated from the narcotics business at high-risk ports of entry.
Enforcement action focused on the use of innovative, unpredictable and
random enforcement operations at air, sea and land border ports of
entry. It was a multi-faceted partnership effort that included
inspectors, special agents, and union representatives. Unique in
Customs enforcement history, Operation Brass Ring was field-based and
field-driven, with emphasis on local solutions to local problems and
sharing of best practices nationwide. Although 42 high-risk ports were
initially required to participate in Operation Brass Ring, ultimately
129 ports of entry submitted and carried out action plans as part of
this historic operation.
As a result of Operation Brass Ring, total amounts of cocaine,
marijuana and heroin seized from February 1 to July 31, 1998, increased
by 45 percent over the same time period as the last year. The amount of
marijuana seized increased by 47 percent, the amount of cocaine
increased by 32 percent and the amount of heroin increased by 13
percent. Controlled deliveries skyrocketed by an incredible 100 percent
during the same time period. The controlled deliveries resulted in an
82 percent increase in arrests. Outbound currency seizures experienced
a 59 percent increase in the amount of currency seized compared to the
same time period in fiscal year 1997.
Operation Brass Ring seizures totaled 548,262 pounds of marijuana,
72,535 pounds of cocaine, and 1,280 pounds of heroin. Customs also
seized $40.6 million in outbound undeclared currency and conducted 220
controlled deliveries, resulting in 414 arrests. Customs will continue
to build upon the success of this operation by capitalizing on the
creativity and innovation that Operation Brass Ring engendered.
Building upon the success of Operation Brass Ring, Customs
established the Joint Narcotics Interdiction Plan (JNIP). The goal of
JNIP is to maintain the momentum of Operation Brass Ring and to
continue the increase of narcotics and currency seized and controlled
deliveries conducted. The long term goal of this initiative is to
achieve a 20 percent increase in these areas over the next 4 years.
This approach supports the Office of National Drug Control Policy drug
interdiction plan.
The JNIP requires each Special-Agent-in-Charge (SAIC) and Customs
Management Center (CMC) to submit a comprehensive narcotics
interdiction plan and will include a plan for each Resident-Agent-in-
Charge and Port Director in their area of responsibility. The JNIP will
be agreed to and signed by each SAIC and CMC Director and will have
included the National Treasury Employees Union (NTEU) in the
formulation of all plans within their respective areas. Field visits
and quarterly reports will be used to review the progress of the JNIP.
Financial Management
The General Accounting Office (GAO) removed Customs from its list
of high-risk federal government programs this year because of the
significant improvements made in our financial management. Customs, in
fact, was the only agency to be removed from the list this year.
Customs demonstrated that it had addressed the weaknesses that
originally contributed to its designation as a high-risk organization.
These weaknesses involved revenue and trade compliance issues; asset
management and control issues; core financial system issues; and
computer security, access, and development issues.
The corrective actions which influenced the decision to remove the
high-risk designation include: (1) receiving unqualified opinions on
financial statements for the past two fiscal years; (2) statistically
sampling commercial importations at ports of entry to better focus our
enforcement efforts by projecting the level of the trade community's
compliance with trade laws and associated loss of revenue; (3)
improving the ability to detect and prevent duplicate or excessive
drawback claims by enhancing the Automated Commercial System to
identify those drawback claims exceeding the total amount of duty and
tax paid on related import entries; and (4) aggressively pursuing
collection of delinquent receivables, resulting in collections of over
$37 million. Customs currently has several ongoing initiatives which
will continue to improve Customs financial management.
Performance Goals Met or Exceeded
Customs had an outstanding year in narcotics enforcement results
and in currency and monetary instrument seizures. It also continued to
make progress in some key trade areas. This is even more significant
since the results achieved were made while processing 19.7 million
entries, worth an estimated $955 billion. This is more than 1.8 million
entries above last fiscal year. Customs also processed almost 460
million passengers and pedestrians, 13.1 million more than last fiscal
year, and 135 million conveyances, 4.4 million more than last fiscal
year.
Seizures of heroin, cocaine, and marijuana were above expectations.
We seized approximately 1.12 million pounds of these three narcotics
which exceeded our goal by 167,000 pounds. These impressive results
were, in part, the result of Operation Brass Ring. Overall, Customs
accounted for a record number of seizures--more than 1.3 million pounds
of all narcotics or controlled substances. As in past years, Customs
continues to seize more illegal drugs than any other federal, state, or
local law enforcement agency.
Customs also exceeded its goal for seizures of currency, bank
accounts, and other monetary instruments involving financial
investigations. It ended the year with seizures totaling $362.9 million
or 166 percent above projections. The culmination of Operation
Casablanca contributed to this significant total with the seizure of
over $100 million from Mexican and U.S. bank accounts. Overall, Customs
seized or participated in the seizure of $426 million in currency and
other monetary instruments. Of that amount, $68.4 million was outbound
undeclared currency seized at ports as it was being smuggled out of the
U.S. in passenger baggage, vehicles, and cargo.
In the area of Trade Compliance, Customs successfully maintained a
high compliance rate, and refined the analysis by which noncompliance
is detected and addressed. Recognizing that all discrepancies are not
equal, Customs convened two task forces, one internal and one in
cooperation with the trade community. These groups determined the types
of discrepancies to be considered materially significant, as opposed to
``letter-of-the-law'' discrepancies. The overall import compliance rate
was maintained at 81 percent, while the compliance rate for imports in
primary focus industries increased from 83 percent to 84 percent.
Considering only the materially significant discrepancies, the
compliance rate was 89 percent overall, and 90 percent for imports in
the primary focus industries.
Customs has also undertaken a new initiative called ``Focus On Non-
Compliance'' (FONC). This initiative analyzes resource expenditures as
compared to discrepancies found, and has allowed Customs to see which
efforts are paying off and which are not. This improved focus and other
improvements have resulted in Customs detecting more noncompliance.
Becoming more effective at finding noncompliance has the effect of
lowering measured compliance levels, but results in improved compliance
in the long term. These refinements make year-to-year comparisons of
performance difficult at this time, but the targeted improvements in
compliance achieved by Customs are significant and well-supported.
Finally, the air passengers' compliance rate increased slightly
over last year to 97.7 percent. The rate of participation in the
Advance Passenger Information System by the airlines improved to 75
percent, which is 10 percent above projected results.
Customs attained these accomplishments with a remarkably high level
of support from the trade community and the public. Operation Brass
Ring had the support of the trade community, even though they knew that
it would mean more intensive examinations of imported goods. In
addition, customer surveys from the trade and the public reflect
satisfaction with Customs performance.
ambitious agenda
Despite all the areas in which Customs is achieving unprecedented
success, we recognize there are areas of our organization which need to
be strengthened. The following are some of the areas of responsibility
we will be changing in order to produce a more disciplined and
effective Customs Service.
Integrity
The Office of Internal Affairs (IA) currently has changes underway
to protect and enhance the integrity of Customs through various
initiatives, programs, and processes. Most recently, Customs as a
whole, with IA as pivotal participants, commenced a ``strategy for
action'' to reshape our capability to swiftly and effectively address
integrity violations and other allegations of misconduct. Specifically,
the process for reporting allegations of misconduct has been
standardized and streamlined. In addition, the manner in which IA
intakes, evaluates, and processes cases has been centralized at
Headquarters. Specialized training for investigators and fact-finders
has been developed and is currently being conducted. Further, we have
established a servicewide Discipline Review Board to ensure fair and
consistent imposition of discipline in misconduct cases. Finally, we
are raising to an appropriate level in the Customs organization, the
authority to propose, decide, and settle disciplinary actions; thus,
increasing decision-making consistency and accountability.
IA is also working to enhance an automated case management system
and integration with the Disciplinary and Adverse Action Tracking
System (DAATS). Systems improvements will enhance Customs efficiency in
reporting and monitoring investigations and administrative inquiries.
Moreover, systems enhancements will permit useful analysis of trends
and timeliness and improve identification of corrective actions. The
Office of Human Resources Management is making comparable changes in
its DAATS, in tandem with IA. When completed, these changes will allow
Customs to track all identified allegations against Customs employees,
from initial allegation through investigation, resolution, and the
appeals process, if invoked. These changes are a measured step to
insure that aspects of timeliness and equity of treatment are
components of both the public and employee view of the Customs
discipline process. Design work is commencing on a replacement for the
IA and Human Resources systems.
Finally, we have recently announced the selection of a new
Assistant Commissioner for IA who has proven expertise as a career
prosecutor and strong credentials working in the Department of
Justice's Public Integrity Sector. This new AC will give Customs the
leadership and credibility necessary to ensure the most effective
function of our IA operations.
Self Inspection
One of our highest priorities is to build management accountability
and strengthen management oversight throughout Customs. We are
redesigning our Management Inspection Program to establish a self-
inspection framework for our managers and to increase the frequency of
on-site inspections by our Management Inspections Division.
Customs has redirected the efforts of our current Management
Inspection Program from conducting comprehensive inspections primarily
of our ports and Special-Agents-in-Charge offices every 5 to 6 years to
the development of a self inspection program. We want managers at all
levels to evaluate their success in managing, assessing, reporting, and
certifying the state of their operations every six months. Our
Management Inspections Division will conduct inspections every 18-24
months to verify and validate the self-inspection results of every
unit. The redesign is well underway. The first full self inspection by
all units began in late March; inspections by our Management
Inspections Division will begin in July.
Management Accountability Model
To ensure that the service Customs provides to the trade and the
traveling public is delivered in a consistent and uniform manner, we
have implemented a Management Accountability Model which strengthens
the Headquarters and field organizations by establishing greater
management accountability and oversight within the organization. As
such, we have created clear and specific service standards for which we
intend to hold our employees and managers accountable.
Our initial goal in implementing this model was to clarify
managers' roles and responsibilities, improve effectiveness, achieve
operational uniformity and enhance levels of service. We have
accomplished this by clearly defining roles and responsibilities for
Headquarters, Customs Management Centers (CMC) and Port managers;
strengthening the Headquarters and CMC organizations in order to
clarify lines of authority and provide greater operational oversight;
holding managers accountable for their actions and operations;
establishing a national Management Inspection Program; and establishing
uniformity in policy dissemination, implementation, execution and
oversight.
Realigning organizational authorities
Because Customs aviation and marine programs have such
complementary missions, it is critical that the activities of these two
interdiction components be coordinated. This is essential to ensure the
employment of a cohesive interdiction strategy necessary to fulfill the
Customs mission in support of the National Drug Control Strategy. In
recognition of this, Customs is consolidating its Aviation and Marine
Programs. The intent of this consolidation is to provide a better
integrated, more efficient, and robust interdiction capability.
Beginning in calendar year 1999, the Aviation and Marine Program began
implementing an ambitious strategy to improve its efforts to combat
marine smuggling through the creation of a unified Air and Marine
Interdiction Division. Currently comprised of 114 operational aircraft
and 87 vessels, the mandate of Customs Air and Marine Interdiction
Program is to disrupt the flow of drugs and other contraband into the
United States by vessel and/or aircraft.
This mission will be accomplished through implementation of a
three-pronged, intelligence, interdiction and investigative approach.
This approach is already in use for aviation interdiction and will now
encompass the marine threat as well, which is complemented by our
ongoing coordination with the U.S. Coast Guard.
Customs aviation assets and personnel will continue to support the
President's International Drug Control Strategy, Ambassadors and
Country Teams by providing detection and monitoring, interceptor
support and training for employment in Mexico, Central and South
America, and the Caribbean.
In order to enhance the effectiveness and efficiency of the Office
of Investigations (OI), three new SES Headquarters positions (Executive
Directors, East, Central and West) were recently created.
Responsibilities include overseeing and directing the investigative
activities of all domestic field offices (Special Agent in Charge
Offices). Another recent change included the creation of another SES
Headquarters position: Executive Director for Investigative Programs
whose responsibilities will include overseeing all Headquarters
functions (Fraud, Strategic, Cybersmuggling, Financial, Smuggling and
Investigative Programs). OI realigned organizational authority by
having these four positions, along with the Executive Director, Foreign
Operations Division, report directly to the Deputy Assistant
Commissioner, OI. This change in itself has strengthened oversight of
and coordination between foreign and domestic offices.
Recent changes within the Office of Intelligence and Communications
include creating a new Communications Branch to administer and manage
the Customs Wireless Communications Program from the Headquarters
level; adding line authority over the Area Intelligence Units (AIUs),
which currently report to SAIC Offices, and adding functional authority
over the Intelligence Collection and Analysis Teams (ICATS).
Training/professionalism
Professionalism means knowing your job, performing it well, and
with courtesy. Customs regularly reviews its operations and training
programs to ensure that our officers maintain a high level of
professionalism. We have developed Passenger Interview and Vehicle
Inspection Technique training for our land border inspectors. This
program reviews the skills necessary to identify high-risk vehicles and
passengers, and officer safety issues. It also provides training on how
to prevent search inquiries from becoming confrontational.
Passenger Enforcement Rover Training is conducted for inspectors
from all over the country at Miami and JFK Airports to improve
observational analysis and interview skills. The training has been
developed and is delivered by our most successful enforcement
inspectors. This training has generated a number of significant
seizures by the inspectors within days of returning to their home
ports.
National Outbound Airport Currency Interdiction Training is being
conducted to improve outbound inspectors' exam and interview skills.
The training was developed and is delivered by the outbound inspectors
at JFK. Inspectors attending the training have subsequently been
involved in significant seizures upon return to their home ports. One
example is the seizure of more than $1.6 million in outbound currency
at Chicago O'Hare Airport. In addition, land border inspectors from
Ports of Entry across the country travel to the Port of Nogales, AZ, to
receive training that will improve their targeting, examination, and
interview skills.
To draw upon outside expertise, Customs has contracted with the
International Association of Chiefs of Police (IACP) to provide two
major programs to our workforce. The IACP is presenting cultural
awareness training to inspectors at the top 15 airports, where 84
percent of our passengers are processed. IACP has also begun training
in decision-making for inspectors along the Southwest Border. This
training enhances their ability to respond appropriately to violent,
potentially life-threatening situations.
In addition, Customs is establishing an Assistant Commissioner for
Training and Development to provide leadership and direction to all
Customs training programs and personnel engaged in training activities.
All training and development activities, including technical training
and support, specialty training, and supervisory and managerial
development, will report to the Assistant Commissioner. The office will
continue to rely on operating functions to ensure that mission-related
training is provided, and on expertise outside of Customs to adapt the
best practices for Customs use.
Focus on the Recruitment of the Best
Quality Recruitment provides an effective process for hiring the
best qualified candidates. It includes utilizing multiple screening
stages which rely upon objective, quantifiable data; using an
electronic rather than paper process, and targeting an applicant pool
with reasoning skills needed for the new millennium. The process, which
is currently being used for entry level inspector, canine enforcement
officer and pilot positions, will be implemented for agents in the near
future.
Quality Recruitment will result in the availability of a diverse
applicant pool of highly qualified candidates for entry level
inspector, canine enforcement positions, agent and pilot positions. As
a result, the quality of the Customs workforce will increase, thereby
better enabling Customs to accomplish its mission.
Customer Service
Customs has begun a number of activities to improve the public's
understanding of our processes and authorities. We are developing
improved informational outlets and working with airport authorities to
put up signs that will better explain our authorities and travelers'
rights. We will post instructions for registering complaints at the
time of the incident or by mail or phone, and we have made comment
cards available in the inspection area. These improvements will also be
incorporated at our land border facilities.
As part of the Border Coordination Initiative (BCI) to address our
southern land border, Customs and the Immigration and Naturalization
Service are working to establish queue time standards that give
inspectors sufficient time to accomplish their respective enforcement
missions while providing predictable service to the traveling public.
We are establishing partnerships with the communities to foster a
better appreciation of our enforcement responsibilities and agreement
on how the wait times are measured.
At international airports we continue to meet the goal of releasing
95 percent of compliant travelers within 5 minutes of baggage claim. We
continue to enhance the Passenger Service Representative program to
ensure that traveler complaints can be handled on-the-spot.
A Customer Satisfaction Unit has been established at Customs
Headquarters to monitor all complaint and complimentary correspondence
and phone calls. We will track and analyze complaints and ensure that
corrective actions are taken if there is a recurring problem or a
disproportionate number from a given location. We are also in the
process of implementing a 1-800 number for people to call with any
questions about Customs matters. The personnel assigned to this unit
will have broad knowledge of our processes and will ensure the
appropriate routing of a call that they cannot personally answer.
Customs has conducted 356 formal workshops around the country for
exporters and shippers (over 11,000 participants) to make them aware of
export laws, rules, regulations, and port procedures. Individual
contacts are also made with freight forwarders and consolidators,
exporters, carriers, etc., to discuss specific and general export
issues.
Our responsiveness to information requests from the public will be
reflected by the ``Contact Us'' feature of the Customs Web site, which
will permit Web visitors to comment, ask questions, or request
information by means of electronic mail. This service will be
established in the next few months. Also, the Customs Electronic
Bulletin Board (CEBB), long utilized by the trade as an information
resource, has been linked to the Customs Web site to make access even
easier by more persons.
On the local level, a test program is underway in five ports
(Champlain, NY; Charleston, SC; Nogales, AZ; Orlando, FL; and San
Francisco, CA) in which Internet electronic mailboxes have been
established for port directors at these locations, and these e-mail
addresses published on the Customs Web site. The public and the trade
are being encouraged to communicate with these port directors on issues
of local concern and for requests for locally specific information. If
successful, this program will be expanded to all service ports.
partnerships
Customs has established important partnerships with groups both in
the private and public sectors. We continue to work in partnership with
the National Treasury Employees Union (NTEU) on a number of issues
facing Customs. While there are always issues on which union and
management disagree, we have found the partnership to be a productive
effort. We have gained invaluable employee input into our decision
making process, allowing us to tap into the wealth of firsthand
experience our people on the front line have. This input has resulted
in better decisions on our part, and improved operations.
One of the most successful examples of partnership was Operation
Brass Ring which focused on aggressive, unpredictable, multi functional
action plans proposed, designed, and implemented at the field level in
cooperation with the NTEU. These plans were developed by Port
Partnership Councils in conjunction with field offices of the Office of
Investigations. Partnerships, such as Operation Brass Ring and the ones
discussed below, are critical to the success of Customs mission in
securing our borders without impeding the flow of legitimate trade.
Border Coordination Initiative
The Border Coordination Initiative (BCI) is a tactical plan
developed by the Immigration and Naturalization Service (INS) and
Customs in partnership to increase cooperation on the Southwest Border
and to enhance the interdiction of drugs, illegal aliens, and other
contraband. The purpose of the BCI is to create a seamless process at
and between land border ports of entry by building a comprehensive,
integrated border management system that effectively achieves the
mission of each agency.
During the past year, INS and Customs have built a strong platform
of cooperation based on eight core initiatives: Port Management,
Investigations, Intelligence, Technology, Communications and Aviation/
Marine, Integrity and Performance/Budget. BCI will give direction to
those efforts over the next five years.
The drug and illegal immigration threat on the Southwest Border is
the initial focus. However, as the BCI builds momentum and generates
the anticipated results, we will expand it to other locations. A joint
Office of Border Coordination has been established with both INS and
Customs. Two Border Coordinators are responsible for overseeing border
operations and ensuring the implementation of the BCI Action Plans. The
unions at both agencies have also been involved, in partnership, in
these activities.
Industry
In addition, Customs continued to expand its ``Industry
Partnership'' programs with the development of the Americas Counter
Smuggling Initiative (ACSI). Building upon the successes of the Carrier
Initiative Program (CIP) and the Business Anti-Smuggling Coalition
(BASC), ACSI will strengthen and expand Customs anti-narcotic security
programs throughout Central and South America. These programs allow
Customs to work with the trade community, both domestic and foreign, to
reduce the ability of drug smugglers to compromise legitimate
commercial shipments and conveyances. During fiscal year 1998,
information from these programs resulted in 136 domestic and foreign
seizures and interceptions totaling 63,882 pounds of narcotics.
long-term commitment to the automated commercial environment
Investments in trade modernization remain a priority for Customs.
Continued reliance on the sixteen year old Automated Commercial System
(ACS) will subject both Customs and the trade to risks of degraded
service. ACS relies on old technology that is costly to maintain and is
not conducive to supporting the requirements of the re-engineered trade
compliance process. In the period from mid-September 1998 through
early-March 1999, ACS experienced significant processing slow downs
that adversely affected the trade's ability to process entries quickly
and cost-effectively. Recent investments at the Customs data center
will alleviate the problems in the short term. However, we can
anticipate reoccurrences of these problems without additional and
substantial investments at our data center; in a modernized data
network technology; and in personal computers and desktop software to
support our field personnel.
Customs remains committed to the development of the Automated
Commercial Environment (ACE) as the commercial system for the 21st
century. ACE is necessary to: cope with 10 percent annual growth in
international trade; meet legislative requirements for informed
compliance and for improved financial controls over the nearly $20
billion in duties collected annually; and meet the requirements
articulated by the trade and Customs field personnel as part of the
trade process re-engineering effort.
Given the size of the investment that ACE represents, it has
received substantial scrutiny. As a result, a number of issues have
been raised about Customs ability to justify such a large project and
to manage it successfully.
Customs takes these concerns seriously and has taken or commits to
take a series of actions to strengthen its ability to manage ACE and
all other information technology projects and to improve the
justification for the large investment that is required.
To improve project management, Customs:
--Hired a Chief Information Officer (CIO) with extensive experience
in enterprise architecture and major systems acquisition.
--Reorganized the Office of Information Technology to provide for
improved accountability and program control. An important
element of the reorganization was the establishment of staff
offices for Technology and Architecture, Strategic Planning,
Program Monitoring, and Resource Management that are
responsible to the CIO for: improved investment management;
further progress on the enterprise architecture; enhanced
controls over software development; and the development and
implementation of software process improvement plans.
--Entered into negotiations with a Federally Funded Research and
Development Center (FFRDC) to acquire critical support in the
areas of strategic management, acquisition support, program
management, technical management, and evaluation and audit.
Customs expects to be able to have the FFRDC on-board in May.
--Plans to acquire the services of a prime contractor to help plan,
implement, and manage its information technology modernization
efforts. The contractor will be responsible for implementing
mature software development processes which Customs will adopt,
and will assume the risks associated with delivering functional
components of ACE and other software projects. Modeled after
the experience of the Internal Revenue Service in addressing
concerns about its tax modernization efforts, Customs will
utilize the experience of the FFRDC from initial acquisition
strategy development through solicitation development and
source selection, award and contract management, to include
support to Customs in overseeing prime contractor performance.
Customs intends to give this the highest priority with the goal
of having a contract in place within 12 months from the time of
initiation. However, before the contract process begins,
Customs needs a commitment on a reliable source of funding.
To improve the justification for the investment in ACE, Customs:
--Engaged a contractor to update and improve the Automated Commercial
Environment (ACE) cost-benefit analysis (CBA) which will be
available for external review in the coming weeks. This CBA
will incorporate analytical approaches responsive to direction
previously provided by General Accounting Office staff,
including reflecting use of the International Trade Data System
as the trade interface for ACE. However, Customs recognizes
that still more work is required beyond the current effort and
commits to follow-on work that will (a) analyze the costs and
benefits of ACE functional increments; and (b) rigorously
analyze alternative approaches to building ACE.
--Engaged Klynveld Peat Marwick Goerdeler Limited Liability
Partnership (KPMG) to provide an independent review of Customs
methodology and assumptions for software development and
infrastructure costs. KPMG's preliminary review found our
approaches for cost estimation to be sound and appropriate.
KPMG is now reviewing the completed CBA referenced above and
advising on the follow-on work.
--Will complete the enterprise architecture work regarding its trade
compliance process in May 1999. As part of its investment
management process, Customs has initiated a documented review
process that ensures that all proposed investments comply with
its architecture standards and are not redundant of other
information technology projects.
Before leaving the issue of justifying the investment in ACE, an
important point should be made. The continuing controversy surrounding
ACE is masking the issue of making the necessary investments in
infrastructure modernization that are required to meet Customs mission
responsibilities. Approximately 54 percent of estimated costs
associated with ACE are for software development and maintenance over
an eight year period. The rest of the investment is required to replace
an outdated and problem plagued data network, to acquire additional
computing capacity at the Customs data center, and to provide for
regular updating of desktop computing capabilities necessary to stay
abreast of rapidly changing technology. Almost all of these
infrastructure investments are necessary even if Customs is forced to
continue to rely on the outdated ACS.
Customs inability to invest in infrastructure modernization is also
adversely affecting its ability to implement targeting systems to
better combat narcotics smuggling, better screen international
travelers, and provide automated mission support to achieve improved
management controls and operational efficiencies.
The actions listed above are in progress and demonstrate Customs
commitment to improve its management of information technology. These
actions reflect Customs recognition of the concerns and we are working
vigorously to correct them.
narcotics enforcement
The demand for illegal drugs in the U.S. remains strong. In
response, drug smuggling organizations continue to introduce their
contraband into our country using every conceivable route and method.
Drugs entering the country through the Southwest Border, South Florida,
and Puerto Rico are transported to distribution and control centers in
major cities like New York, Chicago, Miami, and Los Angeles. Unchecked
and allowed to flourish, drug trafficking organizations bring with them
violent crime, public corruption, money laundering, and the socially
crippling effects of drug abuse.
Drug smuggling organizations are as resilient as they are
insidious. Successful dismantling of such criminal enterprises requires
a balanced and comprehensive strategy, one that interfaces the
functions of all Customs enforcement disciplines: investigations,
intelligence, air and marine operations, and interdiction. Our strategy
exploits the interrelationship of drug transportation and distribution
by building an ``Investigative Bridge'' between border smuggling
activity and criminal organizations located inland. We build this
bridge each time the seizure of illegal drugs at the border leads to
the identification of the controlling criminal organization hundreds of
miles inland. We build it again when investigation of a trafficking
group in an inland city leads to a drug seizure on the border.
Controlled deliveries, undercover operations, and Title III
investigations are our primary inroads into drug smuggling
organizations. These tools complement and solidify the Investigative
Bridge.
It sounds simple and it really is. Customs recognizes that neither
interdiction nor investigations individually add up to effective drug
enforcement. Only by integrating the two processes can we put forth our
best efforts in stemming the flow of drugs across our borders.
Between our regular appropriations and the emergency supplemental,
Customs received substantial additional funding in fiscal year 1999 to
enhance our counterdrug operations. In the investigative area, this
money will enable us to fill 27 new agent positions and to purchase
radios, firearms, protective vests and vehicles for these new
positions. The funding we received for our Marine Program will allow us
to repair and outfit two Bluewater Vessels in inventory in South
Florida, outfit one 47 foot Bluewater Vessel in New Orleans that was
acquired from the Coast Guard and develop and construct a NightCat 40
foot Interceptor Vessel. The $80 million received for Non-Intrusive
Inspection Technology enabled Customs to accelerate its Five Year
Technology Acquisition Plan for the Southern Tier. In addition, the $10
million provided for Port Integrity will be used to not only stop the
flow of drugs, but combat internal cargo conspiracies and cargo theft.
The 1999 emergency supplemental provided $186 million for Air
Program enhancements; $153 million of which is to fund the procurement
of 6 additional P-3 aircraft. The current schedule calls for an October
and December 2000 delivery of the two P-3 AEW aircraft. Delivery of the
4 new P-3 ``Slicks'' is scheduled to begin in early- to mid-fiscal year
2001 at a rate of one every four months.
child labor
Addressing the illegal importation of merchandise manufactured or
produced with forced or bonded child labor is one of the most difficult
tasks faced by Customs. Customs is pursuing a thorough, impartial and
aggressive policy towards imports suspected of being produced with
forced child labor.
In recent months, special agents have visited Indonesia, Nepal,
India, and Pakistan to meet with foreign government officials, non-
government organizations and industry representatives on this very
sensitive issue. Foreign law enforcement and other government agencies
have stated their desire to work with Customs.
Our public outreach program thus far has included mass mailings to
U.S. importers of merchandise, often associated with forced child
labor, advertisements in trade publications, participation in trade
shows, presentations on the Customs Webpage and various press releases
in print and television in the U.S. and several other countries.
Additionally, our forced child labor special agents are meeting
regularly with various non-government agencies that monitor child labor
and other human rights violations in an effort to address issues as
they arise.
Our actions are beginning to bear fruit. Customs has identified
some manufacturers of hand-knotted carpets who are believed to have
produced carpets with forced child labor. Detention orders are in place
to stop imports from those manufacturers at our borders. Should an
importation from one of these manufacturers be attempted, Customs will
require a certificate from the manufacturer stating that the goods were
not produced with forced child labor. Customs will investigate the
validity of the certificate submitted by the manufacturer. If the
investigation substantiates the certificate, the goods will be allowed
into the U.S. If the certificate proves to be false, we will not allow
the goods to enter the U.S and will continue our investigation for any
potential criminal or civil violations.
Increased staffing will soon be in place in several of our foreign
offices. Special agents have been added to our Bangkok, Hong Kong and
Montevideo offices. These additional special agents will be dedicated
to investigating allegations, and training and working jointly with
foreign law enforcement agencies to address the child labor issue.
money laundering
Customs has a broad grant of authority to conduct international
financial crime and money laundering investigations. Jurisdiction is
triggered by the illegal movement of criminal funds, services, or
merchandise across our national borders and is applied pursuant to the
authority under the Bank Secrecy Act, the Money Laundering Control Act
and other Customs laws. Combined with our border search authority,
Customs formidable enforcement efforts focus on the most significant
international criminal organizations, whose corrupt influence often
impacts global trade, economic and financial systems. Customs
enforcement efforts are not limited to drug related money laundering;
they extend to the proceeds of all crime.
Customs has implemented an aggressive strategy to combat money
laundering. Our approach involves interdiction efforts by Customs
inspectors, criminal investigations by Customs special agents, and in
partnership with Treasury, FinCEN, and others, the design and
implementation of innovative regulatory interventions, unique to
Treasury, that dismantle and disrupt systems, organizations and
industries that launder ill gotten gains. Applying these techniques,
New York's El Dorado Task Force, led by Customs, had tremendous success
in removing and preventing the wire remitter industry from being
exploited by drug kingpins to launder money.
Customs also continues to pursue an aggressive program of
undercover investigations directed at money launderers. The two largest
single seizures of cash in the history of Federal law enforcement were
made as a result of Operation Casacam in Miami and Operation Omega in
Los Angeles. Together, these two seizures totaled over $41 million in
cash. Moreover, it was Customs undercover operations that first exposed
the criminal laundering activities of both Bank of Credit and Commerce
International and American Express Bank International. And last May,
Customs concluded Operation Casablanca, the largest, most significant
drug money laundering investigation in the history of U.S. law
enforcement.
Customs operates the Money Laundering Coordination Center (MLCC)
which has gone on-line this year. Physically located at FinCEN, and
staffed by special agents and intelligence analysts, the MLCC is
designed to coordinate intelligence between all U.S. Customs undercover
money laundering investigations. It will be opened up to other agencies
in the future. The MLCC will also be instrumental in developing a
strategy to combat the black market peso exchange which has been
described as the single most efficient and extensive money laundering
system in the Western hemisphere.
With funding approved by the Treasury Executive Office of Asset
Forfeiture, Customs has trained and equipped 19 highly specialized
Asset Identification and Removal groups consisting of special agents,
auditors and data analysts. These groups, established throughout the
United States, are designed to identify, track, and seize the assets of
criminals and their organizations. They are responsible for the seizure
of over $172 million in the past three years and have been integral to
high profile investigations such as the Ruiz Masseiu case and Operation
Casablanca.
As we look toward the future, Customs plans on continuing to work
in concert with other Treasury and federal agencies to dismantle and
disrupt the systems used by international criminal organizations.
anti-terrorism
Equally challenging is our responsibility to protect the American
public from the threat of international terrorism. Easier access to
sophisticated technologies, including weapons of mass destruction,
means that the destructive power available to terrorists is greater
than ever. Customs is the first line of defense at our Nation's borders
to prevent the introduction of weapons of mass destruction and other
instruments of terror into the U.S. from abroad, and to prevent
international terrorists from obtaining weapons of mass destruction
technologies and materials, funds, and other support from sources in
the U.S.
Customs is active on a number of fronts to combat this threat. We
are developing and deploying examination technologies, such as
radiation detection equipment, to our ports for use in detecting and
interdicting nuclear, chemical and biological materials in
international shipments. We work in partnership with the Federal
Aviation Administration and the airline industry to enhance security on
international flights originating in the United States. We aggressively
enforce U.S. export laws to prevent the illegal export of arms,
military equipment and dual use technologies to proliferous countries
and terrorist groups, and enforce U.S. economic sanctions to deny funds
and other support to international terrorists. We actively participate
in Department of Justice-sponsored Joint Terrorism Task Forces.
Among the results of our strategic investigations this year, were
the convictions of two weapons traffickers who not only had negotiated
the sale of Russian-produced, shoulder fired surface to air missiles to
undercover Customs special agents, but who had indicated they could
also supply tactical nuclear weapons stolen from the Former Soviet
Union. Also, indictments were handed down against seven individuals for
weapons smuggling charges after members of the group were intercepted
en route to South America in an attempt to assassinate Cuban president
Fidel Castro.
Customs also has a leadership role in working in partnership with
our counterparts in foreign customs and law enforcement agencies in
strengthening export control and law enforcement programs to deny
weapons of mass destruction and other support to international
terrorists. We provide training and technical assistance to the
countries of the Former Soviet Union and South East Europe under the
U.S. Customs/Department of Defense Counter Proliferation Program. And
we co-chair joint U.S./Russian working groups coordinating customs and
law enforcement matters related to non-proliferation and export
control.
The threat of international terrorism is perhaps one of the most
serious national security threats emerging as we enter the 21st
century. Customs is at the forefront of our Nation's efforts to address
this threat. We are committed to providing the tools and the training
necessary to our Customs inspectors and special agents to enable them
to meet these challenges.
cybercrime/child pornography
As we are all aware, technology, particularly in the realm of
electronic information and communication technology, continues to
advance at an astonishing rate. We see the results of such advancements
in everything we do. We can talk to virtually anyone anywhere via e-
mail; we can research any topic via the Internet from the warmth and
comfort of our living rooms; and we can even order groceries from the
neighborhood food market without ever leaving our homes. The same
technology that provides us with the seeming sense of security that we
get from being able to do so much over our home-based personal
computers is the very same technology that allows the criminal element
to penetrate even the most secure of our homes. Cyberspace recognizes
no borders, no sovereignty, and no walls or doors. Neither does
cybercrime.
Without exception, violations of all of the over 400 laws enforced
by Customs can, in some way, be abetted through the use of cyberspace.
Indeed, three violations investigated by Customs, money laundering,
Intellectual Property Rights violations, and child pornography/child
sexual exploitation, can actually be committed via the Internet.
Although money laundering and Intellectual Property Rights violations
impact greatly the economic fabric of our Nation, it is child
pornography and child sexual exploitation that tear at the moral fabric
of our Nation and our future.
For this reason, Customs has established the Customs CyberSmuggling
Center in Fairfax, Virginia. The Customs CyberSmuggling Center is
tasked with conducting all cyberspace-based investigations on behalf of
Customs. In addition, the CyberSmuggling Center is providing training
to thousands of Federal, state, local, and foreign law enforcement
officers annually. In fiscal year 1998 alone, the CyberSmuggling Center
trained over 3,000 law enforcement officers from four continents.
Cybercrime is the newest challenge for law enforcement. Hardest hit
by cybercrime are the holders of trademarks and copyrights. The actual
losses attributed to counterfeiting and piracy can severely impact our
economic stability if the problem is not adequately addressed. Customs
and FBI co-chair the National Security Counsel (NSC), Special
Coordinating Subgroup on Intellectual Property Rights and Trade Related
Crime. As a result of the work being conducted by the subgroup, the NSC
has requested a proposal for a single agency to be responsible for the
coordination of all U.S. government activities in this area.
Customs has proposed, through the NSC, to take the lead and
responsibility for coordinating these efforts. We are proposing a
multiagency effort to address law enforcement, training, intelligence
and policy for the U.S., both domestically and internationally. This
coordination effort will also include representatives from industry and
trade groups as appropriate.
technology for better enforcement and targeting
In implementing our Five-Year Technology Acquisition Plan for the
Southern Tier, we have sought to steadily increase the risk of
detection across the Southern Tier from San Diego to San Juan. Without
this across-the-frontier approach, our enforcement efforts in one area
will be mitigated by the smugglers' ability to rapidly shift operations
to an area where the threat of detection is lower. What remains
however, is to begin installing this technology at high-risk ports
elsewhere in the country, ports like Charleston, SC, where last fiscal
year we had a seizure of almost 3,100 pounds of cocaine; and Newark,
NJ, where we have historically seen commercial quantities of both
marijuana and cocaine. We have started to look beyond the Southern
Tier, to install automated targeting systems and other technology.
With the increased funding we received in fiscal year 1999, Customs
is aggressively pursuing a mix of technologies designed to complement
one another and present a layered defense to smuggling attempts. Some
of the technologies we are currently testing and evaluating include a
mobile truck x-ray which has the same or better capabilities as our
fixed-site truck x-rays and has the added benefit of over-the-road
mobility allowing us to use it at several ports. This introduces more
unpredictability into our operations since the smuggler can never be
sure where the x-ray will show up next. In addition, a gamma-ray
inspection system has been developed for trucks, other vehicles and
railcars.
Customs has been a good steward of the funding provided by the
Congress. We are nearing completion of the truck x-ray system
installation program. Seven of the nine systems are installed and have
proven to be an effective law enforcement tool for the interdiction of
smuggled drugs. In fact, the top five seizures made using these truck
x-ray systems amount to almost 13,000 pounds of drugs. Customs is also
seeing a decrease in the number of inspections per seizure giving us a
preliminary indication that the x-rays are becoming the force
multiplier we envisioned them to be. We have also fielded two mobile
truck x-rays with two more prototypes in development.
Land Border Automation
We are working with our counterparts in the Immigration and
Naturalization Service to install license plate readers (LPRs) and
automated permit ports (APPs) and replace the terminals used by the
inspectors to query the Interagency Border Inspection System (IBIS)
database. Southwest Border ports and the major crossings on the
Northern Border will also receive this LPR equipment. LPRs have the
capability to count the number of vehicles, identify stolen vehicles,
and identify vehicles which are positive IBIS hits. LPRs will allow
Customs to gather intelligence from the data, plus data mining will
enhance inbound and outbound targeting.
One type of APP being tested at several locations along the
Northern Border is the Remote Video Inspection System. This combination
of card reader, video and audio technology allows travelers to cross at
small, remote locations when there is no inspector on duty. Canada is
installing a similar system at the adjacent ports to our test sites.
Inspectors have at their disposal a wide range of technology and
tools including the large truck x-rays, pallet x-rays, optical
fiberscopes, laser rangefinders, and portable contraband detectors
(a.k.a. busters) to name a few. What must be remembered is that without
the consistent funding to operate and maintain these technologies in
Customs base, the benefits will be short-lived.
Compliance Measurement Examination data collection process (COMPEX)
Customs uses the Compliance Measurement Examination data collection
process (COMPEX), a random selection program in operation at major
airports and nearly all land border ports to determine the overall
compliance rate of arriving passengers and the threat at each location.
We continue to work with the ports to reduce the burden of collecting
the information and improve the data quality. We will be working to
develop COMPEX for passengers arriving at small airports and by vessel,
train, or bus, as well as COMPEX for outbound airport passengers.
Anti-proliferation/Anti-terrorism
Using the Nunn-Lugar anti-proliferation funding, and working
jointly with the Department of Defense, Customs is evaluating
technology to provide our inspectors with a device that not only
quantifies the presence of radiation, but can classify the source of
the radiation against a database to tell the inspector if the source is
medical, industrial, or weapon-related material.
We have also fielded approximately 1,500 personnel radiation
detectors (a.k.a. radiation pagers) with the eventual goal of deploying
3,800 around the country. We are installing radiation detector
equipment in all Customs x-ray systems thereby providing a simultaneous
screening for contraband and drugs as well as undeclared radioactive
material.
Better technology will allow Customs to maximize the efforts of the
limited number of outbound inspectors. Better technology will allow
inspectors to ``target smarter'' and with less wait-time for the
traveling public and trade. Technology can be utilized to target
undeclared outbound currency, stolen vehicles, munitions, and items
which may pose a risk to aviation safety and security.
To support antiterrorism and aviation safety and security efforts
at 17 of the largest international airports, Customs has spent
approximately $18 million of the $35.2 million authorized under the
1996 Omnibus Appropriation to purchase and so far deploy the following
equipment: 24 mobile x-ray vans equipped with explosive and radiation
technology; 18 mobile support system airport tool trucks that provide
inspectors the necessary tools to inspect cargo; 11 portable x-ray
systems and 12 particle detectors capable of detecting trace amounts of
explosives for mail/courier facilities; and 675 radiation pagers to
address the threat of nuclear smuggling. Customs is currently working
toward identifying additional non-intrusive inspection systems that can
be purchased with the approximately $17 million remaining in ``no
year'' funds to support aviation safety and security.
Automated Targeting Systems
The Automated Targeting System for Anti-Terrorism (ATS-AT) is a
rule-based expert system designed to facilitate the targeting of high-
risk outbound cargo. This could include terrorist devices, weapons,
undeclared hazardous material and other contraband. The system was
prototyped at John F. Kennedy International Airport and will be
deployed to 14 additional airports in fiscal year 1999. ATS-AT allows
inspectors to review more outbound documentation for potentially high-
risk shipments, in less time.
ATS is also being used in the air passenger environment. Customs is
in the process of migrating a data base which will enhance the
capability of the Passenger Analysis Units and line inspectors in the
targeting of suspect travelers. The enhanced capability will ultimately
result in more effective interdictive measures and passenger processing
and will increase the opportunity of locating and positively
identifying high-risk travelers involved in drug smuggling, terrorism
and other transnational criminal activity. However, failure to provide
funding to this project, which is funded out of base resources, will
result in decreased connectivity to the first line inspectors in the
field.
fiscal year 2000 budget request
Customs proposed funding level for fiscal year 2000 totals
$1,929,735,000 and 17,389 Full Time Equivalents (FTE), of which
$1,617,335,000 will be directly appropriated, and $312,400,000 will be
derived from a proposed increase to the passenger processing fee. Also,
$35,000,000 is requested from the Treasury Forfeiture Fund Super
Surplus Fund.
Integrity..............................................$6 million, 0 FTE
Corruption and unethical behavior results in serious repercussions
to law enforcement, including an erosion or destruction of public
confidence, which is difficult to restore. While there is no systemic
problem of corruption in the Customs Service, this initiative is
required to increase the likelihood that new hires to Customs will
possess honesty and ethical principles, ensure that Customs complies
with statutory provisions concerning periodic reinvestigations, and
reinforce the awareness of all agency employees to possible integrity
threats, e.g., bribery attempts and unethical behavior. Specifically,
the funding is required to conduct polygraph examinations, upon Office
of Personnel Management approval, for candidates applying for positions
which are most susceptible to corruption (criminal investigators,
Customs inspectors, canine enforcement officers, and contractors). This
request will also fund the contracting out of the required periodic
investigations, as well as fund the corruption prevention awareness
efforts of the agency.
Training...............................................$5 million, 8 FTE
In order to attain the highest level of training, integrity and
professionalism, Customs is requesting additional resources to
establish a new office at the Assistant Commissioner level. This office
will manage and direct the establishment of a comprehensive education,
training, and workforce development program which covers the entire
career of Customs personnel with an emphasis on law enforcement
positions. In-service training and development will be provided on a
regular and recurring basis, and programs will be implemented to
maintain and improve on-the-job effectiveness. Special attention will
be given to continuous training for law enforcement personnel on the
day-to-day application of the unique border search authorities granted
to Customs officers (including, but not limited to: 19 U.S.C.
Sec. Sec. 482, 1461, 1467, 1496, 1581, 1582, and 1646b, 22 U.S.C.
Sec. 401, and 31 U.S.C. Sec. 5316).
Non-intrusive Mobile Personal Inspection Technology....$9 million, 0 FTE
International commercial air travel is increasing each year and the
numbers of narcotics couriers who ingest or conceal narcotics on or
within their body are increasing dramatically. Detection of internal
carriers can only be accomplished through the use of x-ray. Current
procedures require that the suspected courier be transported from the
international arrivals area of the airport, accompanied by two Customs
officers, to a medical facility where the x-ray is administered. This
procedure is time consuming and an inefficient use of staffing due to
the time required and the safety precautions which must be observed
(i.e., handcuffing the suspect for transport), and the procedure is
exceedingly unpleasant for those suspects whose x-rays are negative.
Therefore, as the fight to deter drugs and other contraband from
coming into the United States continues, so does the development of new
non-intrusive detection technology. Customs has developed a way to
examine a suspected courier, with less embarrassment (in the likelihood
of a pat-down and/or strip search), by using a facility staffed with an
x-ray technician and equipped to digitally transmit the x-ray to a
radiologist at a medical facility who will determine whether the x-ray
indicates the presence of a foreign substance in the body. The facility
will either be a fixed building in, or immediately adjacent to, the
international arrivals area of the airport or a bus which is designed
to fit into a custom docking facility built as an extension to Federal
Inspection Services (FIS). Thus, the suspected courier could be
transferred without handcuff restraints and through U.S. Customs
Service corridors to avoid loss of control of the subject as well as
public exposure. Customs is seeking a contractor who will provide a
``turn key'' operation.
Land Border Blitzes..................................$1.4 million, 0 FTE
The additional funding requested would allow Customs to conduct
``blitz'' type operations at land border ports. This initiative
implements some of the lessons learned from last year's successful
Operation Brass Ring. Blitz operations are characterized by the rapid,
unpublicized deployment of a team of Customs Inspectors, Canine
Enforcement Officers, and Special Agents into a targeted port or base
port for varied durations (a day to several weeks) to conduct intensive
inspectional and investigative operations. The size of the port being
blitzed, the duration of the operation, and the objectives of the
operation would determine the actual makeup of each team. The teams
would perform the blitzes at unscheduled times moving from border
crossing to border crossing, from one port to another, and within a
port among passenger primary, secondary inspection, cargo inspection,
and outbound areas. This flexibility will maximize the unpredictability
of the operations to Drug Smuggling Organizations (DSOs).
Unpredictability is a corruption deterrent as well. Use of non-
intrusive technology would also be maximized. Mobile or transportable
systems would be utilized at ports which do not have fixed NII
technology. In other instances, suspect conveyances would be convoyed
to other ports which have fixed NII technology.
Customs Air Operations Support is vital to the rapid, fluid
deployment of the teams. The use of air assets will allow the teams to
maintain the element of surprise and maximize their time in the port
instead of in lengthy transits between geographically dispersed border
crossings. During Operation Brass Ring, the use of aircraft was shown
to disrupt the normal activities of Drug Smuggling Organizations (DSOs)
at the ports of entry. In addition, air assets provide enhanced
security measures for ground personnel in the event of any escalated
incidents.
Forced Child Labor.....................................$2 million, 3 FTE
The Customs Service is continuing its efforts to address the issue
of forced child labor. Customs intention is to establish regional
offices in Asia and increase staffing in foreign countries where there
is significant potential for goods to be produced by forced child
labor. This funding would provide for the hiring of special agents/
representatives and a staff assistant.
The need for foreign-based agents rather than domestic agents is
crucial to the success of this initiative. Regular interaction with
foreign governments and non-government organizations (NGOs) ensure that
Customs can maintain an enforcement presence and exert pressure because
ultimately verification of the use of child labor will require
inspection of the suspect foreign facility and its records.
Money Laundering (Outbound) Technology.................$2 million, 0 FTE
The majority of undeclared currency going out of the U.S. involves
proceeds from narcotic trafficking activities. The ever-increasing
volume of cross-border traffic means that Customs should conduct more
examinations more effectively, in order to keep up with the activities
of the drug cartels. Outbound enforcement examinations are currently
conducted on a very limited basis. In fiscal year 1998, although
outbound exams were conducted only intermittently and with minimal
resources, Customs seized more than $68.4 million in outbound currency.
In order to maximize Customs enforcement efforts, non-intrusive
technology and equipment (and infrastructure) are necessary to
efficiently interdict undeclared currency.
Technology will strengthen outbound enforcement efforts, while
facilitating the public and legitimate trade. Due to the vast amount of
cargo being exported out of the United States, Customs can only examine
a percentage of these shipments. The procurement of mobile x-ray vans,
tool trucks, and contraband detection kits will assist Customs in the
examination of more cargo and conveyances at seaports, courier hubs,
and on the Southern land border.
user fees
The fiscal year 2000 budget request includes two new user fee
proposals. They are:
Passenger Processing Fee
The Administration proposes to increase an existing fee paid by
travelers arriving by commercial aircraft and commercial vessel from a
place outside of the United States, and to remove certain exemptions
from this fee. Proceeds of the fee increase would partially offset
Customs costs associated with air and sea passenger processing.
Subsequent to the budget, authorization legislation will be transmitted
to allow the Secretary to increase the fee paid by air and sea
passengers and to remove existing exemptions from this fee. In order
for Customs to be able to collect $312.4 million for fiscal year 2000,
collections would have to begin on July 1, 1999.
Automation Modernization Fee
The Administration proposes to establish a fee for the use of
Customs automated systems. The fee will be charged to users of Customs
automated systems. Proceeds of the fee will offset the costs of
modernizing Customs automated commercial operations and an
international trade data system, and will be available for obligation
after fiscal year 2000. Subsequent to the budget, authorization
legislation will be transmitted to allow the Secretary to establish a
fee for the use of Customs automated systems.
This concludes my statement for the record. I appreciate the
opportunity to appear before you today. I particularly want to express
my appreciation to this Subcommittee for its tremendous support in
providing Customs with increased funding in fiscal year 1999. This
funding will provide Customs with the much needed tools to accomplish
our mission, and I assure you that we will use these resources in the
manner in which Congress intended them to be utilized, in the
furtherance of international counterdrug efforts and our critical
mission to protect the Nation's borders and to reduce the flow of drugs
into the United States.
SEIZURE DATA
Senator Campbell. Thank you. And thank you for clarifying
the searches. I wanted to just ask you something that just came
to my mind though. In your testimony you mentioned the seizure
of six tons of cocaine, did you say?
Mr. Kelly. Six tons of marijuana and cocaine in the
Casablanca operation.
Senator Campbell. In the Casablanca operation alone. I know
Senator Kyl is not here, but he has brought up in several
forums here what he sees as a lack of enough resources going
into this State. Is most of this seized at airports rather than
coming across in cars?
Mr. Kelly. In Arizona?
Senator Campbell. Anywhere.
Mr. Kelly. No, most drugs are seized coming across the land
border.
Senator Campbell. He mentioned in specific two or three
times in hearings I have been in with him about the increase of
drugs as well as illegal aliens coming through Bisbee. Were
some of these seizures done at Bisbee? So I could pass that on
to him.
Mr. Kelly. I am sure there were, but we could get back to
him with the specific seizures.
Senator Campbell. Would you get back specifically to
Senator Kyl? He needs it more than I do, if you would.
Mr. Kelly. Yes, sir, we will do that.
[The information follows:]
Customs has experienced increases in drug seizures in the area
encompassing Bisbee, at and between the Naco and Douglas Ports of
Entry. During the first 6 months of fiscal year 1999, non personal use
marijuana and cocaine seizures combined have increased in weight by 3
percent above all of fiscal year 1998 (26,342 pounds vs. 25,486
pounds). The number of seizures in this area is also running higher
than in fiscal year 1998, with 130 through March 1999, compared to 153
in all of fiscal year 1998.
PERSONAL SEARCH
Senator Campbell. Let me ask you also on the searches,
these non-intrusive methods, they are like x-rays I guess. If a
person swallowed something in a balloon or a rubber bag, which
I guess is not totally uncommon, would that show up on these
non-intrusive x-rays?
Mr. Kelly. No, it would not. Not on the body scans. We are
looking for full-blown x-rays in the $9 million request for
fiscal year 2000. But we have moved ahead with what we call a
body scan. It will look through clothing but not through the
body, and it is an alternative to a pat-down. We give people
the option, to being touched.
Senator Campbell. I have never seen one of these. Does that
mean just when you look at it it looks like a person just
standing there naked? It does not look inside them, it looks--
--
Mr. Kelly. There are various models. Some are more precise,
you might say, than others. But we use female inspectors to
look at the female subjects, and male inspectors for male
subjects.
PASSENGER PROCESSING FEE
Senator Campbell. Same sex lookers. Okay, good.
Let me talk about your budget a little bit. It contains
legislation authorizing $312 million, a little over $312
million by extending an expired passenger processing fee to pay
for existing, but not new, personnel costs for Customs. What is
the status of that now? And how do you expect to deal with the
$312 million shortfall if it is not enacted?
Mr. Kelly. With great difficulty. That translates to about
5,000 FTE for the agency, and it is an area of concern for me
and for the Customs Service, no question about it. We know that
the issue of user fees is controversial on Capitol Hill, so it
is an area of concern. And even with the $312 million----
Senator Campbell. Do you have a contingency plans just in
case?
Mr. Kelly. We would just have to go to work with the
committee and with the Administration if fees are not
authorized. But it translates into about 25 percent of our
personnel.
AUTOMATED COMMERCIAL SYSTEM
Senator Campbell. Your budget also includes $35 million for
the maintenance and upkeep of the automated commercial system,
the ACS system. As I understand it, that is the first time that
this cost has shown up as a line item but you have carried
approximately $32 million in your base over the last few years
for the cost. If you add in how much you are spending in your
base in fiscal year 2000 the funding will be a total of $67
million. Why is there such a large increase in funding for
fiscal year 2000?
Mr. Kelly. Because the ACS system is in trouble. It is a
15-year-old system using 21-year-old software. It is operating
at over 90 percent of the capacity, sometimes at 100 percent of
capacity. That is why we are strongly advocating the move
towards the automated commercial environment. But the ACS
system is of concern.
If we had funding today for----
Senator Campbell. Okay, that is good enough for me.
Mr. Kelly [continuing]. ACE, we would still need that
money.
VIOLENT CRIME REDUCTION TRUST FUND
Senator Campbell. The Customs Service is also requesting
$64.9 million for the violent crime reduction trust fund.
Generally, when the bureaus submit request for the funding they
provide kind of specific details on how they expect to use the
funds. But as I understand it, you have not provided that
breakout yet. Can you kind of give us an outline on how you are
going to spend those funds?
Mr. Kelly. Yes, sir. We did provide it. We provided it
yesterday.
Senator Campbell. That is all right. I understand we
received it as of yesterday. But that request is for $64.9
million, and when we add this list up we come up with a total
of, it is about $10 million over. What is the discrepancy?
Mr. Kelly. Over?
Senator Campbell. Over the itemized list for fiscal year
2000. The President's budget has $64.9 million, and the total
itemized list comes out to $10 million more than the
President's request.
Mr. Kelly. Some of it may be forfeiture fund and some of it
is violent crime trust fund. I do not have the list in front of
me, but that might explain it.
Senator Campbell. Okay, maybe so, because the forfeiture
fund is not listed on there. All right.
You also mentioned some educating--I understood just from
listening to you, educating agents in their efforts at
airports. But you are also working on a passenger education
effort? What does that entail?
PASSENGER PROCESSING PROCEDURES
Mr. Kelly. We brought on board a consultant to take a look
at our passenger processing procedures and one of the things
they found, which we suspected, was that we were not doing an
adequate job of informing passengers that they--the potential
to be----
Senator Campbell. So they do not have a hissy fit because
they are being asked questions or searched or something?
Mr. Kelly. Right. First, they might be told or in the past
told just to go to the secondary area. They are questioned and
then some are people ultimately searched.
Senator Campbell. Just doing that probably worries some
people I guess.
Mr. Kelly. Absolutely. So we need to do a more effective
job of informing passengers. We have put up signs at airports.
We have developed brochures. We are working with the airlines--
--
Senator Campbell. Of what they might expect?
Mr. Kelly. Exactly. We have a problem, and this is a
country with drugs, and potentially some of you might be
searched; that sort of information. We are also attempting to
redesign the declaration that is made out when you enter the
country, goods that you are bringing in. To in essence add a
cover to that declaration to inform people as to the potential
of search, or at least what they can expect.
MONEY LAUNDERING TECHNOLOGY
Senator Campbell. I think it is good you are doing that.
One last question dealing with money laundering. You are
requesting $2 million for technology to identify undeclared
currency being smuggled into the country. What types of
technology are you expecting to acquire?
Mr. Kelly. In essence we are looking for mobile x-ray
machines to identify money going out of the country. We do some
outbound operations, but as I mentioned in my statement, we do
not do enough.
Senator Campbell. Are these going to supplement--you have
got dogs, I understand, currency-sniffing dogs?
Mr. Kelly. We have currency-sniffing dogs.
Senator Campbell. This will supplement what the dogs do, or
are you going to replace the dogs?
Mr. Kelly. No, we would actually like more dogs. But we are
at full capacity as far as the dogs are concerned in term of
training and getting the dogs on line. So we would like to use
both. We want to explore the possibility of using more dogs,
but certainly this mobile x-ray technology will enable us to--
--
CANINE PROGRAM
Senator Campbell. What kind of dogs do you use?
Mr. Kelly. Any kind of dog. We use good dogs. Although we
are breeding some of our own dogs.
Senator Campbell. Yes, good dogs are better than bad dogs,
I know. [Laughter.]
Mr. Kelly. Good dogs that can detect drugs, and not all
can.
Senator Campbell. It seems like most of the Federal
agencies--if I might tell my friend, Senator Dorgan, most of
the Federal agencies it seems to me use German shepherds, which
are fine. I have a German shepherd at home. They are very nice
dogs. But I have also had bird dogs, and I want to tell you,
Weimaraners and some of those dogs that are trained to--they
have got a nose that will run circles around some of the German
shepherds. But I have never seen any of the bird dogs used in--
--
Mr. Kelly. We cannot afford the luxury of specific breeds.
We go to theses homes and take any dog that reacts in the
appropriate way that indicates that they may be able to detect
drugs. So we have all sorts of different breeds.
Senator Campbell. Thank you.
Senator Dorgan, any questions about dogs or anything else?
Senator Dorgan. No, Mr. Chairman, you are the expert on
this dog issue stuff. I actually did see a demonstration,
however, of your department using dogs and it was really quite
remarkable. In a huge warehouse they had actually planted a
small box with some drugs and they showed me how those dogs
work. And it really is quite remarkable to see them go through
that entire warehouse and find one very small cardboard box
with drugs. It is impressive.
AUTOMATED COMMERCIAL ENVIRONMENT
Let me ask you about ACE, if I might. You are well
familiar, I am sure, with the GAO report which is the scourge
of every administrator who has them peeking around and poking
around and looking at what agencies do. But the GAO is very
important to us. They are our ability to take a look at what is
happening inside of agencies.
Their February report indicates, as you indicate,
Commissioner, that the Customs department is having very
significant problems with ACE. Their results, in brief, start
by saying, Customs is not managing ACE effectively and does not
have a firm basis for concluding that ACE is a cost-effective
solution to modernizing its commercial environment.
Because of the money that is being proposed here for the
system and because of the importance of the system, can you
give us some more feeling about what you are doing as a
commissioner to respond to the GAO's assessment of where we
are?
Mr. Kelly. We think the GAO recommendations are sound. We
are adopting those recommendations. We are moving, as I said in
my remarks, to bring on board a prime contractor, and we are
learning lessons from other Federal agencies in the past. We
are moving aggressively to bring the prime contractor on. We
need money to do that.
In order to put together in essence an RFP to get the prime
contractor working, we brought Mitre Corporation on, and we
have just entered a contract with them. So I think this will,
hopefully, significantly accelerate the process.
There are concerns, and these are legitimate concerns. As I
say in the past, these big ticket items have proven to be
problems with other agencies. So we understand the scrutiny. I
think that the prime contractor move is really the way to go
and will change some of the atmospherics.
Senator Dorgan. We will have the capability of learning at
some point what the whole system will cost? One of the
criticisms by the GAO is there is no capability of assessing
what is all this going to cost? It is like starting to build a
house without any notion of how much you want to put into it.
Will the acquisition of a prime contractor, at I suppose a
fairly substantial cost--none of those come very
inexpensively--will that lead you to a point where you will be
able to give Congress some assessment of what the final cost
will be?
Mr. Kelly. Yes, sir. One of the difficulties is that this
is a bid process. So in other words, you put out a plan and
then you get bids back, so it is hard to identify a specific
dollar amount now. However, the latest estimate is for a total
cost of $1.4 billion. Now we brought Peat Marwick on board to
take a look at the process that we used to cost out the system.
They found our procedures to be reasonable and sound in
arriving at that figure at this point in time as to where the
project stands.
So the latest estimate is $1.4 billion. And again, the
process used has been deemed to be a reasonable process. But
obviously, as we move further along with the prime contractor
we will have more precise figures.
Senator Dorgan. I hope you will keep us closely informed as
we move along because we will want to continue to ask questions
about this as we proceed.
OPERATION CASABLANCA
Just two other very quick questions. In your Operation
Casablanca you talk about 12 commercial Mexican bank officials,
three Mexican banks themselves that have been indicted. This
does not have anything to do with your appropriation, but can
you give me some background information after the hearing on
what is happening to those banks themselves? It seems to me one
of our problems is institutions, which are artificial people,
seem never to pay the same price for illegal behavior as real
people do. I am kind of curious whether this is one of those
cases where you indict a bank and they keep on banking.
Mr. Kelly. I can give you specific information. Two of the
banks have pled guilty to criminal charges and there is
significant forfeitures for the third bank, as well. But I will
give you more specific information, Senator.
INTERNATIONAL CORPORATIONS
Senator Dorgan. One other point. There are some people in
Florida doing some research using your data, Dr. Pack and Dr.
Zadanowitz, trying to determine from your data what is
happening with respect to taxation of international
corporations who do business in and out of this country through
foreign corporations of wholly owned subsidiaries in this
country and then sell and buy to and from themselves.
Let me give you some examples that I just got from them the
last couple of days. Importing toothbrushes from India, $171
per toothbrush. Radial tires from Indonesia, $2,500 per tire.
Exporting bicycles from the United States to Mexico for $11 per
bicycle. Just to give you an example of what is in the bowels
of your data bank that we need to find a way to get to the
Internal Revenue Service so we stop wholesale cheating to the
tune of about $35 billion a year by international corporations.
That is not your responsibility, but we need to work with
your agency to make sure your information is usable by the IRS
to stop tax cheating by international corporations to the tune
of tens of billions of dollars.
Mr. Kelly. Yes, sir. I think we have agreed to do a pilot
project with IRS on the transfer payment issue.
Senator Dorgan. I have talked with you about that, and I
appreciate your cooperation on it.
FORCED CHILD LABOR
Let me thank you. You have a big role to play.
Just one other point. I am especially interested in your
initiative on forced child labor. I do not know how many agents
you have in that area but I would like to get, if I could, a
memorandum from you telling me what kinds of resources you are
committing to that.
You indicate you have been sending agents just recently to
India, Nepal, Pakistan, Indonesia. We know what is happening in
some of those areas with carpets and forced, effectively prison
labor, of young children. You have all heard these stories of
young children who have gunpowder put on their fingertips and
then set on fire in order to create the calluses so that the
later use of needles in rugs will not cause them to bleed and
they will be able to lock these kids up and force them to keep
making rugs.
Some of that is horrible, horrible stuff. So your
enforcement efforts in these areas is critically important. No
American should want to buy a rug, for example, made under
those conditions by kids in forced labor. I want to support you
in those areas.
I would like to get some more information about resources
devoted to them.
Mr. Kelly. Yes, sir.
Senator Dorgan. Commissioner Kelly, thank you very much.
Mr. Kelly. We are deploying additional agents this year to
Hong Kong, Bangkok, and to Montevideo to conduct these
investigations, thanks to the committee.
SUBMITTED QUESTIONS
Senator Campbell. Thank you, Commissioner Kelly.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
forced child labor
Question. Can you give the subcommittee a report on the Forced
Child Labor Initiative? Is the $5 million adequate? Do you have a five
year plan for this initiative which clearly spells out the initiative
goals and steps that Customs must take to achieve the goals?
Answer. Addressing the illegal importation of merchandise
manufactured or produced with forced or bonded child labor is one of
the most difficult tasks faced by the Customs Service. The Customs
Service is pursuing a thorough, impartial and aggressive policy towards
imports suspected of being produced with forced child labor.
In recent months, special agents have visited Indonesia, Nepal,
India, and Pakistan to meet with foreign government officials, non-
government organizations and industry representatives. Foreign law
enforcement and other government agencies have stated their desire to
work with the U.S. Customs Service.
Our public outreach program thus far has included mass mailings to
U.S. importers of merchandise often associated with forced child labor,
advertisements in trade publications, participation in trade shows,
presentations on the Customs Webpage and various press releases in
print and television in the U.S. and several other countries.
Additionally, our Forced Child Labor Special Agents are meeting
regularly with various non-government agencies that monitor child labor
and other human rights violations in an effort to address issues as
they arise.
The Customs Service has identified some manufacturers of hand-
knotted carpets who are believed to have produced carpets with forced
child labor. Detention orders are in place to stop imports from those
manufacturers at our borders. Should an importation from one of these
manufacturers be attempted, Customs will require a certificate from the
manufacturer stating that the goods were not produced with forced child
labor. Customs will investigate the validity of the certificate
submitted by the manufacturer. If the investigation substantiates the
certificate, the goods will be allowed into the U.S. If, the
certificate proves to be false, we will not allow the goods to enter
the United States and continue our investigation for any potential
criminal or civil violations.
Increased staffing will soon be in place in several of our foreign
offices. Special agents have been added to our Bangkok, Hong Kong and
Montevideo offices. These additional special agents will be dedicated
to investigating allegations, and training and working with foreign law
enforcement agencies to address the issue in a joint fashion.
In the fiscal year 2000 initiative, the Customs Service plans to
open a regional office in south Asia to better address forced child
labor investigations. In addition to the new office, Customs will also
add a special agent to one of the offices in Central America to act as
a regional coordinator. Since submission of our initial fiscal year
2000 funding request, new information was developed warranting the
creation of a Regional Attache office in either Argentina or Brazil,
staffed with three special agents and support staff which would require
an additional $1.4 million. In 1997, Customs established the
Enforcement Systems Area to account for enforcement activities not
inherent in the core business processes. The existing Customs 5-Year
Strategic Plan, which was based on the three core business processes
and two enforcement strategies of Narcotics and Money Laundering, is in
the process of being revised to account for the new Enforcement Systems
Area. Customs Forced Child Labor strategy is included in this revised
strategy which is pending final approval and publication.
Customs' strategy for addressing Forced Child Labor is also laid
out in detail in Customs Investigative Strategy. Specifically, Customs
will: Pursue an aggressive, multi-faceted investigative strategy. This
strategy is based upon an intelligence development program that
includes traditional and non-traditional intelligence collection and
analysis. The outreach program has forged strong relationships with
other Executive agencies, Congress, foreign government agencies, and
non-government organizations. The intelligence and outreach programs
are designed to provide investigative leads for jump teams to foreign
countries and domestic investigations of suspect merchandise and
importers. The investigative process is intended to provide a factual
basis for detention orders, findings, other civil investigations and
other criminal investigations.
Question. What specific allegations has the Customs Service
received concerning convict, forced, bonded or indentured labor in
Central and South America? What resources would aid your investigative
efforts in Central and South America?
Answer. The Customs Service has received information about child
labor in South American countries whose products are imported or may be
imported into the United States that may meet the definition of bonded
or indentured labor. A fact finding mission has recently gone to South
America to follow-up on allegations received by the Customs Service.
Also, in 1995, 1996 and 1998, the U.S. Department of Labor documented
forced or bonded child labor in several non-export industries in the
region. fiscal year 1999 funding will provide one Special Agent in
Montevideo this summer but, the addition of one special agent will not
resolve the large work load.
The fiscal year 2000 funding request that includes an additional
Special Agent position in Central America to act as a regional
coordinator will provide the Customs Service with the opportunity to
address historical allegations of forced or bonded labor in Central
America. Currently there are only six Customs Special Agents posted in
South America. Since submission of our initial fiscal year 2000 funding
request, new information was developed warranting the creation of a
Regional Attache office in either Argentina or Brazil, staffed with
three special agents and support staff which would require an
additional $1.4 million.
Question. Can Customs construct a pilot program that would address
these issues by tracking the country of origin for products made with
forced child labor?
Answer. No, Customs now has the ability to track country of origin
for imported products but we cannot determine that the goods were
manufactured with forced child labor merely by identifying the country
of origin. Customs requires legally sufficient information that would
best be obtained by an inspection of the manufacturing facility. Most
foreign governments are reluctant to allow United States Customs
Service to independently visit manufacturing facilities in their
countries or to dedicate the manpower required to conduct joint
inspections.
performance measures
Question. How is Customs planning to adjust their performance
measures (goals) to reflect the available resources?
Answer. When Customs identified its first set of strategic
performance goals, it had little outcome performance trend data on
which to base these projections. However, in the spirit of the Results
Act, Customs established several ``stretch'' outcome and output goals
to challenge itself, particularly in the trade and passenger compliance
arenas. It viewed the setting of easily met goals as potentially
counterproductive, because it undermines organizational innovation and
objective assessments.
Now that we have four years of compliance outcome data under our
belt, it is clear that our original trade compliance goals of achieving
90 percent overall compliance and 95 percent compliance in the Primary
Focus Industries (PFI) by the end of fiscal year 2000 were unrealistic.
The fiscal year 2000 Annual Performance Plan adjusts the time for the
attainment of these goals to fiscal year 2004. We continue to project a
high level of revenue compliance, to reflect a continued focus on its
importance.
For Passenger Processing, the issue is more difficult. We only have
two years of compliance outcome data. In addition, we have embarked on
a major initiative with the Immigration Service to improve port
management on the Southwest border. We are already receiving requests
from field managers to expand the concept. In addition, we still have
access to additional resources through COBRA user fees for air
passenger processing. Consequently, only minor adjustments to our
performance goals have been made.
Available agency resources are a big factor to consider in the
establishment and adjustment of performance improvement goals; however,
they are not the only ones. The way the resources are used, the types
of resources, building on experience gained, and the methods employed
are also very important. In addition, external assistance needs to be
factored into the goal-setting process.
Question. Are any efforts being made to change Customs approach to
improving trade compliance, such as targeting high-risk industries, to
apply scarce resources to areas where they may be best utilized?
Answer. Yes. We use Compliance Measurement, Compliance Assessment,
and Account Management, as our methods to identify and target high-risk
areas and deploy our resources accordingly. A major part of our focus
is on improving compliance in the Primary Focus Industries (PFI's).
Our primary trade measurement system, Compliance Measurement,
provides a statistically valid level of trade compliance for all
importations. Using this data, we can pinpoint areas of noncompliance
in different commodities and industries. Using Compliance Measurement
and other analytical data, Customs has undertaken, at the port level, a
new initiative called ``Focus on Non-Compliance.'' It ensures port
personnel are focusing their resources on the high-risk areas.
Customs uses Compliance Assessments to review importers' systems,
to assess their ability to produce compliant transactions and to
identify systemic problems and areas for improvement. In addition,
Compliance Assessments have resulted in the recovery of $100 million in
revenue, $70 million of which was tendered with Prior Disclosures.
Our Account Management Program enables Customs to assess the
quality of high-volume importers' workload on an aggregate rather than
on a transaction by transaction basis. Using this approach, Customs
maximizes its limited resources to work with these high-volume
importers to improve their compliance rates. Currently, there are 459
accounts. Their workload accounts for 38 percent of all import
transactions and approximately 29 percent of their value. Increasing
this group's compliance will have a substantial effect on overall
compliance rates.
We are continuing our successful PFI program. Customs concentrates
its efforts on PFI's, designated by Customs, to identify compliance
problems and to design interventions to address them. PFI compliance is
three percent higher than overall compliance, because of this approach.
These integrated national programs allow Customs to identify the
areas where risk is the greatest and to maximize the use of our
resources to increase compliance and target noncompliance.
The above programs utilize the informed compliance approach set
forth in the Customs Trade Modernization Act. When an importer is new
or demonstrates a willingness and capacity to improve, Customs works
with the importer to improve compliance. However, when the informed
compliance approach does not result in improvement or there is a
deliberate attempt to not comply, enforced compliance measures, such as
penalties, seizures, etc., will be employed.
This dual approach is important, because trade workloads are
expected to continue to grow at about 10 percent annually. Customs
resources are not expected to keep pace. Available agency resources are
a big factor to consider in the establishment and adjustment of
performance improvement goals; however, they are not the only ones. The
way the resources are used, the types of resources, building on
experience gained, and the methods employed are also very important. In
addition, external assistance needs to be factored into the goal-
setting process.
polygraph investigations
Question. What will the $4 million provide?
Answer. The $4 million will pay for polygraphs examinations needed
to qualify applicants for employment in a projected 1,900 positions
(which include backfill positions) for special agents, inspectors,
canine enforcement officers, and certain contractors. Polygraphs cost
about $800 each. It is estimated that three examinations will be needed
for each vacancy.
Question. Has Customs applied to the Office of Personnel Management
for authority to conduct the polygraph examinations?
Answer. Yes. Application for authority to conduct polygraph
examinations was made March 19, 1999 through the Department of
Treasury, which endorsed the request. The request is now under review
by OPM.
Question. What criteria does OPM apply for providing this
authority? Do the agencies have to provide a justification that agents
are involved in counter-intelligence activities?
Answer. OPM's polygraph examination authority criteria is
established in the Federal Personnel Manual (FPM) 736-9, Subchapter 2,
Background Investigation Requirements, Section 2-6, ``Use of the
Polygraph in Personnel Investigations.'' Under this criteria, the
requesting agency must justify that it has an intelligence or counter-
intelligence mission that directly affects national security.
Question. Since Secret Service and ATF are already conducting
polygraph examinations, isn't there some way the funding could be
combined and the examinations be conducted on a Treasury-wide basis?
Answer. The Customs Service has attempted to establish a Memorandum
of Understanding (MOU) with the Secret Service, the Federal Bureau of
Investigation, and the Bureau of Alcohol, Tobacco, and Firearms. The
Secret Service and the FBI presently lack the resources to accommodate
Customs due to their own hiring initiatives. ATF has received authority
to conduct polygraph examinations, but has not initiated an examination
program yet.
Question. Do you agree that the administration has, for the most
part, abandoned efforts to secure the border? Do you agree that more
Customs inspectors are needed on the border in 1999 and 2000? How many
in each year? Do you agree that more Customs agents are needed in 1999
and 2000? How many in each year?
Answer. Increases in each of the last five fiscal years of total
narcotics seized along the Southwest border are indicative of the steps
taken by the administration to secure the border. The poundage of
narcotics seized by U.S. Customs along the Southwest Border has more
than doubled in the last 5 years: 863,067 pounds were seized in fiscal
year 1998 compared to 369,628 pounds seized in fiscal year 1994
Resources for personnel, equipment and infrastructure improvements
have also increased over the last several years. In addition, Secretary
Rubin and Attorney General Reno have created the Border Coordination
Initiative (BCI) to increase the effectiveness of the principal border
agencies.
Question. Do you know how many of those newly proposed inspectors
and agents requested by your agency but rejected by the OMB would have
gone to Arizona? Every additional agent or inspector sent to Arizona is
a big help to our state.
Answer. When developing our budget request over a year ago, a
tentative allocation/deployment strategy was used. The allocation of
personnel is based on the level of threat and highest demands at the
time. The recently developed Price Waterhouse Resource Allocation Model
provides a more scientific approach to resource allocation and would be
used to determine the appropriate number of employees for a given
location. The initial numbers and distribution were subject to change.
unfunded non-intrusive inspection technology for arizona
Question. Do you know what equipment would have gone to Arizona if
the administration budgeted the $48 million in technology and equipment
for Customs, as Customs requested?
Answer. The following equipment was slated for Arizona from the $48
million which was not included in the fiscal year 2000 President's
Budget request.
----------------------------------------------------------------------------------------------------------------
Planned
Port of Entry Technology Unit Cost
----------------------------------------------------------------------------------------------------------------
Nogales.................................... Upgrade Fixed-Site Truck X-Ray System to Higher Energy $2,000
Douglas.................................... Mobile Truck X-Ray System............................. 2,200
Nogales.................................... Mobile Truck X-Ray System............................. 2,200
----------------------------------------------------------------------------------------------------------------
These locations are based on current threats and workloads at the
individual ports-of-entry. Changes in these factors may cause
adjustments in the assignment of technologies in order to meet
prevailing conditions at that time.
The planned unit cost is the current estimate for these
technologies based on Customs projections. Equipment costs may change
as Customs awards production contracts. Also, final installed system
costs vary due to unique site preparation and construction efforts
necessary to place the technology into service at each location.
Question. Will you work with the committee to get the
administration to come up with ideas for funding sources for inspectors
and equipment?
Answer. We are always willing to explore additional funding sources
and are open to suggestions that could lead to enhanced resources. We
appreciate the support of both the administration and the Congress.
Question. Commissioner Kelly, if Maersk Sea-Land relocates its base
of operation to the Port of Baltimore, will the U.S. Customs Service
have sufficient personnel at the Port to handle the increased workload?
Answer. Customs would likely need additional resources. The level
of those resources would depend on:
--the type of operations Maersk Sea-Land would transfer to Baltimore;
--how quickly the operations are diverted;
--whether the ships' cargo is intended for consumption in the Port of
Baltimore or is intended to be shipped in-bond to other ports
such as New York; and
--whether the cargo is of narcotics source country origin.
It could result in Customs needing as many as 9 additional staff.
Question. If not, what will Customs do to achieve the necessary
personnel needed to handle the increased workload?
Answer. Again depending on the factors outlined above, Customs may
be forced to reduce enforcement inspections of cargo, provide limited
service to Maersk Sea-Land, and/or reduce service to other importers.
u.s. customs asset forfeiture program
Question. Asset forfeiture programs, administered by the Customs
Service and Justice, have been on GAO's ``high-risk'' list since the
inception of the list in 1990. These programs continue to have
significant weaknesses.
What is the status of Customs efforts to resolve this high-risk
problem?
Answer. In the January 1999 GAO High Risk Series Update GAO cited
three reasons Treasury remains on the high-risk list in the area of
Asset Forfeitures (A through C below).
(A) Treasury reported material weaknesses relating to seized
property in its fiscal year 1997 Accountability Report. Customs is
accountable for two--``Data in Customs Seized Property Accounting
Systems are unreliable'' and ``Customs has problems with the integrity
of data in its Fines, Penalties, and Forfeiture (FP&F) files''.
Action: Customs expects to close both of these material weaknesses
by implementing numerous enhancements to its Seized Asset and Case
Tracking System (SEACATS) which will significantly improve the existing
currency and property records and complete the remaining case,
financial, and reporting functions necessary for data integrity in the
FP&F file. The target completion date for these enhancements is
September 1999.
(B) For fiscal year 1997, SEACATS did not contain accurate and
sufficient data to prepare the analysis of changes in forfeited and
seized currency and property without substantial manual intervention
and reconciliation.
Action: Customs was able to produce the analysis of changes in
seized and forfeited property disclosure from SEACATS for fiscal year
1998, reducing the number of manual adjustments to prepare the
disclosure. Information provided from SEACATS will be used to produce
currency disclosure at the end of fiscal year 1999.
(C) GAO continues to recommend Treasury and Justice consolidate the
management and disposition of all noncash seized property to reduce
administration costs.
Action: No action is being taken. Customs and Justice have argued
against GAO's position. Current policy, as established by Congress with
the creation of the Treasury Forfeiture Fund (1992) is clear that
Treasury and Justice asset forfeiture programs should be managed
separately. With separate and distinct financial, management, and
contract structures in place for each department, consolidation would
be significantly more complicated, disruptive, and costly today than in
1991.
Question. Have Customs and Justice found a way to cooperate in the
management of their respective funds?
Answer. GAO continues to recommend Treasury and Justice consolidate
the management and disposition of all noncash seized property to reduce
administration costs. No action is being taken. Customs and Justice
have argued against GAO's position. Current policy, as established by
Congress with the creation of the Treasury Forfeiture Fund (1992) is
clear that Treasury and Justice asset forfeiture programs should be
managed separately. With separate and distinct financial, management,
and contract structures in place for each department, consolidation
would be significantly more complicated, disruptive, and costly today
than in 1991. Please see response 1C above.
Question. Are any specific goals and measures in Customs fiscal
year 2000 performance plan to resolve any remaining problems?
Answer. Customs expects the enhancements it plans to implement by
September 1999 to resolve its problems that have contributed to
Treasury remaining on the high-risk list.
1. Treasury reported material weaknesses relating to seized
property in its fiscal year 1997 Accountability Report. Customs is
accountable for two--``Data in Customs Seized Property Accounting
Systems are unreliable'' and ``Customs has problems with the integrity
of data in its Fines, Penalties, and Forfeiture (FP&F) files''. Customs
expects to close both of these material weaknesses by implementing
numerous enhancements to its Seized Asset and Case Tracking System
(SEACATS) which will significantly improve the existing currency and
property records and complete the remaining case, financial, and
reporting functions necessary for data integrity in the FP&F file. The
target completion date for these enhancements is September 1999.
2. For fiscal year 1997, SEACATS did not contain accurate and
sufficient data to prepare the analysis of changes in forfeited and
seized currency and property without substantial manual intervention
and reconciliation. Customs was able to produce the analysis of changes
in seized and forfeited property disclosure from SEACATS for fiscal
year 1998, reducing the number of manual adjustments to prepare the
disclosure. Information provided from SEACATS will be used to produce
currency disclosure at the end of fiscal year 1999.
information technology
Question. An incomplete systems architecture hinders Customs
ability to manage information technology investments, particularly
large, mission-critical systems such as its Automated Commercial
Environment system. How does Customs fiscal year 2000 performance plan
specifically address this problem?
Answer. The focus of Customs' performance plan is on improving the
overall performance of mission critical areas. This is consistent with
the goals and requirements of the Government Performance and Results
Act. Customs considers the management of information technology
investments to be a management control issue. Material weaknesses in
management control areas are addressed through other reporting vehicles
such as the Customs Service Accountability Report. This report
addresses requirements associated with evaluative mechanisms such as
the Federal Managers Financial Integrity Act (FMFIA), the Chief
Financial Officers Act, and material weaknesses identified by GAO and
Inspector General audits. The Accountability Report is a public
document and can be found on the Customs Service web site.
The organizational approach to measurement is that measures within
the performance plan must be clearly focused on the key missions of the
organization. By clearly focusing the performance plan on the mission
areas, management can determine the overall mission health of the
organization and use the plan to better manage mission related
programs. Proliferating the performance plan with extraneous non-
mission related measures and management control issues would only serve
to dilute the plan's usefulness and deviate from its intended purpose.
Bureau of Alcohol, Tobacco and Firearms
STATEMENT OF JOHN W. MAGAW, DIRECTOR
INTRODUCTION
Senator Campbell. We will go now to Director Magaw. It is
nice to see you here again.
Mr. Magaw. Thank you, Mr. Chairman and Senator Dorgan.
Once again, I have asked our executive staff to accompany
me here today so they can listen to what you have to say
firsthand. We welcome this opportunity to discuss the budget
request and ATF's strategic goals for fiscal year 2000.
ATF GOALS
These goals are to reduce violent crime, collect the
revenue, and protect the public. Our direct salary and expense
submission is $584 million and 4,131 full-time equivalent
positions. Additionally, we have asked for $13 million and 24
FTE's from the Violent Crime Reduction Trust Fund to support
the GREAT Program, and $15 million for site acquisition of our
new headquarters building. Our total submission of $612 million
represents a $54 million increase or 10 percent over the 1999
budget.
Soon after becoming the Director of ATF, I requested the
assistance of this committee in restoring ATF's base operating
level which had become alarmingly eroded. This was a situation
that had not occurred overnight and, of course, would not be
resolved overnight. However, because of your consideration,
your oversight, and response to this problem we have gradually
been able to strengthen our infrastructure, implement more
sound management controls, and regain a healthier balance in
our operations.
PROPOSED INITIATIVES
Permit me to address the initiatives that ATF is expected
to implement this year. I remain focused on the protection of
the dedicated men and women of ATF and the customers that come
into our building to be served. And we will use the requested
$15 million to acquire an appropriate site for a safer
headquarters location.
Another initiative responds to demands from across the law
enforcement community for the Youth Crime Gun Interdiction
Program which targets the sources of illegal firearms
trafficking to our youthful offenders. The program will expand
from 27 cities to 37 cities at a cost of $11.2 million.
ATF utilizes a unique blend of criminal investigation,
regulation, and revenue collection to effectively enforce the
Federal laws governing alcohol, tobacco, firearms, arson, and
explosives. The resources provided by Congress have enabled ATF
to achieve many successes in each of these areas.
Once again, ATF can fully account for the funding that you
have provided. For the fourth year in a row ATF has received
the highest possible rating on the annual audit of our finances
and internal controls. This audit was conducted by Price
Waterhouse Coopers and the Treasury Inspector General's office.
Finally, the $12.6 million requested for the Bureau's
Integrated Violence Reduction Strategy will be utilized for
several different components of firearms enforcement, which are
aimed at reducing the illegal acquisition, possession, and the
use of firearms by armed career criminals, firearms
traffickers, and prohibited purchasers in violation of the
Brady law.
The $1.1 million requested for implementation of ATF's
promotion assessment system and career development plan enables
ATF to fulfill the last phase of our commitment under the
African-American Special Agent class action settlement
agreement. This commitment, I am very pleased to note, benefits
all of our personnel. We feel this to be a prudent and wise
investment of our resources.
ATF ACCOMPLISHMENTS
Our national revenue center in Cincinnati, Ohio has applied
technology and partnership to improve the consistency of our
tax administration and provide timely trend analysis and
industry statistics. In addition to investigating a significant
number of arson and bombing cases and establishing a national
repository of explosives and arson incidents, we have been in
the forefront of research involving explosives detection and
prevention.
PREPARED STATEMENT
What perhaps cannot be adequately conveyed in the formal
list of major accomplishments included in our general statement
is the competence, the dedication, and the exceptional spirit
of public service that drive the men and women of ATF as they
go about their daily tasks. I am proud to serve this Nation
with them.
That completes my statement, Mr. Chairman.
[The statement follows:]
Prepared Statement of John W. Magaw
Thank you Mr. Chairman, Senator Dorgan, and members of the
Subcommittee. I welcome this opportunity to appear before this
subcommittee and further acquaint you with ATF and the value we bring
to the American public.
With me today are my executive staff members:
Mr. Bradley Buckles, Deputy Director; Mr. William Earle, Assistant
Director for Management and Chief Financial Officer; Mr. Andrew Vita,
Assistant Director for Field Operations; and Mr. Jimmy Wooten,
Assistant Director for Firearms, Explosives and Arson; Mr. Arthur
Libertucci, Assistant Director for Alcohol and Tobacco; Mr. John
Manfreda, Chief Counsel; Ms. Gale Rossides, Assistant Director for
Training and Professional Development; Mr. Patrick Schambach, Assistant
Director for Science and Technology and Chief Information Officer, Mr.
David Benton, Assistant Director for Liaison and Public Information and
Ms. Toby Bishop, Executive Assistant for Equal Opportunity.
atf fiscal year 2000 budget request
I am here today to discuss ATF's portion of the President's Budget
request. This includes a Direct Salary and Expense (S&E) request of
$585.0 million and 4,131 full-time equivalent positions (FTE), a
Violent Crime Reduction Trust Fund (VCRTF) request of $13 million and
24 FTE and a Construction request of $15 million and no FTE. The ATF
fiscal year 2000 S&E request includes $15 million recommended by the
Domestic Policy Council for firearms enforcement programs. Our total
request of $612 million represents an increase of $54 million, or 10
percent over the total fiscal year 1999 enacted level of $557.6 million
for Direct S&E and the VCRTF appropriations.
This increase is required to offset payroll cost growth and other
inflation that affects our ability to maintain current services ($28.7
million); expand the Youth Crime Gun Interdiction program ($11.2
million); implement the Tobacco Compliance initiative ($5.2 million);
implement the Bureau's Integrated Violence Reduction Strategy ($12.6
million); and implement the Bureau's Promotion Assessment System ($1.1
million).
In our fiscal year 2000 request, the Bureau is seeking $11.2
million and 43 FTE for expansion of the Youth Crime Gun Interdiction
Initiative program. This very successful program uses a multi-faceted
approach to break the chain of illegal gun supply to youths and minors
and reduces youth violence. ATF plans to continue providing partnership
and comprehensive crime gun tracing with State and local law
enforcement, provide rapid high volume crime gun tracing and crime gun
market analysis through the National Tracing Center (NTC), and continue
training ATF, State and local law enforcement. ATF is requesting to
expand this program to an additional 10 cities in fiscal year 2000.
ATF is also seeking $5.2 million and 38 FTE for the implementation
of the additional revenue collection requirements provided by the
Taxpayer Relief Act of 1997, (Tobacco Compliance law). Under the
provisions of this law, ATF will collect an estimated $2.5 to $3
billion per year in additional revenue by 2002. This will be derived
from cigarette taxes at the higher rates. This new law requires two
floor stocks tax increases effective January 1, 2000 and January 1,
2001, plus a new permit system for importers of tobacco products. In
future years, resources must be directed to increase compliance and
anti diversion efforts.
Additionally, ATF is requesting $12.6 million and 56 FTE for the
implementation of the Integrated Violence Reduction Strategy that will
focus on several different components of firearms enforcement aimed at
reducing the illegal acquisition, carrying, and use of firearms. The
Bureau has planned an integrated approach, through the use of
investigation of criminal violations, laboratory forensic analysis of
documents, and increased FFL inspections. The key element to success of
this integrated approach is the effectiveness of data exchange and
coordination. Through this effort ATF will maintain the integrity of
commerce in firearms, ensure the maximum productivity of the Brady law,
and further deter prohibited persons, especially those with criminal
intent, who are actively attempting to acquire a firearm from FFLs and
from illegal sales at gun shows and similar venues.
ATF is also seeking $1.1 million to implement the Promotion
Assessment system as proscribed by the settlement of the 1997 Class
action settlement. ATF plans to use this as an opportunity to replace
the existing system for special agent promotions with a vehicle that
creates an equitable approach to law enforcement personnel promotions.
ATF believes that the new system will assure the equitable treatment of
all special agents who apply for competitive promotions.
link to strategic planning and gpra
Our proposed budget funds ATF's three strategic activities.
Reduce Violent Crime.--Effectively contribute to a safer America by
reducing the future number and costs of violent crimes, complement
enforcement with training and prevention strategies through community,
law enforcement, and industry partnerships.
Collect Revenue.--Maintain a sound revenue management and
regulatory system that continues reducing taxpayer burden, improves
service, collects the revenue, and prevents illegal diversion.
Protect the Public.--Protect the public and prevent consumer
deception in ATF's regulated commodities.
The Bureau proposes a $461 million investment in programs and
projects associated with our Reduce Violent Crime Activity. Some of the
more notable examples of programs related to this activity include:
--Deny criminals access to firearms, which includes projects such as
the Illegal Firearms Trafficking program, the Youth Crime Gun
Interdiction (YCGI) and the proposed Integrated Violence
Reduction Strategy. The Illegal Firearms Trafficking program
identifies and reduces illegal sources of firearms to
criminals, while the Youth Crime Gun Interdiction program
identifies and reduces illegal sources of firearms to youths
and juveniles. The Integrated Violence Reduction Strategy will
focus on several different components of firearms enforcement
aimed at reducing the illegal acquisition, carrying, and use of
firearms. All three programs are supported by the Bureau's
National Tracing Center which received and processed more than
180,000 requests for traces of firearms in fiscal year 1998. A
major objective of ATF's ``deny criminals access to firearms''
program is to ensure strong enforcement of the requirements
outlined in the Brady legislation.
--Safeguard the public from arson and explosives incidents which
includes programs such as Prevent the Criminal Misuse of
Explosives, the National Repository for Arson and Explosives
Incident Information, Church Fire Investigations, Research
Programs, Effective Post-Incident Response programs and the
Bureau's very successful Canine Training Program.
--Remove violent offenders from our communities, which includes the
National Integrated Ballistics Information Network (NIBIN).
NIBIN provides support to law enforcement agencies addressing
serious firearms related violent crime. By partnering with the
FBI and representatives from State and local law enforcement,
ATF is ensuring that agencies interested in acquiring automated
ballistics technology are provided an opportunity to do so.
--Prevent violence through community outreach, which includes the
Gang Resistance and Education and Training Program
(G.R.E.A.T.). GREAT provides classroom instruction and a wide
range of community based activities to the most susceptible
teenagers. By enhancing their sense of self and decision-making
capability, youth can be empowered to avoid violence and
criminal activity.
The Bureau also proposes to invest $68 million in programs and
projects related to our Collect all Revenue Due strategy. During fiscal
year 1998, the Bureau collected more than $12 billion in revenue from
Federal taxes and fees on alcohol, tobacco, firearms and explosives. In
addition, $10 million in assets was recently forfeited from the
convictions resulting from the tobacco diversion investigation across
the U.S./Canadian border. Examples of programs that comprise this
activity include:
--Collect all the revenue due which includes the Diversion and
Smuggling program, and addresses alcohol trade issues.
--Implement a permit system for importers of tobacco products.
--Implement a floor stocks tax for tobacco products, which is
estimated to generate $200 million in additional revenue.
--Use electronic commerce, which involves the increased use of
automated systems to disseminate information and collect and
archive electronic documents as opposed to paper files. Our
objective is to increase efficiency by using file space more
productively.
Finally, ATF proposes a $69 million investment to fund programs and
projects associated with our Protect the Public Activity. Examples of
programs related to this activity include:
--Assure the integrity of the products, people, and companies in the
marketplace, which includes programs such as Assuring Alcohol
Product Integrity, Certificates of Label Approval, and Deny
Prohibited or Ineligible Persons Entry into Regulated
Industries.
--Ensure compliance with laws and regulations through education,
inspection and investigation which includes Federal Firearms
Licenses and Inspections, Explosives Licenses/Permits and
Inspections, Alcohol Industry Inspections, Industry Seminars,
Firearms and Ammunition Importation, and the National Firearms
Act requirements.
--Inform the public, which includes Industry and State partnerships.
Several noteworthy partnerships include the ATF's Office of
Science and Technology ``Partnership Approval Process'' between
ATF and beverage and flavor manufacturers. One example is ATF's
Partnership with the Department of Transportation, which is
assisting in the classification of explosive materials entering
into commerce. Another example is the ATF partnership with the
Institute of Manufacturers of Explosives and the American
Pyrotechnic Association (APA) to develop an ``Advanced
Explosives Training Class'' for all ATF inspectors. Nearly all
ATF Inspectors have received the advanced training. A final
example illustrating our commitment to partnering with industry
to protect the public is the partnership ATF is forming with
APA in encouraging citizens to turn in M80 devices using ATF's
hotline number. ATF and APA are very interested in reducing
injuries and accidents especially in light of the heavy
anticipated use of these items in celebration of the year 2000
New Year celebrations.
fiscal year 1998 atf accomplishments
ATF is a law enforcement organization within the Department of the
Treasury with a combination of responsibilities. Our vision is to
``Work for a Sound and Safer America . . . Through Innovation and
Partnership.'' ATF responds to the public outcry against crime,
violence, and other threats to public safety. Our vision helps us chart
the course to best serve the public and achieve new levels of
effectiveness and teamwork.
Year after year, ATF works to make America a safer place for its
citizens by fighting violent crime. ATF's position of being vested with
the enforcement of Federal firearms and explosives laws, as well as the
regulation of those industries, puts it at the forefront of violent
crime enforcement. We also continue to efficiently collect revenue in
accordance with current laws, contributing to the stability of Federal
Government and national economy. This is achieved through responsible
monitoring of regulated industries. Some accomplishments during 1998
include:
--Completed the Bureau's field restructuring to create an
organization that is unified in both philosophy and structure.
--Entered into a Memorandum of Understanding with the American Re-
Insurance Company, the U.S. Fire Administration and the
National Fire Protection Association to develop a state-of-the-
art interactive CD-ROM for advanced fire investigation
training.
--Created the National Integrated Ballistics Information Network
(NIBIN) that combines ATF's former CEASEFIRE and the FBI's
Drugfire Programs into a single Federally-sponsored initiative,
fostering partnerships between the ATF, FBI, State and local
law enforcement.
--Conducted more than 12,000 Federal Firearms Licenses inspections,
disclosing more than 6,200 violations.
--Conducted more than 7,000 Explosive Licenses inspections,
disclosing more than 2,800 violations.
--Conducted more than 165 seminars for firearm industry members.
--Conducted more than 22 seminars for explosive industry members.
--Initiated more than 330 stolen firearm investigations.
--Expanded the NIBIN database to include more than 70,000 projectiles
and 95,000 casings.
--Made 39 ballistic matches with projectiles and 506 ballistic
matches with shell casings.
--Fourteen firearm examiners used NIBIN to accomplish the workload
equal to 7,465 firearm examiners without NIBIN.
--The National Tracing Center received more than 180,000 trace
requests from Federal, State, local and foreign law enforcement
agencies.
--Initiated 183 explosive investigations that included 337
defendants, resulting in 98 explosive indictments, and 258
explosive convictions.
--Expanded the Youth Crime Gun Interdiction Initiative to 27 cities,
providing standardized published crime gun trace analysis for
the cities, focusing on determining the sources of firearms
recovered from juvenile and youthful offenders, and arresting
traffickers.
--Made significant contributions in the drafting of the ``Inter-
American Convention against the Illicit Manufacturing of and
Trafficking in Firearms, Ammunition, Explosives and Other
Related Material,'' which was negotiated by the Organization of
American States.
--Trained and deployed internationally twenty-one explosive detection
canines.
--Trained and deployed three canines for other Federal agencies.
--Trained three explosives detection canines for State/local
agencies.
--Deployed two explosives detection canines for ATF's canine program.
--Trained and deployed six accelerant detection canines for State/
local agencies.
--Deployed ATF explosives detection canine teams on 57 search
warrants, 2,155 consent searches, 1,527 security sweep/
searches, and 127 field demonstrations.
--Recovered with the 8 ATF explosives detection canine teams, 2
bombs, 52 firearms, 4 machineguns, over 2,000 rounds of
ammunition, over 50 pounds of black and smokeless powder, 203
sticks of dynamite, 1 hand grenade, identified explosives
residue during investigations, as well as post blast debris.
--Initiated the design phase for the Fire Research Laboratory with
construction anticipated to begin in late 1999.
--Provided funding to 101 different State and local agencies to
support their participation in the GREAT Program. Over 1,265
communities have officers certified in the GREAT Program.
--Conducted 22 ``train the trainer'' classes with 672 police officers
participating from across the U.S. in ATF's GREAT program.
--ATF trained more than 50,000 state, local, international, and
Bureau personnel in fiscal year 1998 in all areas of ATF's
expertise.
--Partnered with the Department of State for international training
of 920 police officials from 45 countries. ATF supplied the
course development and instructors.
--Established the ATF National Firearms Examiner Academy.
--Developed and deployed the first Rapid Response Laboratory.
--Conducted Technical Countermeasure Surveys of five ATF field
offices in partnership with the U.S. Secret Service and with
training provided by the National Security Agency in order to
insure a safe and secure working environment for ATF employees
assigned to those offices.
--Provided field support in Bosnia by authenticating audio recordings
for investigators of the International Criminal Tribunal for
the Former Yugoslavia (ICTY) in their investigation of war
crimes. These efforts have resulted in the indictments of the
former president of the Serbian Republic and the former
commander of the Serbian Army for planning and ordering the
executions of approximately 7,000 men after the fall of
Sebrenica in 1995.
--ATF served as expert advisors in the on-going United States/
European Union (EU) wine talks which attempt to resolve trade
differences between the two sides.
--ATF acted as the representative of the United States as a member of
the International Organization of Wine and Vine (OIV) during
meetings in Paris and Lisbon, Portugal.
--ATF was involved as technical advisors in intellectual property
rights discussions before the World Trade Organization, as they
relate to geographical indications on wines and spirits.
--ATF Specialists, lawyers, and Special Agents have been actively
involved in the International Taxation Training program by
acting as instructors and creating lesson plans. The purpose of
the training program is to encourage the development of free
market practices in emerging democracies. Three such courses
were held in 1998, two in ATF Bureau Headquarters and one in
Kiev, Ukraine.
--As part of its role in informing ATF personnel about foreign
products and standards, ATF's Alcohol Import-Export Branch
completed the updating of the ``Foreign Appellations of Origin
for Wine'' files. These files have to be updated periodically
so ATF's Label Specialists can accurately process label
applications for imported wines.
--ATF completed a compilation of statistics relating to the
international trade in wine, beer, and distilled spirits. This
information will be provided to interested members of the
alcohol industry.
--ATF continued to promote a good working relationship with foreign
governments through direct communication with foreign
government officials in order to facilitate international trade
in alcohol beverages and eliminate tariff and non-tariff trade
barriers.
--ATF's Diversion Branch was established during fiscal year 1998. The
Branch was formed in an effort to look at all potential
diversion related areas and has been quick to point out trends
in this area.
--ATF conducted approximately 140 alcohol and tobacco diversion
investigations. Seizures of alcohol and tobacco monies and real
property equaled $1.7 million in fiscal year 1998. Assessment
of taxes in fiscal year 1998 totaled approximately $284,000.
--ATF hosted the 4th annual Alcohol Diversion and Contraband
Cigarette Trafficking Conference in Denver, Colorado on July
21-23, 1998 which brought together those individuals who share
a common interest in alcohol diversion and contraband cigarette
trafficking. Participants included ATF, Assistant United States
Attorneys, State Tax Administrators, representatives from state
law enforcement agencies, as well as foreign government
personnel.
--ATF formed a national task force to look into the issue of slotting
fees in the alcohol beverage industry. To date, ATF is
conducting three national slotting fee investigations.
--ATF personnel attended more than 25 meetings, seminars and trade
shows held by members of the regulated industry in 1998. Over
500 industry members attended either public or private seminars
to discuss the trade practice regulations or industry concerns.
--In fiscal year 1998, ATF identified products containing Ginseng.
Labels of these products did not reflect the product's true
alcohol content and beverage character.
--ATF issued a press release to inform the public that Ginseng
products contained alcohol and were being sold at retail
outlets such as grocery stores, convenience stores and health
food stores. ATF notified manufacturers, importers,
distributors and retailers of the federal requirements involved
with selling liquid Ginseng products that contain alcohol.
State liquor authorities and U.S. Customs were also advised.
--ATF established an internal ``Alcohol Policy Working Group'' (APG),
to examine current ATF policies on labeling, advertising, and
promotion of beverage alcohol in relation to health and youth
issues.
--ATF has been working closely with the Department of Health and
Human Services, Treasury Officials, and the Wine Institute on
the wording and placement on beverage alcohol labels of two
different directional statements about the health effects of
wine consumption.
--During fiscal year 1998, ATF responded to over 100 complaints or
requests regarding alcohol beverage products.
--ATF contracted with the U.S. Research company to conduct a survey
of consumer interpretation of claims made on wine labels. The
survey was designed to assess whether wine consumers
distinguish between standard wine and wine specialty products
based on information on product labels and to assess whether
placement of information on product labels (side only versus
front and side) affects consumers' ability to discern between
wine and wine specialty products.
--ATF identified the need to improve customer service, improve its
processes within ATF along with achieving the desired culture
for ATF. The Federal Quality Consulting Group and members of
ATF's Product Compliance Branch formed the Beverage Alcohol
Streamlining Team (BAST). During fiscal year 1998 this team met
regularly in order to accomplish their goal of conducting a
business process review.
--In fiscal year 1998, ATF representatives conducted labeling
seminars at a Latin American trade show at the Miami World
Trade Center for a French delegation visiting Washington, DC.
--ATF was given primary responsibility for conducting a thorough
study of alternative methods for taxing distilled spirits,
specifically, moving the point of tax payment for distilled
spirits to the wholesale level. Working with the U.S. Customs
Service, the Office of Management Budget, and the Office of Tax
Analysis at Main Treasury, ATF completed the study and
forwarded a full report to the Under Secretary's office on
March 13, 1998. The report was signed by the Under Secretary on
April 15, 1998 and submitted to the Congress.
--In August 1997, the Taxpayer Relief Act was enacted. This law
contained numerous provisions that affected ATF-regulated
operations, notably in the tobacco regulations. ATF evaluated
the law and began work on implementing the applicable sections.
Since October 1, 1997, ATF has published three procedures,
three notices of proposed rulemaking, and two treasury
decisions related to this law. Additional documents are in
review.
--ATF has formed a work group to make the necessary changes to
regulations, forms and procedures to implement tobacco
provisions of the Balanced Budget Act of 1997. ATF is preparing
for the 2000 and 2002 tobacco tax increases, floor stocks
taxes, new permit requirements for tobacco importation, and
other significant changes.
--ATF directed or assisted several projects to promote Electronic
Commerce. These projects were started or worked on during
fiscal year 1998: The use of Document Management and Imaging
Software (using the Eastman Software). ATF obtained the
software in fiscal year 1998 and it is in development phase.
Conducted studies and received proposals for analytical
software for trends and anomalies. Researched and oversaw a
contract to convert historical files to images for filing. ATF
developed a test system to provide the capability to taxpayers
of completing forms on computers and then submitting the forms
to ATF electronically. We have arranged a test project with
four tobacco producers. ATF has also been working toward
electronic payments, including electronic wallets, cyber cash,
Internet debits, and automated clearing house (ACH). ATF has
made arrangements to conduct a limited pilot program at NRC to
accept Credit card payments for collecting some tax payments
via telephone.
--ATF streamlined the permit application process, so that all of the
information and forms needed in order to enter one of the
regulated industries can be downloaded from the ATF web site.
--The National Revenue Center assumed nationwide responsibility for
licensees/permittees and operations for most commodities. ATF
coordinated the transfer of functions to the National Revenue
Center from the Tax Processing Center, Cincinnati and from the
remaining Technical Services offices. The Atlanta Technical
Services office was closed and functions from Atlanta, as well
as some functions from San Francisco and Philadelphia Technical
Services, were transferred to the NRC.
--Conversion and migration of information in Special Occupational Tax
and Federal Excise Tax mainframe databases to a local
``Oracle'' based server environment was begun.
--ATF Permits Issued/Registrations Processed in fiscal year 1998:
Alcohol Fuel Plant............................................ 13
Beer--Brewery (Registration).................................. 271
Wine--Bonded Winery/Bonded Wine Celler/Taxpaid Wine Bottleing. 264
Distilled Spirits--Dillery.................................... 42
Non-Beverage Alcohol--Fruit Flavor Concentrate Plant,
Specially Denatured Spirits, Tax-Free User.................. 315
Tobacco--Export Warehouse, Manufacturers...................... 36
Firearms--Tax-free Manufacturer (Registration................. 5
Distributors--Wholesalers..................................... 1,015
Distributors--Importers....................................... 727
--Purchased 710 Astro-Spectra mobile radios, 122 Quantar repeaters,
and over 150 Spectra-Consolette base stations, making ATF the
lead among Treasury bureaus in deploying digital and narrowband
capable equipment to field agents.
--Distributed the 1st, 2nd, and 3rd quarterly editions of the ATF
Reference Library CD-ROM to 2,500 field office personnel who
now have ``at their fingertips,'' no matter where they are
deployed, the most up-to-date information consisting of ATF
directives, internal guidelines, forms, tax rates, and other
data of import to the prompt and efficient performance of their
official duties.
--ATF has expanded its Internet site, http://www.atf.treas.gov, to
include current information, links to the Federal Register,
directorate information and expanded information on firearm
questions. Congressional offices, the public and members of the
industries that ATF regulates visit the site daily. In 1998,
ATF received more than 8,000 e-mail queries from the public,
the media, and industry members.
--Experienced a 350 percent increase in ATF's Internet web site
visits from 700 per day in fiscal year 1997 to over 2,500 per
day in fiscal year 1998.
--Continued Year 2000 date compliance efforts, and information
systems security to ATF's 4,100-member user community.
--Deployed the Enterprise System Architecture (ESA), utilizing the
innovative ``seat management'' acquisition strategy to provide
and maintain a nationwide high speed data communications
network, standardized e-mail and office suite software,
encryption-protected access to ATF data systems. Under ``seat
management'', ATF leases information technology services,
namely, management, operation, and maintenance of desktop
computing services and the associated networks infrastructure,
on a ``per seat'' basis. ESA supports 4,100 employees
nationwide in 188 points of presence.
--ATF's Intranet site was redesigned with each directorate and
executive level office represented. The Intranet is the
internal communication vehicle for employees to obtain
information on ATF's activities, programs, forms, publications,
current events, and initiatives.
--Linked ATF's Intraweb to the Treasury Intranet and enhanced
Intraweb services to provide employees access to an electronic
resource library consisting of up-to-date ATF directives,
internal guidelines, forms, and other information including
broadcasts.
--Received over 6,700 applicants for agent and inspector positions
were gleaned out of recruitment activities during that year
(e.g., (4) Special Agent and (1) Inspector announcement). On
average 50 percent of those who applied were found to be
qualified. 12 percent of those determined qualified were
tentatively selected with more selections underway.
--Obtained authorization from the Congressional Subcommittee on
Public Buildings for the ATF Headquarters Relocation
Prospectus, and narrowed the number of potential sites for the
new Laboratory Center.
--Implemented heightened security measures at Headquarters and
standardized security requirements for all major field offices.
--Implemented several external initiatives including the Welfare to
Work Program, and the Federal Computers to Schools program.
--Implemented a program which encourages employees to sell their own
homes when relocating without use of third party relocation
companies to help offset the rising cost of permanent change of
duty station moves.
--Completed the first phase of integrating a new procurement sub-
system within Financial Management Information Systems.
--Identified changes to the payroll interface and time and attendance
systems to record payroll costs by ATF's major activities.
fy 1999 year in progress
ATF and its predecessor agencies have rendered honorable and
effective service for generations. As with all organizations, we have
gone through changes. Effective organizations continuously re-examine
the way they do business. Over the last several years, we have sought
to improve internal controls, accountability, management training and
operational processes and systems. These changes have provided the
framework for making ATF a stronger more effective organization. With
the strong support and encouragement of the Committee, we have begun to
make significant strides in these areas.
When I appeared before this subcommittee last year, I talked about
implementing a series of operational changes. We have made substantial
progress in implementing these changes. As part of our continued work
to build a sound and safer America through innovation and partnerships,
we face several important issues throughout fiscal year 1999,
including:
--Faced with a number of special agents eligible for retirement over
the next 5 years, coupled with the need to staff the
organization to effectively combat crime, identify tax revenue,
and to address program needs, ATF has moved into an aggressive
recruitment mode.
--Hiring 162 special agents to support the Youth Crime Gun
Interdiction Initiative Program.
--Hiring special agents for the Violent Crime Coordinator program.
--Completing the canine training building by May 1999. The kennel
building is currently on schedule and should be completed by
the summer of 2000.
--Expanding the National Tracing Center and the NIBIN program.
--Develop a plan for the tax gap study.
--Implement Determine At Risk Taxpayers (DART) program. With this
program, ATF generates lists of revenue facilities to be
inspected. Since we do not have an automated system to analyze
the data in our systems, the plants to be inspected were
selected manually. By next year's planning cycle, we plan to
have a software program in place to automate this process.
--Implement Relational On-Line Analytical Program (ROLAP). Analytical
software for trends and anomalies to be used to help predict
problem areas and direct inspections where problems are more
likely to be found.
--Implement Pandora, a program to determine jeopardy to the revenue.
There are several sub-programs listed under the Pandora
Program. Inspections of these industry members are vital in
determining whether any jeopardy to the revenue exists and the
general compliance rate within certain industry segments.
Inspections conducted under Pandora could generate additional
indicators of revenue jeopardy, requiring adjustments to the
DART Program.
--Continue with consolidation of Technical Services offices into one
National Revenue Center.
--Complete Special Occupational Tax database and match to state data.
--Complete new directive on resolving tax liabilities.
--Initiate advanced training for inspectors and specialists revenue
issues.
--Provide training to field personnel on diversion schemes for
alcohol and tobacco products.
--Continue imaging of data at National Revenue Center.
--Develop better criteria for proof of export of alcohol and tobacco
products.
--Participate in international training on revenue matters.
--Coordinate with state agencies on diversion matters for alcohol and
tobacco products.
--Implement provisions of the 1997 Taxpayer Relief Act.
--Implement Beverage Alcohol Streamlining Team (BAST). During fiscal
year 1998 this team met regularly in order to accomplish their
goal of conducting a business process review. Our goal is to
implement, in segments, the team's recommendations and approved
business improvements during fiscal year 1999.
--Continue to provide guidance to industry on directional health
statements.
--Continue development of The Beverage Alcohol Manual (BAM), A
Practical Guide.
--Continue development of Alcohol and Youth policy.
--Provide access to label approvals on the Internet.
--Conduct Market Basket Samplings on specialty products.
--Conduct slotting fees investigations.
--Conduct label analysis on new products and/or new labels.
--Conduct industry seminars.
--Support U.S. Trade Representative's Office.
--Participate in World Trade Organization discussions relating to
geographical indications on wines and spirits.
--Having received an approved prospectus, the Bureau plans to
continue efforts to construct the new Laboratory and Fire
Research Center.
--Continuing efforts, with the committees support, to relocate the
ATF Headquarters to a facility that will bring the Bureau in
compliance with the recommendations of General Services
Administration's security reviews.
--During the past year, ATF's Year 2000 (Y2K) Program Management
Office completed identification and assessment of the Bureau's
IT and non-IT systems readiness for Y2K. Modifications and
replacement of our non-compliant hardware and software is
continuing in order to ensure proper systems operations as the
century date changes. I am pleased to report that all mission
critical systems will be fully compliant by the end of fiscal
year 1999.
--Pilot collaborative efforts with four communities, their police
departments and the Boys and Girls Clubs to develop and
continue experimentation of GREAT to include teaching the GREAT
curriculum in non-school environments. In addition GREAT
partnerships are being developed with the Boy and Girl Scouts
of America and the police Athletic League in a number of
communities. These partnerships will become part of
comprehensive strategies to reduce youth violence and gang
development at the local level. These partnerships assist
communities in providing positive places for children to go in
the summer months, where they have positive role models and
adult leadership to reinforce the lessons taught during the
school year in GREAT.
atf's efforts to combat terrorist acts
The current Presidential Decision Directives (PDD) outline the
responsibilities and lead authority for some agencies when dealing with
terrorist incidents. The PDDs also direct the United States Government
to use all of its available resources and expertise to combat terrorist
incidents. ATF's expertise in the firearms, arson and explosives
related fields are among the best in the world and will greatly benefit
the United States in the fight to combat terrorism.
ATF's mission includes the investigation of bombings, firearms
trafficking, arsons etc. These functions are at the core of our
mission. Regardless of the motive for committing the crime, ATF
dedicates the necessary resources to investigate violations under our
jurisdiction. ATF's laboratories are involved in other research
projects such as explosive residue tests from large vehicle bombs,
prevention of contamination and decontamination issues in bombing
investigations, and advanced evidence packaging and preservation.
Because of our unique mission, research is a necessary part of our job.
We have a great deal of expertise in explosives research including the
``Dipole Might Study,'' a large vehicle bomb research program, funded
in 1996, under the Anti Terrorism and Effective Death Penalty Act. ATF
has also formed an Explosives Study Group to coordinate our research.
Section 732 of the Antiterrorism and Effective Death Penalty Act of
1996, including: the tagging of explosive materials for purposes of
detection and identification; the feasibility and practicability of
rendering common chemicals used to manufacture explosive materials
inert; the feasibility and practicability of imposing controls on
certain precursor chemicals used to manufacture explosive materials;
and State licensing requirements for the purchase and use of commercial
high explosives. ATF is continuing to research and test methods for
efficiently rendering inert or desensitizing ammonium nitrate
fertilizer.
Congress also authorized the Secretary of the Treasury (through
ATF) to establish the first National Repository of information relating
to arson and explosives incidents. This system is still under
development and includes information from more than 80,000 arson and
explosives related incidents.
Examples of the resources and expertise that ATF has include:
--Investigating nearly 700 explosives incidents per year.
--Laboratory (3) staff with 26 forensic chemists trained in the
analysis of fire and explosives debris. The laboratories
analyze evidence from nearly 700 bombings per year, including
evidence sent by local law enforcement.
--Four National Response Teams (NRTs) with 120 members including Fire
Protection Engineers, chemists, bomb technicians.
--International Response Teams (IRTs)--16 activations around the
world in conjunction with the Department of State, Office of
Diplomatic Security. ATF also conducts assessments of foreign
response capabilities relating to explosives issues for the
Department of State's Anti-Terrorism Assistance program.
--Nearly 300 certified explosives specialists.
--24 bomb technicians.
--Mobile forensic laboratory which travels to the scene.
--42 fully equipped NRT trucks.
--75 Certified Fire Investigators.
--An Explosives Study Group (ESG) tasked with a number of research
and development projects relating to explosives used in
bombings.
--Additional explosives research projects such as Dipole Might,
(large vehicle bomb study) and Pipe Bomb study (effects of pipe
bombs); both are coordinated through the Technical Support
Working Group (TSWG) which was formed by the National Security
Council.
--Partnership with the explosives industry and the fertilizer
industry to form programs such as ``Be Aware For America.''
--A world class Explosives Detection Canine Program. This training
program has trained more than 170 explosives detecting canines
for the Department of State's Anti-Terrorism Assistance
Program. These dogs are stationed in 12 countries around the
world. Additionally, ATF has 8 special agent handler teams in
the United States and has trained canines for the CIA, IRS and
other State or local department Congress also tasked the
Secretary of the Treasury with developing ``odor recognition
standards for explosives detecting canines.'' ATF developed
these standards and they were published in September 1998.
--Two arson/explosives profilers assigned to the FBI's Behavioral
Science unit.
information technology
As we approach the new millennium, ATF has worked diligently in an
effort to keep pace with an extraordinary amount of technological
change. The Office of Science and Technology (OST) supports ATF's
strategic law enforcement and revenue collection activities. The Bureau
will focus on four areas in fiscal year 2000 and beyond:
Information Technology Infrastructure
Agents, inspectors, and auditors deployed in field offices received
notebook PCs with docking stations. Notebook PC as well as stationary
PC workstations are connected via local area networks (LANs). The LANs
are connected with a current technology high-speed wide-area network
(WAN). The WAN links the offices within ATF to each other and becomes
the electronic backbone of ATF's data communications.
The new network infrastructure provides more efficient ways for ATF
to manage and transmit data, text and images--facilitating key
capabilities like electronic mail and access to the Internet, intraweb
services, and other law enforcement.
Laboratory Services
ATF's laboratories specialize in examining arson, firearms, and
explosive evidence and in analyzing alcohol and tobacco products.
Controls are maintained to ensure the quality and integrity of
laboratory operations including on-site investigative support of both
national and international response teams. ATF's three forensic science
laboratories are fully accredited by the American Society of Crime
Laboratory Directors. ATF maintains an independent test sample service
to persevere the proficiencies of individual examiners. A second
examiner and a supervisor ensure accuracy, completeness, and
scientifically validate conclusions by reviewing all examiner findings.
ATF uses stringent evidence packaging protocols to detect and guard
against contamination among forensic samples and cases. Eleven
laboratory management personnel are subject matter experts within their
specific disciplines. All ATF laboratories use analytical methods and
procedures that meet the highest quality assurance standards for
precision and accuracy.
Audit Services
ATF's field auditors provide an important investigative tool for
solving financially motivated crimes such as arson and the illegal
diversion of alcohol and tobacco products. Auditors determine the
financial condition of the business and suspects, develop investigative
leads and criminal charges through examinations of financial records,
participate in the conduct of interviews, assist the case agent in
determining, for example, if an insurance claim is fraudulent, and,
ultimately, provide expert witness testimony at trial.
Technical Support
The Technical Support Division provides tactical radio
communications, vehicles, new investigative equipment, investigative
supplies, agent safety equipment including body armor, electronic
surveillance technologies, computer forensics, training of tactical
operations officers and technical enforcement officers, and audio,
visual, graphics and photographic services.
training activities
ATF's Office of Training and Professional Development provides our
employees with high quality and innovative training programs by
assisting in their professional development, thus improving performance
and supporting our Strategic Plan. Training initiatives, which enhance
employee development and performance, include our New Professional
Training Program, Advanced Firearms Trafficking, Alcohol and Tobacco
Diversion, Advanced Explosives for Inspectors and Certified Explosives
Specialists, and other technical programs. Each of these training
programs seek to expand the base of employee knowledge and
understanding regarding ATF's roles, missions and capabilities, and to
capitalize on the ever-increasing collaboration between agents and
inspectors in the field. ATF also provides training to thousands of
other Federal, State, local and international law enforcement officers.
Training areas include arson investigation, explosive identification
and regulation, firearms trafficking, and post blast investigations.
During this FY, ATF's Office of Training and Professional Development
has created a state-of-art Academy for State and Local Firearm and
Toolmark Examiners which will be the first of its kind in Federal law
enforcement.
The GREAT Program is having a positive effect on preventing
violence. Students, parents, GREAT officers, police chiefs, and
sheriffs from all over the country testified before the Senate
Appropriations Committee this past May. The constant theme echoed
during that hearing was that ``GREAT works!'' The successes of the
GREAT Program will continue to help our communities achieve the
reduction in gang and youth violence that is so very important to the
well being of American society.
management and administrative efforts
During fiscal year 1998, ATF's Office of Management once again
provided leadership, coordination, and direction, working in
partnership with other senior Bureau officials in executing ATF's core
business processes. The Office of Management focused on operating on a
fiscally sound basis, meeting external mandates, and protecting the
Bureau's resources, while continuously improving customer service. Some
specific management accomplishments include:
--Developing a Year 2000 contingency plan for mission critical
information technology systems such as payroll, vendor payment,
and building and facility security systems;
--Providing Contract Officers' Technical Representative (COTR)
refresher training for personnel handling significant
procurements, thus improving internal management controls; and
--Developing and implementing vault inventory (bar code) systems at
two major field sites to track more efficiently asset
forfeiture and seized property.
A challenge facing ATF is relocating its Headquarters to a facility
that is safe and secure. ATF is requesting $15 million and continued
support from the committee to meet this challenge.
financial management
fourth unqualified chief financial officers audit opinion
I am proud to announce that after thorough review and audit by the
Department of the Treasury Office of Inspector General and Price
Waterhouse/Coopers, the Bureau received its fourth successive
``Unqualified Audit Opinion''. This yet again confirms that the
Bureau's financial statements conform to all applicable guidance,
regulations and statutes, and demonstrate sound financial management by
a talented staff of professionals.
recruiting/promotion efforts
ATF created a recruitment team to identify and maintain liaison
with a number of sources including colleges and universities. ATF has
also reorganized the Personnel Division to meet this need. To address
diversity, ATF has increased the visibility of the Diversity Career
Impact Program (DCIP), which aids our outreach efforts nationwide.
Partnerships between headquarters and field personnel have made it
possible for the Diversity Career Impact Program representatives and
the Personnel Division to work together cohesively.
ATF has aggressively marketed its recruitment efforts at over (19)
Job/Career Fairs sponsored by organizations that are recognized for
reaching significantly under represented communities in our work force.
Examples of job/career fair organizations participating are:
--National Congress of American Indians (NCAI Conference)
--Hispanic Conferences (National Diversity Career Expo.)
--John Jay College Career Fair
--National Black Police Association
Linked to these efforts the Bureau has pursued applicants for its
vacancies in the primary areas of special agents and inspectors with
the following results:
Specifically, during the last six months of fiscal year 1998, 98
new agents were added to our rolls. For the first half of fiscal year
1999, 68 agents and inspectors will have reported; and another 42 have
been scheduled to report by the end of June; 132 additional special
agent selections have been made and are in the background investigation
stage; 360 applicants for special agent positions are currently in the
interview process; and 700 applicants are under initial review.
Additionally, 114 inspector selections have been made and are in
background investigation process; 314 of 923 applications for inspector
positions paneled are currently in the interviewing stage; in addition,
106 applications for the Outstanding Scholar Program are also in the
interviewing stage.
Our field offices have interviewed over 220 agent applicants, 91 of
who are eligible candidates from the Treasury Enforcement Agent
Examination Register. Selections from that group started in February
and should be completed this month. Last but not least, we have opened
another announcement for grade 9 special agents that closed March 30.
For fiscal year 1999, ATF currently has an additional 6,000
applicants in the pipeline from various sources. ATF is also working to
improve the quality of our applicants by using various recruitment and
information dissemination mechanisms such as: Office of Personnel
Management (OPM), student programs, establishing relationships with
colleges and universities for future pools of qualified candidates,
Internet distribution and applications and the like. Cooperative
Education Agreements have been established with 18 colleges and
universities and we are continuing to pursue other educational
facilities.
conclusion
We thank the committee for its continued support in our base
restoration efforts over the last two fiscal years. The restoration of
base funding has allowed the bureau to strengthen its infrastructure
and foundation, in order to adequately support regular program
activities and increasing demands as well as program expansion. Our
focus on recruitment during fiscal year 1999 and fiscal year 2000 is an
integral component of our base restoration and the achievement of our
vision of working for a safe and sound America through innovation and
partnership.
Contributions from our non agent, non inspector staff has proven
invaluable and provides critical infrastructure support to in all
Bureau activities. Most importantly they are the diverse component
ingredients of our fiscal year 2000 program initiatives. These are the
talented ``behind the scene'' individuals that support our science and
technology efforts in investigations and tracing, our accounting and
finance operations when collecting the revenue, training objectives,
human resource management operations and building management and
security requirements.
As we move into the 21st Century, I recognize the importance of
having a strong balance among all elements of ATF's population, in
order to meet our goals of reducing violent crime, protecting the
public and collecting revenue. We encourage the committee to continue
its support of our base restoration and recruitment efforts among these
ranks.
This completes my statement. I will be happy to answer any
questions you may have and I would like to express my sincere
appreciation for the support that the Committee has provided us. I look
forward to working with the Committee to further our mutual goals of
safeguarding the public and reducing violent crime.
INTEGRATED VIOLENCE REDUCTION STRATEGY
Senator Campbell. Thank you, Director Magaw. Let me ask you
a couple of questions here.
The ATF is requesting additional funding as part of the
violence reduction strategy dealing with gun shows, you
mentioned those, and flea markets as sources of illegal
firearms purchases. I have here, in my notes, a copy of a
Spokane, WA, newspaper that states in a stakeout that they
yielded no illegal firearm sales.
I assume you have been conducting undercover investigations
around. Could you tell me if you have gotten any handle on what
percent of sales at these gun shows are illegal sales?
Mr. Magaw. It is a little too early for us to give the
percent. The study that you talked about, or the experiment
that you talked about, did not involve any ATF personnel. We
are not involved in that at all, and that is the direct
opposite of what we are finding in the investigations that we
conduct.
Virtually almost every gun show in America over a weekend
period of time will have some illegal gun sales.
Senator Campbell. So a person goes to a gun store, and
since they are somewhat regulated now with background checks
and so on, he cannot get the gun he wants, he goes to a gun
show and gets what he wants anyway? That is basically what is
happening apparently.
Mr. Magaw. When they do not want to go to a gun store
because--they still are doing it through a gun store, though,
through straw purchases. If I am an illegal and cannot
present----
Senator Campbell. Get somebody that is legal to buy it for
me.
Mr. Magaw. Take someone to buy it for me, yes. But as to
wanting to stay away from all that, wanting to stay away from
that risk, because some of them have felony warrants for their
arrest. They just do not want to be noticed. They will go to a
gun show to buy a weapon.
GREAT
Senator Campbell. The president has requested $10 million
for grants to state and local law enforcement for the Gang
Resistant Education and Training Program, which was commonly
called GREAT. I have been a very big supporter of that program,
as Senator Kohl was when he was ranking minority on this
committee, as you know.
Last year we provided $13 million and that probably was not
nearly enough to fund all of the qualified applicants. But how
many law enforcement agencies will receive GREAT funding this
year?
Mr. Magaw. How many law enforcement groups did?
Senator Campbell. Yes.
Mr. Magaw. In 1999 we had 109 cooperative agreements this
year, right now, and spent $13 million for those 109
cooperative agreements.
Senator Campbell. How many requests did they have, do you
know?
Mr. Magaw. 316.
Senator Campbell. What was the original number, 109?
Mr. Magaw. We were able to fund 109 of the 316. We had
estimated, remember last year when we talked, we estimated
about $40 million would take--and that is about right. That is
about what it would have worked out to be.
Senator Campbell. We also, in a hearing last year, in the
conference report there was supposed to have been a long-term
evaluation about the impact of the program on youngsters. We
urged the ATF to contract with the National Academy of Sciences
to conduct that evaluation. Have you followed through with
that?
Mr. Magaw. The longitudinal evaluation is still in
progress. We should have some final statistics back on that
within a few months.
Senator Campbell. Could you provide the committee with that
result?
Mr. Magaw. Yes, sir.
POLICY ON FEDERAL FIREARMS LICENSEE RECORDS
Senator Campbell. Last year the ATF was directed to develop
a written policy on collection and maintenance of Federal
firearms licensee records. How is that policy being developed?
Where is it in the mix?
Mr. Magaw. I did not understand that question, Mr.
Chairman.
Senator Campbell. Last year the ATF was directed to develop
a written policy on the collection and maintenance of Federal
firearms licensee records and was asked to provide a copy of it
to this committee. Is that report ongoing now?
Excuse me, I apologize, we got it last night.
Mr. Magaw. That report was delivered yesterday. It was 2
weeks late, Mr. Chairman, and we apologize for that.
Senator Campbell. I had not seen it. Without reading this
thing myself, does this policy make any change in current
practices? I see a couple of people shaking their heads no,
back there in the audience.
Mr. Magaw. The policy that we have now is two years on
multiple sales purchases. And if they are not inquired or not
part of an investigation we will keep them for eight years. The
problem is that we are still continuing to look at that because
it is such a new program because the 2-year period may, in
fact, not be enough. But we want to be able to show that
through inquiry and investigations.
Senator Campbell. Just from my perspective, eight years
seems like an awful long time to keep tracing information, too.
But I will read that as length, as I can.
CEASE FIRE
The ATF and the FBI have ballistic ID systems, ceasefire
and drugfire. Do they work totally independent, or are they
compatible systems? And if they are not, why should we not have
them----
Mr. Magaw. They used to work totally independent. They do
not work totally independent now.
Senator Campbell. Does one program do something the other
one would not?
Mr. Magaw. Pardon me?
Senator Campbell. Does one make some certain IDs that the
other program would not?
Mr. Magaw. Yes; what we have done is put them under one
program, called the National Ballistic Information System.
Drugfire, the one that the FBI had developed, does shell
casings. The one that ATF developed does both.
Now what we are trying to do, and we are very close to
getting it done, is tying those machines together so that they
will talk to each other, and therefore when a police department
in one location of the country makes an inquiry, it would be
checked through both drugfire and the old term ceasefire. We
now refer to them as NIBIN.
The funds being used cannot be spent now unless it is
making the systems whole and one and benefit to the
investigative organizations around the country.
Senator Campbell. Very good. I have some further questions
that I would like to submit in writing because we are running
on in time a little bit here. So if you could get those answers
back to me, I would appreciate it.
Mr. Magaw. I would be happy to.
Senator Campbell. Senator Dorgan, did you have some
questions for Director Magaw?
GREAT PARTICIPATION FROM INDIAN LAW ENFORCEMENT
Senator Dorgan. Just brief questions. The Gang Resistance
Education and Training Program, I heard your answer to Senator
Campbell.
We do not have much participation in that program from
Indian Nation law enforcement programs or officers, do we?
Mr. Magaw. That is correct, Senator. We have set aside
money each year to work with the Indian reservations. But up
until this point, we have not been able to get them to accept
the program.
Part of it may be our fault on communications. We are going
to work harder at that in the next year because we do believe
that it is--and it has shown around the country to be a very
valuable program and we think that presented on Indian
reservations by Native Americans to those children will be a
benefit to them.
Senator Dorgan. I think its value on Indian reservations
would be extraordinary, so I would encourage you and want to
work with you, as I am sure Senator Campbell would, to make
sure that we extend that if we can.
Senator Campbell. If the Senator would yield for a minute,
one of the problems we have had with a lot of these programs
that are available to Indian reservations is that they simply
do not know they are available. The agencies, from my
perspective, have really fallen down in just getting the word
out and letting the tribes know that they can get in the mix,
that they can avail themselves of the programs.
Mr. Magaw. That is what we intend to do, to make sure we
are going to those Indian reservations and doing a better job
of selling the program. We thought that the funds sitting there
would be used and in a couple of cases it has been $25,000 or
more that has not been used during the year. So we are going to
approach that.
BOOTLEGGING OF CIGARETTES AND ALCOHOL
Senator Dorgan. Mr. Magaw, can you just tell me generally
what kind of problem, or what size of problem, exists in this
country with respect to bootlegging of cigarettes and alcohol
without tax consequences? What kind of enforcement effort----
Mr. Magaw. We constantly are working a fairly large number,
and I would be happy to share that in private with you, a
fairly large number of tax diversion cases. You have in this
country States where their tax rate is about 5 cents on a pack,
and others that are $.75 or $.80 or $.90 or $1. They are going
up now more. And so you are finding truckloads of cigarettes
being moved from one State to another, and huge amounts of tax
being mispaid to that particular State.
And as the Federal taxes go up, it does not create a real
problem for the diversion, so much as when individual States go
up. In fact, you have a situation right here now where Maryland
tax is going to go up fairly substantially and the very lowest
State, Virginia, sits right next to it.
Senator Dorgan. We have a problem with Indian reservations
in these issues?
Mr. Magaw. Yes, there are a number of cases involving
Indian reservations and we constantly have cases going on
involving that. And we can share some of that information with
you, also.
BRADY LAW BACKGROUND CHECKS
Senator Dorgan. Let me briefly ask you a question about
background checks for firearms with respect to pawnbrokers.
There is a controversy with respect to a requirement of
pawnbrokers to do an instant check, either when they check the
gun in or when it is redeemed. Tell me a bit, if you can, about
our experience with that? What is your impression of the
importance of that and how does that fit in with the instant
check system?
Mr. Magaw. The pawnshop dealer has a real problem on their
hands, because as a person walks in with a weapon to pawn it
they want to make sure that weapon is not loaded. And so as a
result what happens a lot of time is they check the weapon to
make sure it is not loaded so it is not a danger to anyone else
in their shop. Instead of giving it back to the individual and
then run the check, they have it in their possession. And if
they have it in their possession when they find out this is a
prohibited person, they really cannot give it back to them.
On the other hand, trying to work with them and work within
what we think the Congress intended, which is to have them go
ahead and check the safety of the weapon, hand it back to the
individual, then they run the check. Now after they run the
check and the individual is a person who is prohibited, the gun
dealer now does not have it in their possession, the prohibited
person does, and then they pick the phone up and notify local
authorities. They have 48 hours to do that.
So we think, within the way it is set up there is a way out
for the pawnbrokers. Sure, they have it 24 to 48 hours before
law enforcement catches up with them or might have a chance to
talk with them, but it is really the only way we can see that
it works, because it was fairly clear to us that the Congress
did not intend for the pawnshop dealer to have to be the seizer
of this weapon by running the check.
Senator Campbell. If I might interject, that is a pretty
confusing method. If he does not give the gun back, he risks
some bodily harm possibly. If he does give the weapon back and
it is not in his possession and the guy clearly is a criminal,
then he may make the call but the guy that is going to use the
gun has it and he is out of there.
Mr. Magaw. That is right, it is a very difficult situation
for them. And yet they cannot not look at the weapon to begin
with because many of them are coming in with them loaded.
PROPOSED NEW HEADQUARTERS FACILITY
Senator Dorgan. Mr. Magaw, in the interest of time, let me
submit some questions to you. I wanted to ask about the
building of a new facility for BATF. As you know, the Justice
Department was evaluating security risks and I think BATF was
judged to be a level 4, the highest risk. You are now in leased
space. I understand you have other requirements and needs.
SUBMITTED QUESTIONS
But I do want to ask a series of questions about siting and
other issues, so let me send them to you and ask that you
submit them to the subcommittee.
Mr. Magaw. All right, sir, I would be happy to.
Senator Campbell. I understand you are looking at Denver
for a facility. [Laughter.]
Senator Dorgan. It is actually Bismarck.
Senator Campbell. I knew it was one or the other.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
Question. President Clinton announced over the weekend that he has
instructed the Departments of the Treasury and Justice to work together
to develop a plan to reduce gun violence. He specifically mentioned
``Project Exile,'' a program in Richmond, Virginia, designed to
prosecute those who use firearms in the commission of a crime under the
most stringent laws, usually ATF Federal statutes, in order to get
violent offenders off the streets. Have you begun developing that plan?
Answer. Yes. ATF is working with Treasury's Office of Enforcement
and DOJ to develop documents that will go to ATF Division Directors and
United States Attorneys. These documents will direct these officials to
develop plans tailored to the firearms violence problems in their
geographic areas.
Question. Do you envision recommending further restrictions on gun
ownership?
Answer. No. This initiative involves the development and refinement
of strategies to enforce current law.
Question. How much emphasis will be placed on utilizing existing
law to get criminals off the streets much like ``Project Exile?''
Answer. The thrust of the initiative is to have local ATF
officials, working with their United States Attorney as well as State
and local officials, develop strategies appropriate to the problems of
the area. Project Exile might be appropriate in Richmond but in other
areas another approach might be best. In all cases the use of existing
laws to get criminals off the streets will be the overall goal.
There is a continuing interest in having ATF get more involved in
making sure that the rightful, legal owner of a stolen registered
firearm is notified when that weapon has been recovered. As you know,
last year the Senate report directed ATF to work with State and local
law enforcement to ensure that the legitimate owner has been notified
when the firearm turns up.
Question. Have you identified ways to assist State and local law
enforcement?
Answer. ATF and law enforcement agencies cooperate and make every
effort to ensure that firearms owners have their property returned.
However, firearms taken into custody by law enforcement in most
instances are considered evidence of a crime. This usually prohibits
the return of the firearm until the criminal case has been thoroughly
investigated and prosecuted and in some cases appeals are decided. This
can take years for final adjudication. The return of firearms during
this time would not be possible. When they are available for return law
enforcement agencies are encouraged to contact ATF for tracing
assistance. This assistance is limited as it can only identify the
initial purchaser, who may not now be the legal owner.
The return of a firearm to its rightful owner can be a complicated
and man-power intensive search if the owner has not reported the theft
or loss to local authorities.
Question. What is the status of ATF efforts?
Answer. These efforts are on going with the expectation that all
law enforcement agencies will continue to make every effort to return
firearms to the lawful owner.
There is a provision in the fiscal year 1999 appropriations law
which authorizes the Secretary of the Treasury to reimburse rifle
importers for costs resulting from an Executive Order which prohibits
the importation of such weapons. This is commonly called ``in-transit
relief''. I understand that the responsibility for investigating these
requests has been delegated to ATF.
Question. What is the status of these reimbursements?
Answer. ATF has completed the field verification of the claims and
is presently awaiting the issuance of an order, which will delegate the
authority to act on the claims under the statute from the Secretary of
the Treasury to the Director, ATF. Once the delegation order is issued,
ATF will immediately initiate the process to reimburse the importers
pursuant to their claims, and to arrange for the disposal of the
firearms.
On Monday the Washington Post ran an article about a man in
Illinois who lost one of his sons to gun violence, and his attempts to
hold someone accountable. According to the article, he was able to
obtain ATF firearm trace information on the gun used in the attack. The
information developed by the National Tracing Center is a valuable
investigative tool for Federal, State, and local law enforcement.
Question. Under what circumstances is that information released to
the public?
Answer. The National Tracing Center (NTC) does not release
information to the public. The NTC provides firearms tracing as a
service to the law enforcement community as provided for in the 1968
Gun Control Act which mandated ATF to support State and local law
enforcement. Information generated as a result of firearms tracing is
provided to law enforcement and government agencies in an effort to
support State and local law enforcement.
The public does have access to some NTC information through the
means of a Freedom Of Information Act (FOIA) request. However, no names
of individual dealers are ever released.
Prior to 1999, no information was released that was dated within
one year of the response. This changed in 1999 after three fields
previously released were determined not to be releasable as they may
potentially compromise an ongoing investigation. Those fields are
Serial Number, Purchase Date, and Federal Firearm License number. As a
result an extract of all NTC data was made up to the end of 1998. This
information is now available in an electronic format (zip disk) and
will be disclosed through the Office of the Assistant Director for
Liaison and Public Information.
______
Questions Submitted by Senator Dorgan
law enforcement facilities
Question. The Secret Service rent rate has increased $10.3 million
at their new Headquarter facility. Of that amount, $4 million is
related to the increase in square footage. ATF is starting to plan for
their new headquarter facility. Is the Office of Real Property
providing ATF guidance on the facility acquisition to ensure that the
costs associated with this new facility can be captured within ATF's
base funding?
Answer. Yes, the Treasury Office of Real Property is providing
guidance to ATF on the new Headquarters project. However, there are two
developments associated with this issue for ATF. Base funding for ATF
in the rent category will experience the most significant increase in
fiscal year 2000 and 2001. GSA must extend the existing Headquarters
space leases which will expire prior completion of the new building
(currently estimated for fiscal year 2004), and ATF's square footage
requirements have increased. Secondly, since the construction funding
for the new ATF facility was only recently moved into the GSA budget
(fiscal year 2000), it was not anticipated in prior year planning that
ATF would be subject to rent in the new facility.
It is the intent of ATF, with guidance by the Office of Real
Property, to negotiate GSA rental payments for the new facility that
fall within the limits of the increased rate at the current location,
thus capturing them in the fiscal year 2000 and fiscal year 2001
adjusted base.
counter terrorism
Question. Did ATF participate in developing that plan, and if so,
were ATF's recommendations included in the plan?
Answer. ATF participated in the development of the plan as members
of working groups charged with addressing specific issues. Some of
ATF's recommendations were included in the report. The following are
some key recommendations that were not included:
--Create a ``Joint International Firearms Trafficking Center'' formed
with ATF, Customs and the Department of State as the main
participants. ATF believes this center would be useful,
particularly since one of the main strategies of this report is
to address the international firearms trafficking problem.
Funding was tied to this recommendation. This strategy ties
closely with the ``International Firearms Trafficking
Training'' that was recommended in the report.
--Expand ATF's arson and explosives repository to include
international data. Congress authorized the Secretary of the
Treasury (through ATF) to develop a repository of arson and
explosives information in the United States. ATF's
recommendation was that for minimal costs, this system could be
expanded to collect and exchange international data. That
information would make our system much more valuable to the
United States when preparing for or responding to a terrorist
threat.
--The National Domestic Preparedness office (NDPO) should include
Treasury as a representative. ATF and Treasury advised the
Department of Justice of this recommendation, because we
believe the NDPO will be coordinating the efforts of Federal,
State and local agencies, and will be training them to respond
to acts involving Weapons of Mass Destruction (WMD's). Title
18, section 2332 (b) includes in its definition of WMD's
``destructive devices'' which fall under the purview of the
Secretary of the Treasury.
--Include ATF's research and development efforts relating to
explosives in Federal research. The report identifies the need
for coordinated research in explosive issues. ATF's research
and development efforts relating to explosives, such as,
``Dipole Might'' (relating to the study of large vehicle bombs)
should be included.
Congress earmarked funding for this project. Additionally, Congress
authorized and provided resources for ATF to study a variety of issues,
including tagging explosives, rendering fertilizer inert, etc.
--Include ATF in teams referred to by the report; including, the
Foreign Emergency Response Teams (FEST) and the Domestic
Emergency Response Teams (DEST). The report lists what their
resources and capabilities are. ATF's capabilities through the
National and International Response Teams fall under this
category.
Question. What role does ATF play with respect to counter terrorism
and the level of expertise ATF brings to the investigations of counter
terrorist bombings?
Answer. ATF's mission is a blend of regulatory and enforcement
activities. We regulate certain industries and enforce the Federal
firearms and explosive laws; particularly, those involving the criminal
misuse of firearms, explosives and fire. ATF's expertise in the
firearms, arson and explosives fields is among the best in the world
and should be used to its fullest extent.
ATF's mission includes the investigation of bombings, firearms
trafficking, arsons etc. These functions are at the core of our
mission. The important thing to note is that the underlying crime is
still a bombing, arson or firearms trafficking charge where existing
statutory authority already exists, regardless of what the motive is.
Therefore, regardless of what the motive for committing the crime is,
ATF will dedicate the necessary resources to investigate violations
under our jurisdiction. Because of our unique mission, we have a great
deal of expertise in explosives research. Research is a necessary part
of our job. Congress funded some of the existing research projects we
have. For instance, in 1996, under the Anti Terrorism and Effective
Death Penalty Act, the Congress funded a large vehicle bomb research
program known as ``Dipole Might''. Additionally, ATF's laboratories are
involved in other research projects such as explosive residue tests
from large vehicle bombs, prevention of contamination and
decontamination issues in bombing investigations, and advanced evidence
packaging and preservation.
ATF has formed an Explosives Study Group to coordinate our research
in the explosives field. Their focus is to study concerns mandated by
Section 732 of the Antiterrorism and Effective Death Penalty Act of
1996 (April 24, 1996), of: the tagging of explosive materials for
purposes of detection and identification; the feasibility and
practicability of rendering common chemicals used to manufacture
explosive materials inert; the feasibility and practicability of
imposing controls on certain precursor chemicals used to manufacture
explosive materials; and State licensing requirements for the purchase
and use of commercial high explosives. ATF is continuing to research
and test methods for efficiently rendering inert or desensitizing
Ammonium Nitrate fertilizer.
Congress tasked the Secretary of the Treasury with developing
``odor recognition standards for explosives detecting canines.'' ATF
developed these standards and they were published in September 1998.
Congress also authorized the Secretary of the Treasury (through
ATF) to establish the first National Repository of information relating
to arson and explosives incidents. This system is still under
development and includes information from more than 80,000 arson and
explosives related incidents. Additionally, ATF investigates nearly 700
explosives incidents per year.
Some of the resources and expertise that ATF has are:
--Three laboratories staffed with 26 forensic chemists trained in the
analysis of fire and explosives debris. Analyze evidence from
nearly 700 bombings per year.
--Four National Response Teams (NRT's) made up of 175 members,
including Fire Protection Engineers, chemists, and bomb
technicians.
--International Response Teams (IRT'S) that were called into 19
activations around the world in conjunction with the Department
of State, Office of Diplomatic Security. ATF also conducts
assessments of foreign response capabilities relating to
explosives issues for the Department of State's Anti-Terrorism
Assistance program.
--Nearly 300 certified explosives specialists and 24 bomb
technicians.
--A mobile forensic laboratory which travels to the scene.
--Forty-two NRT trucks (fully equipped).
--Seventy-five Certified Fire Investigators.
--An Explosives Study Group (ESG) tasked with a number of research
and development projects relating to explosives used in
bombings.
--Additional explosives research projects such as Dipole Might,
(large vehicle bomb study) and Pipe Bomb study (effects of pipe
bombs). Both are coordinated through the Technical Support
Working Group (TSWG) which was formed by the National Security
Council.
--A National Repository of explosive and arson related incidents.
This system has records from more than 80,000 arson or
explosives incidents from the past 22 years. The system links
with other data collection systems. In addition, this system
enables us to trace stolen and recovered explosives and
compares things such as motives, component parts, device
placement and initiating devices.
--Partnership with the explosives industry and the fertilizer
industry to form programs such as ``Be Aware For America.''
--A world class Canine Explosives Detection Program. This training
program has trained more than 170 explosives detecting canines
for the Department of State's Anti-Terrorism Assistance
Program.
These dogs are stationed in countries around the world.
Additionally, ATF has 8 special agent handler teams in the United
States and has trained canines for the CIA, IRS and other State or
local departments.
--Two arson /explosives profilers assigned to the FBI's Behavioral
Science unit.
Question. Does ATF's role in counter terrorism conflict with the
FBI's role? When does ATF take the lead in a terrorist bomb situation?
Answer. There should be no conflict with the roles of ATF and the
FBI when addressing legitimate terrorist incidents. ATF has always
acknowledged the FBI's lead role in terrorist incidents and has
supported them with our resources. Conflict does arise due to the
constantly changing definition relating to ``domestic terrorism.'' ATF
relies on the definition of terrorism outlined in Title 18 U.S.C.
section 2332b(g)(5). Others use different definitions developed within
their agencies. The term ``federal crime of terrorism'' relates only to
the underlying crime, such as a bombing or arson.
ATF approaches every investigation with an open mind in order to
determine if a crime was committed and if so, who was responsible for
the act. As mentioned earlier, terrorism is more of a motive. Motive is
not an element that must be proven in many cases. In most cases, the
investigative steps, regardless of whether or not it was committed by
``terrorists'' are handled the same way. The best way to handle these
investigations is to share the best resources of each agency and work
together to solve the crime.
During the past five years, the United States has experienced an
average of 2,500 explosive incidents per year. This includes categories
such as thefts of explosives, bombings and attempted bombings.
According to the FBI's latest Bomb Data Center report for 1996, there
were 11 bombing and hoax device incidents included in the 2,579 overall
incidents in 1996. According to the FBI's latest ``Terrorism in the
United States'' publication for 1996, they listed 17 ``domestic
terrorist'' incidents between 1990-1996. Of those incidents, 11 were
bombings (6 were pipe bombs), and 5 were attributed to arson. When
looking at the history of these types of incidents, the data is
relatively constant.
As one can see, it is fortunate that we experience very few acts of
``domestic terrorism.'' Therefore, ATF must continue to thoroughly and
fairly investigate these other cases that have a Federal interest and
not assume what the motive was. ATF has always welcomed the assistance
of the FBI in bombing investigations and has shared information with
the FBI in a timely manner. We have agreed that once a terrorist nexus
is identified and validated, we would relinquish the lead investigator
role to the FBI and assist them as necessary.
Question. Does ATF have the capability to respond to foreign
bombing such as the East Africa bombing?
Answer. Yes, ATF does have the capability to respond to incidents
such as those that occurred in East Africa. As a matter of fact, ATF's
International Response Team (IRT) has responded abroad to 19 incidents
involving fires and explosions. These IRT's are comprised of our most
experienced forensic chemists with the most current forensic equipment,
experienced explosive enforcement officers (bomb technicians) who
regularly reconstruct bombs for investigative and court purposes,
forensic crime scene mapping equipment, personnel trained in studying
and documenting large vehicle bombs (Dipole Might), explosives
detecting canine teams, and certified explosive specialists who
regularly work on bombing cases. ATF has an agreement with the
Department of State to provide technical and investigative assistance
in foreign countries when it is required.
The Department of State also uses our staff to train foreign
nationals in pre- and post-blast investigations, and we perform
critical assessments of the capabilities of these foreign nationals to
address threats in their countries. ATF bomb technicians have performed
numerous threat assessments throughout the world.
atf headquarters facility
Question. What requirements exist for locating the entire
headquarters staff of 900 within the District?
Answer. The Secretary has stated that he is committed to keep ATF's
Headquarters in the District. There are no specific ATF or Treasury
policies requiring the entire Headquarters staff to be housed in the
District. However, the dissection of Headquarters' mission functions,
the majority of which require critical interaction and support with
each other and provide for effective ATF field operation activities,
would be costly and inefficient.
Question. Does the Federal Government own any property in the
District which is large enough to house the ATF requirement?
Answer. GSA has been unable to identify a Federally owned site that
meets ATF's requirements.
Question. Is ATF investigating the use of this Federal land, which
would ultimately cost the Federal Government less?
Answer. GSA and ATF are pursuing options which would compare
favorably in overall costs to development at a Federal owned site. GSA
in cooperation with ATF has investigated several Federally owned sites
within the District over the past several years. It has been determined
in several instances that it would actually be more expensive to
renovate existing facilities as opposed to constructing a new building.
Question. Are there any remediation requirements on the other
available sites?
Answer. We are unaware at this time of the extent of remediation,
if any, required on the District-owned site being evaluated for ATF
Headquarters. Prior studies indicate minor contamination along the
perimeter of the land. The original Southeast Federal Center site
parcel offered for the ATF Headquarters required a contribution of
approximately $5 million in remediation costs.
Question. Has an environmental impact study been completed on the
New York Avenue site? How does the construction of a headquarter
facility impact the traffic flow on this major thruway?
Answer. A preliminary site study, identifying the major impact
factors of the ATF project, will be complete by the end of this fiscal
year. The answer to the impact of traffic flow to the NY Ave. area by
the Headquarters project, along with the other new major developments
beginning in that vicinity, will probably not be known until the
completion of a full environmental impact study by the end of fiscal
year 2000.
Question. Couldn't the proposed visitor's center have a potential
security concern?
Answer. The ATF space requirements include an area inside of the
building entrance of approximately 1,000 square feet called ``Visitor
Reception Center.'' This space is defined as the area for receiving and
clearing visitors who have official business to conduct with ATF.
integrated violence reduction strategy
Question. ATF has requested $12.6 million and 56 FTE for an
Integrated Violence Reduction Strategy. The Strategy will focus on
several components of firearms enforcement aimed at reducing illegal
acquisition and illegal use of firearms. ATF proposes to use new
Federal purchase denial information, obtained from the National
Instacheck System, which performs background checks before the purchase
of every firearm, by electronically receiving information from the
120,000 referrals ATF receives, as a result of background checks. ATF
is projecting an increase of each special agent's workload by seven
violations per month. What is the current special agent's workload?
Answer. Currently, each special agent initiates an average of ten
investigations per year, or nearly one per month.
Question. How many additional special agents are required to meet
the demand of the increased workload as a result of the referral
information?
Answer. Our previous submissions for the period up to and including
fiscal year 2005 called for a total of 346 new special agent positions,
along with support and inspectors. This proposal was made with the
assumption of a continued workload as provided above.
Question. ATF proposed the use of National Instacheck Systems on
purchases at gun shows. How would this system work? Would the seller
conduct the background check or would ATF? How many gun shows are held
annually? What level of increase in resources would be necessary to
meet the referrals from these background checks?
Answer. Current law requires that retail purchasers of firearms
from FFLs, whether at the retail premises or at a gun show, be the
subject of a background check directly through the FBI's NICS system,
or through a State serving as a point of contact to NICS. The Gun
Control Act allows exceptions from the check in certain circumstances,
such as persons holding a qualifying firearms permit. A recent study
conducted by the Department of the Treasury with ATF and the Department
of Justice recommended statutory changes that would require NICS checks
be conducted on all retail purchasers at gun shows, whether they
acquire the firearm from an FFL or from a non-licensee.
If this recommendation were enacted into law, a non-licensee would
transfer a firearm to a purchaser only through an FFL. The FFL would
enter the firearm into his or her records and would cause the purchaser
to complete an ATF Form 4473, Firearms Transaction Record, and would
conduct a NICS check. Only then could the purchaser take possession of
the firearm. ATF would not be involved in conducting the background
check.
It is estimated that there are over 4,000 gun shows annually
throughout the country. It is estimated that roughly 25-50 percent of
sellers at these shows are unlicensed persons. Our estimates to date
when considering the effect of proposed legislation have tried to take
into account these levels, and to plan for appropriate levels of
resources to conduct inspections, investigations and pursue additional
referrals which would result. These preliminary estimates through the
2003 outyear call for a total of 280 special agent, inspector and
support positions for fiscal year 2001, 77 for fiscal year 2002 and 51
for fiscal year 2003.
Question. ATF proposed applying Federal statutes to firearm
possessors if the Federal statute carries incapacitation and
deterrence. Some have said that the criminal justice system is being
federalized. Is this another step in that direction?
Answer. No. ATF has been enforcing firearms legislation for the
past 30 years. Our focus has been to reduce the number of illegal
firearms that are trafficked.
youth crime gun interdiction initiative (ycgii)
Question. The February 1999 Youth Crime Gun Interdiction Initiative
Performance Report states that the most immediate measure of success of
YCGII lies in the investigations of illegal trafficking cases, which
have resulted in participating YCGII cities submitting for prosecution
almost 400 defendants. However, the report goes on to say that no
baseline currently exists by which to measure changes in illegal
trafficking. Has the compilation of this report lead to ATF's
development of a baseline?
Answer. The baseline is being developed through research, such as
that conducted for this year's Performance Report. Even though this was
the first year that Congress appropriated additional special agent
positions for this effort, ATF felt that it was important to take an
initial look at investigative efforts being conducted across the
country in firearms trafficking and the relationships to juvenile and
youth possession. We are currently revising our information systems to
capture this critical information at the proper level of detail to see
the effects that these cases have on the youth gun market and to
measure changes in illegal trafficking. With this increased emphasis on
the illegal market, along with Brady checks, we are seeing a decrease
in the average number of guns handled by the typical trafficking
defendant, which, in simpler terms, means that it has become much more
difficult for these dealers to conduct their illicit businesses.
Question. What is that baseline and when will the committee see
some program performance indicators?
Answer. The baselines being considered to evaluate this program are
referenced in the YCGII report published this year on the 27 affected
cities. One of the key pieces of analysis conducted for each city's
trace report focuses on categorizing crime guns by three age groups,
``juvenile'' (17 and under), ``youth'' (18 to 24), and ``adult.'' We
intend to achieve a continuing reduction in the percentages of crime
guns associated with youth and juveniles.
Question. Does the fiscal year 2000 request include the resources
necessary to conduct the research and to conduct a longitudinal study
of the program?
Answer. Yes. Since the inception of this program, ATF has used
technology to make full use of the unique assets of the firearms
information under our control. We then tailor enforcement strategies to
stem firearms trafficking by contracting with leading academic
researchers. We have not only continued this partnership with
institutions such as Harvard University and it's scholars, but we have
also maintained flexibility in commissioning new research when needed.
This was evident in the research presented to Congress in this year's
Performance Report.
Question. What type of annual reporting is ATF planning to provide
on the YCGII program?
Answer. We will continue to provide relevant trace analyses of the
partner cities and report on the results of our investigations. We will
focus on the reduction of illegally trafficked firearms, many of which
end up in the hands of juveniles, youths, and prohibited persons. ATF
will also continue to provide the results of this effort in conjunction
with our established performance measures, which demonstrate the cost
savings to society when the illegal flow of firearms is impacted.
tobacco compliance initiative
Question. How will this tobacco tax be different from existing tax
programs? In other words, why are additional employees needed to run
this program?
Answer. Effective fiscal year 2000 ATF is required by law (passed
in 1997) to implement a tobacco tax program consisting of qualification
of a new type of tobacco permittee, importers, and collect additional
tobacco tax (floor stocks tax). The tax increases enacted for 1/1/2000
and 1/1/2002 will require that floor stock taxes be collected on all
unpaid inventory held in stock (over a small exempt amount), involving
collections from approximately 15,000 first time taxpayers. Qualifying
tobacco importer permittee applicants and collecting tobacco floor
stocks taxes are activities that ATF is not currently engaged. ATF does
not have the resources to do this work and asked for the additional
resources in order to meet the requirements of the new law. In the
first year, additional resources will be used to qualify new tobacco
importers and collect the floor stocks tax.
Question. In the future the employees will be utilized in
increasing compliance and directing anti-diversion efforts. Will these
agents be used for just tobacco programs or will this staff be used to
expand the entire regulatory program?
Answer. The requested employees will be utilized just for tobacco
programs. After the initial period of conducting approximately 1500
application inspections and floor stocks tax audits, these employees
will be utilized to obtain compliance with the tobacco regulations,
insure proper tax payments, investigate leads and develop cases
pertaining to the illegal trafficking and diversion of tobacco
products.
Question. Wasn't the explosives inspection program dramatically
increased last year?
Answer. Explosives inspections increased from 7,924 in fiscal year
1997 to 8,908 in fiscal year 1998. This was due primarily to the
funding of 26 FTE through the Treasury Asset Forfeiture Fund (TAFF).
During that timeframe, ATF had requested 53 FTE in order to accomplish
100 percent of the explosives inspections. Presently, we are
maintaining approximately an 85 percent completion rate. This level is
expected to continue given the current resources and FTE dedicated to
this effort.
Question. The report accompanying last year's appropriations bill
stated ``the Conferees directed the ATF to continue to fully fund its
investigations on diversion and trafficking of contraband cigarettes,
particularly on Indian lands.'' What can you tell us about some of
those investigations? Are these investigations any different than other
contraband cigarette cases?
Answer. Contraband trafficking of cigarettes involving Indian lands
is no different than contraband trafficking of cigarettes between
States. Contraband trafficking off of Indian lands (reservations) has
been on the rise over the past several years. Several of the cases have
originated out of New York. Individuals travel from as far away as
Michigan to purchase the cigarettes. They purchase these cigarettes
State tax-free (NY), thus increasing their profit potential and
withholding the required State taxes (MI or other target states). The
Agency is investigating contraband trafficking cases out of Nebraska,
Arizona and several other states. A majority of these types of
investigations are centered around a tobacco store or smoke shop
located on tribal lands. Native Americans receive substantial State tax
breaks for the sale of tobacco and other products on their respective
reservations. As a result, we have seen an increase of products
purchased, State tax-free, on reservations and then taken off for
consumption or sale. The States are the main reporters of loss in such
circumstances. What makes this a Federal violation is when more than
60,000 cigarettes, the threshold for a Federal violation under the
Contraband Cigarette Trafficking Act, are purchased and then
transported to another state for sale. ATF has participated in numerous
investigations involving this type of activity.
Question. The Director's written statement indicated that ATF
provided funding to 101 different State and local agencies to support
their participation in the G.R.E.A.T. program and that over 1,265
communities have officers certified in the G.R.E.A.T. program. Can you
tell the subcommittee how many Indian nation law enforcement officers
have participated in the program and what efforts are being made to
increase training to these groups?
Answer. Our current records indicate that 61 Tribal Police Officers
have been previously certified to teach G.R.E.A.T. Presently, 15
officers are currently teaching the G.R.E.A.T. curriculum. These
statistics are based on the number of student graduation certificates
the officer orders.
In fiscal year 1998, $300,000 was awarded to the Department of the
Interior, Bureau of Indian Affairs (BIA), and $250,000.00 in fiscal
year 1999. Unfortunately, no requests have been received from BIA
soliciting reimbursement for funds incurred through their efforts to
implement the G.R.E.A.T. Program.
ATF is making efforts to establish a more positive and effective
approach to increase active participation of the Tribal Police and BIA
with regards to the G.R.E.A.T. Program. The Bureau Assistant Director
for Firearms, Explosives and Arson, Jimmy Wooten, has been elected as
an officer in the Native American Law Enforcement Association. One of
their goals is to improve relations and enhance training.
The Bureau will also continue efforts to attract more Tribal
officers into the G.R.E.A.T. Program and let other Tribal Law
Enforcement officials know that the program is available and their
participation is welcomed. Communities that are currently being
targeted for this effort include those in New Mexico, Wisconsin and
Arizona.
In June of 1998, the G.R.E.A.T. Program published an article in the
Native American Law Enforcement Association's newsletter. The article
described the program and its need for more Native American G.R.E.A.T.
officers.
Two separate meetings are scheduled for next week. One meeting is
with BIA and the second is with the Boys and Girls Club of America
(B&GCA). The B&GCA meeting is to discuss a proposal that would
establish the G.R.E.A.T. Program at local Boys and Girls Clubs within
the Tribal Police/BIA communities.
U.S. Secret Service
STATEMENT BRIAN L. STAFFORD, DIRECTOR
Senator Campbell. Okay, Mr. Stafford. You are on.
Mr. Stafford. Mr. Chairman, Senator Dorgan, I am pleased
to be here today. I have also submitted a more comprehensive
statement.
Senator Campbell. That will be included in the record.
Mr. Stafford. With me today are Deputy Director Bruce Bowen
and Assistant Directors Jane Vezeris and Kevin Foley.
On March 4 of this year, I was sworn in as the 20th
Director of the Secret Service. I have followed in the Secret
Service tradition of being a career agent and I am proud to
have served in this outstanding law enforcement agency for the
last 27 years.
In light of the fact that I am making my first appearance
before the committee as the Director, rather than provide you
with a statement outlining appropriations and budgetary issues,
my oral statement will be brief and will address my commitment
to you.
I will also outline the challenges facing the Secret
Service in the year ahead. I will seek your input on issues
that arise of mutual concern to us and the American people and
commit that I will always be available to respond promptly to
any questions or inquiries from you or your staffs.
As you know, the Secret Service is one of the oldest
Federal law enforcement organizations. Created in 1865 to
suppress counterfeit currency, we now have very important dual
missions of safeguarding our Nation's financial systems and
protecting world leaders. Our traditional investigative mission
of suppressing counterfeiting has expanded into areas of
financial and economic crimes in order to respond to the needs
of the American people and mandates of Congress.
Likewise, our protective responsibilities have expanded in
scope beyond the President and Vice-President, former
Presidents, visiting heads of states and others. We are now
also mandated to take the lead role in the design, planning and
implementation of security at events designated by the National
Security Council as national special security events. Our role,
as set forth in Presidential Decision Directive 62, is an
example of how the Secret Service is recognized for one of its
traditional areas of expertise, security planning and
implementation.
In the protection arena, the Secret Service has no equal,
but we will be facing new challenges in the weeks and months
ahead. In less than a week we will face a challenge we are
accustomed to, to protecting more than 40 visiting heads of
state in the North Atlantic Treaty Organization summit here in
Washington, DC. This event has been designated as a national
special security event and the Secret Service's role has
expanded beyond our traditional one of physical protection. The
Service will be coordinating the security for the event which
will include more than 40 world leaders, 22 spouses of world
leaders, and more than 180 total protectees.
Furthermore, in the months ahead, as we have done since
1968, we will be faced once again with the challenge of
protecting presidential candidates.
Mr. Chairman, part of our success comes from partnerships
developed over the years, partnerships with Federal, state and
local law enforcement and public safety entities that work with
the Secret Service on a daily basis. Our partnership with
Federal agencies is highlighted by my colleagues sitting with
me today at this table. The United States Customs and the
Bureau of Alcohol, Tobacco and Firearms are a few that lend the
Secret Service such a helping hand.
As you know, we also work closely with the FBI, FAA, FEMA,
Department of Defense and the State Department to make these
events come together.
Mr. Chairman, in your own State of Colorado, during the
Denver Economic Summit of Eight, you saw those partnerships in
action when we worked closely with many law enforcement and
public safety agencies throughout the State. I can assure the
committee that today these partnerships remain as strong as
ever on all levels.
In our investigative mission, the Secret Service is dealing
with challenges in the areas of counterfeiting and financial
crimes. In the counterfeiting arena, the Secret Service is
faced with a rise in production and passing of computer and
color copier generated counterfeit Federal Reserve notes.
The Secret Service remains committed to attacking the
problem in three ways. First, we will continue to work with
Congress for legislative enhancements to sentencing guidelines
and forfeiture provisions. Second, the Service will continue to
form partnerships with private industry to develop
technological solutions to deter this form of counterfeit
currency. And third, and equally as important a component, is
educating the public throughout the world about the threat of
these new forms of counterfeit currency.
In the area of financial crimes, the Secret Service has
increased its efforts to train and equip its personnel to
address new and emerging high technology crimes in all areas of
its jurisdiction. A key component in this arena is the
electronic crimes special agent program. These highly trained
agents are qualified as experts in the examination of
electronic evidence and the use of the latest technology in the
fight against new high technology financial crimes.
In conclusion, I wish to thank the committee for its long
history of support, not just for our mission, but for the
actions you have taken to ensure that the men and women of this
agency have the tools they need to do their job.
PREPARED STATEMENT OF BRIAN L. STAFFORD
Mr. Chairman, this concludes my statement and I will be
happy to answer any questions.
[The statement follows:]
Prepared Statement of Brian L. Stafford
Mr. Chairman and members of the Subcommittee, I am pleased to be
here today, and to be afforded the opportunity to testify on the Secret
Service's fiscal year 2000 Budget Request.
With me today, Mr. Chairman, are Jane E. Vezeris, Assistant
Director for Administration; Danny Spriggs, Assistant Director for
Protective Operations; Barbara S. Riggs, Assistant Director for
Protective Research; Kevin T. Foley, Assistant Director for
Investigations; Gordon S. Heddell, Assistant Director for Inspection;
Charles N. DeVita, Assistant Director for Training; Terrence Samway,
Assistant Director for Government Liaison and Public Affairs; and John
Kelleher, Chief Counsel.
fiscal year 2000 appropriation request
The Service's fiscal year 2000 funding request totals $745.9
million and 5,123 FTEs, and is comprised of four separate funding
sources: the Salaries and Expenses appropriation; the Acquisition,
Construction, Improvement and Related Expenses appropriation; transfers
from the Violent Crime Reduction Trust Fund account; and reimbursements
from the Departmental Super Surplus Forfeiture Fund. Together, the
total budget for fiscal year 2000 is $17.3 million, or 2.4 percent,
above the level of funding the Service has received this fiscal year.
With this funding, the Service expects to further advance the
attainment of its two mission goals, which are: to maintain the highest
level of physical protection possible through the effective use of
human resources, protective intelligence, risk assessment, and
technology; and to protect the integrity of the nation's financial
systems through aggressive criminal investigations and assessing trends
and patterns to identify preventive measures to counter systemic
weaknesses.
Salaries and Expenses (S&E)
The Service's Salaries and Expenses appropriation request for
fiscal year 2000 totals $664,508,000 and 5,123 FTE positions, of which
$3,196,000 shall be derived from the Violent Crime Reduction Trust Fund
(VCRTF). This is a decrease of $39,230,000 and 71 FTEs from the fiscal
year 1999 appropriated level of $703,738,000 and 5,194 FTEs. This
request includes: $13,790,000 and 23 FTEs in program increases,
$39,152,000 in upward adjustments necessary to maintain current program
performance levels, and a transfer of $7,000 from the National Archives
and Records Administration. These increases are offset by a reduction
of $39,567,000 for non-recurring costs and program reductions totaling
$14,180,000 and 220 FTEs. This account is further adjusted with a
proposal that would fund $38,432,000 with the Department's Super
Surplus Forfeiture Fund. With this amount from the Super Surplus
Forfeiture Fund the Service will cover the costs of annualizing the
staffing added in fiscal year 1999 with the Emergency Supplemental
appropriation for Antiterrorism, the costs of the protective effort
relative to the presidential campaign, and the costs of purchasing
replacement vehicles.
Salaries & Expenses Program Changes
The Service is requesting $5,854,000 and 38 positions (19 FTE) for
its Presidential and Vice Presidential Protective Divisions. The threat
of terrorist activity directed at this country and its interests
continues to be a major concern for the Secret Service and, because of
this concern, security measures are constantly being reviewed and
enhanced as necessary.
Also included in this budget is $880,000 needed to purchase new and
replacement protective equipment. This equipment includes a
sophisticated computerized system that will be used by the Service's
advance personnel to survey protective sites prior to the protectee's
visit. Specifically, this equipment will enhance the survey process for
the Service's countersnipers. By using data such as barometric
pressure, elevation, bullet velocity, distance to the target, air
temperature and slope, this automated system, when developed, will
calculate the exact angle and distance to the target.
The potential use of chemical and biological agents or other
hazardous materials as weapons of mass destruction poses a very serious
threat to the Service's protectees. With the increased number of
intelligence reports involving the use or possession of chemical/
biological materials, it is possible that the White House Complex could
be a target of a chemical/biological (CB) attack in the near future.
The incident in 1995 in Tokyo, Japan demonstrated the devastating
effects of chemical agents. The intelligence community considers
weapons of mass destruction to be an extremely serious threat.
Terrorism experts are no longer talking about ``if'' an attack will
occur. They are planning for the time ``when'' it occurs. The Service
has budgeted $3,325,000, to come from the Department's Super Surplus
Forfeiture Fund, to provide the means to purchase a variety of the
latest, most sophisticated chemical/biological detection technologies,
as well as decontamination and personal protective equipment,
neutralizing materials and containment systems. It is extremely
important that the Service have a deliberate, long-term concern for the
potentially devastating impact of this type of terrorist activity.
The fiscal year 2000 budget request also includes $3,857,000 and
seven positions (4 FTE) to enable the Service to maintain, repair, and
replace security systems and technologies at the White House in line
with recent upgrades/enhancements in physical protection made there.
The Service is continually involved in a risk assessment process as
part of meeting its mandated protective mission. This ensures that
appropriate security measures are in place. As part of this risk
assessment process there must be adequate funding available to ensure
that security systems for the White House continue to effectively
counter new or evolving threats, and to remove vulnerability from those
threats. This funding will allow the Service to take advantage of
technological advances that can enhance security at the White House and
during Presidential travel.
This coming summer the Secret Service will consolidate its
headquarters operations at 950 H Street in Washington, D.C. The fiscal
year 2000 Budget includes funding to cover the increased rental costs
the Service will incur, as well as building operations costs.
Contractor support services for this newly constructed building are
required to ensure a smooth transition of building management and
operations from existing leased space locations to the consolidated
site. These services will make certain that building operations at this
new headquarters site will be proper, safe, and economical, and that
this new facility is properly maintained.
Finally, this budget includes the funding that the Service
estimates will be required to provide for the protective effort
relative to the upcoming 2000 presidential campaign. The Service has
budgeted $35,247,000, to come from the Department's Super Surplus
Forfeiture Fund, to cover the costs of providing protection for the
candidates and nominees involved in the campaign, and two national
party conventions.
Acquisition, Construction, Improvement, and Related Expenses (ACIRE)
The Service's fiscal year 2000 request for its Acquisition,
Construction, Improvement, and Related Expenses (ACIRE) account is
$4,923,000; a reduction of $3,145,000 from the fiscal year 1999
appropriation of $8,068,000.
Acquisition, Construction, Improvement, and Related Expenses Program
Changes
There are no program initiatives budgeted for this account.
Results Act
The Performance Report for fiscal year 1998 is included in the
fiscal year 2000 budget request. This report presents actual fiscal
year 1998 performance results.
Fiscal year 1998 was an extremely productive and demanding year for
the Secret Service. The total number of stops for all protectees was
9.2 percent higher than the number estimated. Although permanent
protectee travel was slightly under that which was estimated,
protection of foreign dignitaries was significantly higher.
The Secret Service closed 27,429 criminal cases during fiscal year
1998, just 571, or 2 percent, below the level estimated. This is a
remarkable achievement given the heavier than anticipated protective
workload.
For fiscal year 1998, the level of counterfeit money passed was
held to $92 per million dollars of genuine currency. This was
significantly below the $119 per million dollars of genuine currency in
the performance plan, and means substantial savings in dollars lost to
counterfeiting for the American public.
The Service continues to focus its efforts to curb the
counterfeiting of U.S. currency in foreign countries. A total of $3.2
million in counterfeit currency was passed overseas during fiscal year
1998. This was significantly below the total of $5.0 million in the
performance plan.
protective program
The Secret Service's protective operations program provides
security for the President, the Vice President, their families, as well
as former Presidents and other dignitaries and designated individuals.
This program also provides security for the White House Complex, the
Vice President's residence, and foreign missions within the Washington,
D.C. area.
The President and Mrs. Clinton, and Vice President Gore, continued
to maintain extensive foreign travel schedules during fiscal year 1998.
The President made 44 foreign stops, the First Lady made 62 foreign
stops, and the Vice President made 28 foreign stops last fiscal year.
The Service's Office of Protective Operations also successfully
coordinated a number of major protective events. The Service provided
individual protection for the 53rd annual United Nations General
Assembly and the 20th United Nations Special Session on the World Drug
Problem, as well as individual protection and event security at the
17th Congress of the World Energy Council. This Congress of the World
Energy Council was held in Houston, Texas, and was the first event for
which the Secret Service assumed lead agency responsibilities for
security in accordance with Presidential Decision Directive #62. This
Presidential Decision Directive names the Service as the lead agency
for security design, planning and implementation at events designated
as national special security events.
All of the above events take significant planning, deployment of
resources, and coordination with Federal, State, and local law
enforcement to be successful. In spite of the tremendous protective
workload associated with the heavy travel schedules of individual
protectees, the Service was able to complete the necessary preparatory
efforts required to ensure that the security plans for each of these
events were successfully implemented.
In addition to the usual protective workload, this year the Service
has also been involved with the large protective effort surrounding the
visit to this country by the Pope. Also, the Service is currently
planning for the upcoming presidential campaign, which will again place
a heavy workload burden on all elements of the organization. In
addition, a summit meeting of the North Atlantic Treaty Organization
will be held in Washington, D.C., later this month. This event has been
designated as a national special security event in accordance with
Presidential Decision Directive #62.
Protective intelligence serves a critical role in the Secret
Service's protective mission. The Intelligence Division develops threat
assessments in support of protectee visits to domestic and foreign
settings; provides warning indicators for specific and generalized
threat environments; maintains liaison with the mental health, law
enforcement, and intelligence communities; and conducts operational
studies that are needed to stay at the forefront of the effort to
predict the likelihood of danger.
To improve the Service's ability to process protective intelligence
information, the Secret Service will be taking advantage of its newly
developed PRISM system. PRISM is a state-of-the-art information
technology system that facilitates case management and the preparation
of threat assessments in support of protectees' foreign and domestic
travel, and for protective intelligence investigations.
Additionally, a recently completed behavioral research study, the
Exceptional Case Study Project (ECSP), will enhance the Secret
Service's ability to identify, assess, and manage persons who might
pose a risk of violence toward its protectees. This study analyzed the
thinking and behavior of all persons known to have attacked or
approached with a weapon, a prominent public official in the United
States since 1949. The information developed by this study has
increased the Service's understanding of violence directed toward
persons of prominent public status, and has benefited the Service's
risk assessment procedures, physical protection techniques, and
training methodologies. The findings of the ECSP and subsequent
interest by the law enforcement and criminal justice communities led to
the creation of the Secret Service National Threat Assessment Center.
This center will be developing threat investigations and assessment
protocols, and has been assisting State and local law enforcement
agencies in the prevention of stalking and violence in both the
workplace and schools. Through the National Threat Assessment Center,
the Service's goal is to provide leadership and direction to the
criminal justice community in its efforts to prevent targeted violence.
The technical security program continues to develop measures to
ensure the safety of the President, and other protectees, against
weapons of mass destruction. Specifically, in response to the threat of
chemical weapons, the Secret Service has developed a plan that
incorporates detection, countermeasures, and survivability. The
detection aspect is supported by baseline technology that will detect
the presence of a chemical agent and activate an alarm. Countermeasures
technology will not eliminate the threat from weapons of mass
destruction, but will mitigate the effects. Survivability is
accomplished through the transfer of protectees to areas that are
equipped with special protective systems. In this program area, the
Service has developed partnerships with the Massachusetts Institute of
Technology's Lincoln Laboratories, the Lawrence Livermore Laboratory,
the United States Army's Technical Escort Unit at the Aberdeen Proving
Grounds, and the National Medical Research Institute.
During fiscal year 2000, additional chemical/biological teams will
be trained to support the Service's protective responsibilities. These
teams will require protective clothing, life support equipment, medical
antidote kits, and chemical/biological field sampling and analysis
equipment. The Service will also provide each special agent and
security specialist assigned to the field with the protective equipment
necessary to counter chemical nerve agents and biological toxins. This
measure is necessary due to the increasing number of domestic incidents
involving extremist groups producing and storing lethal substances.
The Service continues to enhance the physical security around the
perimeter of the White House. This fiscal year, additional hydraulic
barriers, interim booths, and fixed bollards are being installed around
the northside of President's Park. Also, approval for the southside
construction and design has been finalized. Funding requested in the
fiscal year 2000 Budget will allow the Service to complete the security
enhancements along the southside perimeter of President's Park.
In fiscal years 1996, 1997, and 1998, the Service was appropriated
approximately $35 million to enhance the physical security of the White
House Complex. Nearly all of these enhancements have been completed,
including an access control system, a technical surveillance
countermeasures system, an air intrusion detection system, security
gates and barriers, armored windows, x-ray equipment, etc. To properly
maintain these systems and ensure their effective long-term operation,
additional technical support personnel and funds are needed to cover
maintenance contracts, replace critical systems components with
periodic upgrades, and incorporate new technologies as needed.
information technology
Completing a multi-year effort, the Service's wide-area
communications network was transitioned to the Treasury Communications
System (TCS) network. The TCS network architecture is designed to
support the Service's future information technology needs. All domestic
field offices have been transitioned to the TCS. Transition of
headquarters and overseas offices will be completed in the fall of
1999.
The highest priority information technology initiative for the
Secret Service is to ensure that all of its information technology
systems are Year 2000 compliant. Significant progress has already been
made for the compliance of personal computer and local area network-
based systems, and the telecommunications infrastructure. Efforts will
continue throughout 1999 to certify compliance of all information
systems.
investigative program
The Secret Service is responsible for domestic and international
investigations involving financial systems crimes to include bank
fraud; access device crimes; telemarketing crimes; telecommunication
crimes (cellular and hard wire); cyber crimes (attacks on critical
infrastructures; desk top publishing and network intrusions); automated
payment system and teller machine crimes; crimes involving government
entitlements; crimes involving identity takeovers; crimes involving
counterfeit and fictitious financial instruments, obligations and
securities; crimes involving counterfeit currency; criminal activity in
the area of money laundering as it relates to certain specified
unlawful activities; and the seizure and subsequent forfeiture of
assets used to facilitate certain criminal activities, as well as the
proceeds of those criminal activities.
The Secret Service has long recognized the need to approach high-
tech crime on a global basis. Through participation in the high-tech
subcommittee of the G-8 and the drafting of the President's
International Crime Control Strategy, the Secret Service has sought to
bring actual cases based on investigative history to the forefront. At
this time, the Secret Service recognizes that traditional methods of
law enforcement practices in the international environment need to be
changed. Through solid partnerships developed by our international
field offices, including joint training initiatives with law
enforcement and industry, significant high-tech investigations have
been brought to successful conclusions by working beyond geographic
boundaries.
As discussed last year, the U.S. dollar continues to be the
currency of choice worldwide. Approximately $480 billion of genuine
U.S. currency is in circulation worldwide and nearly 60 percent of that
is in foreign markets. As the General Accounting Office and the Federal
Reserve Board have testified, foreigners have a tendency to hold U.S.
currency, primarily because of their confidence in the dollar, and as a
hedge against inflation affecting their own currency. This willingness
to hold U.S. currency results in an interest free loan to the United
States amounting to more than $25 billion annually. The taxpayers of
the United States directly benefit from this activity.
Competition for market share will be affected with the introduction
of the ``Eurodollar.'' This represents a healthy challenge to U.S.
currency remaining the currency of choice worldwide. The U.S. Secret
Service will be tasked with increasing investigative efforts to combat
the counterfeiting of the U.S. dollar both domestically and
internationally in order to maintain confidence in the U.S. dollar.
During the Service's briefing last year the significant changes in
counterfeiting methods due to technological advances were highlighted.
The methods counterfeiters use to produce counterfeit currency have
dramatically changed over the last few years. In fiscal year 1995,
counterfeit U.S. currency produced by advanced reprographic technology
accounted for only .5 percent of the total amount passed in the United
States. This percentage increased to 44 percent in fiscal year 1998.
As the Service expected, there has been an increase of 30 percent
in the amount of counterfeit currency passed from fiscal year 1997 to
fiscal year 1998, the number of plant suppressions increased from 435
in fiscal year 1997 to 616 in fiscal year 1998, and the number of
arrests increased from 2,178 in fiscal year 1997 to 2,926 in fiscal
year 1998. The increase in counterfeiting is directly attributed to
counterfeit currency manufactured with inkjet and advanced reprographic
technology.
The Service's strategy to combat this problem remains the three-
fold approach adopted in fiscal year 1997. The first part of this
approach involves legislative proposals. In fiscal year 1998, Treasury
Secretary Rubin asked the Justice Department to join with the Treasury
Department in working with the Sentencing Guideline Commission to
review and enhance the guideline ranges for imprisonment in
counterfeiting cases. Attorney General Reno has been very supportive of
efforts to heighten the awareness of prosecutors to the significance of
successful counterfeit prosecutions as a deterrent to potential
counterfeiters. Additionally, the U.S. Secret Service is aggressively
seeking to obtain administrative forfeiture authority with regard to
the equipment used to manufacture counterfeit U.S. currency. At this
time, the Service must rely on formal Civil Forfeiture proceedings,
carried out through the U.S. Attorney's Office. However, this formal
Civil Forfeiture proceeding is often seen as a non-cost-efficient
avenue due to the low dollar value of the manufacturing equipment. It
is vitally important to take away the ``weapons'' used to perpetrate
the crime, so as not to easily allow the offender to resume the
criminal enterprise.
The second part of the approach, initiated in October 1998,
involves finding technological solutions to deter reprographically
generated counterfeit currency. Approximately one hundred
representatives from private industry (laser printer manufacturers,
computer manufacturers, and desktop software publishers) gathered at
John Hopkins University with the Secret Service, the Bureau of
Engraving and Printing, the Federal Reserve and senior Treasury
officials to discuss technological solutions.
The third part of the approach made great strides in fiscal year
1998 when Secret Service agents participated in over 1,400 educational
and training seminars around the globe. These seminars were held to
discuss counterfeit currency issues as well as to highlight the design
changes and security features in the newly designed 1996 series Federal
Reserve Notes. Furthermore, the Secret Service participated in 20
national seminars co-hosted with the Federal Reserve Banks throughout
the United States presenting these issues to the banking industry and
merchants.
The Secret Service is increasing its efforts to train and equip its
personnel to address high-tech crime in all areas of its jurisdiction.
The Electronic Crimes Special Agent Program (ECSAP), consisting of 70
highly trained special agents qualified as experts in the forensic
examination of electronic evidence, is the key component to this
effort.
The Electronic Crimes Special Agent Program (ECSAP) has evolved to
be an essential component of the investigative and protective missions
of the Secret Service. With the extensive use of computers by the
criminal element in all areas where the Secret Service has an
investigative and protective interest, the demand by the field for
ECSAP support has predictably and dramatically increased.
In accordance with Presidential Decision Directive #63, the Secret
Service has provided personnel to staff the National Infrastructure
Protection Center (NIPC) and Critical Infrastructure Assurance Office
(CIAO). These two entities were designed for the facilitation of an
inter-departmental approach to protection of the nation's critical
infrastructures. The Secret Service brings unique capabilities and
experience to this initiative with highly qualified investigators
having significant high-tech experience, and with established
partnerships in the computer, financial, and telecommunications
industries.
When Attorney General Janet Reno announced a Nigerian Criminal
Enterprise Initiative, she acknowledged the investigative expertise and
historical commitment of the Secret Service in this area. In fiscal
year 1998, the Secret Service was the lead agency in 28 domestic task
forces involving 54 law enforcement agencies throughout the United
States. The goals of these task forces are to identify individuals,
organized groups and/or assets from fraud schemes intended to victimize
individuals, banks, credit card issuers, or other financial
institutions.
In one ongoing investigation involving fictitious instruments and
bogus investment offerings, a seizure of approximately $4 million was
made in the United States, and bank accounts totaling approximately $11
million were identified overseas. This investigation accelerated the
efforts of the Department of Justice to finalize a Mutual Legal
Assistance Treaty (MLAT) with their counterparts in New Zealand. This
agreement enables both nations to recover proceeds of transnational
criminal activity. As a result, the accounts were frozen by authorities
in New Zealand pending forfeiture proceedings in both countries.
The Secret Service is acutely aware of the need for law enforcement
to have a vision of the future as it relates to the transnational
nature of financial crimes. Presidential Decision Directives #42, #62,
and #63, along with the International Crime Control Strategy, have laid
the foundation to implement this vision.
Under the Law Enforcement Sub-Group of the G-8, a number of
projects were developed which directly impacted the jurisdictional
authority of the Secret Service. High tech crime, access device fraud
and West African fraud were recognized as having a detrimental effect
on the economies of the G-8 member nations. The Secret Service is the
head of the U.S. delegations in both the access device fraud group and
the West African fraud group.
In response to initial findings of these groups, the Secret Service
implemented a number of overseas initiatives to address these and other
forms of transnational criminal activity. Three of these initiatives
are recurring, and include temporary duty assignments of Secret Service
Agents to the City of London Police Department, the German BKA, and
Lagos, Nigeria.
The banking industry has identified ``skimming'' (the replication
of electronically transmitted magnetic stripe data to allow or enable
valid authorization to occur) as the most significant financial problem
facing the credit card industry today and for the near future. The
Secret Service has taken the lead in the development of a database that
will give credit card issuers and other members of the financial
services industry the ability to provide time sensitive investigative
leads to a central location.
The Secret Service continues to take a very active role in matters
involving missing and exploited children by making forensic technology
available to Federal, State, and local law enforcement. During fiscal
year 1998, forensic support for the National Center for Missing and
Exploited Children (NCMEC) included polygraph examinations, handwriting
examinations, ink analysis, voiceprint comparisons, audio and video
enhancements, and fingerprint research and identification.
Since initiating the Children's Identification System (KIDS), which
provides parents with a printed document that contains the thumbprints
and a photograph of their child, the Service has processed more than
seven thousand children at different sites across the country. The
Service utilizes Livescan fingerprint equipment and digital cameras to
produce the documents. Frequently, KIDS support is provided at events
hosted for state and local law enforcement personnel. At these events,
the Service publicizes the availability of the forensic support
described above for investigators actually tasked with suppressing
these heinous crimes. The Service does not maintain or make any use of
these KIDS records.
workforce diversity
The Secret Service consistently recruits, hires, and retains a
diversified workforce and has recently developed a three-year
recruitment strategy for the continued achievement of this goal. This
strategy encourages every employee of the Secret Service to become a
recruiter for every position within the agency. This year the Service
will hire 432 special agents, the largest special agent hiring in the
history of the Secret Service. The three-year strategy is being
published and distributed to all employees, along with recruiter
handbooks which provide position descriptions, requirements and salary
ranges to assist in advising of employment opportunities.
The recruitment strategy is also responsive to Presidential
Decision Directive #63 which requires the Secret Service to, among
other things, vigorously recruit undergraduate and graduate students
with the relevant computer-related skills for full-time employment, as
well as for part-time work with regional computer crime squads.
Presidential Decision Directive #63 also requires the Service to
facilitate the hiring and retention of qualified personnel for
technical analysis and investigations involving cyber attacks.
The recruitment strategy also supports the International Crime
Control Strategy by identifying employees with various language
capabilities to fill overseas posts of duty.
rowley training center
The Secret Service's Office of Training has embarked upon a number
of major initiatives. Preparations have been made to conduct basic
training for an unprecedented number of new agents and uniformed
officers this fiscal year. Nearly 500 trainees will complete eleven-
week training courses this year at the Service's James J. Rowley
Training Center.
Also, the training staff is working closely with the Service's
newly created Major Events Division to develop and conduct training
needed to prepare for the protective effort relative to next year's
presidential campaign.
The Office of Training has also begun the firearms training
necessary for the Service to transition from using the 9mm Sig Sauer
(P228) and the UZI submachine gun as standard equipment to the .357 Sig
Sauer (P229) semi-automatic pistol and the Hechler and Koch MP5A3
submachine gun. Over 4,000 law enforcement personnel will receive this
training over the next two years.
This office is also planning to intensify its academic relationship
with Johns Hopkins University. In addition to enhancing the curriculum
review and program validation projects already begun, staff members
from the Police Executive Leadership Program at Hopkins are working
with this office to develop new ethics and leadership courses for
Service personnel.
Finally, the James J. Rowley Training Center is in the midst of a
significant capital construction program that includes a new tactical
live fire training facility and new classroom and administration
buildings. The classroom building will feature 14 classrooms, two
computer laboratories, a library, a canteen, and the Security and
Incident Modeling Laboratory (SIMLAB). When completed, these new
facilities will enable the Secret Service to conduct state-of-the-art
training and better prepare its personnel to confront the daily
challenges of both the protective and investigative missions.
secret service headquarters consolidation
Work on the Service's new headquarters building is proceeding on
schedule, with construction expected to be completed this summer.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions that you or other members of the subcommittee may
have.
PRESIDENTIAL CANDIDATE/NOMINEE PROTECTION
Senator Campbell. OK, I thank you. You mentioned that part
of your responsibility is to protect presidential candidates.
At the last count there was about 13 of them, I think. I know
about half of them and the other half I wish I never heard of.
But how do you possibly budget now when you have no idea
how many are going to be in the race? There may be another 13
for all we know.
Mr. Stafford. Mr. Chairman, that is correct. It has always
been a challenge for us to put together that budget.
It really is divided up into four areas. The first one is
the most difficult one, which this year we are asking for close
to $20 million. Rather than try to determine how many
candidates that there will be, we base it historically on past
campaigns. We found that it costs approximately $30,000 per
protection day, to protect each candidate.
Senator Campbell. $30,000 a day.
Mr. Stafford. Historically over the past five campaigns
combined.
Senator Campbell. Combined numbers of running, whether
there is two running or 10 running?
Mr. Stafford. Correct. Historically, that is the figure
that we use to estimate that portion of the budget, which is
variable.
The other ingredient is the number of days of protection.
We have estimated again historically that there will be
approximately 654 days of protection at just a little over
$30,000, which puts us at about $20 million, which is probably
a conservative figure.
The conventions, of which there will be two, one in
Philadelphia and one in Los Angeles, are both in August. Those
will cost us about $5 million each.
Also coordinating centers, of which there will be two or
three. And then we have some overhead costs of equipment and
rental vehicles.
ARMORED LIMOUSINES
Senator Campbell. I noticed also that part of your budget
request is to buy armored all-terrain vehicles and sedans. I
guess it would be too much just to have you issue each one of
those candidates one of those and let them be on their own,
would it not? [Laughter.]
Let me ask you about these armored ATVs. First of all, how
many vehicles do you think that is going to purchase, the
requested amount, and what are you going to do with them?
Mr. Stafford. The ATVs?
Senator Campbell. Yes.
Mr. Stafford. We asked for approximately $5 million for the
armored fleet, which includes----
Senator Campbell. I see. I should have asked staff. This
was money we did provide and you want to redirect use of that
money now. You are not buying----
Mr. Stafford. That is correct, about $3 million of the $5
million. And we need to redirect that to our primary limo
program. The primary limos are the cars that the President
uses. We have four of those that we are working with the
contractor right now to build and that is the final payment,
the final $3 million on the primary armored program.
NATIONAL SPECIAL SECURITY EVENTS
Senator Campbell. All right, thank you. You mentioned the
Summit of Eight that was in Denver that you were involved in,
and you are going to, obviously, be involved with the 50th
anniversary of NATO which will meet here in Washington, D.C.
You coordinate with State and other Federal agencies and local
law enforcement too. Is the NATO anniversary going to present
any special and unique problems that the Summit of Eight and
some of the other big international events you are involved
with----
Mr. Stafford. Well, they all present problems and risks, as
you know. Right now with what is going on in the world there
will be some unique problems. But we feel very comfortable with
the security plan. As I said earlier, the NATO summit has been
designated a national special security event, which really
brings forth the full force of the U.S. Government, the Secret
Service being the lead in the planning and implementation of
that plan. We work very closely with the FBI who has the lead
in----
Senator Campbell. The dates have already been set for that,
have they not?
Mr. Stafford. Yes.
Senator Campbell. What are the dates?
Mr. Stafford. They are April 23rd through the 25th.
Senator Campbell. April 23rd?
Mr. Stafford. April 23rd through the 25th. It is three days
of meetings that will involved--most of the meetings will take
place in the Federal Triangle area, Customs building, Ronald
Reagan building, and the Mellon Auditorium. There will also be
about 13 other venues of social events which include the White
House and the Naval Observatory.
Senator Campbell. Would you send me a memo to remind me to
be out of town? [Laughter.]
Mr. Stafford. It will not be a good place to drive around
Friday afternoon, that is true.
Senator Campbell. Senator Dorgan.
ANTI-COUNTERFEIT
Senator Dorgan. Mr. Chairman, let me ask Mr. Stafford the
same question I asked Mr. Johnson. With the new currency that
is in circulation you, I assume, agree with his assessment on
its relationship to the ability to counterfeit. Are the anti-
counterfeit features of the currency working in your judgment?
Mr. Stafford. Yes, they are working extremely well, as
evidenced by most of the counterfeits that we seize and that
are passed are the older counterfeits, the pre-1996 series. So
counterfeiters will continue to counterfeit the older series.
We seized, nationwide, $110 million last year and most of that
was generated from overseas and most of it was the older series
of counterfeits.
PROTECTIVE THREATS
Senator Dorgan. Mr. Stafford, we obviously appropriate
money for the Secret Service to protect our President and
candidates for President and perform many other important
functions. In a world that is increasingly difficult to
predict, with terrorist acts that occur from time to time
around the world, what kind of experience are we having with
threats these days? Are there more threats that you perceive,
or fewer threats, pretty stable?
Mr. Stafford. Threats specific to a protectee or just
overall threats?
Senator Dorgan. Threats to the protectee that the Secret
Service is required to protect, whether it is candidates or the
President, Vice President.
Mr. Stafford. We track threats weekly. Actually, we track
them daily for each of our protectees. Those numbers will vary
depending on the protectee and depending on what happens to be
going on in the world. The threats are up right now on our
protectees. Particularly, we get probably sometimes up to 20
threats a day just on the Internet that we have to address. But
the threats are high right now.
Senator Dorgan. My question is, what is the climate, and I
guess you are answering that. That the climate in which we live
is producing somewhat----
Mr. Stafford. An increased threat level? Yes, it is.
Senator Dorgan. And my expectation is that the action that
is now occurring in Europe, of course, may even precipitate
more.
Mr. Stafford. That is correct.
ARMORED LIMOUSINES
Senator Dorgan. Let me ask you one little question. I know
it is a difficult one probably for you to answer, but the
amount of money that has been requested and now being requested
to finish the purchase of four vehicles, obviously, the primary
limousines in which the President and others are transported.
I have flown in Air Force One. In think the old Air Force
One before the new 747s came was purchased, I think, in 1962 or
so. I was on one of its last trips to Asia before it was
retired. But I think it was used up until about 1989 by
President Bush, so I think it had nearly a 25-year life as Air
Force One for use by American Presidents. It was a great old
airplane.
But the limousines, it looks to me like we only get a few
years' life out of them, and I cannot conceive of a President
driving around very much. You do not wear those things out, I
would not expect. Yet the cost of them are extraordinary. I
will not describe all the cost data here, but----
Senator Campbell. In addition, as I understand it, they are
torn down or something. Because they are specially constructed
vehicles, you just do not take them down to the used car lot
and put them up for sale.
Mr. Stafford. No, that is correct. There are only four in
the primary armored program and those four are for the
exclusive use of the President. The other armored limos are
what we refer to as cut and stretch limos where they are
standard vehicles that are stretched and cut and retrofitted
with armor. The primary limos are built from the ground up. We
need an assembly line unique just to those four vehicles. We
have a very difficult time even finding a contractor.
Senator Campbell. What is the oldest one in service now?
Mr. Stafford. The oldest cut and stretch?
Senator Campbell. No, the specially constructed one. Is the
oldest one----
Senator Dorgan. 1989, and three of them are 1993s.
Mr. Stafford. Right. We have the four new ones, of which we
need the $3 million to make the final payment on, they will be
due in in October of next year.
Senator Dorgan. I am just asking if you can give me some
information about why so expensive. I mean, these are
extraordinarily expensive. It is not 10 times or 20 or 40 or
100 times more than an automobile--it is extraordinary.
Mr. Stafford. I can give you the particulars. Basically the
vehicles are built from the ground up. They are not standard--
--
Senator Dorgan. I understand. But my uncle Harold he could,
if he had this kind of money, Uncle Harold could get you one of
these, be perfectly safe from any threat. But just give me some
information so I can understand what possibly could require a
car company to charge that much, even building it from the
ground up with every technology conceivable to protect against
a threat. It seems to me like an extraordinary amount of money.
Mr. Stafford. If I could just conclude--and I would be
happy to supply that for you. But those vehicles first have to
be designed. There is a no generation vehicle that are coming
out now that are front-wheel drive versus rear-wheel drive, so
that had to figure into that. So they have to be specifically
designed, not only for the new generation of vehicles so they
look like other cars, but also the armorment for the weight.
And the assembly line, again, is unique to those four vehicles.
So I know that it is not a money-making thing for the
contractors. As I said, we have a very difficult time even
getting contractors to be receptive to that program.
Senator Dorgan. It is a fairly specific question and I do
not mean to hit you with it. But if you could just give me a
memo that describes some of the special circumstances, I would
appreciate it.
Mr. Stafford. I will be happy to.
Senator Dorgan. Mr. Chairman, that is all I have. Thank
you.
Senator Campbell. Look at it this way, we are saving money
by not putting any armor on motorcycles.
Senator Dorgan. That is true. At this price though, I would
encourage the President to drive around a bit. [Laughter.]
Just get some mileage out of these cars and get some
enjoyment out of them.
SUBMITTED QUESTIONS
Senator Campbell. I thank this panel for appearing.
Appreciate it very much, and if you would like to stay, you are
welcome to. But if you have other things to do, thanks for
being here. We look forward to working with all of you again.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Dorgan
candidate/nominee protection
Question. Please explain the functions the Secret Service provides
during presidential campaign years that are outside the scope of the
Secret Service's regular activities.
Answer. During presidential campaign years, the Service is required
by law to provide protection for major presidential and vice-
presidential candidates, nominees and their spouses, and to provide
security at both major conventions. These functions are a part of the
Secret Services mandated workload. None of the activities are outside
the scope of the USSS' regular activities, however, they do not occur
every fiscal year.
Question. The Service provides protection for the major candidates.
How does the Service determine the major candidates?
Answer. Public Law 98-587 places upon the Secretary of the Treasury
the responsibility for determining, after consultation with an advisory
committee, which persons qualify as major presidential or vice
presidential candidates and as such, should be furnished with Secret
Service protection; unless such protection is declined. The committee
consists of the majority and minority leaders of the Senate, the
Speaker of the House of Representatives, the minority leader of the
House of Representatives, and one additional member selected by the
other members of the committee.
The following guidelines assist the committee in advising, and the
Secretary in determining, who the major presidential or vice-
presidential candidates are, and thus who should receive protection.
a. The candidate must have publicly announced his or her candidacy.
b. The candidate must be entered in at least 10 primaries.
c. The candidate must be seeking the nomination of a party who
received at least 10 percent of the popular vote in the previous
election.
d. The candidate must qualify for matching funds of $2 million
under 26 U.S.C.9031-9042.
e. The candidate must register at least 5 percent in polls
conducted by ABC, CBS, NBC and CNN, or receive 10 percent of the votes
in two consecutive primaries or caucuses.
f. After April 1 of the election year, the candidate will qualify
if he/she has received 10 percent of the delegates Notes:
a. Protection is only provided while the candidate/nominee is in
the United States.
b. Protection will not be withdrawn as long as the candidate
continues to have the commitment of 10 percent of the delegates.
The Secretary of the Treasury has the discretion to provide
protection even if the above guidelines are not met.
Question. Should the Service spend less than anticipated can the
subcommittee anticipate the funds would be lapsed, (returned to the
General Fund of the Treasury) or would the Service request the funds be
reprogrammed for other Service activities, such as White House
protection?
Answer. The Service's fiscal year 2000 budget proposes that the
Service seek reimbursement for candidate/nominee expenditures from the
Treasury Asset Forfeiture fund for campaign related expenses. If
funding is provided with this source, then no funding will be lapsed.
However, if funding is ultimately provided with the Service's Salaries
and Expenses appropriation, and the Service should spend less than
anticipated on the campaign, any excess funding will either be lasped,
or a proposal to reprogram these funds for another purpose will be
made.
armored limousines
Question. Given the weight and special engineering what is the
average life of these vehicles.
Answer. Due to the weight and constant use, armored primary
limousines have an expected life of only seven to ten years.
Question. What was the cost of the previous vehicles?
Answer. When the previous vehicles were purchased, the Service
accepted a bid from Cadillac to build three vehicles at a cost of
$225,000. Upon completion of the first three vehicles, a fourth vehicle
was purchased at cost of $150,000. In addition to the cost of building
these vehicles, an additional $265,000 was expended by the Service to
purchase armored glass and air filtration systems. These systems were
provided to Cadillac for incorporation into the vehicles. Although the
Service paid only $375,000 to Cadillac, it actually cost Cadillac $15
million to build these vehicles.
Cadillac is now familiar with the Service's armored limousine
program, and what it costs to build the required vehicles. They are no
longer willing to sustain a significant loss in order to win the
contract to design and build these vehicles. Ford, who lost money
building these vehicles in 1989, and Chrysler, were not interested in
bidding for the most recent contract to build these vehicles.
In October of 1998, the Service awarded to Cadillac a contract for
$692,000 to do the feasibility study needed to provide the Service with
the exact cost to engineer, design and manufacture four new primary
limousines. The study was completed last year and Cadillac provided the
Service with a proposal of $13,434,000 to design, engineer, test and
deliver the vehicles. The Service is paying for the engineering and
design of these vehicles only. Because of the exposure and recognition
of the brand name that accrues to the manufacturer of these vehicles,
Cadillac has agreed to spend an estimated $5,882,000, to manufacture
these vehicles. The proposal calls for the Service to pay as follows:
Fiscal year 1999--$692,000 for feasibility study; Fiscal year 1998--
$4,608,000 phase I engineering and design; Fiscal year 1999--$6,555,000
phase II engineering and design; Fiscal year 2000--$2,271,000 phase III
engineering and design.
Question. Did the Federal government purchase these vehicles?
Answer. Yes, the federal government purchased these vehicles.
Federal Law Enforcement Training Center
STATEMENT OF W. RALPH BASHAM, DIRECTOR
Senator Campbell. Our second panel will--if Under Secretary
Johnson wants to stay, he is certainly welcome to do so. It
will be Ralph Basham, director of FLETC, and Jim Sloan, the
director of the Financial Crimes Enforcement Network.
Friends, if we could quiet down a little bit we will
proceed with this panel. Under Secretary Johnson, you are
welcome to stay, but if you have to go, we understand.
We will go ahead with Director Basham first. As I mentioned
to the other panel, please abbreviate your comments and we will
make sure that all the testimony is in the record.
Mr. Basham. Thank you, Mr. Chairman, Senator Dorgan. I am
pleased to be here today to report on the current operations
and performance of the Federal Law Enforcement Training Center
and to support our appropriations request for fiscal year 2000.
In the interest of time, I will submit a longer written
statement for the record.
Senator Campbell. That is fine.
INTRODUCTION
Mr. Basham. While I have only been the director of the
center for approximately one year, I am well aware of the
outstanding reputation this organization has acquired over
nearly three decades of delivering high quality training to law
enforcement officers across the country. Throughout the
center's 29 years of service to Federal law enforcement, this
committee has been extremely supportive and most generous in
its funding of consolidated training. The success enjoyed by
the center and success of the consolidated training concept are
directly attributable to this committee's strong and consistent
support.
TRAINING WORKLOAD INCREASE
As I mentioned in my testimony last year, the Center
continues to face an unprecedented increase in its training
workload. In fiscal year 1998, the Center delivered more
student weeks of training than in any other time in its
history, and we expect the training workload to be even heavier
this year. Further, based on projections of our participating
agencies, we expect this trend to continue for the foreseeable
future.
The majority of increases in training workload result from
initiatives to improve the effectiveness of the Immigration and
Naturalization Service, counter-terrorism activity, security
enhancement at Federal facilities, and the new Federal prisons
coming on line. The initiatives outlined in our request are
targeted at maintaining the quality of training and increasing
the center's training capacity in response to this growing
workload.
STRATEGIC PLAN
They tie directly to the goals outlined in the Center's
strategic plan, which is in the process of being revised to
better align it with the center's mission and to make it more
meaningful to our staff, this committee, and other
stakeholders. A copy of the revised plan will be provided to
this committee and our other stakeholders for review and
comment prior to being finalized.
MASTER PLAN AND CONSTRUCTION
I would like to take a few minutes and briefly discussed
the center's master plan and Construction initiatives outlined
in our request. These initiatives are critical to the continued
success of consolidated training.
To meet the dramatic rise in the training workload, the
Center is moving forward on its master plan construction
program to increase capacity at both Glynco and Artesia.
Through 1999, Congress has appropriated over $100 million for
master plan construction projects. The plan has been updated
several times over the last few years and copies of these
updates have been furnished to the committee.
It should be recognized that the cost of fully implementing
the master plan has increased over time because of inflation
and changes necessary to meet the training requirements of our
customers. The FLETC will continue to work through Treasury,
OMB, and Congress regarding adjustments to the plan.
In the past two fiscal years, the center has completed
construction on two additions to the main classroom building
and a computer training facility at Glynco. Additionally,
construction is well underway on one new dormitory, and
construction recently began on a second new dorm as well.
Further, construction of an administration building began this
year and is nearing completion.
In Artesia, construction on a 73-bed dormitory is completed
and we expect to award a contract for construction of a
classroom and practical exercise building very soon. Funds for
a 300-bed dormitory at Artesia should also be obligated later
this fiscal year.
Our 2000 request includes $13.1 million for new
construction, and these funds will be used to complete funding
already partially appropriated for construction of a new
classroom building, construction of a specialized facility
required for implementation of new counter-terrorism training
program, and expansion of the center's chilled water system to
support facilities being constructed.
PREPARED STATEMENT
The continued expansion of facilities at both Glynco and
Artesia are vital if the closure of the temporary training
facility in Charleston, South Carolina is ultimately to be
realized.
Thank you, Mr. Chairman, and I am ready to answer any of
your questions.
[The statement follows:]
Prepared Statement of W. Ralph Basham
Mr. Chairman and Members of the Subcommittee, I am pleased to be
here today to report on the current operations and performance of the
Federal Law Enforcement Training Center (FLETC) and to support our
appropriations request for fiscal year 2000. The Center has seen
tremendous growth since its establishment in 1970 when a handful of
agencies joined together and established the Consolidated Federal Law
Enforcement Training Center. There are now 71 agencies which train at
the Center, and we expect this growth to continue as more agencies
recognize the many benefits of consolidated training.
The Department of the Treasury has been the lead agency for the
United States Government in providing the administrative oversight and
day-to-day direction for the FLETC since its creation. Under the
leadership of Secretary of the Treasury, Robert E. Rubin, and Under
Secretary for Enforcement, James E. Johnson, the FLETC has received
strong support and active assistance for carrying out its
responsibilities. I am especially thankful for the assistance and
counsel they have provided during my first year as Director of the
Center. We are indeed fortunate to have these two individuals playing a
leadership role as the FLETC prepares to embark on the next century.
While I have only been Director of the Center for approximately a year,
I am well aware that this Committee is also owed a debt of gratitude.
Throughout the Center's 29 years of service to Federal law enforcement,
this Committee has been extremely supportive and most generous in its
funding of consolidated training. We extend our appreciation and look
forward to working with you in the coming year.
The Administration and Congress can be proud of the quality of the
training being provided at the FLETC and the savings realized through
consolidation.
Today, I am prepared to discuss a number of our initiatives
outlined in the President's fiscal year 2000 budget. The Center's
fiscal year 2000 request is for a Salaries & Expenses (S&E)
appropriation of $86,846,000 and 572 FTE, an increase of $11,375,000
and 10 FTE from the fiscal year 1999 level. Further, the FLETC is
requesting that an additional $900,000 be made available from the
Treasury Asset Forfeiture Fund for the purchase of training vehicles.
Our request for Acquisition, Construction, Improvements & Related
Expense (ACI&RE) is $21,000,000 a decrease of $13,760,000 from the
fiscal year 1999 appropriation. The FLETC is also asking that
$4,600,000 be provided from Treasury's Asset Forfeiture Fund to support
the expansion of the Center's chilled water system. The S&E and ACI&RE
funding requested will support eight important initiatives: Counter
Terrorism Training ($2,506,000 and 4 FTE); Cost Accounting System
($1,380,000 and 2 FTE); Audited Financial Statements ($500,000);
Equipment ($1,973,000); Scheduling Automation ($350,000); Construction
($4,889,000--balance of funds for construction of a classroom
building); Chilled Water System ($6,950,000--includes $4,600,000 from
the Asset Forfeiture Fund and $2,350,000 from the FLETC's ACI&RE
account); and New Training Building Support ($2,234,000 and 4 FTE). The
Counter Terrorism Training initiative is split between the S&E and
ACI&RE accounts because of the nature of the initiative. A breakout of
the funding between the accounts for this initiative is as follows:
Counter Terrorism Training--S&E, $1,216,000 and 4 FTE; ACI&RE,
$1,290,000
The S&E and ACI&RE request represents a decrease of $2,385,000 from
the fiscal year 1999 appropriation. Coupled with approximately
$38,000,000 in funds to be reimbursed to us for training related
services, the total budget for fiscal year 2000 is $151,346,000.
Before providing this Committee with an overview of Center
operations and discussing each of the initiatives in more detail, I
would like to take a moment to address progress being made in complying
with the requirements of the Government Performance and Results Act
(GPRA). As you know the GPRA requires agencies to publish annual
performance plans that are tied to their strategic plans. Performance
plans are to include measurable goals which agencies are required to
report on after the year is completed. These performance plans are now
an integral part of the budget documents sent to you each year.
Included in our budget request this year is a report on whether or
not the FLETC achieved each of the targets proposed for fiscal year
1998. The performance measures used for the Law Enforcement Training
activity in fiscal year 1998 included: (1) results of the student
quality of training survey, (2) student-weeks trained: Federal Basic,
(3) variable unit cost per basic student-week of training funded, and
(4) number of personnel input forums conducted. The performance
measures for the Plant Operations activity included: (1) student
quality of services survey and (2) initiation of a comprehensive
development plan.
The student quality of services survey and student quality of
training survey performance measures are outcome measures. The student
quality of training index is based on a six point rating scale, and the
student quality of services index is based a five point scale. Both
indices are computed using evaluations completed by students attending
Center programs. The variable unit cost per basic student-week of
training funded is also an efficiency measure and is based on training
dollars divided by funded student-weeks of training. The student-weeks
trained outcome measure is based on whether the Center conducts 100
percent of the basic training requested by its participating agencies.
Finally, the plan called for the FLETC to conduct 4 personnel input
forums.
I am pleased to report that the Center's performance against
established targets overall was excellent. The index for the most
critical performance measure in our plan, the student quality of
training survey measure, was ``5.9''. This exceeded the Center's
performance plan target of ``5.0''. The student quality of services
actual performance index was ``4.5'' which also exceeded our
performance target of ``4.0''. Additionally the FLETC's training costs
were below the cost figure established for the variable unit cost per
basic student-week of training. The plan projected a per week cost of
$137 and the actual was $129, a savings of $8 per week or 6 percent. In
the Plant Operations activity performance measures were either met or
exceeded.
As stated earlier and in the Center's testimony last year, the
FLETC will continue to refine its plan and existing performance
measures and/or identify new performance measures in an effort to more
accurately reflect its performance. Additionally, during fiscal year
1999 the FLETC began the process of revising its strategic plan to
better align it with the Center's mission. A copy of the draft will be
provided to this Committee and our other stake-holders for review and
comment when it is completed.
overview of operations
Now Mr. Chairman, if I may, I would like to provide the Committee
with a brief overview of the operations of the Federal Law Enforcement
Training Center.
The Center was established by a Memorandum of Understanding in 1970
and has experienced tremendous growth over the last 29 years. With but
a few exceptions, the FLETC currently conducts basic and advanced
training for the vast majority of the Federal government's law
enforcement personnel. We also provide training for state, local and
international law enforcement personnel in specialized areas and
support the training provided by our participating agencies that is
specific to their needs. Currently, 71 Federal agencies participate in
more than 200 different training programs at the Center.
There are entry level programs in basic law enforcement for police
officers and criminal investigators along with advanced training
programs in areas such as marine law enforcement, anti-terrorism,
financial and computer fraud, and white-collar crime. Training is
conducted at either the main training center in Glynco, Georgia, our
satellite training center in Artesia, New Mexico, or a temporary
training facility in Charleston, South Carolina.
The temporary training site in Charleston was established in fiscal
year 1996, to accommodate an unprecedented increase in the demand for
basic training by the participating agencies, particularly that of the
Immigration and Naturalization Service (INS) and United States Border
Patrol (USBP). The workload increase is the direct result of recent
Administration and Congressional initiatives to control illegal
immigration along the United States borders and efforts to protect
Federal workers in the workplace.
In addition to the training conducted on-site at one of the FLETC's
residential facilities, some advanced training, particularly that for
state, local and international law enforcement, is exported to regional
sites to make it more convenient and/or affordable for our customers.
The tremendous demand for basic training over the next three years will
increase the FLETC's reliance on export training sites to meet these
advanced training requirements. The Center's driver and firearms
special training facilities cannot currently accommodate all of the
training being requested. Therefore, much of the advanced training
requiring the use of special training facilities will have to be
accommodated elsewhere.
Realizing that a short-term solution was needed to meet the
advanced training needs of our Federal customers until additional
facilities are completed under the FLETC's construction Master Plan,
the Center began to identify state and local facilities that could be
used to accommodate this training. Several sites have been identified
and FLETC is continuing to work on specific arrangement protocols.
These sites will be used on a reimbursable basis when required and
there will be no use of FLETC funds for capital expenditures.
Essentially, FLETC will serve as a ``broker'' in setting up training
arrangements with selected non-Federal sites that can accommodate
training that cannot otherwise be conducted at a FLETC site. Continued
implementation of the Master Plan will eventually allow this advanced
training to be returned and conducted at the Glynco and Artesia
training centers.
Over the years, the FLETC has become known as an organization that
provides high quality and cost efficient training with a ``can do''
attitude and state-of-the-art programs and facilities. In my first year
as Director, I have quickly come to realize and have seen first-hand
the many advantages of consolidated training for Federal law
enforcement personnel, not the least of which is an enormous cost
savings to the Government. Consolidated training avoids the duplication
of overhead costs that would be incurred by the operation of multiple
agency training sites. Consolidation also ensures consistent high
quality training and fosters interagency cooperation and camaraderie in
Federal law enforcement.
We view FLETC and consolidated training as a National Performance
Review concept ahead of its time. Quality, standardized, cost-effective
training in state-of-the-art facilities, interagency cooperation, and
networking are indisputable results of consolidation. However the
concept of consolidated training is fragile and needs constant
nourishment and support if it is to remain intact.
workload
As I mentioned earlier, the Center is facing an unprecedented
increase in its training workload that began in fiscal year 1996 and is
projected to continue for several more years. The majority of the
increase in training workload is the result of the fiscal year 1995
initiative by the Administration and Congress to increase the
effectiveness of the INS in controlling our borders by increasing the
number of INS and USBP law enforcement personnel. Other factors
contributing to the Center's increasing workload include counter
terrorism activity and security enhancements at Federal facilities and
new Federal prisons coming on-line.
During fiscal year 1998 the Center graduated 25,762 students,
representing 120,399 student-weeks of training. This total included
16,969 students who were trained at Glynco, GA; 3,565 students trained
at Artesia, NM; 1,481 students trained at the temporary training site
in Charleston, SC; and 3,747 students trained in export programs. There
were 10,605 basic students; 11,038 advanced students; 3,494 state and
local students, and 625 international students trained equating to an
average resident student population (ARSP) of 2,315 Fiscal year 1998
was the heaviest workload in the Center's history and as I mentioned
earlier we expect this workload to grow over the next few years.
The April 1998 participating agency projections indicate that
during fiscal year 1999, the Center will train 35,315 students
representing 167,449 student-weeks of training. This total includes
25,418 students to be trained at Glynco; 4,539 students at Artesia;
1,650 students at the temporary site in Charleston; and 3,708 students
in export programs. A total of 15,809 basic students; 14,711 advanced
students; 3,867 state and local students; and 928 international
students are projected for a total ARSP of 3,220.
Our participating agencies indicate that during fiscal year 2000,
the FLETC will train a total of 38,201 students representing 184,360
student-weeks of training. This total includes 26,430 students at
Glynco; 6,683 students at Artesia; 1,650 students at Charleston; and
3,438 students in export programs. A total of 16,948 basic students;
15,918 advanced students; 4,407 state and local students; and 928
international students are projected for a total ARSP of 3,545.
The Center has experienced enormous growth in the training demanded
by its participating agencies over the past decade. We have been able
to accommodate many, but not all, of these increased training demands
by being innovative and undertaking extraordinary measures.
To accommodate training during fiscal year 1985 and again in fiscal
year 1989, the Center had to temporarily expand its capacity for
housing, dining, classroom, office space, storage, and special training
facilities by using temporary buildings and contracted or licensed
temporary facilities. Further, the Center has not always had space to
accommodate all of our students in on-Center housing and has used
contractual arrangements with local motels to house our overload. Many
of the temporary measures taken to meet these training demands were
costly, and they adversely impacted the Center's operations.
The Center is again in a position where it has had to resort to
using a temporary facility to meet the training needs of the
participating agencies. As I mentioned earlier, a temporary training
facility was established in Charleston, South Carolina, during 1996
because our current facilities do not have the capacity to accommodate
all of the training being requested. It is exclusively being used to
conduct USBP training that cannot be accommodated at Glynco and
Artesia. Plans called for Charleston to be closed in the early 2000's
time frame, once the training requirements for the Border Patrol
buildup are completed and/or new facilities become available to
accommodate the training at FLETC's permanent locations. Given adequate
funding to support planned new construction, FLETC should have
sufficient capacity at Glynco and Artesia at that time to meet the
overflow training requirements of the participating agencies now being
accomplished at Charleston. As facility capacity increases over the
next several years, training at Charleston can be phased out.
In addition to having to rely on temporary training facilities to
accommodate the increased workload, the training being requested in
fiscal year 1999 has also made it necessary to implement a dual-shift
schedule at Glynco. Two overlapping shifts, one that runs from 7:00
a.m. to 4:00 p.m and the other which runs from 9:00 a.m. to 6:00 p.m.
are being used. The overlap in the dual-shift schedule provides some
additional facility capacity because the training day under the dual
shift is ten hours instead of the normal eight allowing for expanded
use of the special training facilities.
The dual-shift schedule will increase usage of both training
equipment and facilities and result in a shortened life cycle. Both
will require earlier repair and/or replacement. Additionally,
implementation of the dual schedule required numerous adjustments in
FLETC's food, janitorial, transportation services, and role player
contracts resulting in significant unprogrammed increases in operating
expenses. There will be some impact on the quality of life for students
and staff because some weekend training is also likely under the dual
schedule.
This is the third time since fiscal year 1985 that FLETC has taken
extraordinary measures to meet the projected training demands of the
participating agencies. More importantly, it is the second time in the
last 10 years that a temporary training facility has had to be
established.
Opening temporary training facilities is a time-consuming and
expensive process. Capital improvements must be made to bring the
facility on line and, unlike capital improvements made at Glynco or
Artesia, there is no permanent return on that investment. The dollars
expended are lost when the facility is closed. It also impacts on the
cost effectiveness of the training provided and on the student's
quality of life and overall training experience.
facilities master plan
Now, Mr. Chairman, I would like to brief you and the Committee
members on progress being made in expanding the FLETC's facilities. The
Master Plan, presented to Congress in June 1989, provided a basis for
the efficient and orderly development of the Center's land and
facilities resources to meet projected needs through year 1998. It was
a comprehensive blueprint and orderly guide for expansion of the
Center's facilities to meet the projected training workload.
Over the years the original Master Plan has been updated to refine
earlier estimates and incorporate changes necessary to meet the
evolving training needs of our customers. It is important to note that
this planning process is dynamic and on-going. We anticipate additional
and continuous revisions to the Master Plan in response to ever-
changing law enforcement training requirements and mission
enhancements. Since 1989, Congress has appropriated $105,649,000 for
construction. Of this amount $87,068,000 was for Glynco projects;
$18,031,000 was for Artesia projects; $300,000 for Marana projects; and
$250,000 for Davis-Monthan projects. In addition, funds have also been
allocated from other sources (i.e. Treasury Asset Forfeiture Fund,
etc.) for construction of new facilities at both Glynco and Artesia.
Both the Marana and Davis-Monthan centers have been closed.
At Artesia, major projects that have been completed include:
rehabilitation of the cafeteria/student center complex and main
classroom building; construction of a physical training complex;
interim driver/firearms ranges; a road and sidewalk network; permanent
firearms ranges; and a driver/firearms administrative support/classroom
building. At Glynco, completed projects include: a dormitory; an
expansion of the indoor firearms range complex; consolidation/expansion
of the physical techniques facility; an expansion of the cafeteria;
construction of two 25 firing point outdoor ranges; an addition to the
Steed classroom building (two state-of-the-art classroom buildings);
and an expansion of our driver training complex (the addition of a
control tower, defensive driving and highway response ranges).
In addition to those projects already completed, construction is
underway on two new dormitories, an administrative building and a
security/registration building at Glynco. These projects are expected
to be completed in 1999 and 2000. Construction of a 73 bed dormitory in
Artesia is nearing completion and funding for a second dormitory with
300 beds will be obligated this year. Additionally, we also expect to
award a contract for the construction of a classroom/practical exercise
building at Artesia soon.
The Center's fiscal year 2000 ACI&RE request is in the amount of
$21,000,000, a $13,760,000 decrease from the fiscal year 1999 enacted
level. The request includes $13,129,000 for new construction. Projects
that would be funded include: $4,889,000 to complete funding already
partially appropriated for construction of a classroom building,
$1,290,000 for construction of a specialized facility for
implementation of a new counter terrorism training program and
$6,950,000 (includes $4,600,000 from the Treasury Asset Forfeiture
Fund) for expansion of the chilled water system that will provide the
additional capacity needed to cool new facilities being constructed.
The construction initiatives outlined support goal two in FLETC's
strategic plan which is develop, operate, and maintain state-of-the-art
facilities and systems responsive to interagency training needs.
Funding is required if the Center is to meet the training needs of our
customers and to protect the government's investment in facilities. Not
funding these initiatives will result in the continued reliance on the
more costly method of establishing temporary training facilities to
meet training requirements. It also endangers the concept of
consolidated training as the larger agencies look at alternatives, such
as individual agency sites, to meet their training needs.
The Center continues to consult closely with its participating
agencies so that the design features of each project will meet current
and future needs. This close consultation sometimes prolongs the period
it takes to design and construct facilities; however, the time and
effort are well spent because it ensures that funds are efficiently and
wisely used. In an effort to increase the number of construction
projects underway simultaneously, the Center is currently negotiating a
partnership arrangement with the General Services Administration to
provide assistance with related projects.
Obviously, changing events have and will continue to dictate
modifications to the various projects outlined in the Master Plan. I
assure you that we will continue to work through the Treasury
Department, Office of Management and Budget, and the Congress in
dealing with these changes.
Mr. Chairman, I want to thank you and members of the Subcommittee
for the support given the Center in its Master Plan development and
implementation. We are pleased and grateful that Congress has seen fit
to appropriate the funds necessary to expand our facilities and better
equip the Center to meet the training needs of its customers. Only by
doing so is the concept of consolidated training nurtured and
strengthened.
Now, if I may Mr. Chairman, I would like to take this opportunity
to briefly discuss our funding request for the mandatory basic training
workload increase and the remaining initiatives in the Center's fiscal
year 2000 budget request that I briefly referred to earlier in my
testimony.
mandatory basic training workload increase
In our fiscal year 2000 request the Center is asking for $5,439,000
and 18 FTE to support the direct cost of basic training. As I discussed
in some detail already, the Center is faced with an unprecedented
increase in its workload over the next three years. Spring 1998
workload projections by the Center's participating agencies indicate
that FLETC will conduct 149,171 basic student weeks of training in
fiscal year 2000. The requested funding is essential if the
consolidated training concept is to remain healthy. It supports goal
one in FLETC's strategic plan--provide high quality law enforcement
training.
The request is in accordance with the OMB/Treasury/FLETC policy
that requires funding of the direct cost of basic training. The
participating agencies do not request funding for these costs in their
budget submissions and are fully expecting and relying upon the FLETC
to provide that funding.
counter terrorism training
The increasing threat of terrorism requires that the government be
more proactive and aggressive in developing plans to protect its
workforce, citizens and infrastructure. Training will be a critical
element of any plan to combat terrorism, especially against weapons of
mass destruction. Our fiscal year 2000 request includes $2,506,000 and
4 FTE for Counter Terrorism Training ($1,216,000 and 4 FTE S&E and
$1,290,000 in ACI&RE) which will fund the development of two training
programs and related facilities targeted specifically at combating
terrorism, the Weapons of Mass Destruction/Nuclear, Biological, or
Chemical (NBC) Training Program and Critical Infrastructure Protection
Training Program. Both are train-the-trainer programs aimed at Federal,
state and local law enforcement officers and emergency services
agencies. The purpose of the first program is to prevent the first
responders to an incident from becoming victims themselves upon
arriving at incidents where large amounts of conventional explosives or
NBC materials have been used. The second program is aimed at providing
physical security training with an emphasis on prevention of terrorist
attacks against facilities, utilities and cyber systems. This program
would be conducted in a Special Classified Information Training
Facility also funded by this initiative. The specialized facility is
required because of the classified training that will be conducted.
These initiatives support Goals 1 and 2 in FLETC's strategic plan--
provide high quality law enforcement training and develop, operate, and
maintain state-of-the-art facilities and systems responsive to
interagency training needs.
cost accounting system
The Statement of Federal Financial Accounting Standard Number 4
requires all agencies to implement a managerial cost accounting system.
This initiative requests $1,380,000 and 2 FTE. It would provide the
FLETC with the resources necessary to develop and support a customized
cost accounting system. The complexities of the FLETC system in dealing
with several accounts--S&E, ACI&RE, Violent Crime Reduction Trust Fund,
Treasury Asset Forfeiture Fund, reimbursables from 71 agencies plus
numerous state, local, and foreign governments--make a customized cost
accounting system necessary. The initiative supports Goal 3 in FLETC's
strategic plan--effectively organize, develop, and lead FLETC's
personnel in support of the Center's mission.
audited financial statements
The Chief Financial Officers Act and the Government Management
Reform Act requires that Federal agencies have their financial
statements prepared and audited by an independent party. If the
Treasury's Office of Inspector General (OIG) cannot conduct this audit
for the FLETC, additional resources will have to be provided for
contract services if the Center is to comply with the requirements as
set forth in the Acts. The $500,000 requested in this initiative will
allow the FLETC to contract with a certified public accounting firm for
these services. The $500,000 estimate for an audit is based on a pre-
audit survey conducted by the OIG and directly supports Goal 3 in
FLETC's strategic plan--effectively organize, develop, and lead FLETC's
personnel in support of the Center's mission.
new training building support
As I mentioned earlier in my testimony, the Center is requesting
$2,234,000 and 4 FTE for new training building support The funding and
FTE requested is necessary to support the operation and maintenance of
new facilities that will have already come on-line or will be coming
on-line at both Glynco and Artesia. At Glynco these include two
dormitories, two office buildings, firearms ranges, a security/
registration building, and an explosives range. In Artesia it includes
a dormitory, a classroom/practical exercise building, and expansion of
the physical training building. The FLETC's request provides the
necessary resources and personnel to support operation of the new
facilities including utilities, contracts (janitorial/grounds
maintenance), and minor construction and maintenance. It is essential
to protect the Government's investment in these facilities and supports
both Goals 1 and 2 in FLETC's strategic plan.
equipment
Our request includes $1,973,000 for equipment. As I mentioned
earlier, the FLETC is experiencing a tremendous growth in its workload.
The heavier training workload and extended workday schedule makes it
necessary to increase our training equipment inventory. Additionally,
it also increases wear and tear on existing equipment thus shortening
the life of existing stocks and requiring more frequent replacement.
Further, new types of equipment must be purchased as technology changes
because it is vital that students receive training on the types of
equipment they will use in the field. This initiative supports the
purchase of new Digital Radios which have been mandated by the National
Information Administration under the Omnibus Budget Reconciliation Act
of 1993 and will be used by our graduates on-the-job. It will also
provide FLETC with the necessary resources to modernize its computer
equipment. This funding will allow the FLETC to maintain its quality of
training and respond to the needs of our customers. It supports Goals 1
and 3 in FLETC's strategic plan--provide high quality training for law
enforcement and effectively organize, develop and lead the FLETC's
personnel in support of the Center's mission.
scheduling automation
This initiative requests $350,000 to begin development of an
automated scheduling process. As previously mentioned, FLETC's workload
has seen tremendous growth over the last few years and this growth is
expected to continue. Not only are our participating agencies
projecting ever increasing basic training requirements, additional
advanced training for journey level law enforcement personnel will also
be required as a result of this growth. Currently the scheduling of
facilities is done manually. This initiative will begin the process of
automating the scheduling process and will result in more effective and
efficient use of the FLETC's training facilities when completed. It
supports Goals 2 and 3 in FLETC's strategic plan--develop, operate, and
maintain state-of-the-art facilities and systems responsive to
interagency training needs and effectively organize, develop and lead
the FLETC's personnel in support of the Center's mission.
Now, Mr. Chairman, if I may, I would like to take a moment to
briefly update the Committee on activities of our satellite training
center in Artesia, New Mexico, and the activities of our National
Center for State, Local and International Training.
artesia operations
The Artesia center was purchased and became operational in 1989.
Training facilities at Artesia include a 164-room dormitory, cafeteria
with seating to serve 270 persons per sitting with a serving capacity
of 400 per meal, and a physical training complex. There are also 21
general purpose classrooms which will accommodate up to 675 students.
Special purpose classrooms include a 24-person computer classroom and a
24-person fraudulent document lab. Other specialized facilities at
Artesia include but are not limited to practical exercise areas, a mock
courtroom, driver training and firearms ranges, an obstacle course, a
rappelling tower and recreational facilities for students.
The Department of the Interior's Bureau of Indian Affairs (BIA)
Indian Police Academy moved to Artesia during 1993 and is one of the
largest customers. In addition to the BIA training that is conducted,
Artesia also serves as an advanced training site for students posted in
the Western United States. Further, because of its diverse special
training facilities, it can accommodate overflow basic training that
cannot be done at Glynco due to space limitations. Artesia is playing,
and will continue to play, an important role in meeting the training
requirements of the INS over the next three to five years.
During fiscal year 1998, the Center trained 3,565 students at
Artesia. In fiscal year 1999, our latest estimates indicate that we
will train 4,539 students. April 1998 projections by our participating
agencies indicate that 6,683 students will be trained in fiscal year
2000. The majority of the increase in the fiscal year 1999 training
workload is due to the increases in the BIA basic training requirement
and the advanced training requirements of the INS, USBP, and the Bureau
of Prisons.
Other users of Artesia, in addition to those already mentioned
above, include the Bureau of Land Management, National Marine Fisheries
Service, and the FLETC's National Center for State, Local and
International Training.
The expansion of the Artesia center as authorized by the Congress
is continuing essentially as planned. As I mentioned earlier in my
testimony when discussing the Master Plan, many of the Artesia Master
Plan projects have been completed and are in use. Construction of a 76
bed dormitory will be completed soon and construction should begin on a
classroom building/practical exercise complex and site security system
this year.
national center for state, local, and international
Glynco's National Center for State, Local, and International
Training was established in 1982 by the President to provide much
needed training for state and local law enforcement agencies. Since its
inception, the National Center has received broad support from the
Federal, state, and local law enforcement communities. They provide
subject matter experts for course and program development as well as
instructional services.
The National Center is charged with training personnel from state,
local and international law enforcement agencies in advanced topics
designed to develop specialized law enforcement skills. By combining
the expertise of the participating agencies' and FLETC's staff with the
specialized training facilities already available, the Center is able
to provide participants with instruction in advanced programs that meet
their specific needs. In most cases the training enables these agencies
to be more supportive of Federal agencies and their missions.
During fiscal year 1998, there were 3,494 state and local students
trained through the National Center in more than 40 advanced training
programs. In fiscal year 1999 we expect to train 3,867 students. In
fiscal year 2000 we project that 4,407 students will receive training
through the National Center.
Because of the success of the National Center, many of these
programs are being conducted on an export basis at sites across the
country, including our Artesia center. This has proven to be a cost
effective method to provide training to state and local agencies.
Additionally, exporting training to state and local academies and other
locations throughout the country increases the visibility of the
Administration and Federal law enforcement and leads to improved
cooperation between Federal and state and local agencies.
The FLETC has been involved in international training for more than
20 years and has provided assistance to selected foreign governments in
a variety of ways, including operational briefings, technical
assistance, and hands-on training programs. The same network and
support structure in place to assist state and local agencies in
meeting their training needs makes the National Center a logical focal
point for international training at the FLETC.
Since 1979 the FLETC has provided training to more than 5,000
foreign law enforcement officials from more than 102 countries.
Training has been provided at the Center (on a space available basis)
or abroad with recent training focusing primarily on the areas of
international banking and money laundering, financial fraud
investigations, and telecommunications fraud.
The number of foreign training requests have grown substantially in
the last few years, with student weeks of training increasing by nearly
200 percent since 1994. Two Administration and Congressional
initiatives, the Freedom Support Act and the Support for Eastern
European Democracies Act, are responsible for much of the upsurge in
foreign training. As you know, these acts provide law enforcement
technical assistance in combating organized crime, financial crime, and
narcotics trafficking to Russia, the newly independent states of the
former Soviet Union, and other eastern European countries.
The majority of recent training has been provided under the
sponsorship of the Department of State's Office of Antiterrorism
Assistance and Office of International Criminal Justice. During the
last three years programs have been conducted in Russia, Poland,
Hungary, Romania and Moldavia. In addition to this training, the FLETC
also provides instruction in financial crimes to students attending
each session of the program conducted at the International Law
Enforcement Academy in Budapest, Hungary.
The FLETC maintains frequent contact and liaison with several
foreign law enforcement academies, such as the Royal Canadian Mounted
Police Academy, Bramshill Police College in England, and the Australian
Police Academy to further collaborative efforts in training related to
transnational crime.
During fiscal year 1998 the Center trained 625 foreign students,
representing 1,375 student-weeks of training. Although the majority of
the foreign training is done at the request and under the sponsorship
of the U. S. State Department, the Center stands ready and has the
capability to assist other agencies in meeting critical foreign
training needs, particularly for money laundering and financial crime
training for western hemisphere countries.
closing
Mr. Chairman, I am committed to the mission of the Center to
provide high quality training at the lowest possible cost. Substantial
savings are being realized through the operation of the Center as a
consolidated training facility. I look forward to your continued
support as the FLETC strives to remain a partnership committed to
excellence.
I am available to answer any questions you may have concerning this
appropriation request.
ARTESIA CONSTRUCTION
Senator Campbell. I think we will proceed as we did before.
We will each ask a few questions before we go to Mr. Sloan.
You mentioned Artesia. Has the construction for the master
plan been completed?
Mr. Basham. No, it is ongoing.
Senator Campbell. What facilities are still in the planning
stage?
Mr. Basham. We are currently working with GSA to assist us
in completing the master plan construction projects. We
currently have an additional classroom that is in the planning
stages, as well as expanding our physical training facilities
there. A new dorm is under----
Senator Campbell. In these discussions with GSA, are these
the projects they are taking on?
Mr. Basham. We have just this past week--this week,
actually, entered into a contract with GSA to support us in
bringing these facilities on line at a more rapid rate. Again,
as I stated, that will assist us in closing the Charleston
facility hopefully in the next several years. But we will
continue to develop plans and work on construction projects at
FLETC as well.
FIVE-YEAR PLAN
Senator Campbell. Do you have a completion date the
planning stage would be done?
Mr. Basham. At this point we have a five-year plan which we
have gotten support from the Department as well as the
Administration. We feel that if we are able to get the funding
we will be able to complete that within five years.
PROJECTED NUMBER OF STUDENTS
Senator Campbell. Each year FLETC estimates the number of
students that it is going to train at the center and they
estimate them to increase each year. In 1998 you estimated that
the Center would train over 32,000 students, but the actual
number was 25,762 as my notes say, about 20 percent less than
you expected. This year you are projecting over 38,000 for the
year 2000; 38,000 students in the year 2000.
Why is there such a large shortfall, and how do you
determine the number of students that you expect to train?
Mr. Basham. We work through our participating
organizations. They provide us with estimates of the number of
students, or the number of new hires that they anticipate
getting through their own appropriations process. That happens
generally a year prior to actually getting the funds. So they
request training slots based on what they anticipate they are
going to get. That does not always occur. Therefore, what they
actually receive and what we actually end up training can
differ considerably.
COUNTERTERRORISM TRAINING
Senator Campbell. Early on when we started this hearing
Senator Dorgan mentioned something about counterterrorism. Do
we have any form of counterterrorism training at FLETC?
Mr. Basham. As a matter of fact, Mr. Chairman, there is
$2.5 million that we requested to do training for counter-
terrorism. Part of that, approximately $1.5 million, will be to
build a specialized facility to do the training, and the other
is to provide for the resources to do that training. So if in
fact we do receive the funding, we do intend to start that
training in----
Senator Campbell. That is good. That is the only questions
I had of Director Basham. Did you have any questions of him?
EXPORT SITE CRITERIA
Senator Dorgan. I would just like the director, perhaps to
furnish if you could, a memorandum to us to tell us how you
choose or what criteria is used to choose the export sites. You
indicate that you have to export some of your more specialized
training because you do not have site capability at your
permanent sites, and additionally, you want to be out in
regions of the country where that training is necessary. That
seems to me to make a lot of sense, and I would like to find
out where you are doing that, what the criteria is used to do
that.
One of the reasons for my question, obviously, is these
more sparsely populated areas of the country, generally
speaking do not do very well in those kinds of decisions. We
are, in our region of the country, housing a fair number of
contract Federal prisoners in State and local facilities,
because States like our have fewer long term prisoners. We also
are, obviously, more interested these days in recent years in
developing training for our county sheriffs and police forces.
Your facility makes a lot of sense to me, and your program
makes a lot of sense. Having the capability of substantial
providing outreach all around the country for specialized
training, and also general law enforcement training is very
helpful to law enforcement locally. But if you would just get
me some information about that, I would appreciate it. I would
like at some point to be able to come down and see your
permanent facilities, and see what you are doing, and what kind
of training you are providing.
Mr. Basham. We are very aggressively pushing our programs
in State and local training, and identifying sites around the
country where we can deliver those services, products, because
we do realize that it is needed. It is greatly needed, and we
want to do what we can to provide that. But I will provide you
with criteria.
SUBMITTED QUESTIONS
Senator Dorgan. All right, thank you very much. No further
questions.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
Question. There has been some discussion of reclassifying the GS-
1811 instructor positions at FLETC. Will you please update us on plans
to reclassify these positions? How long will this take? How many GS-
1811 positions are involved in this reclassification?
Answer. As FLETC instructor positions now filled by personnel
classified as 1811 are vacated or there is a need for additional
positions to be filled by personnel with Federal criminal investigative
backgrounds, FLETC intends to recruit personnel with the appropriate
criminal investigative experience. These positions are being classified
and announced as 1801 series positions. However, if the appropriate
backgrounds cannot be recruited into 1801 positions, these positions
will be filled by detailed criminal investigators from participating
agencies. Historically, FLETC has pursued the practice of having an
instructor staff consisting of both permanent FLETC staff and personnel
detailed to FLETC from our participating agencies who have current
criminal investigative field experience.
In addition, personnel currently in 1811 positions have a three-
year window effective January 1, 1999, in which the transfer from 1811
to 1801 series. To help ease the transition on affected individuals,
FLETC has agreed to reimburse salary costs, including LEAP, to those
agencies which agree to move 1811 personnel from our rolls to their
agency rolls. The FLETC will continue this reimbursement as long as the
agency details the individual to the FLETC as an instructor or manager.
Such details will not exceed three years. Effective January 1, 2002 any
remaining FLETC positions classified as 1811 will be converted to 1801
and the LEAP pay terminated.
The FLETC currently has nine 1811 series instructors on the
permanent staff. In addition, there are eight 1811 series personnel in
supervisory/management/program specialist positions on the permanent
staff at the FLETC.
Question. Explain why it is such a lengthy process from beginning
to end to complete a construction project.
Answer. There are a number of factors which can affect the amount
of time required to build a facility, ranging from whether it is a
unique or special-use facility design (e.g, firearms ranges, targetry,
technology, or special classroom requirements), the experience and
reliability of the construction firm, to the amount of staff resources
which can be devoted to a particular project. The actual construction
of a building is usually accomplished within the normal industry
standards, but can be impacted when significant unforeseen situations
are encountered, (environmental assessment study of the proposed
construction site, hidden subsurface conditions, etc.) The overall
process required, subsequent to an appropriation (which includes the
A&E award, A&E design, customer design reviews, contract award, and
actual construction) can give the appearance of being an inordinately
long time before the completion and occupation of a building. While a
considerable amount of time is purposely allowed to ensure the full
involvement in the design reviews from those persons who will be the
ultimate users, or occupants of a building, FLETC's experience has
shown this front-end investment of time yields a better final product
and increased customer satisfaction. Also, there are several specific
legal and regulatory requirements in the acquisition process which must
be observed.
Question. Which projects have been completed since the construction
Master Plan was put into place? How many projects are currently under
construction and what is the expected date of completion of these
projects?
Answer. The following projects have been completed:
Glynco
--Physical Techniques Consolidation/Expansion
--Indoor Firearms Range 1
--Outdoor Firearms Ranges 5 & 6
--Driving Range Expansion
--Cafeteria Expansion
--Brunswick Residence Hall/Road Improvements
--Two Classroom Buildings
Artesia
--Dormitory
--Physical Training Facility
--Interim Driver/Firearms Facility
--Interim Firearms Ranges
--Practical Exercise Area
--Recreation Area
--Walkways
--Architect/Engineering Services
--Permanent Driver/Firearms Facility
--Permanent Driver Training Ranges
--Permanent Firearms Ranges
Marana
--Driver Training Ranges and Practical Exercise Areas
Davis Monthan
--Site Preparation/Closedown
The following projects, with estimated completion dates, are under
construction:
Glynco
--Dormitory 2/June 1999
--Administrative Office Building/June 1999
--Dormitory 3/June 2000
--Firearms Ranges 7 & 8/October 2000
--Security/Registration Building/November 1999 Burn
--Building/June 1999
Artesia
--Security System/July 1999
--Classroom/Practical Exercise Lab
--Building/February 2000
______
Questions Submitted by Senator Dorgan
Question. FLETC is currently providing specialized training in
alternative locations. FLETC acts as the broker in the identification
of sites and develops specific arrangements. How are the alternative
sites identified?
Answer. The alternative sites are identified by regions. There are
five regions containing five to seven sites in each region for a
current total of thirty-two export training sites. These sites are
located at various State and local police academies as well as police
training institutes associated with colleges and universities.
Question. What are the criteria for determining if a site meets the
needs of FLETC?
Answer. Site selection is based upon the training requirements of
specific programs to be offered at a location, including the sites
availability during the desired scheduling dates, and the level of
interest in that area for the training to be offered. Certain programs
require special facilities and logistical support which further
restricts the site determination process. For example, the Airborne
Counterdrug Operations Training Program requires two airports with
runways exceeding 5,500 feet, and a location that is not in an active
air traffic control (ATC) area. Only a limited number of sites across
the country have these capabilities. Many of the selected sites are in
small cities and rural areas to enable State and local officers access
to training while reducing travel costs and time away from their
respective agencies.
Question. What cost factors does FLETC consider when identifying
the alternative training sites?
Answer. All of the advanced specialized training offered by the
FLETC is on a reimbursable basis. Some programs are funded through
appropriations such as the Small Town and Rural Law Enforcement
initiative in the Crime Bill. Also, some sites may charge an
administrative fee which the FLETC includes in its tuition cost.
Question. How could a facility in North Dakota be considered by
FLETC?
Answer. As in the case with other States, a facility in North
Dakota could request a site visit by writing the National Center for
State, Local and International Law Enforcement Training. The request
should indicate which programs the site would be interested in hosting,
and when the site would be available to host the training. The National
Center publishes a Catalog of Training Programs which outlines training
available to State and local officers. This catalog is available upon
request.
Question. The Booze Allen Report indicated that there was a lack of
support for the Artesia facility from Glynco and that there was poor
communications between staff at the facilities. Have steps been taken
to provide Artesia greater support?
Answer. Numerous actions and activities have been undertaken to
increase the level of support and communications to the Artesia Center.
Beginning with Director Basham's visits to Artesia to personally assure
the staff of his commitment to their success, there have been
significant investments dedicated to improving communications,
providing requisite staffing, increasing infrastructure support, and
delegating decision making necessary for self-sufficiency. In addition
to the staffing increases, reclassifications and promotions have been
accomplished with 34 percent of the Artesia workforce being upgraded.
Television/conference meetings with the entire Artesia staff are
arranged so the Director and senior staff may interact with their staff
on a personal basis, in addition to the on-site visitations. Weekly
video conferences are held with the management staff, and regularly
scheduled counterpart video/teleconference sessions are convened for
specific functional areas. Artesia staff are invited to attend training
and/or conferences at Glynco in person in order to have the advantage
of personal interaction with their counterparts. In the area of
facilities development, 55 percent of the resources requested and
reflected in the Five-Year Plan for FLETC are specifically for Artesia
requirements; in fiscal year 1999, $14,149K of $27,149K for new
construction went to meet Artesia needs.
Question. What actions are being taken to improve staff
communications?
Answer. Addressing and improving communications between the Glynco
and Artesia staffs continues to be a priority initiative for the
FLETC's management team. The Director has emphasized the absolute
requirement that a consolidated FLETC viewpoint on issues is comprised
of employee input from both the headquarters training facility at
Glynco and the western-based training facility at Artesia. To this end,
the Director has mandated that managers, specialists and technicians
from both locations regularly visit the other site to review processes,
systems, and issues that affect the overall FLETC operation as well as
their respective component parts. In fact, the frequency of site visits
of employees between both locations and use of video conferencing on a
cross section of issues has increased within the organization. The
result has been the opportunity for more consistent and productive
communications across all employee levels.
In addition, the Director and other management staff regularly
visit Artesia and conduct meetings with all levels of employees on a
variety of issues. Further, ``all-hands general staff meetings'' are
conducted either in person or via video conferencing to facilitate a
more personalized and meaningful approach to communications. Throughout
the summer of 1998, the Director led various employee focus groups at
Glynco and Artesia to identify issues, then acted upon the concerns
raised by the employees in these forum. For example, the FLETC Employee
Development Services (FEDS) at Glynco opened its doors in February
1999. The work group included representation from the Artesia staff,
who served on the team through site visits and via teleconference.
Based on this experience, the FEDS is being duplicated at the Artesia
facility.
Question. The FLETC implementation response has indicated that all
inherited sexual harassment allegations were settled informally. Please
explain what is meant by inherited sexual harassment cases, and how
with a goal of zero tolerance they were settled informally?
Answer. In the FLETC's implementation response, the term
``inherited sexual harassment cases'' referred to allegations of sexual
harassment that were pending at the time of the change in Directors.
All those cases/allegations (of sexual harassment) have been resolved.
Additionally, the zero tolerance sexual harassment policy is defined as
top management's strong, aggressive stance of taking immediate,
appropriate and equitable action, including corrective action, when
warranted, on any and all allegations of sexual harassment. This policy
is in accordance with Codified Federal Regulation and current case law.
Financial Crimes Enforcement Network
STATEMENT OF JAMES F. SLOAN, DIRECTOR
Senator Campbell. Why don't we proceed, Director Sloan?
Mr. Sloan. Thank you, Mr. Chairman, Mr. Dorgan. I am
pleased to be here today. As you may know, this is my first
appearance before you. In fact, given the fact that I was sworn
in on Monday, it is my first appearance anywhere. I consider it
an honor to both testify before this subcommittee----
Senator Campbell. Hopefully it will not be your last.
Mr. Sloan. Hopefully. We will know at the end of this
testimony.
I consider it to be an honor to both testify before the
subcommittee and to represent the Financial Crimes Enforcement
Network, FinCEN. As the others before me have indicated, I will
abbreviate my remarks and ask that my written statement be
included in the record.
2000 will mark FinCEN's first full decade. From what I have
seen and heard over the past few weeks, the subcommittee's
support and guidance during FinCEN's developing years has been
invaluable. FinCEN began with programs which were pilot
efforts, experiments in discovering what would work best in
terms of quality products and the timely delivery of those
products. Because of your help and assistance, we now know what
works.
Each of the programs I am going to describe, support
FinCEN's mission, using our knowledge, technology, and
partnerships, especially the partnerships, which is essentially
our network, to assist law enforcement against the high tech,
high speed world of financial crime.
Our fiscal year 2000 budget request of $29.7 million
includes the cost needed to maintain base funding of the
programs which are now the core of our support to law
enforcement. It is these programs which you, the Congress, and
our law enforcement partners have told us are working and merit
additional funding.
DIRECT SUPPORT
Briefly, the key programs. FinCEN's flagship program is its
direct case support to Federal agencies. Last year, FinCEN
worked with more than 150 agencies. Through the use of advanced
technology and numerous data sources, FinCEN links together
various aspects of a case, finding the missing pieces to the
criminal puzzle.
The experience we have gained in analyzing financial data
to support criminal investigations, combined with improved
outreach efforts, has resulted in greater demands for the case
support services. For example, the casework which requires our
immediate attention, that which we call rapid response
requests, has increased by 73 percent over the previous year.
PLATFORM
Another program supporting Federal law enforcement agencies
is the program known as ``Platform.'' This program permits
others to use FinCEN's resources, including office space and
database access, to work on cases being conducted by their own
agencies. FinCEN has trained and is currently assisting 73
Platform participants from 32 agencies. Work done through
Platform is handled the same as traditional FinCEN case work in
terms of case management and security.
All told, using direct case support and the Platform
concept, FinCEN supported approximately 7,000 cases last year,
and we expect the demand to continue.
GATEWAY SYSTEM
In fiscal year 2000, FinCEN is requesting funding for
recurring costs associated with the Gateway system, a critical
program for State and local law enforcement. It provides rapid
electronic access to information FinCEN collects under the Bank
Secrecy Act to designated, specially-trained law enforcement
coordinators in every State. In fiscal year 1998, the Gateway
system processed almost 70,000 queries from our State and local
law enforcement partners from around the country.
If Gateway is to continue to provide this critical support
to all of law enforcement, resources must be provided in our
base funding.
IMPROVED ANALYSIS AND TECHNOLOGY
In addition to providing valuable intelligence information,
law enforcement also looks to FinCEN to combine analytical
expertise with the latest in technology in order to dig deeper
into today's complex money laundering schemes.
The Suspicious Activity Reporting System, SARS, for
example, is a good illustration of why FinCEN needs to
reinforce both its analytical and technological capabilities.
These reports of suspected criminal activity ranging from bank
and tax fraud to embezzlement, money laundering, check kiting,
and credit card fraud, are rapidly proving their value to more
than a dozen Federal law enforcement and regulatory agencies. I
would point out that the SARS have proven very useful in a
number of suspected terrorism cases.
As financial institutions improve the quality of the SAR
reporting, and as law enforcement continues to benefit from the
data contained in these reports, FinCEN is being looked to for
creative ways to make the information even more meaningful.
Additional analysts with specialized training in financial
examination and technology who can further enhance our
capabilities in data manipulation and data mining are
critically needed to meet our customers' understandable
expectations. The fiscal year 2000 budget request will provide
funds for these additional analysts to enhance SARS and other
Bank Secrecy Act database analysis.
REGULATORY EFFORTS: NON-BANKS
In the regulatory arena, FinCEN will continue to focus on
what we call non-banks. As the subcommittee knows, FinCEN has
worked very closely with the financial services industry over
the last 10 years to ensure that effective programs are in
place to prevent money laundering. Banks and many other
financial service providers have been very successful at
cutting off these avenues to money launderers and other
criminals through strong compliance with the Bank Secrecy Act
regulations. The information provided by banks and others also
creates a valuable financial trail for law enforcement to
follow.
FinCEN must be prepared to accommodate the additional
information these regulations will generate. The sources of
information make it absolutely necessary that we upgrade our
computer systems and increase our pool of analysts in fiscal
year 2000. Without the upgrade and resources requested in the
2000 budget, the information will be far less useful to our law
enforcement partners.
INTERNATIONAL EFFORTS
FinCEN also continues to maintain a key leadership role in
assuring that the United States has a strong voice in
international anti-money laundering initiatives. A central
objective has been the development of an international network
of financial intelligence units, or FIUs. These organizations
are willing and able to assist one another in practical terms
in the fight against money laundering.
Just as FinCEN is able to assist Federal, State and local
law enforcement from various regions of the United States by
bringing varied pieces of information and individual
investigations together, so too FinCEN can reach out to other
FIUs to obtain information that might prove critical to
American Federal, State, and local investigations.
That is the point. We want to have the best information for
our investigators as quickly as possible, in order for them to
pursue criminals around the world. FinCEN has already been able
to support a number of investigations within the United States
by gathering information from its FIU counterparts, and we will
continue to improve this important link to foreign law
enforcement entities.
FinCEN will also continue to maintain its efforts to
strengthen its international teamwork through venues such as
the financial action task force and its satellite organizations
in the Caribbean, Asia, and South Africa. Our 2000 request will
enable us to continue to foster an FIU network, as well as
supporting these key programs which promote international anti-
money laundering standards.
MAGNITUDE OF MONEY LAUNDERING
Finally, Mr. Chairman, FinCEN has learned to better
identify what resources are needed to more effectively target
our support to law enforcement. The programs I have described
are aimed at providing that support in a variety of specific
ways. But as we have stressed in our annual performance plan
and in budget submissions, it is difficult to truly gauge the
effectiveness of the Nation's battle against financial crime
until we have found a way to measure the magnitude of the
problem we are addressing.
Fiscal year 2000 phase of our attempt to determine the
magnitude of money laundering will also continue to use the
expertise drawn from national research organizations and
academic institutions in concert with the knowledge and
experience of law enforcement, regulatory, and financial
professionals. It is our expectation that the early estimate of
the magnitude will result in elementary baselines which will be
refined with greater precision over time. We will continue to
keep the subcommittee informed about the progress on this
difficult but very necessary effort.
PREPARED STATEMENT
In conclusion, Mr. Chairman, I am honored to lead this
organization of dedicated men and women, all professionals, as
we begin the next decade and chapter in FinCEN's history. I am
grateful to the subcommittee for its guidance and support as we
continue to explore innovative ways to further our country's
effort to combat financial crime and protect the integrity of
our Nation's financial systems.
Thank you, sir.
[The statement follows:]
Prepared Statement of James F. Sloan
Mr. Chairman and Members of the Subcommittee, I am pleased to be
here today. As you know, this is my first appearance before you. I
consider it an honor to both testify before the subcommittee and to
represent the Financial Crimes Enforcement Network--FinCEN.
2000, the year of the millennium, will also mark FinCEN's first
full decade. This request reflects the directions we must take in
fulfilling our mission as we move into the 21st century. FinCEN's key
mission--support for law enforcement has not changed. Over the last
nine years, FinCEN has learned how to capitalize on its network--a link
between the law enforcement, regulatory, and financial communities.
This strategy maximizes information sharing among its partners in these
communities and fosters cost-effective and efficient measures to
address the complex problem of money laundering. My testimony will
briefly describe how FinCEN is applying that knowledge to assist all
law enforcement in its battle to outsmart criminals in today's world of
high-tech, high-speed financial crime.
The Committee's support and guidance during these developing years
has been invaluable. FinCEN began with programs which were pilot
efforts--experiments in discovering what would work best in terms of
quality products and the timely delivery of those products. With your
help and assistance, we now know what works. A number of our pilot
projects have become viable programs with a proven track record.
Our fiscal year 2000 budget request of $29.7 million reflects our
commitment to these important programs. This request includes the costs
needed to maintain base funding of these programs which are now the
core of our support for law enforcement. It is these programs which the
Congress and our law enforcement customers have told us are working and
merit more resources. I am referring to case support provided in
various ways to our federal law enforcement customers: the Gateway
System which supports the state and local enforcement community;
research and analysis efforts provided to both the regulatory and
enforcement community using enhanced financial databases and the latest
technology; expansion of secure communications to expedite case support
and share sensitive case information; continuing anti-money laundering
regulatory efforts governing non-bank financial institutions;
international outreach and training efforts to increase the number of
Financial Intelligence Units (FIUs); and a study to gauge the magnitude
of money laundering. FinCEN is committed to strengthening these
essential programs--programs that are essential to our government's
overall anti-money laundering strategy.
All of these programs support FinCEN's mission--identifying,
managing, packaging, and delivering, in a timely fashion, the massive
amounts of information which investigators need to do their jobs.
case support
Direct, Platform and Gateway
FinCEN's support to law enforcement is provided in two ways:
through direct case support which consists of in-house staff of experts
who respond to field requests for data searches and analysis; and
through programs, called Platform and Gateway, which permit others to
take advantage of our services while using their own resources. This
second approach enables FinCEN to accommodate the increasing demand for
our services by providing our law enforcement customers with access to
our resources themselves in a variety of hands-on, interactive ways.
Described below are these key programs, which successfully
demonstrate how FinCEN uses its network to achieve its mission of
providing case support.
Direct Case Support
FinCEN's flagship program is its direct case support to federal law
enforcement agencies. Last year, FinCEN worked with more than 150
different agencies. Through the use of advanced technology and numerous
data sources, FinCEN links together various aspects of a case, finding
the missing pieces to the criminal puzzle. The experience we have
gained in analyzing and disseminating financial data to support
criminal investigations, combined with improved outreach efforts has
resulted in greater demands for our case support services. For example,
in response to significant increases in priority or sensitive requests,
rapid response and expeditious casework increased by 73 percent over
the previous year. Requests for on-site field support are becoming
equally as demanding.
A new software program illustrates how FinCEN is assisting
investigators with their on-site field support investigations. FinCEN
has developed a new case management software system, Analytical System
for Intelligence Analysis (AS IS) which has resulted in FinCEN
providing assistance to a large number of entities in support of major
cases. The software program is provided on a diskette to case agents as
a type of ``fill in the blank'' process to save time in converting the
raw data into a form that our analysts can easily merge with FinCEN's
multi-source database information.
AS IS has been very helpful in a number of investigations. For
example, FinCEN supported the IRS and other federal agencies including
the FBI and Postal Service in a large-scale investigation of money
laundering, fraud, conspiracy, and tax violations. A team of FinCEN
analysts and an IRS representative conducted research and analysis on
more than 100 subjects, some with organized crime links. Using link
charts and other analytical tools, including AS IS, FinCEN's products
portrayed over $14 million in currency transactions, several million
dollars in assets, and hundreds of links among individuals, businesses
and various records.
In another case, FinCEN supported the Customs Service and other
federal and state agencies in a money laundering investigation
involving an international scheme to defraud private citizens through
fraudulent investments. FinCEN used currency transaction reports and
suspicious activity reports, filed by banks, to link the subjects to
banks, currency exchange houses, and casinos. Twenty-five subjects were
responsible for approximately $100 million in illicit activity.
FinCEN's support included link charts, analytical reports, and on-site
field support through AS IS.
Platform
Another program supporting federal law enforcement agencies is
called ``Platform.'' This program is a way to permit others to use
FinCEN's resources directly to carryout their own work. FinCEN
pioneered the ``Platform'' in 1994, offering training, office space and
database access to employees of other federal agencies who come to
FinCEN, on a part-time basis, to work only on cases being conducted by
their own agencies. These individuals know the needs of their
organization and can support that need directly through database
access. FinCEN is currently assisting 73 Platform participants from 32
agencies. Work done through Platform is handled the same as traditional
FinCEN casework in terms of case management and security. Platform
cases accounted for about 20 percent of the cases closed by FinCEN in
1998.
All told, using direct case support and the Platform concept,
FinCEN supported approximately 7,000 cases last year.
Gateway System
The Gateway System supports state and local law enforcement by
providing rapid, electronic access to information FinCEN collects under
the Bank Secrecy Act. Access to the information--large currency
transactions, for instance--is provided to designated, specially-
trained, law enforcement coordinators in each state, the District of
Colombia, and Puerto Rico. In fiscal year 2000, FinCEN is requesting
$600,000 for recurring costs for this critical program, which was
funded from the Violent Crime Reduction Trust in fiscal year 1999.
Gateway saves investigative time and money because subscribing
agencies can conduct their own research and not rely on the resources
of an intermediary agency to obtain financial records. In fiscal year
1998, the Gateway System processed 69,335 queries from our state and
local law enforcement partners around the country, a 20 percent
increase over fiscal year 1997.
One of the most outstanding and useful features of this system is
its ``alert'' mechanism that automatically alerts FinCEN that two
agencies have an interest in the same subject. In this way, FinCEN can
not only assist state and local law enforcement in coordinating their
investigations among themselves, but also with federal agencies. The
statistics for the Gateway System speak for themselves. The number of
``alerts'' issued in fiscal year 1998 rose to 1,429, a 55 percent
increase over fiscal year 1997.
If Gateway is to continue to provide this critical support,
resources must be provided in our base funding.
using technology to improve analysis and delivery of information
The programs described above have demonstrated the importance of
delivering valuable intelligence information as it relates to suspected
money laundering and other financial crimes. Law enforcement also looks
to FinCEN to combine analytical expertise with the latest in technology
upgrades in order to dig deeper into the hidden folds of today's
complex money laundering schemes.
Improved Analysis and Technology
The Suspicious Activity Reporting System (SARS), for example, is a
good illustration of why FinCEN needs to reinforce both its analytical
and technological capabilities. These reports of suspected criminal
activity ranging from bank and tax fraud to embezzlement, money
laundering, check kiting and credit card fraud are rapidly proving
their value to law enforcement. Because of the centralized feature of
the system, more than a dozen law enforcement and regulatory agencies
are able to access its reports simultaneously. But as financial
institutions improve the quality of their reporting and law enforcement
discovers the benefits of the data contained in these reports, FinCEN
is being looked to for creative ways to make the information even more
meaningful. Additional analysts with specialized training in financial
examination and technology who can further enhance our capabilities in
data manipulation and data mining are critically needed to meet our
customer's understandable expectations. The fiscal year 2000 budget
request will provide funds for these additional analysts.
Secure Communication
But the value of our work is not just measured in terms of how well
we manage data systems or what information our analysts uncover.
Information is worthless if it does not get to the people who need it
in time for them to act. Timeliness of delivery is just as important as
the quality of the product in today's ``Information Age.'' FinCEN has
been making a concerted effort to shorten the time it takes to analyze,
package and deliver its analytical products to law enforcement. In
addition to streamlining the time it takes our experts to analyze law
enforcement data, our experts on the technical side have built a secure
Internet system to facilitate law enforcement's ability to request and
receive case support information electronically from FinCEN as well as
rapidly exchange information with their counterparts within a secure e-
mail system.
Using fiscal year 1998 funds, the initial secure outreach system is
allowing Treasury law enforcement bureaus to begin to communicate among
themselves about sensitive law enforcement information. Through the
application of sophisticated encryption and the Internet, this secure
outreach network has the potential to provide a real time means of
sharing information quickly and securely.
regulatory efforts: non-banks
As the Committee is aware, FinCEN has worked closely with the
financial services industry over the last 10 years to ensure that
effective programs are in place to prevent money laundering at these
institutions. Banks and many other financial service providers have
been very successful at cutting off these avenues to money launderers
and other criminals through strong compliance with Bank Secrecy Act
regulations. The information provided by banks and others also creates
a valuable financial trail for law enforcement to follow. FinCEN has
worked very hard to cultivate partnerships within the banking community
in order to encourage and assist them in improving their compliance
program.
It also is working to expand requirements of the Bank Secrecy Act
to other segments of the financial services industry. FinCEN must be
prepared to accommodate the additional information these regulations
will generate. These sources of information make it imperative that we
upgrade our computer systems and increase our pool of analysts in
fiscal year 2000. Without the upgrades and resources requested in the
fiscal year 2000 budget, the information will be far less useful to our
law enforcement customers.
international efforts
FinCEN continues to have a key leadership role in assuring that the
U.S. has a strong voice in international anti-money laundering
initiatives. A central objective has been the continued development of
an international network of financial intelligence units, or FIUs.
These organizations are willing and able to assist one another in
practical terms in the fight against money laundering. Just as FinCEN
is able to assist federal, state and local law enforcement from various
regions of the U.S. by bringing disparate pieces of information and
individual investigations together, so FinCEN can reach out to other
FIUs to obtain information that might prove critical to a U.S. federal,
state, or local investigation.
One successful outcome of this effort is the Egmont International
Secure Web System, developed almost entirely by FinCEN, this system
permits members of the Egmont Group (the core group of FIUs) to
communicate with one another via secure e-mail, and to post and access
information on FIUs, money laundering trends, financial analysis tools,
and technical developments.
This international information exchange for tracking ``dirty
money'' just helped uncover Australia's largest cocaine seizure--225
one-kilogram blocks of cocaine recovered from a yacht off the coast of
New South Wales. FinCEN provided critical information on financial
transactions and property records in support of this investigation. In
a recent news report, the head of the Australian FIU, Elizabeth
Montano, praised FinCEN for its assistance with this case, saying ``the
[exchange] with the United States has been amazingly successful in
terms of providing us with lots of linkages, showing us that what we
are following are not silly hares down rabbits' hollows that don't
matter.''
And that is the point-we want to have the best information for our
investigators as quickly as possible in order for them to pursue
criminals around the world. FinCEN has already been able to support a
number of U.S. investigations by gathering information from its FIU
counterparts and will continue to improve this important link to
foreign law enforcement entities.
FinCEN will also maintain its efforts to strengthen its
international network through venues such as the Financial Action Task
Force (FATF) and its satellite organizations in the Caribbean, Asia,
and Southern Africa. FATF, a 26-nation organization created by the G-7,
serves as the world leader in promoting the development of effective
anti-money laundering controls and cooperation in counter money
laundering investigations among its membership and around the globe.
Another international priority for FinCEN is its efforts related to
Presidential Decision Directive-42 (PDD-42). This directive focuses
U.S. efforts on encouraging countries known to be money laundering
havens to cooperate in denying criminals access to their financial
systems. To that end, working with other agencies, FinCEN has provided
results-oriented training and technical assistance programs. Our
efforts are demonstrating the benefits of sharing our expertise with
other governments.
Our fiscal year 2000 request will enable us to continue to foster
an FIU network, our PDD-42 efforts and other work, to include: devising
coordinated strategies to combat money laundering schemes; and
providing training and technical assistance.
magnitude of money laundering
Finally, Mr. Chairman, FinCEN has learned to better identify what
resources are needed to more effectively target our support to law
enforcement. The programs I have described are aimed at providing that
support in a variety of specific ways. But as we have stressed in our
fiscal year 1999 and fiscal year 2000 Strategic Plans and budget
submissions, it is difficult to truly gauge the effectiveness of this
nation's battle against financial crime until we have found a way to
measure the magnitude of the problem we are addressing.
Our overriding objective then is to seek a workable methodology for
creating estimates of the volume of laundered money. As we have pointed
out in previous testimony, there have been a few attempts made by
international organizations, such as the United Nations, as well as by
governments to address the problem. These studies, however, have fallen
short of their objective because of a lack of available data as well as
standardized data collection systems within the international
community.
Keeping in mind the difficulties others have experienced, FinCEN
allocated staff resources with the funding this Committee provided in
fiscal year 1999 to look at the problem on both a national and
international level. Because the problem is global, the first step in
the process has been to approach the issue at a macro level. The U.S.
led this effort by presenting a concept paper to the FATF plenary last
spring. Although the national interests of the FATF members coupled
with broad differences in the collection of relevant data make it
difficult to proceed as quickly on the international level as we would
like, FATF discussions have made it clear that the U.S. is in a
relatively strong position to move forward with our own national study.
We have been collecting data regarding drug supply and demand for
sometime in this country, which will help provide the basis of a
methodology to estimate money laundering.
Under the direction of Treasury's Office of Enforcement, two
committees of experts from a wide variety of federal law enforcement
and economic policy agencies within our own government have been
established and will begin to identify available data sources and
analytical approaches to the study. The fiscal year 2000 request of
$500,000 will support the implementation phase of the methodology
currently being explored with fiscal year 1999 funds. This phase will
include development of the survey instrument and initial collection of
data. The fiscal year 2000 phase will also continue to use expertise
drawn from national research organizations and academic institutions in
concert with the knowledge and experience of law enforcement,
regulatory and financial professionals. It is our expectation that the
early estimate of the magnitude will result in elementary baselines,
which will be refined with greater precision over time. We will
continue to keep the Committee informed about progress on this
difficult but necessary effort.
conclusion
In conclusion, Mr. Chairman, we have attempted in our testimony
today, to describe those paths FinCEN has been following which are
producing demonstrable benefits. As we continue to progress as an
organization, it is essential that we receive base funding for those
projects which have now become integral to the fulfillment of our
mission. Again, we are grateful to this Committee for its guidance and
support as we continue to explore innovative ways to further our
country's efforts to combat crime.
REGULATORY
Senator Campbell. Thank you for your testimony. I am going
to wing it a little bit here. I am sure Senator Dorgan is going
to ask much more intelligent questions than I am because he has
had a much stronger background in understanding this than I
have. But let me ask you just a couple of questions, and maybe
Under Secretary Johnson might want to chime in here, too.
As I understand it, the money services businesses is really
kind of the new wave of money laundering. You mentioned
something along that line. Money launderers are turning to the
unsupervised financial services because they do not have to
register, nor do they have any rules to govern them. There are
over 160 unregistered businesses nationwide with transactions
of over $200 billion a year that do not maintain account
relationships comparable to banks. So it is difficult for these
businesses to know their customers well enough to identify any
suspicious activity.
I understand that the rules for registration are being
written, or are written for governing the money services
businesses but they are waiting on clearance from Treasury. Is
that correct, and can you give us the status on those rules,
either one of you?
Mr. Johnson. After a notice and comment period the proposed
rules have--the comment period closed and the proposed rules
have left FinCEN and they are being evaluated within Treasury.
The process, before we implement any program with respect to
this new unregulated industry we need to make sure that the
resources are available, and then we have----
Senator Campbell. Once those rules are written you are
going to have an increased workload, I assume.
Mr. Johnson. Yes, sir, we are.
Senator Campbell. Have you requested additional employees
to handle that increased workload?
Mr. Johnson. There is a component in FinCEN's budget that
deals with the increased workload. There are also issues with
respect to other elements of the workload. We had envisioned,
at least in preliminary plans, was that it would be handled by
IRS exam. We are still working through those issues with
respect to implementation. And as you know, there have been
changes within the structure of IRS as a result of the reform
act of last summer.
Senator Campbell. When is the expected date that the rules
will be finalized?
Mr. Johnson. We expect that, and this is with respect to
the registration rule which is the first rule that would form
the basis for the program. We have put together a group that
expects to be able to report out to us, and for us to report to
the Hill at the end of 45 days. And they will do the final
analysis of the resource requirements, and at that time we
would be in a better position to inform the committee as to our
timelines.
Senator Campbell. All right, if you would, I would
appreciate that. I have two or three additional questions that
I will put in writing, if you could get back to us.
Mr. Johnson. Yes, sir.
Senator Campbell. Senator Dorgan?
INTERNATIONAL
Senator Dorgan. Let me just ask briefly a question about
the international aspect of this. We hear every day in Congress
that this is a global economy. The implication of that is that
there are really not many geographic borders any more when we
are talking about trade and so on. I assume exactly the same is
true with crime, especially financial crime. It is a global
economy in financial crime, which means that international
relations and arrangements are critically important to
addressing it.
Tell me, if you would, about your agencies' work in
international relationships and creation of the state-of-the-
art communications systems and so on to accommodate that.
Mr. Sloan. Senator, I am very fortunate to have inherited
an organization that has a very well established program that
continues to work to develop and foster global anti-money and
laundering strategies, policies, and programs in the
international arena. As you may know, the G-7 Economic Summit
created an organization known as the Financial Action Task
Force which is comprised of 26 countries and is recognized as
the leading organization is setting international anti-money
laundering standards, if you will.
As an outgrowth of that, many nations around the world have
created parallel organizations similar to FinCEN, known as
FIUs. FinCEN's relationship with these FIUs has been, as I have
been able to determine in the few days that I have been here--
because I have met with some of the counterparts from the
foreign FIUs already--has been incredibly successful.
You are absolutely right, our success or failure with
regard to international anti-money laundering initiatives, the
success would be non-existent if we did not pay attention and
did not have the cooperation of foreign countries as far as the
transmission of laundered cash.
Senator Dorgan. You get fairly good cooperation?
Mr. Sloan. It is my understanding, both from the historical
perspective that has been presented to me and from my personal
contact with several of the foreign representatives in the last
several days, that the cooperation is outstanding.
GATEWAY
Senator Dorgan. Just one last question on the Gateway
program. My understanding is that program supports State and
local law enforcement by providing rapid electronic access to
the information you have. What kind of utilization exists with
that program by State and local, and do you have outreach
efforts to make sure that State and local authorities know that
this opportunity exists for them?
Mr. Sloan. Yes, we do. In fact, the training continues. As
I mentioned in my oral statement, we now participate with every
State in the Union, as well as the District of Columbia and
Puerto Rico relative to the Gateway project. There were close
to 70,000 queries last year alone from the various States. Our
training and our relationship with the States not only
concentrates on their ability to take advantage of the system,
but also focuses on making sure that the system is utilized for
law enforcement activity exclusively.
Senator Dorgan. Mr. Sloan, thank you very much. We
appreciate the dedication of the employees in your agency and
your work. Yours is one of those areas that is not very visible
from the outside, but it is critically important to enable a
lot of other law enforcement agencies to do their work in a
very sophisticated area of financial crime here and also
internationally. So thank you for your work.
Mr. Sloan. Thank you.
INTERNATIONAL
Senator Campbell. Mr. Sloan, one last question. Senator
Dorgan and I just came back from a CODEL to South America and
most of our work down there dealt with trade. But in Argentina
I noticed that dollars were almost interchangeable when you
would purchase things as their own currency, and they seemed to
be moving more and more towards that. In those countries that
have almost unlimited use of dollars on the streets as well as
their own currency, does that increase the difficulty of
monitoring international laundering? With respect to crimes in
the U.S. the dollars must first be ``placed'' into the
financial system here, or smuggled out of the United States,
before the situation in any other country is relevant. More
generally, of course, the United States and its citizens derive
significant continuing benefit from the fact that the dollar is
one of the world's reserve currencies. Of the approximately
$500 billion in circulation, it is estimated that approximately
$300 billion or 60 percent, circulates overseas. Many
government programs, including our programs to deal with money
laundering, must take those basic economic facts into account.
Mr. Sloan. To the degree that I could speak specifically
about South America and Argentina I would probably have to
respond after some research on my own and get back to you with
an answer on that, sir.
Senator Campbell. Would you do that?
Mr. Sloan. Absolutely.
Senator Campbell. I would be interested in knowing that.
Mr. Sloan. I shall.
Senator Campbell. Did you have anything further?
Senator Dorgan. No, Mr. Chairman.
SUBMITTED QUESTIONS
Senator Campbell. We have additional questions that will be
submitted in writing to be answered for inclusion in the
record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Campbell
financial crimes enforcement network (fincen)
Question. It has been noted that state investigators remain largely
untrained and ill equipped to investigate money laundering, leaving the
bulk of the investigating to Federal investigators who lack the staff
to handle the entire job. Certain states do not utilize the Gateway
automation commercial data base as much as others. How has FinCEN made
these states aware of the resources available to them, and assisted
them in their efforts to combat money laundering through Gateway?
Answer. Over the past few years, FinCEN has worked with state and
local law enforcement, policy makers, and prosecutors to stress the
benefits and importance of attacking criminal proceeds. This outreach
encompasses a three-prong strategy: working with states to ensure anti-
money laundering and asset forfeiture laws are in place; encouraging
them to utilize to the fullest extent possible the financial data
available through Gateway; and promoting the establishment of financial
intelligence units within the states. FinCEN has been joined in this
strategic outreach effort by the National Association of Attorneys
General (NAAG) and the International Association of Chiefs of Police
(IACP).
Approximately 26 states have been visited over the past two years
in which this strategy was articulated. Overall, these efforts have
resulted in a substantial increase in Gateway usage.
FinCEN also provides more in-depth case support to its state and
local enforcement customers through its Office of Investigative Support
(OIV). Under OIV, FinCEN analysts provide support to more complex cases
requiring greater in-depth analysis and expertise. In the last two
years, approximately 1,000 cases were processed by OIV. This number is
in addition to Gateway.
Question. It is important to maintain an international network of
Financial Intelligence Units (FIU's). Explain how this network works in
the money laundering process.
Answer. FinCEN continues to have a key leadership role in assuring
that the U.S. has a strong voice in international anti-money laundering
initiatives. A central objective has been the continued development of
an international network of financial intelligence units, or FIUs.
These organizations are willing and able to assist one another in
practical terms in the fight against money laundering. Just as FinCEN
is able to assist federal, state and local law enforcement from various
regions of the U.S. by bringing disparate pieces of information and
individual investigations together, so FinCEN can reach out to other
FIUs to obtain information that might prove critical to a U.S. federal,
state, or local investigation.
One successful outcome of this effort is the Egmont International
Secure Web System. Developed almost entirely by FinCEN, this system
permits members of the Egmont Group (the core group of FIUs) to
communicate with one another via secure e-mail, and to post and access
information on FIUs, money laundering trends, financial analysis tools,
and technical developments.
A recent example helps illustrate the importance of this
international information exchange for tracking ``dirty money.'' The
information exchange helped uncover Australia's largest cocaine
seizure--225 one-kilogram blocks of cocaine recovered from a yacht off
the coast of New South Wales. FinCEN provided critical information on
financial transactions and property records in support of this
investigation. In a recent news report, the head of the Australian FIU,
Elizabeth Montano, praised FinCEN for its assistance with this case,
saying ``the [exchange] with the United States has been amazingly
successful in terms of providing us with lots of linkages, showing us
that what we are following are not silly hares down rabbits' hollows
that don't matter.'' Importantly the information sharing was not one-
way. AUSTRAC, Australia's FIU, provided U.S. law enforcement via FinCEN
with important bank account information helping authorities to target
drug proceeds here in the United States.
In all these instances, FinCEN ensures that the information-
exchanges adhere to privacy protection guidelines, policies, and
regulations.
In another example of information-exchange, Treasury's Office of
Enforcement has asked FinCEN to find ways to expand access to cross-
border data with the Mexican FIU. It is hoped that through this and
similar activities, the two FIUs can establish additional cooperative
efforts.
The strategy behind all of these efforts is to have the best
information for our investigators as quickly as possible in order for
them to pursue criminals around the world. FinCEN has already been able
to support a number of U.S. investigations by gathering information
from its FIU counterparts and will continue its efforts to improve this
important link to foreign law enforcement entities.
Question. FinCEN's budget doesn't reflect any new initiatives;
however, the overall increase is more than $4 million over fiscal year
1999. Please explain the reasons for the increase.
Answer. FinCEN, an agency that is just nine years old, is
concentrating on ensuring the continuity of existing programs--which
are proving valuable to law enforcement--rather than asking for
additional funds for the new programs. The Committee's support and
guidance during these developing years has been invaluable.
A number of FinCEN's pilot programs, such as the Gateway Program
and Secure Outreach (Internet Communication), have been funded out of
the Violent Crime Reduction Trust Fund and Treasury Forfeiture Fund.
These programs have been designated to improve FinCEN's ability to
strengthen and broaden its information-sharing network among law
enforcement agencies, and thus should be reflected as part of FinCEN's
core funding.
The additional funding also will address workload increases to meet
increasing customer demand, especially for law enforcement case
support, as well as mandatory cost increases.
______
Questions Submittted by Senator Dorgan
gateway program
Question. What efforts is FinCEN making to ensure this program is
being utilized by State and local law enforcement agencies to the
maximum degree?
Answer. Over the past few years, FinCEN has worked with state and
local law enforcement, policy makers, and prosecutors to stress the
benefits and importance of attacking criminal proceeds. This outreach
encompasses a three-prong strategy: working with states to ensure anti-
money laundering and asset forfeiture laws are in place; encouraging
them to utilize to the fullest extent possible the financial data
available through Gateway; and promoting the establishment of financial
intelligence units within the states. FinCEN has been joined in this
strategic outreach effort by the National Association of Attorneys
General (NAAG) and the International Association of Chiefs of Police
(IACP).
Approximately 26 states have been visited over the past two years
in which this strategy was articulated. Overall, these efforts have
resulted in a substantial increase in Gateway usage. Currently, there
are also 34 states with anti-money laundering legislation, with more
anticipated in the near future.
international relations and law enforcement
Question. Money Laundering is a global problem; it doesn't stop at
our borders. What is being done to address the money laundering issue
on an international scale? Are you utilizing international task forces
or intelligence efforts?
Answer. Fundamental to FinCEN's mission and ultimate success in
fighting international crime and money laundering is its work with
other governments. Enhancing bilateral and multilateral anti-money
laundering efforts with foreign governments, such as identifying and
working toward eliminating financial safe havens, is receiving
increased focus by FinCEN. Most recently, FinCEN issued an Advisory to
banks and other financial institutions to give enhanced scrutiny to all
financial transactions routed into or out of Antigua. This advisory was
immediately followed by a similar advisory from Britain. FinCEN's
advisory resulted after months of U.S. interagency deliberations by a
group set up to specifically look at money laundering havens around the
world. After the decision to issue the advisory, FinCEN led the effort
to inform the Financial Action Task Force (FATF), the Caribbean
Financial Action Task Force (CFATF), and the Egmont Group of FIUs.
FinCEN's work with other governments to fashion and put in place a
regional and global response to the threat of money laundering is
expanding. FinCEN continues to strengthen its international network
through venues such as the FATF and its satellite organizations in the
Caribbean, Asia, and Southern Africa. FATF, a 26-nation organization
created by the G-7, serves as the world leader in promoting the
development of effective anti-money laundering controls and cooperation
in counter money laundering investigations among its membership and
around the globe. FinCEN serves as the lead agency for coordinating the
U.S. role within the FATF. We are strengthening and expanding
multilateral efforts against money laundering in other forums such as
the G-8, the Organization of American States and international
financial institutions.
In addition FinCEN coordinates and provides training and technical
assistance to partner nations seeking to legislate against financial
crimes, to put in place anti-money laundering regulatory regimes and to
establish financial intelligence units (FIUs). Using information
provided by banks and other sources, FIUs find innovative tools to
delve into the information to make it useful for law enforcement and
others. Whereas in 1995 there were 14 FIUs, today, there are 38--with
many others in development. This international network of FIUs is
willing and able to assist one another in practical terms in the fight
against money laundering. FinCEN can reach out to other FIUs to obtain
information that might prove critical to a U.S. federal, state or local
investigation.
fincen regulatory role
Question. What is the status of the three money services businesses
regulations?
Answer. The rules related to registration of Money Services
Businesses (MSBs) and the reporting of suspicious transactions by MSBs
are in the clearance process at the Department of Treasury. The rules
are being reviewed by all affected Treasury functions to ensure that
all of the issues involved are carefully considered.
The rule concerning the reporting of foreign-bound wire transfers
paid in currency is being reviewed at FinCEN. Since it would have a
significant effect on resources, FinCEN is exploring a variety of
options before finalizing the rule.
In addition, it's imperative that the resources are in place to
support implementation of the rules. A working group, which includes
representatives from various Treasury agencies and offices, including
FinCEN, is charged with devising a detailed strategy to implement the
new program and to ensure its long-term viability. In recent testimony,
Treasury's Office of Enforcement indicated that a report on the group's
plans for implementation of the MSB regulations will be provided to the
Congress in 45 days.
CONCLUSION OF HEARINGS
Senator Campbell. I have no further questions, and I
appreciate this panel for appearing. With that, these hearings
are concluded. Thank you.
[Whereupon, at 11:38 a.m., Thursday, April 15, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
MATERIAL SUBMITTED SUBSEQUENT TO CONCLUSION OF HEARING
[Clerk's note.--The following agencies did not appear
before the subcommittee this year. Chairman Campbell requested
these agencies to submit testimony in support of their fiscal
year 2000 budget request. Those statements and answers to
questions submitted by the chairman follow:]
GENERAL SERVICES ADMINISTRATION
Questions Submitted by Senator Campbell
gsa's management controls
Question. According to GSA's Inspector General (IG), GSA's
reinvention initiatives to reduce administrative barriers and promptly
respond to customers' needs have detracted from controls designed to
deter fraud, waste, and abuse. GSA's fiscal year 2000 performance plan
doesn't address goals or strategies to ensure that GSA's activities are
protected from fraud, waste, and abuse. What goals and strategies does
GSA have in this area?
Answer. GSA sees the establishment of management controls to deter
fraud, waste, and abuse as part of every performance goal. Clearly, no
reinvention initiative, no matter how innovative, can be considered
effective if it results in the likelihood that Government assets will
be stolen or diverted to improper uses. As new approaches to meeting
customer needs are developed, new means of management control to deter
fraud waste, and abuse will also be developed.
Question. What mechanisms does GSA have in place to ensure that the
strategies and controls are working?
Answer. At present, GSA primarily relies on IG reviews of
activities to determine whether management controls are working. If
problems are identified, we follow-up with the activity until the
problems are corrected.
gsa's organizational structure
Question. GSA's administrative processes, organizational structure,
systems, and procedures were designed based on the needs of a large,
central oversight agency. The organizational structure, created when
GSA was a 40,000-employee organization included many headquarters and
regional components that reflected a traditional hierarchical approach.
According to the IG, GSA's organizational structure has not changed to
keep pace with the downsizing, streamlining and reform that have taken
place within the agency. GSA's fiscal year 2000 performance plan does
not mention the organizational structure or the possibility of
assessing it to foster efficiencies and economies. What is GSA's view
on the IG's observation regarding GSA's organizational structure?
Answer. The IG needs to take into consideration changes in GSA's
organizational structure over the past years. Our processes, structure,
systems and procedures have continually evolved from the time when we
consisted of more than 40,000 employees until today with less than
15,000. Recently we have made a number of changes to serve our
customers better. For example, the Public Buildings Service now has 12
Centers of Expertise around the country that function as corporate
knowledge centers, offering specialized information and hands-on
assistance quickly and efficiently to clients. Only four of these
centers are based in Washington.
Question. Would an organizational make-over better equip GSA to
meet the performance goals identified in the fiscal year 2000 and
future performance plans, such as reducing administrative barriers and
improving customer service?
Answer. GSA believes that a comprehensive ``organizational make-
over'' is not warranted at this time and would, in fact, be a
distraction from adding value and serving customers. We do, however,
believe that the organizational structure must be fine-tuned from time
to time to improve performance. For example, in supporting preparations
for the Year 2000 Census, GSA has organized its support around our
customer's regional structure (that is, the Census Bureau) rather than
our own.
______
OFFICE OF PERSONNEL MANAGEMENT
Prepared Statement of Janice R. Lachance, Director
Mr. Chairman and members of the subcommittee. I appreciate this
opportunity to discuss for the record the appropriations request for
fiscal year 2000 for the Office of Personnel Management.
In order to provide some context for the President's request for
appropriations for OPM for the next fiscal year, it may be useful to
review the recent history of our agency and the Human Resources
Management (HRM) area generally before turning to the specifics of our
budget.
Although you may be familiar with our recent history, I believe it
is imperative to reemphasize the dramatic changes that have occurred in
OPM since 1993. Our reduction in our full-time equivalent employment
level by 52 percent is virtually without parallel in the federal
government. It was achieved not only by a thorough restructuring of our
operations, but also through the privatization of two of our major
components, training and investigations, with the latter being
converted into an employee stock ownership plan, the first to result
from a federal entity.
This restructuring, along with our emphasis on tighter financial
controls across all programs and increased accountability, enabled us
to make the tough management decisions that are paying off today. The
best evidence of our success is the elimination of the $48,800,000
deficit which existed in our revolving fund at the end of fiscal year
1994.
Our successes in focusing on our core mission and doing more with
less have provided leadership by example for the reinvention effort in
the federal community. We have built on that position by supporting
other agencies as they undertake workforce reductions and
restructuring. Significant downsizing of human resources management
staff in many agencies has created an even greater need for and
reliance upon OPM expertise.
We have responded to that challenge in numerous ways. Permit me to
mention a few examples. In the area of performance management, our
recently issued study of poor performers in the federal service has
received considerable attention. But equally important to us and our
agency constituents is our development of a booklet, CD-ROM, and web-
based training on addressing and resolving poor performance. OPM staff
is also focusing on assisting agencies with aligning individual
performance plans to agency strategic plans, as envisioned by the
Government Performance and Results Act.
In addition, with two of our executives cochairing the Human
Resources Technology Council, we are working with agencies to ensure
that they are able to do more with less through the best and most cost-
effective use of automation in their HRM activities. This year, we will
complete a vision and concept of operations for a Federal Human
Resources Data Network, a broader approach to the governmentwide
application of human resources automation that encompasses the more
limited objective of an electronic personnel folder.
We have also placed increasing emphasis on communicating with
agency HRM personnel through our web page and through focused
conferences on a variety of subjects. From our annual benefits officers
conference to our annual symposium on employee and labor relations, we
have had great success in bringing together hundreds of HRM
professionals to share information and experiences. Increases in demand
and in satisfaction with our presentations have led to the
consolidation of some of our workshops and seminars on leave, position
classification, and performance management into a new total
compensation conference.
In fiscal year 1998, we engaged in outreach to provide a more
diverse workforce. Our efforts included a strengthened nine-point plan
to increase Hispanic employment, an initiative to improve black
representation at higher grade levels, and targeted recruitment
guidance for persons with disabilities and for women. During that
fiscal year, representation in the federal workforce generally improved
from 6.2 percent to 6.4 percent for Hispanics, from 17.0 percent to
17.1 percent for blacks, from 4.0 percent to 4.1 percent for Asian/
Pacific islanders. And from 42.8 percent to 42.9 percent for women.
We also responded to evolving policy concerns relating to the
quality of managed health care by implementing the patients bill of
rights throughout the entire Federal Employees Health Benefits Program.
This included issuing regulations barring health plans from imposing a
``gag rule'' limiting the disclosures physicians may make to patients
regarding treatment options.
Of course, we are involved in much more than just the management of
existing systems. In fiscal year 1998, five personnel management
demonstration projects were begun, and we are expecting four more to be
implemented this fiscal year. By helping agencies design, implement,
manage, and evaluate alternative approaches to personnel management, we
not only improve the operations of those agencies, but also learn
lessons to apply throughout the federal establishment.
As rewarding as our accomplishments have been, we recognize that
there is no room for complacency in view of the challenges facing us.
Accordingly, we have established a set of priorities to carry us
forward to address these challenges.
First, we intend to continue to improve our ability to compete for
skilled and motivated employees in the next century. A significant
component of our ability to do so effectively will be our earned
benefits package. The development of a center for benefits design and
delivery will enable us to improve our benefits publications by using
plain language and to move forward with appropriate enhancements, such
as additional life insurance options and a long-term care insurance
program for federal employees, annuitants, and their families. In that
regard, we would urge the careful consideration of the administration's
proposal for long-term care insurance which is currently pending before
the Congress.
Second, we have taken note of the requests by agencies for help in
enhancing their ability to recruit and hire. We will be working with
them to develop quick hiring programs tailored to their specialized
needs. At the same time, we will give priority to enhancing employment
opportunities for adults with disabilities, Hispanic Americans, and
women, as well as to initiatives targeting computer security
professionals.
Third, we have rededicated ourselves to our core mission of
providing oversight of the merit system. With many agencies already
exempted from key provisions of civil service laws and many others
seeking additional flexibilities, we must redouble our efforts to
support compliance with the basic merit system principles. Additional
oversight visits, coupled with our assistance to agency delegated
examining units and our work on the development of agency internal
accountability systems, will reduce the potential for mistakes and
abuses.
In fiscal year 2000, OPM will lead the effort to refocus attention
on training and development programs for federal employees. By chairing
the President's task force on federal training technology, I will be
uniquely positioned to assist in the development of recommendations for
using technology most effectively to promote lifelong learning
throughout our workforce.
We will also continue our internal work to modernize systems and
processes in ways which complement the governmentwide vision of a
federal human resources data network. Consistent with our leadership of
the interagency human resources technology council, we have
concentrated our efforts on significant improvements in our central
personnel data file and on our retirement systems modernization
project.
Additionally, our ongoing commitment to family friendly programs in
the federal workplace will be even more evident this year. The
establishment of our family friendly workplace advocacy office will
allow us to serve as a point of contact for those employees who need
information about affordable child care, elder care, alternative work
schedules, telecommuting, or any other related programs.
Finally, we intend to build on the progress we have made in recent
years in improving our financial management systems and procedures.
Through the use of quality improvement teams which include
representatives from various organizational components, including the
Office of the Inspector General, we can eliminate the weaknesses in
these areas and improve the quality of service we provide to all of our
constituencies.
Turning to our appropriations request for fiscal year 2000, we are
seeking $91,600,000 in general fund basic operating expenses. The 733
full-time equivalent positions supported by this request will enable us
to continue to provide leadership to the human resources management
community as well as pursue the priority goals discussed earlier.
The requested increase of $6,200,000 over fiscal year 1999 includes
a required reimbursement of the National Archives and Records
Administration (NARA) in the amount of $3,400,000. This payment
compensates that agency for the cost of storing and servicing the
government's official personnel files, and reflects the decision to
change NARA's financing from appropriated funds to a reimbursable
basis.
Another $2,000,000 of the increase will be devoted to the creation
of a cyber corps. Developed at the request of the national security
community, this program will involve outreach to high schools,
colleges, and universities to address a critical need by facilitating
the recruitment and training of students for information technology
positions in the federal service, with particular emphasis on
information security occupations, where we are currently experiencing a
shortage of qualified candidates.
The remaining $800,000 of the increase will be devoted to our
efforts to ensure compliance with the merit system principles,
principally through expanded oversight, and to improvements in OPM's
information technology infrastructure.
For the administration of the government's retirement and insurance
programs for its employees, we are asking that $95,500,000 be
transferred from the trust funds for those programs to support 1,357
full-time equivalents. An increase of $4,000,000 in funding to remain
available until expended is sought for the retirement systems
modernization effort previously mentioned. In addition, a small
increase of $300,000 will assist in the development of a new center for
benefits design and delivery.
Of course, a significant portion of the funding for OPM's Office of
the Inspector General is also provided through transfers from the trust
funds. I would note that, of their total request for $10,600,000 to
support 111 full-time equivalents, $9,600,000 will be provided through
such transfers. A more detailed explanation of their request will be
provided by that office in a separate statement for the record.
It is also important to note that OPM uses payments from other
agencies to its revolving fund, to finance a wide variety of services.
From providing training for federal managers and executives to
providing employment information to the public, from conducting
investigations of individual candidates for critical-sensitive
positions to testing potential inductees for the Department of Defense,
our fiscal year 2000 budget includes an estimated $194,100,000 million
in obligations and 673 full-time equivalents to be financed through the
revolving fund.
As always, since annuitants have no employing agencies to
contribute the government's share of the costs of the health benefits
and life insurance programs on their behalf, mandatory appropriations
to include those contributions are included in OPM's budget request.
Given the mandatory character of these accounts, we are requesting a
``such sums as may be necessary'' appropriation for each of them.
We estimate that, for the 280,000 non-postal annuitants retiring
since 1989 and electing post-retirement life insurance, we will need
$36,200,000 while the financing of the health benefits coverage of the
1,900,000 annuitants will require an estimated $5,100,000,000.
Also, consistent with the mandate of Public Law 91-93, which
established the current retirement financing system, we are requesting
a ``such sums as may be necessary'' appropriation for the civil service
retirement and disability fund. In order to address the payment of
annuities under special acts (such as lighthouse widows) and the 30-
year amortization of liabilities produced by changes (principally pay
increases) made since the date of that act (1969) which have affected
benefits, we estimate that a payment of $9.1 billion will be required.
Finally, we believe it is important to note that we have again
included in the general provisions the necessary legislative language
to ensure consistency in the levels of pay adjustments provided to
federal blue-collar and white-collar employees.
For those white-collar employees, the President's budget for fiscal
year 2000 seeks a pay increase of 4.4 percent, with the appropriate
distribution between an across-the-board raise and locality pay to be
determined following discussions with interested parties, including
employee and professional organizations and others.
Thank you for this opportunity to submit this Statement for the
record. I would be pleased to respond to any additional questions or
provide such additional information for the record as the subcommittee
may require.
______
Questions Submitted by Senator Campbell
merit system principles and flexibilities
Question. One of OPM's priorities in its fiscal year 2000 Annual
Performance plan is to prevent merit system abuses and enhance human
resources management in agencies through systematic oversight of agency
systems and practices. Human resources management authorities
increasingly have been made more flexible. What is OPM doing to ensure
that agencies, including those exempted from standard civil service
provisions, adhere to merit system principles and requirements while
preserving the benefits associated with more flexible human resource
systems?
Answer. The Office of Merit Systems Oversight and Effectiveness
(O&E) within OPM ensures that agencies covered by standard civil
service provisions adhere to the merit system principles and
requirements through a comprehensive onsite evaluation program that
covers all the major departments and agencies on a four-year cycle and
the small and independent agencies on a five-year cycle. The emphasis
of these reviews is two-fold: to determine if agency human resources
systems are taking full advantage of new flexibilities, and to ensure
that the systems are adhering to merit system principles and
requirements. In addition, O&E works with agencies to establish their
own accountability systems to help them ensure adherence to merit
system principles and requirements. For agencies that are exempted from
standard civil service provisions such as the Internal Revenue Service
and the Department of Defense Laboratories, OPM ensures that the design
of these alternative human resources systems has at its core the merit
system principles and ensures that there are provisions for oversight
and accountability. We are also continuing to review ways that we can
assist agencies exempted in whole or in part from standard civil
service provisions in establishing and maintaining accountability in
their personnel systems.
internal control improvements
Question. The independent audit of OPM's 1996 and 1997 financial
statements noted internal control weaknesses in a number of areas for
OPM's retirement, health benefits, and life insurance programs. One of
OPM's strategic goals is to resolve material weaknesses and improve
financial systems and internal controls to maintain the integrity of
the benefit trust funds by the year 1999. What improvements has OPM
made to its internal controls?
Answer. We are pleased to report the following internal control
improvements in OPM's administration of the retirement, health benefits
and life insurance programs:
Agency Oversight
Our earned employee benefits systems rely on the accuracy and
completeness of the data employing agencies provide to Office of
Personnel Management (OPM). We have made significant progress in this
area by working jointly with the Office of Management and Budget (OMB)
on the issuance of OMB Bulletin 98-08. This bulletin requires
Inspectors General and Independent Public Accounting (IPA) firms to
review agency systems and procedures for collecting, updating and
transmitting benefits information, and to report their findings to OPM.
We have reviewed the first round of reports submitted by agencies and
have determined that they do not contain findings or other reportable
matters that, when taken as a whole, would have a material impact on
the withholdings and contributions presented in OPM's fiscal year 1998
financial statements.
Annuity Payments
The Retirement and Insurance Service (RIS), OPM's Office of the
Inspector General (OIG), and the IPA firm under contract to OPM
performed an audit of OPM's retirement benefits payment system (annuity
roll) in early 1998. Although the IPA recommended that RIS establish
additional controls to ensure the accuracy of payments, they issued an
unqualified audit opinion on the fiscal year 1997 Retirement Program
financial statements. In late 1998, RIS and the IPA performed
additional test work to determine the accuracy of annuity roll
payments. The results were consistent with the IPA's earlier
determination that the impact of erroneous payments on the Retirement
Program's financial statements did not rise to the level of
materiality. Although not a material weakness we continue to address
the IPA's recommended improvements.
Health Benefits Program Claims Payments
In consultation with OPM's Office of the Chief Financial Officer,
OIG, carriers, OMB and the General Accounting Office, RIS fully
implemented the Federal Employees Health Benefits Program (FEHBP)
Carrier Audit Guide in 1998. This guide requires experience-rated
carriers to have the FEHBP portion of their financial statements
audited annually and provides procedural guidelines and standards
covering a wide range of carrier activities, such as claims processing,
benefit payments and funds management. We have reviewed the 1998 audit
opinions and other reports submitted by carriers in accordance with the
Guide, and have deter mined that they do not contain adverse opinions,
findings, material weaknesses or other reportable conditions that, when
taken as a whole, would have a material impact on the portion of OPM's
fiscal year 1998 FEHBP financial statements relating to experience-
rated carriers. Accordingly, OPM's IPA firm has issued an unqualified
opinion on its fiscal year 1998 audit of the FEHBP financial
statements.
Financial Systems
We have also made substantial progress towards correcting the non-
conformance reported on the absence of a transaction-level General
Ledger for the Employee Benefits System. On October 1, 1998, RIS
implemented a new core financial system. This system meets OMB Circular
A-127 and all other Government-wide financial management systems
requirements. We also consider this non-conformance to be corrected.
Although all material weaknesses reported for the fiscal year 1997
financial statements have been downgraded and/or resolved, OPM's IPA
did report a material weakness relating to financial reporting under
the FEHBP in its audit of the fiscal year 1998 financial statements.
This new material weakness arose due to a difference between the
general ledger (GL) and the benefits accounting system. This material
weakness had no effect on the overall audit opinion because OPM and its
IPA were able to obtain the necessary information by extracting,
eliminating and reconciling the general ledger accounts. We are in the
process of reviewing and modifying our accounting structure to resolve
this problem, and expect to do so by the end of fiscal year 1999.
pay adjustment process
Question. OPM's fiscal year 2000 performance plan has a goal of
proposing a credible annual pay adjustment process during fiscal year
1999. In addition, OPM has committed to develop legislative proposals
by 2002 under which annual pay adjustments would be considered in the
context of a performance-oriented system of total compensation. What is
OPM doing to follow through on its stated goals of developing a
credible annual pay adjustment process and of considering pay in the
future in light of the full compensation package available to Federal
and non-Federal employees?
Answer. The Conference Report on the Treasury and General
Government Appropriations Act, 1999, directed the President's Pay Agent
(the Directors of the Office of Personnel Management and the Office of
Management and Budget and the Secretary of Labor) to provide the Senate
and House Appropriations Committees by May 1, 1999, with any pay-
setting methodology concerns it has with regard to the Federal
Employees Pay Comparability Act of 1990 (FEPCA). The Pay Agent's
report, dated April 30, 1999, discusses the Administration's major
methodological and technical concerns about the annual pay adjustment
process for General Schedule employees and suggests a few basic
principles that should guide the Government's efforts to address these
concerns. In a letter transmitting the report to the Senate and House
Appropriations Committees, the Pay Agent stated that it would be
pleased to work with Congress ``to fashion an appropriate package of
legislative reforms that will go a long way toward achieving our mutual
goal of establishing a credible annual pay adjustment process.''
With respect to the longer-term effort to reexamine all aspects of
Federal compensation and benefits, the present report touches on only
one of those aspects, that is, the annual across-the-board adjustments
to the rates of pay within the General Schedule salary structure. OPM's
total compensation policy review will look at a much broader range of
compensation issues such as the methods used to evaluate and classify
work, better ways to emphasize and reward performance and results, the
kinds of employee benefits that will help attract and retain a quality
workforce in the next millennium, and effective approaches for meeting
the merit system principle that private sector pay should be considered
in setting the levels of pay for Federal employees. Stakeholders will
be fully involved in examining these issues and considering options for
possible legislative changes in the future.
______
Questions Submitted by Senator Shelby
advanced vehicle technologies program
Question. The Advanced Vehicle Technologies Program is a joint
Department of Transportation/Department of Energy program designed to
demonstrate the market viability of U.S.-built medium and heavy duty
vehicles that meet emission standards for 2004 and contribute to a
reduction in greenhouse gases. The Research and Special Programs
Administration is the lead agency on this program for DOT; the Office
of Energy Efficiency and Renewable Energy is the lead office at DOE.
Currently, the program is managed under the auspices of the Defense
Advanced Research Projects Agency (DARPA) at the Department of Defense.
Please detail the funding history of this program, from its inception
through the funding levels requested for fiscal year 2000, in each
applicable executive branch department, agency and office. Provide both
the requested level, the appropriated level, and total for each year.
What is the statutory authorization for this program? When does the
authorization expire? Who is the congressional authorizing committee?
Answer. In 1998, the Transportation Equity Act for the 21st Century
(TEA-21) authorized the Advanced Vehicle Program (AVP) at $50 million
annually through fiscal year 2003, to be directed by the Secretary of
Transportation. The authorizing committee in the House was the
Committee on Transportation and Infrastructure, and the authorizing
committee in the Senate was the Committee on Commerce, Science and
Transportation.
Fiscal year 1999 marks the first year of existence for the Advanced
Vehicle Technologies Program (AVP). In fiscal year 1999, a total
Federal allocation of $14 million will be matched by at least an equal
amount provided by the seven regional consortia, a partnership funded
by public/private sources. fiscal year 1999 Transportation
Appropriations included $5 million for the Research and Special
Programs Administration (RSPA) of the Department of Transportation
(DOT) to ``support a public/private partnership to design, develop, and
deploy alternative fuel and propulsion systems focusing on medium and
heavy vehicles.'' Congress directed the Department of Defense (DOD) to
provide another $9 million from the Defense Advanced Research Projects
Agency (DARPA) for this joint program. The fiscal year 1999 President's
Budget requested $20 million for this program comprised of $10 million
for DOT and $10 million for the Department of Energy (DOE), Office of
Transportation Technologies; subsequently, no funding was requested by
DOD or provided by Congress for DOE.
The fiscal year 2000 President's Budget includes $20 million for
DOT/RSPA to support the AVP and represents the total Federal investment
requested for this program. A total estimated fiscal year 2000 program
level of over $40 million leverages the Federal request for $20 million
of DOT funding with an equal amount provided by the seven regional
consortia, which represent a public/private partnership and conduct
research under the program. In fiscal year 1999, the seven regional
consortia developed 100 full proposals which requested over $40 million
in Federal funding with more than a $40 million public/private sector
match. The Department of Energy did not request funds for AVP in fiscal
year 2000.
The AVP represents the successful transition to civilian agency
management of the Electric and Hybrid Vehicle Technologies (EHV)
partnership program previously run by DARPA. Under DARPA management,
the EHV program had been specifically earmarked within appropriations
by Congress for $25 million in fiscal year 1993, $46 million in fiscal
year 1994, and $15 million each for fiscal year 1995, fiscal year 1996,
fiscal year 1997, and fiscal year 1998. This funding was not included
in the President's Budget for those fiscal years. Having successfully
transitioned EHV to civilian agency management, DARPA has no plans to
continue funding support for the AVP after fiscal year 1999.
The following represents DOD and other non-transportation
investments in establishing the global positioning system, including
the network of satellites. The summary table shows the Department of
Defense (DOD) research and development, procurement and military
construction investment in the Global Positioning System satellites and
ground control systems from 1974-2005. Per the Committee's request, it
does not include Department of Transportation funding. It also does not
include DOD or other Department funding specifically related to the
nuclear detonation detection capability which is installed on some GPS
satellites; launch funding, or funding for development and procurement
of applications, or user equipment.
DOD and Other Non-Transportation Investments in the Global Positioning
System
[In Millions of Dollars]
Fiscal Year Amount
1974-1998.........................................................$4,179
1999.............................................................. 196
2000.............................................................. 284
2001-2005......................................................... 1,555
______
TOTAL 1974-2005............................................... 6,214
magnetic levitation technology deployment program
Question. Why has the Administration requested that a firewall-
protected TEA-21 program, the Magnetic Levitation Technology Deployment
program, be zeroed out in order to transfer the $20,000,000 in
guaranteed highway trust funds to the Advanced Vehicle Technologies
Program? Please provide a name, title, office location, and phone
number for the staff coordinator in each participating agency.
Answer. The Administration supports the eventual deployment of cost
effective and economically justified Magnetic Levitation (Maglev)
systems. In fiscal year 1999, the Federal Railroad Administration (FRA)
received $15 million in guaranteed contract authority for Maglev pre-
construction activities. These funds are being used to design up to
five potential sites for Maglev development. TEA-21 also authorized
$950 million in non-guaranteed funds for a competitively awarded grant
for the construction of one of these sites.
Most public and private studies conclude that Maglev's public
benefits fall short of its public costs. FRA currently estimates that
the public benefits from investing in Maglev would be less than half of
public cost. To make Maglev a more cost-effective public investment,
the President's fiscal year 2000 Budget requests $20 million for FRA to
conduct research designed to reduce the costs of developing and
implementing Maglev systems. At the same time, the President's Budget
proposes to reallocate the $20 million provided for Maglev pre-
construction in fiscal year 2000 to the Advanced Vehicle Technologies
program. This program will play an important role in making
commercially available vehicles which meet the 2004 emission standards.
Federal Railroad Administration contact:
James T. McQueen, Associate Administrator for Railroad Development
(202) 493-6381, 400 7th Street, S.W., Stop 20, Washington, DC 20590
nationwide differential global positioning system (ndgps)
Question. In the fiscal year 1999 Senate Report 105-249
accompanying the Transportation Appropriations bill, on page 112 the
Department of Transportation was directed to submit a report to the
House and Senate Committees on Appropriations as part of the fiscal
year 2000 budget justification identifying the long-term costs,
benefits, and cost sharing that might be reasonably expected for the
nationwide differential global positioning system. The likely financial
role of each affected federal agency, as well as states and the private
sector were to be specified to the greatest extent possible. This
report was not included in the Federal Railroad Administration's
detailed justification. Was it included in another agency's
justification? If so, please specify where that report is located. If
not, please provide that report for the record.
Please detail the funding history of this program, from its
inception through the funding levels requested for fiscal year 2000, in
each applicable executive branch department, agency and office. Provide
both the requested level, the appropriated level, and total for each
year.
What is the statutory authorization for this program? When does the
authorization expire? Who is the congressional authorizing committee?
Please provide a name, title, office location, and phone number for the
staff coordinator in each participating agency.
Answer. The Federal Railroad Administration (FRA), the lead agency
for the Administration in this effort, submitted it for final
Administration clearance in early May. All participants in the program
(including the Departments of Transportation, Commerce, Interior,
Agriculture; the Army Corps of Engineers, and the United States Air
Force) provided input to the report through their representatives on
the DOT-chaired NDGPS Policy and Implementation Team (PIT). The report
will outline the costs of deploying NDGPS and describe the potential
benefits to be derived from the system as well as possible cost-sharing
arrangements.
Section 346 of Public Law 105-66, authorized the USDOT to
establish, operate, and manage the NDGPS, including taking receipt of
necessary Ground Wave Emergency Network (GWEN) sites and equipment.
This provision does not expire. While Public Law 105-66 is an
appropriations bill, the authorizing committees with jurisdiction are
the House Transportation and Infrastructure Committee and the Senate
Commerce Committee.
The funding history for NDGP's capital is as follows: $8 million
total was appropriated for fiscal years 1998 ($2.4M) and 1999 ($5.5M).
For fiscal year 2000 the FRA is requesting $7.2 million for capital and
$3.2 million for operating costs, both to be derived from the
unanticipated increase in highway guaranteed spending resulting from
higher than expected gas tax receipts, referred to as the Revenue
Aligned Budget Authority (or RABA). This request reflects the full
amount originally sought by the Department of Transportation in the
fiscal year 2000 President's Budget. All NDGPS funding in fiscal year
1998 and fiscal year 1999 was appropriated directly to the Coast Guard.
On February 8, 1999, the Secretary of Transportation delegated his
authority under Section 346 of Pub. L. 105-66 to the Federal Railroad
Administrator to determine the Federal requirements for the NDGPS (64
Fed. Reg. 7813, February 17, 1999).
The following list provides the names, titles, office locations,
and phone numbers for the staff coordinators in each participating
agency which are serving as their agency's representative on the DOT-
chaired NDGPS Policy and Implementation Team (PIT):
James A. Arnold, Engineer and FHWA Representative, Federal Highway
Administration, Room T201, Turner Fairbank Highway Research Center,
6300 Georgetown Pike, McLean, Virginia 22101, 202-493-3265
LCDR John Macaluso, PIT Chairman and OST Representative, USDOT
(Office of the Secretary of Transportation, Office of the Assistant
Secretary for Transportation Policy, Office of Radionavigation and
Positioning), 400 Seventh Street, S.W., Room 10309, Washington, DC
20590, 202-366-0362
John A. Kern, Senior Attorney and Federal Railroad Administration
Representative, Federal Railroad Administration, 1120 Vermont Avenue,
N.W., Mailstop10, Washington, DC 20590, 202-493-6044
Richard C. Shamberger, NDGPS Program Manager and Federal Railroad
Administration Representative, Federal Railroad Administration, 1120
Vermont Avenue, N.W., Mailstop 20, Washington, DC 20590, 202-493-6371
LCDR Leonard W. Allen III, U.S. Coast Guard Representative, USCG
Navigation Center, 7323 Telegraph Road, Alexandria, VA 22315-3940, 703-
313-5888
William Bergen, U.S. Army Corps of Engineers Representative,
HQUSACE, 20 Massachusetts Avenue, NW, Washington, DC 20314-1000, 202-
761-1553
Richard Snay, U.S. Department of Commerce, NOAA/NGS (Room 8112),
1315 East-West Highway, Silver Spring, MD 20910, 301-713-3205 ext 155
In addition, representatives from other agencies are:
Larry Hothem, Senior Physical Scientist, U.S. Department of
Interior, U.S. Geological Survey, 1521 National Center, Reston, VA
20192, 703-648-4663
William Belton, U.S. Department of Agriculture, U.S. Forest
Service, 201 14th Street, SW, Washington, D.C. 20250, 202-205-1428
Stanley Howard, Lt. Col., U.S. Air Force, Chief, Readiness and
Sustainment Division, Directorate, Communications and Information, U.S.
Air Force, Langley AFB, VA 757-764-4166
______
MERIT SYSTEMS PROTECTION BOARD
Prepared Statement of Ben L. Erdreich, Chairman
Chairman Campbell, Ranking Member Dorgan, and Members of the
Subcommittee. Thank you for the opportunity to submit this statement
for the record and, as the Subcommittee begins its consideration of the
appropriations for the U.S. Merit Systems Protection Board and other
components of the Federal government's civil service system, to discuss
MSPB funding for the next year.
As we celebrate the 20th anniversary of the enactment of the Civil
Service Reform Act of 1978, I must comment on what a different world
the Federal workplace is than it was 20 years ago. It is much smaller--
the workforce has been cut by some 300,000 jobs. It is more customer
oriented. Regulations have been streamlined. Accountability and
performance are the focus of management. And, information technology is
changing everyone's daily work.
But, despite all these changes, it is also true that the principles
underlying the CSRA remain sound and viable. And, there is no change in
the MSPB's commitment to promoting merit and fairness in the operation
of the Federal civil service system. The Board's neutral, independent
adjudication of employee appeals ensures a fair and efficient workplace
and its published studies provide a broad view of trends, issues, and
problems facing Federal employees and managers. Both functions are
critical to preserve a merit-based employment system that benefits not
only Federal employees but the public they serve.
managing for the future
I am pleased to report that the MSPB today is 23 percent smaller
than when I became Chairman in 1993, a decrease from 323 to 250
employees. At the same time, we have not experienced the decline in
case receipts that we had anticipated because of government-wide
downsizing. Rather, the historic level of about 10,000 cases a year
continues. To process cases at this level with our reduced resources
has required significant organizational planning.
The increasing complexity of cases has also shaped our long-range
strategic plans. Basic adverse actions are becoming more complex. To
claims of removals and suspensions, many appellants are adding
allegations of disability, sex, race and/or age discrimination, Family
and Medical Leave Act issues, claims of reprisal for whistleblowing,
and Uniformed Services Employment and Reemployment Rights Act (USERRA)
rights. All of these issues must be addressed, lengthening the time
required for hearings and decision writing.
In addition, Board jurisdiction and appealable matters are
changing. The Board estimates that it might receive some 1,000
additional appeals under the Veterans Employment Opportunities Act of
1998. The Veterans Programs Enhancement Act of 1998 extended Board
jurisdiction under USERRA to cover claims of violations that occurred
before USERRA was enacted (October 13, 1994). The Presidential and
Executive Office Accountability Act of 1996 extends the Board's
jurisdiction to some 1,700 employees and requires the Board to apply
civil rights and labor laws.
In light of these circumstances and budget constraints, we have
continued to review our operations, reducing management layers,
consolidating field offices, eliminating administrative and support
staff, and devoting more resources to critical case-processing
functions. Even with all that, we determined that more must be done.
After careful evaluation, we concluded the answer was to change our
processes through information technology.
information technology
MSPB is in the process of implementing an integrated document
management and workflow system that will revolutionize the way we do
business. After full implementation, agencies, representatives, and
Board employees will have easy electronic access to documents in case
records. The electronic filing system will improve employee
productivity, allow the Board to reduce staff costs, reduce legal
research and administrative costs, provide better customer service--and
produce significant cost savings--some $1,015,000 to the Board,
$250,000 to our customers, for a total of $1,265,000 annually. See
attached analysis of projected savings.
The first phase of the system includes modules for case management,
document management, document creation, and legal research. The next
phase involves on-line submission and acceptance of appeals, briefs,
and other case-related materials and provides access to electronic case
records by all Board employees. The project is being carefully
implemented, step by step, using off-the-shelf software rather than
expensive custom-designed--and untested--products. To avoid costly
mistakes, we are using prototypes and pilot projects to test components
during each phase of the development process. In this initiative, we
have kept in mind the Government Paperwork Elimination Act that
encourages use of electronic information technologies (Pub. L. No. 105-
277 (1998)) and the recently proposed OMB regulations requiring
agencies to provide optional use and acceptance of electronic documents
and electronic record-keeping by October 2003.
alternative dispute resolution
The MSPB has long looked to alternative dispute resolution to
promote settlement of cases. The MSPB was authorized by the CSRA to
experiment with alternatives to litigation and the Board early on
established a policy to make settlement efforts in every case. For over
a decade, the Board has settled some 50 percent of the cases not
dismissed on jurisdictional or timeliness grounds. Last year, the Board
settled almost 54 percent of cases not dismissed--a new high.
In 1993, the Board initiated a program focused on settling cases
pending for review of the initial decision by the full Board. Last
year, the Board settled almost 30 percent of the cases selected for the
program.
The Board has also initiated planning for a formal training program
to help agencies and employees achieve early resolution of potential
cases. The program, to be conducted in partnership with the Public
Administration Forum and a major university, is intended to develop a
cadre of knowledgeable and skilled certified appeals resolution
advisors who will be able to resolve cases prior to their being filed
with the MSPB.
the mspb record
The MSPB record remains strong. During fiscal year 1998, the
Board's timeliness in issuing decisions meant that, on average, an
appeal to the Board was processed through both initial and Board level
review in about 10 months. This speedy processing is important because
about 90 percent of Board appeals involve review of agency personnel
actions--actions having a real impact on lives.
At the same time, the MSPB has maintained the quality of its
decisions. In fiscal year 1998, our principal reviewing court, the U.S.
Court of Appeals for the Federal Circuit, left 92 percent of the MSPB
decisions it reviewed unchanged.
And, in the studies program, the MSPB provides relevant, timely
assessments of basic personnel matters--important in light of the
increasing decentralization of personnel authorities. MSPB studies of
the civil service and merit systems are deliberately emphasizing issues
of practical importance to Federal employees and managers. Recent
reports focused on helping agencies recruit, select, motivate and
manage a highly qualified workforce. Not only do Board studies provide
useful recommendations, they also provide benchmarks against which
current practices can be measured.
funding request
Our fiscal year 2000 request is for $28,957,000 in appropriated
funds and a $2,430,000 limitation on reimbursements from the Civil
Service Retirement and Disability Fund. Because we believe the long-
term ability of the Board to provide due process to those who come
before it is at stake, we are exercising our budgetary bypass
authority, 5 U.S.C. 1204(k), and request additional funds beyond the
OMB passback level--an additional $1,371,000.
Funding at the requested level is critical to maintain our current
staffing levels--a bare minimum necessary to provide timely
adjudication of cases and basic studies. We have assessed our operation
repeatedly and further savings from cuts in personnel or operations are
simply not feasible. We have little flexibility in our budget. In
fiscal year 2000, about 74 percent of the budget will go for personnel
compensation. Another 14 percent will go for fixed costs (11 percent
for such things as rent, utilities, and maintenance costs and another 3
percent for direct case processing costs, including travel, court
reporting and legal research).
The requested funding will also provide the resources necessary to
implement the electronic case filing and document management systems,
systems we believe are critical to our long-term ability to handle our
cases. OMB expressed strong support for the integrated electronic case
system but was only able to approve $529,000 of the $1,900,000 needed
in fiscal 2000. As I noted, we have carefully planned this system to
make our process more efficient, and, when implemented, to provide
better service at lower cost.
Thank you Mr. Chairman, Ranking Member Dorgan, and Members of the
Subcommittee for your interest in and support of the civil service. We
can all agree that neutral, third-party adjudication and oversight is
essential to a Federal government that functions well. As you
deliberate over the difficult funding choices this year, I ask you to
take into account that litigation before the MSPB is not decreasing--
either in volume or complexity. Support of our efforts to provide
timely, quality adjudication of appeals through effective use of
information technology will pay off.
I look forward to working with you and your staff, and I will be
happy to provide any additional information you would like.
projected savings from the mspb adp improvement plan
Under the Five Year ADP Plan the Merit Systems Protection Board
well replace its outdated information technology with an integrated
system featuring electronic filing, electronic publishing, and
electronic case records. The plan provides a state-of-the-art system
integrating case processing, case management, automated document
preparation, and electronic storage of case documents. All components
of the new system will be built using well tested commercially
available off-the-shelf software (COTS). As a quality assurance check,
the system will be implemented in phases using prototypes and pilot
systems.
Summary of Annual Cost Savings
[At fiscal 1999 rates]
Savings to MSPB...............................................$1,015,000
Savings to our Customers...................................... $250,000
--------------------------------------------------------------
____________________________________________________
Total Annual Savings......................................$1,265,000
(1) Reduce cost of legal research and end maintenance of outdated
systems ($215,000 annually).
(2) Reduce staff costs ($750,000 annually).
(3) Reduce administrative costs such as paper, postage, and storage
of documents ($50,000 annually).
(4) Reduce customer costs and improve customer services ($250,000
annually).
projected savings the mspb adp improvement plan
Explanation of Savings
(1) Reducing costs of legal research and ending maintenance of
outdated systems. ($215,000 annually)
--Using Dataware software will reduce our on-line legal research
costs of $23O,000 per year by approximately 50-60 percent for
savings of about $115,000;
--Using electronic legal research will reduce our paper subscriptions
to research tools, saving MSPB about $50,000 annually; and
--Eliminating obsolete hardware and ending software maintenance
contracts will save about $50,000 annually.
(2) Reducing staff costs. ($750,000 annually)
The efficiency of the ADP system will increase staff productivity
in adjudicating appeals. These efficiencies will be translated into
savings through a combination of reducing staffing levels, if future
workload levels permit, reassigning staff to other priorities, and/or
reducing the overall grade levels required to process work.
--Implementing a HotDocs based expert system and an improved Document
Management System will reduce the time Administrative Judges
and Headquarters attorneys spend on initially developing a
case, and lower graded staff can be assigned to the early
stages of case processing; and
--Implementing an improved Case Management System, an Electronic
File, Electronic. Filing, and a Document Management system will
automate tasks such as preparing and mailing routine
correspondence, orders and decisions, reviewing case files,
entering data, and filing of briefs and pleadings, tasks now
largely performed manually by MSPB attorneys and support staff.
(3) Reducing administrative costs such as paper, postage, and
storage of documents. ($5O,OOO annually)
Using electronic correspondence and maintaining case records
electronically through an enhanced Case Management System, Electronic
Case File, Electronic Filing, coupled with an advanced Document
Management System, will save about $50,OOO annually in paper, postage,
and storage costs.
(4) Reducing customer costs and improving customer services
($250,000 annually)
Allowing our customers to file electronically will generate a
savings of about $25 per appeal on the average 10,000 appeals MSPB
receives each year.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on the Treasury and General Government for
inclusion in the record.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule separate hearings for
nondepartmental witnesses.]
Prepared Statement of Dr. Raymond E. Bye, Jr., Interim Vice President
for Research, Florida State University
Mr. Chairman, thank you and the Members of the Subcommittee for
this opportunity to present testimony. I would like to take a moment to
acquaint you with Florida State University. Located in the state
capitol of Tallahassee, we have been a university since 1950; prior to
that, we had a long and proud history as a seminary, a college, and a
women's college. While widely known for our athletics teams, we have a
rapidly emerging reputation as one of the Nation's top public
universities. Having been designated as a Carnegie Research I
University several years ago, Florida State University currently
exceeds $110 million per year in research expenditures. With no
agricultural or medical school, few institutions can boast of that kind
of success. We are strong in both the sciences and the arts. We have
high quality students; we rank in the top 25 among U. S. colleges and
universities in attracting National Merit Scholars. Our scientists and
engineers do excellent research, and they work closely with industry to
commercialize those results. Florida State ranks fourth this year among
all U.S. universities in royalties collected from its patents and
licenses, and first among individual public universities. In short,
Florida State University is an exciting and rapidly changing
institution.
Mr. Chairman, let me describe an outstanding project that FSU is
pursuing this year--The Institute on World War II and the Human
Experience. This Institute is working to amass and make available to
scholars, teachers, and the general public the letters, diaries,
memories, oral histories, photos, and other memorabilia of millions of
Americans who served under the colors or labored to equip those who
did. The largest collection in the country, that of the Army at
Carlisle Barracks, contains the donation of only 20,000 individuals;
namely, less than one percent of one percent of those who served, not
including defense workers. Unfortunately, much more of this
irreplaceable material is being lost, misplaced, or destroyed than is
being donated to institutions around the country. To protect the legacy
of the surviving 6.5 million veterans, it will take a determined effort
and the cooperation of all interested parties.
FSU, through its World War II Institute (supported by the
University's Archival and Oral History Programs), is endeavoring to
create a national and comprehensive archive that will permit the
writing of good social and cultural history of the late 1930s and the
1940s. The papers that it has already collected reflect the experiences
of men and women, of all branches of the service, and of every theater
of operations during World War II. In addition to preserving the
indispensable original documents necessary to write the history of this
long neglected area (namely, the contributions and experiences of the
ordinary American citizen during wartime), the WWII Institute is
preserving the human interest anecdotes that are the key to interesting
future generations of students in magnitude of the accomplishment of
their grandparents. A uniquely interesting feature of the FSU effort is
its collection of more than 3,000 student interviews (over a period of
30+ years) with their grandparents about the older generation's lives
during World War II.
For the purposes of a broader education in American values,
research into the true stories of ``GI Joe'' and ``Rosie the Riveter'',
and instruction in civic duty exercised under the most stressful of
circumstances, the Institute on World War II and the Human Experience
is dedicated to bringing together as much of these insights as
possible. Rather than the story of the unusual battle or the
extraordinary general, its holdings reflect what one vet described as
the life of the ``anonymous solider who won the war'' and another spoke
of as those written memories that prove ``I existed and made a
difference.'' The amazing volume of materials that vets have donated to
FSU fully justify its on-going plans to raise a suitable endowment to
run the WWII Institute and obtain archival space and resources for its
rapidly-expanding collection of memorabilia and memories on paper of
this wartime generation.
The Department of Florida Veterans of Foreign Wars and American
Legion support the Institute concept.
Funding will be requested from the National Historical Publications
and Records Commission of the National Archives at the $1 million level
for fiscal year 2000. Private resources will be added to this effort as
well.
Mr. Chairman, this is just one of many exciting activities going on
at Florida State University that will make important contributions to
solving some key problems and concerns our Nation faces today. Your
support would be appreciated, and, again, thank you for an opportunity
to present these views for your consideration.
______
Prepared Statement of Robert M. Tobias, President, National Treasury
Employees Union
Chairman Campbell, Senator Dorgan and distinguished members of the
subcommittee, my name is Robert M. Tobias and I am National President
of the National Treasury Employees Union (NTEU). Our union represents
160,000 dedicated federal employees in the Department of the Treasury,
and twelve other agencies. The actions of this subcommittee directly
affect their lives, livelihood and working conditions.
Our members who work for agencies under this subcommittee's
jurisdiction perform some of the toughest jobs in government. They
enforce the tax and trade laws Congress sets and they face down vicious
international drug cartels to stem the flow of illegal narcotics and
contraband into our country. The employees of these agencies continue
to confront rapidly increasing workloads with a static amount of
personnel and fiscal resources. I urge that the subcommittee make wise
choices to properly fund these agencies so that they can effectively
perform the mission Congress has given them.
internal revenue service
Last year, Congress passed the IRS Restructuring and Reform Act.
Congress made many changes and needed reforms as to how the IRS works
and how it can better serve the American taxpayer and its mission to
enforce the tax law. If Congress was serious when it passed the
Restructuring Act, it must now give IRS the resources necessary to make
that legislation meaningful. Too much work and effort went into that
legislation for it to be cavalierly ignored in the funding process.
The Administration has requested $8,105,000,000 for fiscal year
2000. This is only a mere $2,000,000 over the fiscal year 1999 budget.
NTEU asks that Congress fund the full amount requested by the
Administration in order to see that the restructuring effort is
successful. Any less would seriously undermine the agency's work. The
coming fiscal year will be the most critical one in determining if the
changes desired in the IRS will stick. NTEU's members at IRS are poised
to take on the challenges we have been given. But employee morale, so
essential to bringing to fruition the vision of a customer service-
oriented agency that meets its revenue collection mission, can be
destroyed by underfunding of agency resources.
Mr. Chairman, I need to mention one other matter that also has the
possibility of undermining the IRS employee morale. NTEU believes that
Section 1203 (b) of the IRS Restructuring and Reform Act regarding
termination of employment for certain matters of misconduct is a
sledgehammer approach with the potential for excessive unfairness to
employees. Our members refer to Sec. 1203 (b) as ``The Ten Deadly
Sins.'' Employees found to have committed one of the ``Ten Deadly
Sins'' must be terminated. Once misconduct has been found, a lesser
penalty cannot be substituted for the decision to remove regardless of
the circumstances. NTEU finds this particularly troubling as many of
the provisions are vague and untested. Under Section 1203 (b) every
taxpayer complaint must be investigated by the newly created Treasury
Inspector General for Tax Administration (TIGTA) and in many instances
employees are not allowed to have a union representative present as was
the case in the past. Employees are terrified that disgruntled
taxpayers will make false claims that they will not be able to
``unprove.'' I fear that their fear will have a negative impact on tax
collection efforts and I would ask this subcommittee to look into the
potential of reduced revenue collection due to fears of 1203 (b)
actions.
More than just adequate funding is needed at IRS. The funding must
be spent right. The purchase of improved technology is important, but
even more critical is the need for greater employee training to handle
increasing complex tax law and tax administration responsibilities. In
the previous two years alone, Congress brought about over 1,260 changes
in the tax code.
The new IRS will become more accessible to taxpayers by providing
24 hour/7 day a week telephone service, expanded walk-in service and
improved service to small businesses. But expanded service is not true
service unless these frontline workers have had the proper training and
receive the necessary technology to do their job. The Administration
proposal asks for $17,000,000 for technical training. NTEU is
pessimistic that this in an adequate amount and certainly believes any
less is courting disaster. I would note, Mr. Chairman, that in a recent
IRS customer satisfaction survey, the areas of lowest needs for
improvement was the general courtesy and professionalism of IRS
employees. The areas of highest need was the accessibility of the toll-
free line, expanded office hours at the walk-in centers and the
shortness of time employees had to spend with customers.
It is critically important that Congress fund the agency request of
$140,000,000 for IRS to restructure, reorganize and retrain the IRS
workforce. Realigning the IRS to four new operating divisions (wage and
investment, small business/self-employed, large and mid-sized
businesses, and non-profits) creates some temporary expenses for
implementation, but without this funding the entire Reorganization Act
can fall apart. This is not a huge sum considering the enormous changes
Congress has asked the IRS to make. We do recognize it is a substantial
increase from the $25,000,000 appropriated in fiscal year 1999.
However, one could not find a better example of being penny wise and
pound foolish than the failure to fund this request.
u.s. customs service
The Administration has requested a funding level of $1,930,000,000
and 17,389 FTEs for fiscal year 2000 for the U.S. Customs Service. The
importance of the work of this agency cannot be overemphasized. Customs
makes more drug seizures than every other federal agency combined,
keeping 1,300,000 pounds of illegal drugs out of this country. Its
employees processed 19,700,000 commercial entries (up 1,800,000 from
last year) and 460,000,000 personal entries (up by 13,100,000 from the
previous year). Despite the great successes of Customs employees in
these fields, the growth in legitimate trade as well as illegal
narcotic smuggling and currency laundering continues at incredible
rates, far outpacing federal resources. In addition, the agency is
underfunded in fulfilling its duty to stop the importation of products
made by forced child labor and of child pornography sent over the
Internet. Moreover, with the recent allied action in Serbia and the
often violent reaction of America's critics in parts of the world, NTEU
questions if the U.S. Customs Service's resources to combat terrorism
are sufficient.
NTEU strongly supports new funding for better employee training.
The Administration proposes a new position of Assistant Commissioner
for Training and Development. We believe this is a good start. NTEU
supports expansion of the new employee training program for cultural
awareness initiated last year at major airports. Customs inspectors
must greet every arrival not knowing if they are facing someone trying
to fill our children's veins with drugs or an elderly couple returning
from their first overseas trip after a lifetime of scrimping and
saving. It is a tough job and Congress should not be miserly in
providing funds to help these workers do their job right.
It is also important that Congress fund the Automated Commercial
Environment (ACE) system. NTEU recognizes that this is an expensive and
vital initiative. But the alternative is to rely on a 16 year old,
dated system that makes it impossible for employees to do their work
efficiently. The continued growth in trade, tourism and illegal
activities show no signs of abating. Congress cannot leave Customs
behind as the world moves into the third millennium.
Our Union has been working with Customs management in a
partnership. We believe that such a relationship is the most productive
for the employees, the managers and the mission of the Customs Service.
We appreciate Commissioner Kelly's statements that the extremely
successful Operation Brass Ring would not have been possible without
the labor-management partnership at Customs. NTEU members in the
Customs Service are committed to accomplishing both the drug
interdiction and trade facilitation missions of the agency, but they
need adequate resources to be successful.
The Administration's budget request proposed a number of user fees
to fund the Customs Service. NTEU has no particular philosophical
objection to any of these fees. We are very concerned, however, that
failure to either enact such fees or find money elsewhere would cause
extreme damage to the important work of Customs. Any cuts in funding
from the proposed budget threaten to cause real disruptions in
international trade and tourism, real barriers to drug seizures and
terrorism prevention, real deficiencies in fighting child labor and
money laundering. However the agency is funded, reductions in resources
are not acceptable.
federal employee pay
Finally, Mr. Chairman, let me address the issue of compensation for
federal employees. Federal pay is governed by the Federal Employees Pay
Comparability Act of l990 (FEPCA). Under FEPCA, federal employees
should receive an annual nationwide pay adjustment based on the
Employment Cost Index (ECI), plus a locality-based adjustment designed
to close the gap between federal and private sector salaries. No
federal pay raise since the law was signed have provided the full pay
raise called for under its formula. The pay gap, as measured by the
Bureau of Labor Statistics, is approximately 30 percent.
FEPCA authorizes the President to issue an alternative pay proposal
in the event of a ``national emergency or serious economic conditions
affecting the general welfare.'' Each year, the President has used this
loophole and declared an economic emergency--even in this year of
budget surpluses.
The federal budget is now balanced and the country has entered a
period of budget surpluses, in no small part due to the sacrifices in
federal pay and benefit cuts made by employees over the last decade. It
is time for FEPCA to be followed and for federal employees to be paid a
fair wage.
President Clinton has recommended 4.4 percent raises for military
and civilian federal employees in fiscal year 2000. Legislation
providing a 4.8 percent military pay raise in January of 2000, a second
substantial pay increase in July of 2000, and future military raises
one-half percent more than private sector increases measured by the ECI
is moving quickly through Congress.
Parity between federal and military pay has been the norm for
decades and federal civilian employees want parity with their military
counterparts again in fiscal year 2000. Uniformed members of the
military often work side by side with civilian federal employees. NTEU
asks that the Appropriations Committee support parity between uniformed
military and civilian pay in fiscal year 2000 and all efforts to close
the pay gap between federal and private sector pay.
I would like to thank the Subcommittee again for the opportunity
for our Union to present its views on the proposed budget for fiscal
year 2000. As we enter this exciting, new millennium, I know we can
count on Congress to stand with federal employees as we look to a
future of progress and social betterment for our nation.
______
Prepared Statement of the Council for Citizens Against Government Waste
The Food and Drug Administration's (FDA) consolidation project
reminds one of the movie ``Terminator.'' In it, the monster calmly
declares, ``I'll be back'' and sure enough, it never seems to die. It
keeps rearing its ugly head, recreating itself and attacking the hero
and heroine, no matter what weapons are used against it. Finally, good
wins over evil, and the monster dies the final death it should.
The FDA's monstrous consolidation project, formally known as the
Taj Mahal or Kessler's Kastle, is once again rearing its ugly self in
the President's fiscal year 2000 budget in the form of a $136,000,000
funding request. The plan is to build a consolidated campus at the
former White Oak Naval Surface Warfare Center in Montgomery County,
Maryland. It will provide space for the Office of the Commissioner, the
Center for Drug Evaluation and Research, the Center for Devices and
Radiological Health, and the Center for Biologics Evaluation and
Research. According to a General Services Administration (GSA) estimate
in November 1998, the total cost for this consolidation is expected to
be $484,813,000. It appears that GSA has a project and construction
manager, a public-private partner and an architect for the project.
Yet, it appears, no prospectus has been approved by Congress for this
boondoggle.
But this is nothing new. Apparently no prospectus has been approved
by Congress for the construction of an FDA facility to support a campus
for the Center for Food Safety and Applied Nutrition. Yet, construction
is underway. Congress unwisely appropriated $55,000,000 in the fiscal
year 1996 Treasury, Postal Service, and General Government
Appropriations Act. GSA figured this was a green light to proceed but,
according to Public Law 104-52 ``funds available to the General
Services Administration shall not (emphasis added) be available for
expenses in connection with any construction, repair, alteration, and
acquisition project for which a prospectus, if required by the Public
Buildings Act of 1959, as amended, has not been approved, except that
necessary funds may be expended for each project for required expenses
in connection with the development of a proposed prospectus.'' Is the
GSA breaking the law and misusing taxpayer dollars? That question must
be addressed by the subcommittee.
Without a prospectus, how is Congress supposed to know how much
these buildings will cost the taxpayer, what type of yearly
appropriations will be needed and, no doubt considering the
construction of most federal buildings, when and how much the project
will be over budget? Will there be another scenario like the Ronald
Reagan International Trade Building, originally expected to cost
$362,000,000, but ended up costing taxpayers $818,000,000? Or how about
the Patent and Trade Office building in Northern Virginia, estimated to
cost taxpayers $1,600,000,000 billion over the next 20 years in
construction and leasing?
For years, FDA has been requesting a consolidated campus. But the
one being proposed is not ``consolidated.'' There is one campus that is
supposed to be built in Maryland's Prince George's County, another
campus that is supposed to be built in Montgomery County, and there is
already a laboratory facility in Beltsville. It appears that FDA
consolidation is not really the issue. What is really happening is
pork-barrel spending and the creation of a lush, suburban office
complex, close to a golf course, for FDA bureaucrats.
Since the era of big government is supposed to be over, the Council
for Citizens Against Government Waste (CCAGW) questions why Congress is
even considering building a huge campus for the FDA. In an era of
downsizing, it would appear Congress' first priority should be how to
make FDA smaller and more effective--not providing expensive campuses
that would allow the FDA to grow and hire more bureaucrats so it can
find new areas to regulate, fill the Federal Register with more rules
and cause more mischief.
Most FDA employees are not running off to meetings across town so
spending millions of dollars to convenience a small percentage of FDA
employees seems a bit much. Building a sprawling campus will not
decrease drug and medical device approval times. Furthermore, the
Montgomery campus is not located near a metro station, which will force
most employees to drive to work. This seems to be in direct conflict
with the Clinton administration's efforts to protect the environment
and encourage citizens to take advantage of public transportation!
If FDA offices need to be improved, it would be more cost-effective
to spend money to remodel them or to move employees into existing
buildings rather than build a brand new facility. Modern technology
such as computers and telephone or video conferencing allow employees
to talk to one another in an efficient manner. More and more private
sector businesses are using these modes of communication, why not the
government? Furthermore, spending huge sums of federal dollars in
wealthy Maryland suburbs seems unfair. This process goes against the
Clinton Administration's desire of revitalizing the District of
Columbia's economy or encouraging the location of federal offices into
historic buildings located in cities.
It is time for once and for all for Congress to terminate this
expensive monster and fight on the side of the taxpayers.
______
Prepared Statement of the International Community Corrections
Association
On behalf of the International Community Corrections Association
(ICCA), we are pleased to submit this statement addressing the United
States Appropriations with respect to Treasury and General Government
operations for fiscal year 2000. The International Community
Corrections Association is a membership organization representing more
than fifteen hundred residential and non-residential programs and over
250 private agencies throughout the United States. Over the past twenty
five years, ICCA has provided information, training, and other services
to improve the quality of care for offenders and to promote effective
management practices.
ICCA's comments focus on federal drug control activities critical
to improving community corrections and intermediate sanctions. ICCA
urges strengthening ONDCP's resources for assuring that all appropriate
offenders receive drug treatment in every community.
Until recently, community corrections options have been a neglected
part of the National Drug Control Strategy. Community corrections
options include: pre-trial supervision, probation and parole, intensive
supervision, fines and day fines, restitution, forfeiture, impoundment,
ignition interlock, community services, victim-offender reconciliation,
home confinement, electronic monitoring, day reporting, halfway house
residential treatment, and other services for offenders. It is
estimated that at least sixty percent or more of all offenders are in
need of substance abuse services. Approximately twenty percent receive
services. At least two thirds of all offenders who need treatment do
not receive it. Recent research, cost analysis, and longitudinal
studies show that offenders who receive such transition programs as
education, substance abuse intervention, and job training are much less
likely to return to prison.
Many programs with components that improve community corrections,
such as the National Institute of Corrections and the Federal Bureau of
Prisons community corrections centers, are worthy of sustained support.
However, these programs have only a small impact on the thousands of
lives that are ravaged by substance abuse. The National Drug Control
Budget and the Office of National Drug Control Policy's Office of
Demand Reduction should receive increased funding to actively address
drug treatment for those under correctional supervision in the
community.
National Drug Control Budget
We support the ONDCP's priorities in the National Drug Control
Strategy. A range of community corrections programs such as Treatment
Accountability for Safer Communities (TASC), drug courts, the Federal
Bureau of Prisons Drug Treatment Program, Break-the-Cycle, and the need
for partnership between corrections and treatment professionals are
mentioned. However, an inadequate amount of funding is dedicated for
these programs and for ONDCP's efforts to coordinate this fragmented
field. The ONDCP budget should reflect greater emphasis on developing
treatment throughout the entire correctional system. At least a ten to
twenty percent increase in funding and oversight is necessary to impact
addicted offenders.
With respect to the President's budget, ICCA supports the request
for criminal justice treatment through the Break-the-Cycle programs.
The Break-the-Cycle programs should be expanded to many more
jurisdictions and there should be funding for graduated sanctions,
relapse prevention, and structured transitions back into the community.
At the present time, the Federal Bureau of Prisons (FBOP) supports
halfway houses where inmates serve the last few months of their
sentences, preparing for release into the community. During this time,
many offenders who are substance abusers receive treatment, seek
employment, and re-establish family and community ties. Over the past
several years the FBOP has increasingly supported improved drug
treatment in prison and quality treatment in halfway house beds in
federal community corrections centers. ONDCP should be encouraged to
seek similar improvements at the state correctional level and for the
District of Columbia.
Office of Justice Programs
In recent years, Congress has excluded community corrections from
many categorical and block grant programs in favor of other
initiatives. We support the administration's proposed Drug Intervention
Program for fiscal year 2000. However, A review of the Office of
Justice Programs budget request for fiscal year 2000 reveals that with
the exception of Break-the-Cycle and drug treatment and testing for
offenders, there is insufficient funding for drug treatment for
offenders in drug courts or other programs.
ICCA urges this Committee to encourage ONDCP to expand the
proportion of demand reduction to interdiction programs and to place a
higher priority on the expansion of intermediate sanctions. The federal
appropriation should provide resources and oversight to address the
critical shortage of treatment slots in community corrections.
In closing, we must emphasize that community corrections are most
often a public and private partnership. To provide adequate leadership,
ONDCP must include local, federal, and state governments as well as
private agencies in its efforts. Federal, state, and local governments
should be encouraged through the appropriations process to enter into
partnerships to plan, implement, and deliver effective community
corrections programs which include substance abuse treatment. The ONDCP
is well-positioned to provide the valuable assistance needed to carry
on this work.
______
Prepared Statement of the American Association of Retired Persons
AARP appreciates the opportunity to comment on appropriations next
year for the Tax Counseling for the Elderly (TCE) program. Over the
last two decades, TCE has helped millions of middle and low income
older persons accurately prepare their Federal, State or local tax
returns. The AARP Foundation--a separate 501(c)(3) corporation--
operates the largest nationwide TCE program under a cooperative
agreement with the Internal Revenue Service (IRS).
In authorizing TCE, Congress found that elderly taxpayers are often
confronted with confusing tax provisions, resulting in overpayments or
reliance upon expensive professional tax services. It also concluded
that the particular needs of the elderly population were not being
adequately addressed by the Internal Revenue Service. Under TCE,
volunteer tax counselors are specially trained regarding those tax
provisions which affect older Americans. IRS reports that many people
with incomes below a specific level needlessly file returns. This
results in unnecessary costs for all concerned. TCE helps to prevent
such occurrences.
Electronic filing and other alternative methods are now utilized
under TCE, all of which increase the accuracy of tax returns while
being cost effective to the IRS. Electronic tax filings--both business
and personal--have proliferated during this decade. IRS states that one
of its goals is to have 80 percent of all personal income taxes filed
electronically by 2007. The growing complexity of taxes makes this type
of filing desirable for TCE ``customers''. The program managed by AARP
has expanded its use of alternative filing methods. In 1997, they
accounted for roughly 28,000 of returns. One year later, they accounted
for 59,290 returns--an increase of 111 percent.
Funding for TCE has remained at the current $3,700,000 level since
fiscal year 1994. In light of continued program growth and expanded use
of electronic filing, AARP recommends a slight increase next year--from
$3,700,000 to $3,950,000. This modest amount will help address the
growing demand for assistance while meeting increased costs.
Tax Counseling for the Elderly enables the IRS to assist minorities
more effectively as well as disabled and hard-to-reach taxpayers. This
includes the rural elderly and shut-ins, especially those residing in
nursing homes or senior housing. Last year, assistance was offered in
25 languages including American sign language.
Approximately 31,000 volunteers are involved in providing TCE
services at more than 10,000 sites across the country. When the program
first began, it helped 846,000 taxpayers. Currently, over 1,600,000
people receive tax counseling annually. While we do not have complete
data for the current tax season, we expect TCE to continue to grow in
the future. There are several reasons why this is likely to happen.
First, the elderly population is increasing.
Second, the complexities of our tax code cause many aged taxpayers
particular difficulty in computing their tax obligations. Moreover,
many aged citizens are not aware of the changes made in our tax laws
over the past few years.
Third, the Internal Revenue Service has increasingly turned to TCE
programs for assistance, in large part because budgetary constraints
have stretched the ability of the agency to respond directly to
numerous public inquiries. Volunteers are contributing millions of
hours annually in direct public service to older taxpayers.
Older taxpayers with dependent children or grandchildren are also
counseled regarding their eligibility for the earned income tax credit
(EITC). Many older low income wage earners find themselves responsible
4 for providing care for their dependent children or grandchildren.
EITC is an important benefit for these individuals.
The TCE program will continue to participate in successful
campaigns such as the Reduce Unnecessary Filing initiative. Three-
fourths of the taxpayers notified by IRS regarding this effort last
year were 61 years of age or older. Many of these individuals
subsequently turned to the TCE program for clarification and advice.
Thank you again for this opportunity to comment on appropriations
next year for the Tax Counseling for the Elderly program.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on the Treasury and General Government for
inclusion in the record.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule separate hearings for
nondepartmental witnesses.]
Prepared Statement of Dr. Raymond E. Bye, Jr., Interim Vice President
for Research, Florida State University
Mr. Chairman, thank you and the Members of the Subcommittee for
this opportunity to present testimony. I would like to take a moment to
acquaint you with Florida State University. Located in the state
capitol of Tallahassee, we have been a university since 1950; prior to
that, we had a long and proud history as a seminary, a college, and a
women's college. While widely known for our athletics teams, we have a
rapidly emerging reputation as one of the Nation's top public
universities. Having been designated as a Carnegie Research I
University several years ago, Florida State University currently
exceeds $110 million per year in research expenditures. With no
agricultural or medical school, few institutions can boast of that kind
of success. We are strong in both the sciences and the arts. We have
high quality students; we rank in the top 25 among U. S. colleges and
universities in attracting National Merit Scholars. Our scientists and
engineers do excellent research, and they work closely with industry to
commercialize those results. Florida State ranks fourth this year among
all U.S. universities in royalties collected from its patents and
licenses, and first among individual public universities. In short,
Florida State University is an exciting and rapidly changing
institution.
Mr. Chairman, let me describe an outstanding project that FSU is
pursuing this year--The Institute on World War II and the Human
Experience. This Institute is working to amass and make available to
scholars, teachers, and the general public the letters, diaries,
memories, oral histories, photos, and other memorabilia of millions of
Americans who served under the colors or labored to equip those who
did. The largest collection in the country, that of the Army at
Carlisle Barracks, contains the donation of only 20,000 individuals;
namely, less than one percent of one percent of those who served, not
including defense workers. Unfortunately, much more of this
irreplaceable material is being lost, misplaced, or destroyed than is
being donated to institutions around the country. To protect the legacy
of the surviving 6.5 million veterans, it will take a determined effort
and the cooperation of all interested parties.
FSU, through its World War II Institute (supported by the
University's Archival and Oral History Programs), is endeavoring to
create a national and comprehensive archive that will permit the
writing of good social and cultural history of the late 1930s and the
1940s. The papers that it has already collected reflect the experiences
of men and women, of all branches of the service, and of every theater
of operations during World War II. In addition to preserving the
indispensable original documents necessary to write the history of this
long neglected area (namely, the contributions and experiences of the
ordinary American citizen during wartime), the WWII Institute is
preserving the human interest anecdotes that are the key to interesting
future generations of students in magnitude of the accomplishment of
their grandparents. A uniquely interesting feature of the FSU effort is
its collection of more than 3,000 student interviews (over a period of
30+ years) with their grandparents about the older generation's lives
during World War II.
For the purposes of a broader education in American values,
research into the true stories of ``GI Joe'' and ``Rosie the Riveter'',
and instruction in civic duty exercised under the most stressful of
circumstances, the Institute on World War II and the Human Experience
is dedicated to bringing together as much of these insights as
possible. Rather than the story of the unusual battle or the
extraordinary general, its holdings reflect what one vet described as
the life of the ``anonymous solider who won the war'' and another spoke
of as those written memories that prove ``I existed and made a
difference.'' The amazing volume of materials that vets have donated to
FSU fully justify its on-going plans to raise a suitable endowment to
run the WWII Institute and obtain archival space and resources for its
rapidly-expanding collection of memorabilia and memories on paper of
this wartime generation.
The Department of Florida Veterans of Foreign Wars and American
Legion support the Institute concept.
Funding will be requested from the National Historical Publications
and Records Commission of the National Archives at the $1 million level
for fiscal year 2000. Private resources will be added to this effort as
well.
Mr. Chairman, this is just one of many exciting activities going on
at Florida State University that will make important contributions to
solving some key problems and concerns our Nation faces today. Your
support would be appreciated, and, again, thank you for an opportunity
to present these views for your consideration.
______
Prepared Statement of Robert M. Tobias, President, National Treasury
Employees Union
Chairman Campbell, Senator Dorgan and distinguished members of the
subcommittee, my name is Robert M. Tobias and I am National President
of the National Treasury Employees Union (NTEU). Our union represents
160,000 dedicated federal employees in the Department of the Treasury,
and twelve other agencies. The actions of this subcommittee directly
affect their lives, livelihood and working conditions.
Our members who work for agencies under this subcommittee's
jurisdiction perform some of the toughest jobs in government. They
enforce the tax and trade laws Congress sets and they face down vicious
international drug cartels to stem the flow of illegal narcotics and
contraband into our country. The employees of these agencies continue
to confront rapidly increasing workloads with a static amount of
personnel and fiscal resources. I urge that the subcommittee make wise
choices to properly fund these agencies so that they can effectively
perform the mission Congress has given them.
internal revenue service
Last year, Congress passed the IRS Restructuring and Reform Act.
Congress made many changes and needed reforms as to how the IRS works
and how it can better serve the American taxpayer and its mission to
enforce the tax law. If Congress was serious when it passed the
Restructuring Act, it must now give IRS the resources necessary to make
that legislation meaningful. Too much work and effort went into that
legislation for it to be cavalierly ignored in the funding process.
The Administration has requested $8,105,000,000 for fiscal year
2000. This is only a mere $2,000,000 over the fiscal year 1999 budget.
NTEU asks that Congress fund the full amount requested by the
Administration in order to see that the restructuring effort is
successful. Any less would seriously undermine the agency's work. The
coming fiscal year will be the most critical one in determining if the
changes desired in the IRS will stick. NTEU's members at IRS are poised
to take on the challenges we have been given. But employee morale, so
essential to bringing to fruition the vision of a customer service-
oriented agency that meets its revenue collection mission, can be
destroyed by underfunding of agency resources.
Mr. Chairman, I need to mention one other matter that also has the
possibility of undermining the IRS employee morale. NTEU believes that
Section 1203 (b) of the IRS Restructuring and Reform Act regarding
termination of employment for certain matters of misconduct is a
sledgehammer approach with the potential for excessive unfairness to
employees. Our members refer to Sec. 1203 (b) as ``The Ten Deadly
Sins.'' Employees found to have committed one of the ``Ten Deadly
Sins'' must be terminated. Once misconduct has been found, a lesser
penalty cannot be substituted for the decision to remove regardless of
the circumstances. NTEU finds this particularly troubling as many of
the provisions are vague and untested. Under Section 1203 (b) every
taxpayer complaint must be investigated by the newly created Treasury
Inspector General for Tax Administration (TIGTA) and in many instances
employees are not allowed to have a union representative present as was
the case in the past. Employees are terrified that disgruntled
taxpayers will make false claims that they will not be able to
``unprove.'' I fear that their fear will have a negative impact on tax
collection efforts and I would ask this subcommittee to look into the
potential of reduced revenue collection due to fears of 1203 (b)
actions.
More than just adequate funding is needed at IRS. The funding must
be spent right. The purchase of improved technology is important, but
even more critical is the need for greater employee training to handle
increasing complex tax law and tax administration responsibilities. In
the previous two years alone, Congress brought about over 1,260 changes
in the tax code.
The new IRS will become more accessible to taxpayers by providing
24 hour/7 day a week telephone service, expanded walk-in service and
improved service to small businesses. But expanded service is not true
service unless these frontline workers have had the proper training and
receive the necessary technology to do their job. The Administration
proposal asks for $17,000,000 for technical training. NTEU is
pessimistic that this in an adequate amount and certainly believes any
less is courting disaster. I would note, Mr. Chairman, that in a recent
IRS customer satisfaction survey, the areas of lowest needs for
improvement was the general courtesy and professionalism of IRS
employees. The areas of highest need was the accessibility of the toll-
free line, expanded office hours at the walk-in centers and the
shortness of time employees had to spend with customers.
It is critically important that Congress fund the agency request of
$140,000,000 for IRS to restructure, reorganize and retrain the IRS
workforce. Realigning the IRS to four new operating divisions (wage and
investment, small business/self-employed, large and mid-sized
businesses, and non-profits) creates some temporary expenses for
implementation, but without this funding the entire Reorganization Act
can fall apart. This is not a huge sum considering the enormous changes
Congress has asked the IRS to make. We do recognize it is a substantial
increase from the $25,000,000 appropriated in fiscal year 1999.
However, one could not find a better example of being penny wise and
pound foolish than the failure to fund this request.
u.s. customs service
The Administration has requested a funding level of $1,930,000,000
and 17,389 FTEs for fiscal year 2000 for the U.S. Customs Service. The
importance of the work of this agency cannot be overemphasized. Customs
makes more drug seizures than every other federal agency combined,
keeping 1,300,000 pounds of illegal drugs out of this country. Its
employees processed 19,700,000 commercial entries (up 1,800,000 from
last year) and 460,000,000 personal entries (up by 13,100,000 from the
previous year). Despite the great successes of Customs employees in
these fields, the growth in legitimate trade as well as illegal
narcotic smuggling and currency laundering continues at incredible
rates, far outpacing federal resources. In addition, the agency is
underfunded in fulfilling its duty to stop the importation of products
made by forced child labor and of child pornography sent over the
Internet. Moreover, with the recent allied action in Serbia and the
often violent reaction of America's critics in parts of the world, NTEU
questions if the U.S. Customs Service's resources to combat terrorism
are sufficient.
NTEU strongly supports new funding for better employee training.
The Administration proposes a new position of Assistant Commissioner
for Training and Development. We believe this is a good start. NTEU
supports expansion of the new employee training program for cultural
awareness initiated last year at major airports. Customs inspectors
must greet every arrival not knowing if they are facing someone trying
to fill our children's veins with drugs or an elderly couple returning
from their first overseas trip after a lifetime of scrimping and
saving. It is a tough job and Congress should not be miserly in
providing funds to help these workers do their job right.
It is also important that Congress fund the Automated Commercial
Environment (ACE) system. NTEU recognizes that this is an expensive and
vital initiative. But the alternative is to rely on a 16 year old,
dated system that makes it impossible for employees to do their work
efficiently. The continued growth in trade, tourism and illegal
activities show no signs of abating. Congress cannot leave Customs
behind as the world moves into the third millennium.
Our Union has been working with Customs management in a
partnership. We believe that such a relationship is the most productive
for the employees, the managers and the mission of the Customs Service.
We appreciate Commissioner Kelly's statements that the extremely
successful Operation Brass Ring would not have been possible without
the labor-management partnership at Customs. NTEU members in the
Customs Service are committed to accomplishing both the drug
interdiction and trade facilitation missions of the agency, but they
need adequate resources to be successful.
The Administration's budget request proposed a number of user fees
to fund the Customs Service. NTEU has no particular philosophical
objection to any of these fees. We are very concerned, however, that
failure to either enact such fees or find money elsewhere would cause
extreme damage to the important work of Customs. Any cuts in funding
from the proposed budget threaten to cause real disruptions in
international trade and tourism, real barriers to drug seizures and
terrorism prevention, real deficiencies in fighting child labor and
money laundering. However the agency is funded, reductions in resources
are not acceptable.
federal employee pay
Finally, Mr. Chairman, let me address the issue of compensation for
federal employees. Federal pay is governed by the Federal Employees Pay
Comparability Act of l990 (FEPCA). Under FEPCA, federal employees
should receive an annual nationwide pay adjustment based on the
Employment Cost Index (ECI), plus a locality-based adjustment designed
to close the gap between federal and private sector salaries. No
federal pay raise since the law was signed have provided the full pay
raise called for under its formula. The pay gap, as measured by the
Bureau of Labor Statistics, is approximately 30 percent.
FEPCA authorizes the President to issue an alternative pay proposal
in the event of a ``national emergency or serious economic conditions
affecting the general welfare.'' Each year, the President has used this
loophole and declared an economic emergency--even in this year of
budget surpluses.
The federal budget is now balanced and the country has entered a
period of budget surpluses, in no small part due to the sacrifices in
federal pay and benefit cuts made by employees over the last decade. It
is time for FEPCA to be followed and for federal employees to be paid a
fair wage.
President Clinton has recommended 4.4 percent raises for military
and civilian federal employees in fiscal year 2000. Legislation
providing a 4.8 percent military pay raise in January of 2000, a second
substantial pay increase in July of 2000, and future military raises
one-half percent more than private sector increases measured by the ECI
is moving quickly through Congress.
Parity between federal and military pay has been the norm for
decades and federal civilian employees want parity with their military
counterparts again in fiscal year 2000. Uniformed members of the
military often work side by side with civilian federal employees. NTEU
asks that the Appropriations Committee support parity between uniformed
military and civilian pay in fiscal year 2000 and all efforts to close
the pay gap between federal and private sector pay.
I would like to thank the Subcommittee again for the opportunity
for our Union to present its views on the proposed budget for fiscal
year 2000. As we enter this exciting, new millennium, I know we can
count on Congress to stand with federal employees as we look to a
future of progress and social betterment for our nation.
______
Prepared Statement of the Council for Citizens Against Government Waste
The Food and Drug Administration's (FDA) consolidation project
reminds one of the movie ``Terminator.'' In it, the monster calmly
declares, ``I'll be back'' and sure enough, it never seems to die. It
keeps rearing its ugly head, recreating itself and attacking the hero
and heroine, no matter what weapons are used against it. Finally, good
wins over evil, and the monster dies the final death it should.
The FDA's monstrous consolidation project, formally known as the
Taj Mahal or Kessler's Kastle, is once again rearing its ugly self in
the President's fiscal year 2000 budget in the form of a $136,000,000
funding request. The plan is to build a consolidated campus at the
former White Oak Naval Surface Warfare Center in Montgomery County,
Maryland. It will provide space for the Office of the Commissioner, the
Center for Drug Evaluation and Research, the Center for Devices and
Radiological Health, and the Center for Biologics Evaluation and
Research. According to a General Services Administration (GSA) estimate
in November 1998, the total cost for this consolidation is expected to
be $484,813,000. It appears that GSA has a project and construction
manager, a public-private partner and an architect for the project.
Yet, it appears, no prospectus has been approved by Congress for this
boondoggle.
But this is nothing new. Apparently no prospectus has been approved
by Congress for the construction of an FDA facility to support a campus
for the Center for Food Safety and Applied Nutrition. Yet, construction
is underway. Congress unwisely appropriated $55,000,000 in the fiscal
year 1996 Treasury, Postal Service, and General Government
Appropriations Act. GSA figured this was a green light to proceed but,
according to Public Law 104-52 ``funds available to the General
Services Administration shall not (emphasis added) be available for
expenses in connection with any construction, repair, alteration, and
acquisition project for which a prospectus, if required by the Public
Buildings Act of 1959, as amended, has not been approved, except that
necessary funds may be expended for each project for required expenses
in connection with the development of a proposed prospectus.'' Is the
GSA breaking the law and misusing taxpayer dollars? That question must
be addressed by the subcommittee.
Without a prospectus, how is Congress supposed to know how much
these buildings will cost the taxpayer, what type of yearly
appropriations will be needed and, no doubt considering the
construction of most federal buildings, when and how much the project
will be over budget? Will there be another scenario like the Ronald
Reagan International Trade Building, originally expected to cost
$362,000,000, but ended up costing taxpayers $818,000,000? Or how about
the Patent and Trade Office building in Northern Virginia, estimated to
cost taxpayers $1,600,000,000 billion over the next 20 years in
construction and leasing?
For years, FDA has been requesting a consolidated campus. But the
one being proposed is not ``consolidated.'' There is one campus that is
supposed to be built in Maryland's Prince George's County, another
campus that is supposed to be built in Montgomery County, and there is
already a laboratory facility in Beltsville. It appears that FDA
consolidation is not really the issue. What is really happening is
pork-barrel spending and the creation of a lush, suburban office
complex, close to a golf course, for FDA bureaucrats.
Since the era of big government is supposed to be over, the Council
for Citizens Against Government Waste (CCAGW) questions why Congress is
even considering building a huge campus for the FDA. In an era of
downsizing, it would appear Congress' first priority should be how to
make FDA smaller and more effective--not providing expensive campuses
that would allow the FDA to grow and hire more bureaucrats so it can
find new areas to regulate, fill the Federal Register with more rules
and cause more mischief.
Most FDA employees are not running off to meetings across town so
spending millions of dollars to convenience a small percentage of FDA
employees seems a bit much. Building a sprawling campus will not
decrease drug and medical device approval times. Furthermore, the
Montgomery campus is not located near a metro station, which will force
most employees to drive to work. This seems to be in direct conflict
with the Clinton administration's efforts to protect the environment
and encourage citizens to take advantage of public transportation!
If FDA offices need to be improved, it would be more cost-effective
to spend money to remodel them or to move employees into existing
buildings rather than build a brand new facility. Modern technology
such as computers and telephone or video conferencing allow employees
to talk to one another in an efficient manner. More and more private
sector businesses are using these modes of communication, why not the
government? Furthermore, spending huge sums of federal dollars in
wealthy Maryland suburbs seems unfair. This process goes against the
Clinton Administration's desire of revitalizing the District of
Columbia's economy or encouraging the location of federal offices into
historic buildings located in cities.
It is time for once and for all for Congress to terminate this
expensive monster and fight on the side of the taxpayers.
______
Prepared Statement of the International Community Corrections
Association
On behalf of the International Community Corrections Association
(ICCA), we are pleased to submit this statement addressing the United
States Appropriations with respect to Treasury and General Government
operations for fiscal year 2000. The International Community
Corrections Association is a membership organization representing more
than fifteen hundred residential and non-residential programs and over
250 private agencies throughout the United States. Over the past twenty
five years, ICCA has provided information, training, and other services
to improve the quality of care for offenders and to promote effective
management practices.
ICCA's comments focus on federal drug control activities critical
to improving community corrections and intermediate sanctions. ICCA
urges strengthening ONDCP's resources for assuring that all appropriate
offenders receive drug treatment in every community.
Until recently, community corrections options have been a neglected
part of the National Drug Control Strategy. Community corrections
options include: pre-trial supervision, probation and parole, intensive
supervision, fines and day fines, restitution, forfeiture, impoundment,
ignition interlock, community services, victim-offender reconciliation,
home confinement, electronic monitoring, day reporting, halfway house
residential treatment, and other services for offenders. It is
estimated that at least sixty percent or more of all offenders are in
need of substance abuse services. Approximately twenty percent receive
services. At least two thirds of all offenders who need treatment do
not receive it. Recent research, cost analysis, and longitudinal
studies show that offenders who receive such transition programs as
education, substance abuse intervention, and job training are much less
likely to return to prison.
Many programs with components that improve community corrections,
such as the National Institute of Corrections and the Federal Bureau of
Prisons community corrections centers, are worthy of sustained support.
However, these programs have only a small impact on the thousands of
lives that are ravaged by substance abuse. The National Drug Control
Budget and the Office of National Drug Control Policy's Office of
Demand Reduction should receive increased funding to actively address
drug treatment for those under correctional supervision in the
community.
National Drug Control Budget
We support the ONDCP's priorities in the National Drug Control
Strategy. A range of community corrections programs such as Treatment
Accountability for Safer Communities (TASC), drug courts, the Federal
Bureau of Prisons Drug Treatment Program, Break-the-Cycle, and the need
for partnership between corrections and treatment professionals are
mentioned. However, an inadequate amount of funding is dedicated for
these programs and for ONDCP's efforts to coordinate this fragmented
field. The ONDCP budget should reflect greater emphasis on developing
treatment throughout the entire correctional system. At least a ten to
twenty percent increase in funding and oversight is necessary to impact
addicted offenders.
With respect to the President's budget, ICCA supports the request
for criminal justice treatment through the Break-the-Cycle programs.
The Break-the-Cycle programs should be expanded to many more
jurisdictions and there should be funding for graduated sanctions,
relapse prevention, and structured transitions back into the community.
At the present time, the Federal Bureau of Prisons (FBOP) supports
halfway houses where inmates serve the last few months of their
sentences, preparing for release into the community. During this time,
many offenders who are substance abusers receive treatment, seek
employment, and re-establish family and community ties. Over the past
several years the FBOP has increasingly supported improved drug
treatment in prison and quality treatment in halfway house beds in
federal community corrections centers. ONDCP should be encouraged to
seek similar improvements at the state correctional level and for the
District of Columbia.
Office of Justice Programs
In recent years, Congress has excluded community corrections from
many categorical and block grant programs in favor of other
initiatives. We support the administration's proposed Drug Intervention
Program for fiscal year 2000. However, A review of the Office of
Justice Programs budget request for fiscal year 2000 reveals that with
the exception of Break-the-Cycle and drug treatment and testing for
offenders, there is insufficient funding for drug treatment for
offenders in drug courts or other programs.
ICCA urges this Committee to encourage ONDCP to expand the
proportion of demand reduction to interdiction programs and to place a
higher priority on the expansion of intermediate sanctions. The federal
appropriation should provide resources and oversight to address the
critical shortage of treatment slots in community corrections.
In closing, we must emphasize that community corrections are most
often a public and private partnership. To provide adequate leadership,
ONDCP must include local, federal, and state governments as well as
private agencies in its efforts. Federal, state, and local governments
should be encouraged through the appropriations process to enter into
partnerships to plan, implement, and deliver effective community
corrections programs which include substance abuse treatment. The ONDCP
is well-positioned to provide the valuable assistance needed to carry
on this work.
______
Prepared Statement of the American Association of Retired Persons
AARP appreciates the opportunity to comment on appropriations next
year for the Tax Counseling for the Elderly (TCE) program. Over the
last two decades, TCE has helped millions of middle and low income
older persons accurately prepare their Federal, State or local tax
returns. The AARP Foundation--a separate 501(c)(3) corporation--
operates the largest nationwide TCE program under a cooperative
agreement with the Internal Revenue Service (IRS).
In authorizing TCE, Congress found that elderly taxpayers are often
confronted with confusing tax provisions, resulting in overpayments or
reliance upon expensive professional tax services. It also concluded
that the particular needs of the elderly population were not being
adequately addressed by the Internal Revenue Service. Under TCE,
volunteer tax counselors are specially trained regarding those tax
provisions which affect older Americans. IRS reports that many people
with incomes below a specific level needlessly file returns. This
results in unnecessary costs for all concerned. TCE helps to prevent
such occurrences.
Electronic filing and other alternative methods are now utilized
under TCE, all of which increase the accuracy of tax returns while
being cost effective to the IRS. Electronic tax filings--both business
and personal--have proliferated during this decade. IRS states that one
of its goals is to have 80 percent of all personal income taxes filed
electronically by 2007. The growing complexity of taxes makes this type
of filing desirable for TCE ``customers''. The program managed by AARP
has expanded its use of alternative filing methods. In 1997, they
accounted for roughly 28,000 of returns. One year later, they accounted
for 59,290 returns--an increase of 111 percent.
Funding for TCE has remained at the current $3,700,000 level since
fiscal year 1994. In light of continued program growth and expanded use
of electronic filing, AARP recommends a slight increase next year--from
$3,700,000 to $3,950,000. This modest amount will help address the
growing demand for assistance while meeting increased costs.
Tax Counseling for the Elderly enables the IRS to assist minorities
more effectively as well as disabled and hard-to-reach taxpayers. This
includes the rural elderly and shut-ins, especially those residing in
nursing homes or senior housing. Last year, assistance was offered in
25 languages including American sign language.
Approximately 31,000 volunteers are involved in providing TCE
services at more than 10,000 sites across the country. When the program
first began, it helped 846,000 taxpayers. Currently, over 1,600,000
people receive tax counseling annually. While we do not have complete
data for the current tax season, we expect TCE to continue to grow in
the future. There are several reasons why this is likely to happen.
First, the elderly population is increasing.
Second, the complexities of our tax code cause many aged taxpayers
particular difficulty in computing their tax obligations. Moreover,
many aged citizens are not aware of the changes made in our tax laws
over the past few years.
Third, the Internal Revenue Service has increasingly turned to TCE
programs for assistance, in large part because budgetary constraints
have stretched the ability of the agency to respond directly to
numerous public inquiries. Volunteers are contributing millions of
hours annually in direct public service to older taxpayers.
Older taxpayers with dependent children or grandchildren are also
counseled regarding their eligibility for the earned income tax credit
(EITC). Many older low income wage earners find themselves responsible
4 for providing care for their dependent children or grandchildren.
EITC is an important benefit for these individuals.
The TCE program will continue to participate in successful
campaigns such as the Reduce Unnecessary Filing initiative. Three-
fourths of the taxpayers notified by IRS regarding this effort last
year were 61 years of age or older. Many of these individuals
subsequently turned to the TCE program for clarification and advice.
Thank you again for this opportunity to comment on appropriations
next year for the Tax Counseling for the Elderly program.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
American Association of Retired Persons, prepared statement...... 300
Basham, W. Ralph, Director, Federal Law Enforcement Training
Center, Department of the Treasury............................. 253
Prepared statement........................................... 255
Bye, Raymond E., Interim Vice President, Research, Florida State
University, prepared statement................................. 295
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado........ 159
Questions submitted b26, 91, 139, 180, 207, 230, 264, 279, 283, 286
Council for Citizens Against Government Waste, prepared statement 298
Dalrymple, John, Chief Operations Officer, Internal Revenue
Service, Department of the Treasury............................ 1
Dorgan, Hon. Byron L., U.S. Senator from North Dakota:
Prepared statements......................................5, 71, 113
Questions submitted b34, 97, 145, 153, 155, 178, 231, 251, 266, 280
Statement of................................................. 2
Erdreich, Ben L., Chairman, Merit Systems Protection Board....... 291
International Community Corrections Association, prepared
statement...................................................... 299
Johnson, James E., Under Secretary of the Treasury (Enforcement),
Department of the Treasury..................................... 159
Prepared statement........................................... 166
Kelly, Raymond W., Commissioner, U.S. Customs Service, Department
of the Treasury................................................ 183
Prepared statement........................................... 186
Killefer, Nancy, Assistant Secretary, Office of the Secretary,
Department of the Treasury..................................... 111
Kyl, Hon. Jon, U.S. Senator from Arizona, questions submitted by. 32
Lachance, Janice R., Director, Office of Personnel Management,
prepared statement............................................. 284
LaFaver, John, Deputy Commissioner, Modernization, Internal
Revenue Service, Department of the Treasury.................... 1
Magaw, John W., Director, Bureau of Alcohol, Tobacco and
Firearms, Department of the Treasury........................... 213
Prepared statement........................................... 214
McCaffrey, General, Barry R., Director, Office of National Drug
Control Policy, Executive Office of the President.............. 53
Prepared statement........................................... 59
Mikulski, Hon. Barbara A., U.S. Senator from Maryland, questions
submitted by................................................... 47
Rossotti, Charles O., Commissioner, Internal Revenue Service,
Department of the Treasury..................................... 1
Prepared statement........................................... 9
Statement of................................................. 6
Rubin, Robert, Secretary, Office of the Secretary, Department of
the Treasury................................................... 111
Prepared statement........................................... 117
Shelby, Hon. Richard C., U.S. Senator from Alabama, questions
submitted by..................................................96, 288
Sloan, James F., Director, Financial Crimes Enforcement Network,
Department of the Treasury..................................... 269
Prepared statement........................................... 272
Stafford, Brian L., Director, U.S. Secret Service, Department of
the Treas-
ury............................................................ 239
Prepared statement........................................... 241
Tobias, Robert M., President, National Treasury Employees, Union,
prepared statement............................................. 296
Wenzel, Bob, Deputy Commissioner Operations, Internal Revenue
Service, Department of the Treasury............................ 1
SUBJECT INDEX
----------
DEPARTMENT OF THE TREASURY
Page
Counter-terrorism................................................ 177
Counterfeiting................................................... 178
Custom budget request............................................ 178
Firearms violence................................................ 175
Law enforcement bureau missions, highlights of................... 164
Office of Enforcement............................................ 163
Mission...................................................... 162
Policy guidelines............................................ 163
Strategic plan............................................... 162
Support...................................................... 163
Office of Professional Responsibility............................ 163
Passenger inspections............................................ 177
Review of the integrity issues................................... 174
Submitted questions.............................................. 178
Treasury/Justice funding......................................... 176
Bureau of Alcohol, Tobacco and Firearms
ATF:
Accomplishments.............................................. 214
Goals........................................................ 213
Brady law background checks...................................... 229
Cigarettes and alcohol, bootlegging of........................... 228
Cease fire....................................................... 227
Federal firearms licensee records, policy on..................... 227
Facility, proposed new headquarters.............................. 230
GREAT............................................................ 226
Indian law enforcement, participation from................... 228
Integrated violence reduction strategy........................... 225
Proposed initiatives............................................. 213
Submitted questions.............................................. 230
Federal Law Enforcement Training Center
Artesia construction............................................. 262
Counterterrorism training........................................ 263
Export site criteria............................................. 264
Five-year plan................................................... 263
Master plan and construction..................................... 254
Strategic plan................................................... 254
Students, projected number of.................................... 263
Submitted questions.............................................. 264
Training workload increase....................................... 253
Financial Crimes Enforcement Network
Direct support................................................... 269
Gateway.......................................................... 278
System....................................................... 270
Improved analysis and technology................................. 270
International..................................................277, 278
Efforts...................................................... 271
Money laundering, magnitude of................................... 271
Platform......................................................... 270
Regulatory....................................................... 276
Efforts: non-banks........................................... 271
Submitted questions.............................................. 279
Internal Revenue Service
Fiscal year 2000 budget request.................................. 7
IRS reorganization............................................... 16
Modernized organization.......................................... 6
Prime systems contract........................................... 7
Organization modernization, costs of............................. 14
Rural taxpayer assistance........................................ 17
Service and compliance........................................... 19
Tax-exempt:
Organizations, audits of..................................... 20
Sector....................................................... 21
Taxpayer advocate................................................ 14
Telephone assistance............................................. 20
Training......................................................8, 13, 15
Transfer:
Prices....................................................... 24
Pricing...................................................... 3, 25
Year 2000........................................................ 14
Office of the Secretary
Automation issues................................................ 116
Callable capital................................................. 123
Availability, deferral of.................................... 133
Rescission, financial market reaction to..................... 123
CDFI fund native American lending study, progress report on the.. 136
Customs:
Agents, cost of 500 new...................................... 132
Alternate approaches to funding sufficiency for.............. 128
Automation and fee funding................................... 122
Budget request............................................... 116
Funding increase, purpose of................................. 130
Technology, trade facilitation, and fee-funding.............. 127
Departmental offices:
Budget....................................................... 116
Justification for adding positions to........................ 135
Effect of higher pay raise on personnel retention................ 136
Emergency funding, fiscal year 2000 implications of fiscal year
1999........................................................... 121
Funding caps, government-wide competition among meritorious
proposals within............................................... 131
Gun violence..................................................... 120
International--offsets and outlays............................... 132
IRS modernization..............................................115, 125
No tax return filing system...................................... 124
Offset options to be explored, other............................. 134
Policy choices, law enforcement.................................. 129
Secret Service and ATF........................................... 116
Spending caps, funding priorities within......................... 137
Submitted questions.............................................. 139
Trade:
Deficit...................................................... 125
Facilitation and contraband interdiction, competing interests
of.......................................................114, 127
Treasury:
Budget request............................................... 114
Responsibility for border enforcement issues................. 130
Tax administration, inspector general for.................... 120
U.S. Mint: Additional committee questions........................ 155
U.S. Customs Service
Action plan...................................................... 184
Automated commercial:
Environment................................................186, 204
System....................................................... 202
Canine program................................................... 204
Forced child labor............................................... 206
Integrity........................................................ 184
International corporations....................................... 206
Money laundering technology...................................... 203
Operation:
Brass Ring................................................... 183
Casablanca.................................................184, 206
Cheshire Cat................................................. 184
Outbound technology.............................................. 184
Passenger processing:
Fee.......................................................... 202
Procedures................................................... 203
Personal search................................................185, 201
Seizure data...................................................183, 201
Submitted questions.............................................. 207
Trade and passenger processing................................... 183
Training......................................................... 185
Violent crime reduction trust fund............................... 203
U.S. Secret Service
Anti-counterfeit................................................. 249
Armored limousines.............................................248, 250
National special security events................................. 248
Presidential candidate/nominee protection........................ 247
Protective threats............................................... 249
Submitted questions.............................................. 251
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
Border issues.................................................... 85
Budget choices................................................... 84
Certification.................................................... 88
Conceptual organization.......................................... 55
Corporate involvement............................................ 76
Drug:
Abuse........................................................ 57
Addiction treatment.......................................... 79
Reduction programs........................................... 58
Treatment and parity......................................... 81
HIDTA............................................................71, 82
International responsibilities................................... 74
Juvenile drug courts............................................. 71
Logistical issues................................................ 87
Media campaign................................................... 78
ONDCP:
Budget....................................................... 56
Staffing..................................................... 87
Prison, treatment in............................................. 90
Submitted questions.............................................. 90
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