[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: INSPECTORS GENERAL VIEWS ON 
     NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS

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

                                HEARINGS

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                   VETERANS AFFAIRS AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 15, 2001

                               __________

                           Serial No. 107-51

                               __________

       Printed for the use of the Committee on Government Reform


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


77-881              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2002
____________________________________________________________________________
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
DOUG OSE, California                 JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JIM TURNER, Texas
JO ANN DAVIS, Virginia               THOMAS H. ALLEN, Maine
TODD RUSSELL PLATTS, Pennsylvania    JANICE D. SCHAKOWSKY, Illinois
DAVE WELDON, Florida                 WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   ------ ------
ADAM H. PUTNAM, Florida              ------ ------
C.L. ``BUTCH'' OTTER, Idaho                      ------
EDWARD L. SCHROCK, Virginia          BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

 Subcommittee on National Security, Veterans Affairs and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
ADAM H. PUTNAM, Florida              DENNIS J. KUCINICH, Ohio
BENJAMIN A. GILMAN, New York         BERNARD SANDERS, Vermont
ILEANA ROS-LEHTINEN, Florida         THOMAS H. ALLEN, Maine
JOHN M. McHUGH, New York             TOM LANTOS, California
STEVEN C. LaTOURETTE, Ohio           JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JANICE D. SCHAKOWSKY, Illinois
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
DAVE WELDON, Florida                 ------ ------
C.L. ``BUTCH'' OTTER, Idaho          ------ ------
EDWARD L. SCHROCK, Virginia

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
              Kristine McElroy, Professional Staff Member
                           Jason Chung, Clerk
                    David Rapallo, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearings held on March 15, 2001..................................1, 125
Statement of:
    Griffin, Richard J., Inspector General, Department of 
      Veterans Affairs; Roberta L. Gross, Inspector General, 
      National Aeronautics and Space Administration; and Richard 
      L. Skinner, Deputy Inspector General, Federal Emergency 
      Management Agency..........................................    66
    Lieberman, Robert J., Deputy Inspector General, Department of 
      Defense; and Gregory H. Friedman, Inspector General, 
      Department of Energy.......................................     4
    Sigmund, Ambassador Anne M., Acting Inspector General, 
      Department of State; Everett L. Mosley, Inspector General, 
      U.S. Agency for International Development; Charles D. 
      Smith, Inspector General, Peace Corps; and Dev Jagadesan, 
      Acting Inspector General, U.S. International Trade 
      Commission.................................................   126
Letters, statements, etc., submitted for the record by:
    Clay, Hon. Wm. Lacy, a Representative in Congress from the 
      State of Missouri, prepared statement of...................   228
    Friedman, Gregory H., Inspector General, Department of 
      Energy, prepared statement of..............................    33
    Griffin, Richard J., Inspector General, Department of 
      Veterans Affairs, prepared statement of....................    68
    Gross, Roberta L., Inspector General, National Aeronautics 
      and Space Administration, prepared statement of............    76
    Jagadesan, Dev, Acting Inspector General, U.S. International 
      Trade Commission, prepared statement of....................   197
    Lieberman, Robert J., Deputy Inspector General, Department of 
      Defense, prepared statement of.............................     6
    Mosley, Everett L., Inspector General, U.S. Agency for 
      International Development, prepared statement of...........   152
    Sanders, Hon. Bernard, a Representative in Congress from the 
      State of Vermont, prepared statement of....................   221
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     3
    Sigmund, Ambassador Anne M., Acting Inspector General, 
      Department of State, prepared statement of.................   129
    Skinner, Richard L., Deputy Inspector General, Federal 
      Emergency Management Agency, prepared statement of.........    97
    Smith, Charles D., Inspector General, Peace Corps, prepared 
      statement of...............................................   175

 
VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: INSPECTORS GENERAL VIEWS ON 
     NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS

                              ----------                              


                        THURSDAY, MARCH 15, 2001

                  House of Representatives,
Subcommittee on National Security, Veterans Affairs 
                       and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9 a.m., in 
room 2247, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Putnam, Weldon, Schrock, 
Otter, Kucinich, and Clay.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Vincent Chase, chief investigator; Nicholas Palarino, 
senior policy advisor; Kristine McElroy, Thomas Costa, and 
Robert Newman, professional staff members; Alex Moore, fellow; 
Jason M. Chung, clerk; David Rapallo, minority counsel; and 
Earley Green, minority assistant clerk.
    Mr. Shays. A quorum being present, the Subcommittee on 
National Security, Veterans Affairs and International 
Relations' hearing entitled, ``Vulnerabilities to Waste, Fraud, 
and Abuse: Inspectors General Views on National Security, 
International Relations, and Trade Programs'' is called to 
order.
    In testimony before the subcommittee last week, Comptroller 
General David Walker described serious management challenges 
and high-risk operations in national defense, veterans, and 
international relations programs.
    He called for sustained systemic improvements in efficiency 
and accountability in response to rapid technological advances, 
shifting security threats, changing demographics, and economic 
globalization.
    Today, the Inspectors General [IGs] from nine departments 
and agencies within our oversight jurisdiction will amplify and 
supplement that reform agenda from their very unique 
perspective as internal auditors and watchdogs. Despite the 
diversity of the programs and functions under discussion this 
morning, recurring themes ring through each IG's description of 
wasteful information technology acquisitions, antiquated human 
capital policies, sloppy financial controls, and the lack of 
performance-driven, results-oriented management.
    From the Marine Corps to the Peace Corps, from diplomacy to 
deep space, waste, fraud, abuse, and mismanagement threaten 
vital national missions and undermining public confidence in 
Government.
    Our mission is oversight, best defined as ``watchful and 
responsible care for Federal programs and resources.'' It is 
not an episodic game of ``gotcha,'' but the vigilant, 
methodical examination of agency goals and performance. In that 
endeavor we rely heavily on our oversight partners, the General 
Accounting Office [GAO], and the inspectors general to illumine 
general trends and specific problems in need of reform. We 
welcome their testimony today, are grateful for their service, 
and look forward to their continued help in the subcommittee's 
work.
    [The prepared statement of Hon. Christopher Shays follows:]

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    Mr. Shays. At this time I would recognize the vice chairman 
of the committee, Mr. Putnam.
    Mr. Putnam. Thank you, Mr. Chairman.
    I'm looking forward to hearing the testimony. I have no 
opening statement.
    Mr. Shays. Mr. Schrock.
    Mr. Schrock. No.
    Mr. Shays. Mr. Otter.
    Mr. Otter. No, Mr. Chairman.
    Mr. Shays. Thank you. So we are--Ed's ready and I'm ready 
and Mr. Putnam is ready.
    Mr. Lieberman, we are going to swear you in, and Mr. 
Friedman.
    Let me just announce who we have. We have Robert Lieberman, 
Deputy Inspector General, Department of Defense; and Mr. 
Gregory Friedman, Inspector General, Department of Energy.
    If you'd raise your right hands, please.
    [Witnesses sworn.]
    Mr. Shays. Thank you.
    It is great to have you here, Mr. Lieberman and Mr. 
Friedman, and we welcome your testimony.
    Obviously, you may need to go beyond 5 minutes. I'm not 
sure, given the number of Inspectors General, how many 
questions we are going to have, but it is important we put on 
the record your testimony, so--Mr. Lieberman.

 STATEMENTS OF ROBERT J. LIEBERMAN, DEPUTY INSPECTOR GENERAL, 
   DEPARTMENT OF DEFENSE; AND GREGORY H. FRIEDMAN, INSPECTOR 
                 GENERAL, DEPARTMENT OF ENERGY

    Mr. Lieberman. Thank you, Mr. Chairman.
    My written statement describes the top 10 internal 
management problem areas that we believe confront the 
Department of Defense. In brief, these are as follows.
    First, Defense has a very poor track record for developing 
or acquiring information systems; yet, it depends heavily on 
thousands of information systems to carry out almost all of its 
activities and spends well over $20 billion a year on those 
systems.
    Second, security is a major challenge to all users of 
network computer systems, and Defense is one of the largest 
such users in the world.
    Third, a range of other security concerns also need 
continued attention. For example, there is a backlog of several 
hundred thousand overdue security clearance investigations, a 
problem of which you are well aware. Additionally, the task of 
protecting military technology by revamping the export control 
regime remains unfinished national business.
    Fourth, Defense remains unable to compile auditable annual 
financial statements because its efforts to acquire systems 
that can meet new Federal accounting standards are incomplete. 
Even more fundamentally, Defense accounting systems are too 
complicated or error prone and do not provide reliable, timely, 
and useful information to managers for decisionmaking purposes.
    Fifth, acquisition reform remains very much a work in 
progress, with major challenges remaining in terms of remolding 
the weapons acquisition effort to match evolving national 
strategy, force structure, and available funding. At present, 
Defense has nearly 1,300 weapon acquisition projects worth $1.4 
trillion underway. Besides reaffirming what capabilities are 
actually needed and affordable, the Department needs to do more 
to improve purchasing practices across the board to control 
costs and speed up acquisition lead time, but without cutting 
corners on testing or on the quality of material being put into 
the hands of the war fighters.
    Sixth, the military health system faces enormous cost 
pressures, as do other public and private health care systems. 
It now costs about $20 billion annually.
    Seventh, the Department must find better alternatives to 
the cold war practice of relying on huge stocks of supplies and 
parts. Modern, Web-enabled business practices are being 
introduced, but Defense remains behind the private sector in 
terms of efficient supply chain management.
    Eighth, Defense must find ways to address major unfunded 
requirements in mundane infrastructure areas like facilities, 
where the backlog of real property maintenance, alone, is over 
$27 billion. But, at the same time, we must continue to trim 
unnecessary overhead and support costs. At least one more round 
of base closures is clearly needed.
    Ninth, there is widespread consensus that the readiness of 
the armed forces is suffering from the combined effects of the 
force structure not being designed for the type and frequency 
of missions being performed and shortcomings throughout the 
whole range of support activities needed to train, equip, 
maintain, and sustain the forces. Also, Defense leaders have 
warned candidly of a logistics death spiral caused by the 
rapidly increasing cost and frustration of maintaining old 
weapons systems, especially tactical aircraft.
    Tenth, the combined impacts of eliminating half a million 
civilian jobs without proportional workload decreases, the 
pending retirement of nearly half the remaining civilian work 
force, and severe competition for skilled workers have created 
significant staffing problems and dislocations throughout the 
Department. Outsourcing is a partial solution but brings its 
own oversight challenges.
    In summary, this has been a very broad-brush treatment of 
numerous and formidable management challenges already 
acknowledged by the Department in various ways. The Office of 
the Inspector General looks forward to assisting in every way 
that we can as the new administration and Congress take on 
these problems. I am looking forward to discussing them with 
you in further detail.
    That concludes my summary.
    Mr. Shays. I thank you, Mr. Lieberman. Your statement is 
quite in-depth. It will be available, obviously, to us and the 
staff.
    [The prepared statement of Mr. Lieberman follows:]

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    Mr. Shays. We need to deal with some housekeeping, Mr. 
Friedman, before we begin with you.
    I would ask unanimous consent that all members of the 
subcommittee be permitted to place an opening statement in the 
record and that the record remain open for 3 days for that 
purpose.
    Without objection, so ordered.
    I'd ask further unanimous consent that all witnesses be 
permitted to include their written statements in the record. 
Without objection, so ordered.
    Mr. Friedman, you have the floor.
    Mr. Friedman. Thank you, Mr. Chairman.
    Good morning to you, Mr. Chairman and members of the 
subcommittee. I am pleased to be here at your request to 
testify on the major performance and management challenges 
facing the Department of Energy. These challenges, which were 
reported in our November 2000, special report and actually are 
before you on the chart that you can see, are the startup of 
the National Nuclear Security Administration contract 
administration, energy supply and demand technology, 
environmental remediation, human capital, information 
technology, infrastructure, property controls and asset 
inventories, safety and health, and security.
    Progress in resolving these issues is dependent in large 
measure on whether the Department effectively implements the 
Government Performance and Results Act. The Office of Inspector 
General continues to focus attention on the Department's 
performance measures and results.
    I'd like to summarize my full statement, Mr. Chairman, by 
focusing on five of the challenge areas--startup of the NNSA, 
infrastructure, security, contract administration, and human 
capital.
    First, I'd like to address the startup of the NNSA. As with 
the establishment of any organization, the NNSA faces a number 
of significant challenges. These include logistical and 
organizational issues and human capital concerns. The NNSA also 
faces a number of major policy issues. For example, it is 
responsible, as you are well aware, for the stewardship of the 
Nation's nuclear stockpile and for reducing the threat of 
nuclear proliferation and terrorism.
    In addition, the NNSA will need to address many of the 
other departmental challenges that my office has identified. 
This is particularly true of the second challenge I will 
discuss, the nuclear weapons infrastructure.
    For several years the Office of Inspector General has 
reported that the condition of the Department's infrastructure 
is inadequate and is, in fact, deteriorating at an alarming 
pace. The nuclear weapons production infrastructure is a case 
in point. According to the Department's own estimates, it will 
need between $5 and $8 billion over the current budgeted amount 
to address the deteriorating infrastructure of the weapons 
production plants. The Department and NNSA must act swiftly to 
counter the effects of deferred maintenance and the loss of 
certain critical manufacturing capabilities.
    The third challenge I would like to discuss is security. 
Previous reviews by the Office of Inspector General, the 
Congress, and others have identified weaknesses in the 
Department's security program. For example, we have found that 
security ratings were changed without documented rationale, 
computers were not always sanitized prior to disposal, and 
weaknesses existed that increased the risk that unclassified 
computer networks could be damaged by malicious attack. Lapses 
in security were also frequently cited during the debate 
leading to the NNSA's creation.
    Contract administration also continues to be a major 
challenge to the Department. In short, we have concluded that 
many of the Department's contract reform goals have yet to be 
achieved. For example, while performance incentives have been 
included in most Department contracts, Office of Inspector 
General reviews have disclosed systemic weaknesses in the way 
these incentives have been administered.
    Further, while contractor fees have risen dramatically, 
there has not been a commensurate increase in the financial 
risk and accountability of the Department's major contractors.
    An integral part of contract administration is project 
management. My office has issued many reports that have been 
critical of the Department's planning, justification, and 
management of its major projects. Cost overruns, schedule 
delays, and other management problems have plagued Department 
projects, including the $47 billion tank waste project at 
Hanford and the National Ignition Facility at the Lawrence 
Livermore National Laboratory, which is now projected to cost 
in excess of $3.5 billion.
    Finally, the Department faces a number of human capital 
issues. Since 1995, the Department has reduced Federal staff 
significantly through reductions in force, buy-outs, attrition, 
and a hiring moratorium. The staff eligible for retirement 
today has nearly doubled in the last 5 years. By the year 2005, 
34 percent of today's Federal staff will be eligible to retire, 
and the Department's major contractors--specifically those 
dealing in the nuclear arena and the Defense complex--are 
experiencing similar and in some cases more severe losses. Many 
of those retiring take with them technical and scientific 
knowledge that is not easily replaced.
    The Department and NNSA must take aggressive action to 
ensure that it maintains the technical, scientific, and 
management resources it needs to meet its critical mission 
requirements.
    I want to inform you the Department has made progress in 
some areas. These include integrating research and development 
activities, commencing operations at the waste isolation pilot 
plant, and improving financial reporting of environmental 
liabilities. However, a great deal more needs to be done. In 
this regard, Secretary Abraham and General Gordon have asked me 
to provide regular briefings on the progress made in addressing 
the challenge areas.
    Mr. Chairman and members of the subcommittee, this 
concludes my statement. I would be pleased to answer any 
questions that you may have.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Friedman follows:]

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    Mr. Shays. Let me first welcome Mr. Kucinich. I don't know 
if you have any opening statement you want to make?
    Mr. Kucinich. Just include it in the record.
    Mr. Shays. OK. We will include it in the record, and I'll 
start us out.
    Basically, let me just start with you, Mr. Friedman. I'd 
like to know--and I am going to ask the same question of you, 
Mr. Lieberman, as well. I'd like--you both have been very 
helpful in outlining some key issues. I'd like to know the most 
serious problem that faces the Department. I'd like to know the 
least-serious on the list that you have given in your full 
statement. I also ultimately would like to know--and I'll jump 
back to them and remind you when I'm asking you--the easiest to 
address, the hardest to address, and the one that has been 
there the longest.
    What's the most serious problem, Mr. Friedman, that you 
think needs to be addressed?
    Mr. Friedman. Well, that's a difficult question, Mr. 
Chairman, but I think human capital may well be the most 
difficult problem. You can't address all the others unless you 
have the right people in place to take the appropriate 
corrective actions and to move forward into the future, so my 
quick answer to you would be that human capital is the most 
serious problem.
    Mr. Shays. And you've given us 10 in your full statement of 
problems to deal with. What is the least-serious problem of 
these?
    Mr. Friedman. I suppose property controls and asset 
inventories.
    Mr. Shays. What would be the easiest to address?
    Mr. Friedman. Well, I think, actually, all of them are 
significant challenges or they wouldn't be on the list, but I 
think the easiest to address are the ones that can be addressed 
in the shortest period of time--probably deal with contract 
administration.
    Mr. Shays. In other words, the one if they just put their 
mind to it they could get it done.
    Mr. Friedman. I think contract administration could be 
addressed quite easily.
    Mr. Shays. And it could be done in the shortest period of 
time?
    Mr. Friedman. That's correct.
    Mr. Shays. OK. And, again, you said the hardest to address 
is what?
    Mr. Friedman. Well, the hardest--let me state it 
differently. I think the most significant challenge in this 
certain in part falls within the purview of this committee--
deals with the environmental remediation of the former weapons 
sites.
    As you may be aware, Mr. Chairman, right now the unfunded 
liability in the Department's books for environmental cleanup 
is $230 billion, and that is to be a project the likes of which 
have never been seen in the free world or in any part of the 
world, for that matter.
    I think over time--it is a 60 to 70-year project, so that 
is going to be the longest-term project that we face.
    Mr. Shays. How many years?
    Mr. Friedman. 60 to 70.
    Mr. Shays. Why that long?
    Mr. Friedman. Well, these are some of the most 
technologically challenging sites to clean up. The stuff is 
very hazardous. It is very difficult. The technology is not 
always there. It is a major project, and funding is a function, 
as well. I mean, we couldn't spend that kind of money----
    Mr. Shays. Are these dangerous sites?
    Mr. Friedman. Absolutely yes.
    Mr. Shays. I'm going to do something here. I want counsel 
to explain to the committee what our jurisdiction is as it 
relates, because we're hearing basically overall--you know, our 
jurisdiction basically is what, as it relates to Department of 
Energy?
    The Counsel. The Department of Energy is military nuclear 
programs and the civilian support offices that engage with the 
nuclear safety--military security programs.
    Mr. Shays. In other words----
    The Counsel. And the laboratories.
    Mr. Shays. Anything else?
    The Counsel. That's it.
    Mr. Shays. OK. The bottom line for us, we asked for that 
jurisdiction given national defense concerns and so on, and our 
concerns with the fact that we oversee the intelligence 
community and we oversee terrorism.
    You said the problem has been there for years. If we went 
back 20 years, we would have seen this as a problem if 
Inspectors General had written reports on it?
    Mr. Friedman. Well, the environmental remediation problem--
--
    Mr. Shays. Will go out in years, but what----
    Mr. Friedman. But it basically started 60 years ago with 
the Manhattan project.
    Mr. Shays. Fair enough.
    I'd like to ask the same round of questions to Mr. 
Lieberman, and then I'm going to yield to Mr. Kucinich--not 
yield, give him the floor.
    Most serious problem facing DOD? You understand why I let 
you go second, don't you? It is a little bigger here.
    Mr. Lieberman. I do, Mr. Chairman.
    Mr. Shays. So I gave you plenty of time.
    Mr. Lieberman. All I can say is----
    Mr. Shays. Don't look so surprised. [Laughter.]
    Mr. Lieberman. I hope the rest of your questions aren't as 
tough as the first one.
    Mr. Shays. OK. We can take--which one has been around the 
longest? We can go backward?
    Mr. Lieberman. I believe that the inability to provide good 
financial information to managers has been around for at least 
25 years.
    Mr. Shays. It's such a mammoth Department. It has just been 
hard to get a handle on information systems, financial?
    Mr. Lieberman. Yes. And I think there was a trend that goes 
very far back--as a matter of fact, probably 25 years is 
conservative. And that trend was that financial reporting was 
considered a control mechanism strictly to make sure that 
people did on the spend more money than they were authorized to 
spend.
    Mr. Shays. OK.
    Mr. Lieberman. And that was fine. That's a legitimate goal 
for financial managers. Unfortunately, the idea of capturing 
costs and providing timely financial management information for 
managers to use in decisionmaking, in comparing the costs of 
different alternative ways of doing business, got lost many, 
many years ago and Defense spent millions of dollars designing 
several hundred financial reporting systems back in the 1960's 
and 1970's, none of which provided that kind of cost 
information.
    Mr. Shays. OK. Let me ask you, what is the hardest or 
easiest problem to address--again, whichever one you want to do 
first.
    Mr. Lieberman. The easiest is probably the infrastructure 
problem, simply because that is a money problem.
    Mr. Shays. OK.
    Mr. Lieberman. And we know how to do base closures. All we 
need is authorization to do them.
    Mr. Shays. OK. And the hardest?
    Mr. Lieberman. The hardest--I think is a very close race. I 
do think that the financial management situation is not going 
to be fixed unless a completely different mindset takes hold 
within the Department, and that may well happen with the new 
administration that is looking very hard at this particular 
question.
    Mr. Shays. What would be the other one that is close first?
    Mr. Lieberman. The Department's inability to acquire useful 
information systems, no matter what their purpose is.
    Mr. Shays. OK. And the most serious problem facing the 
Department?
    Mr. Lieberman. I think the decline in military readiness is 
the most urgent problem.
    Mr. Shays. And the least-serious problem? I mean, not that 
it is not a problem, but----
    Mr. Lieberman. Well, I think the infrastructure situation 
is bad. It gets worse every year. But it is tolerable.
    Mr. Shays. OK.
    Mr. Lieberman. It is painful and it is a morale depressor, 
but you can live with that.
    Mr. Shays. Thank you.
    Let me do this. Let me recognize Mr. Kucinich. I do want to 
welcome Butch Otter from Idaho. Nice to have you here, and 
we'll get to your questions as soon as Mr. Kucinich is 
finished.
    Mr. Otter. Thank you.
    Mr. Kucinich. Thank you very much.
    Good morning, Mr. Chairman. Good morning to our witnesses.
    One of the concerns that I have in reviewing areas that 
relate to NNSA is the area of Presidential policy directives. 
Mr. Friedman, are you charged with oversight to see if 
Presidential policy directives are, in fact, being followed 
with respect to the proliferation or non-proliferation 
initiatives?
    Mr. Friedman. Well, that is within our area of interest, 
yes.
    Mr. Kucinich. And are you familiar with Presidential 
Decision Directive 60?
    Mr. Friedman. I am not.
    Mr. Kucinich. You're not? I'm very interested in whether or 
not that policy directive is being followed, and also the work 
that your office does with respect to monitoring the stability 
of systems which puts thousands of nuclear missiles on alert.
    Now, do you--what kind of control do you have in a 
situation where we have intercontinental ballistic missiles 
that are on a ready alert status? What is your work in 
connection with that?
    Mr. Friedman. Well, to the extent the Department of Energy 
is involved, Mr. Kucinich, and as a role in implementation or 
execution of a particular Presidential decision directive, it 
would not be unusual for the Inspectors General to take a look 
to review the implementation and see what steps are being 
taken. I'm just not familiar with PDD 60.
    To give you one example, we recently completed a review of 
Presidential Decision Directive 63, which deals with the 
critical infrastructure. So it is not unusual to do this; I'm 
just not familiar with No. 60.
    Mr. Kucinich. OK.
    Mr. Friedman. And I couldn't obviously speak to the role of 
the Department of Energy in implementation of that particular 
PDD.
    Mr. Kucinich. But you can speak to oversight in connection 
with NNSA?
    Mr. Friedman. Yes.
    Mr. Kucinich. In your testimony, I believe you mentioned 
that among the major policy issues which confront NNSA is 
reducing the threat of nuclear proliferation and nuclear 
terrorism by helping to upgrade physical protection and 
material control and accounting system in nuclear facilities in 
the states of the former Soviet Union.
    Mr. Friedman. Right.
    Mr. Kucinich. Do you have teams which go to those states on 
a regular basis and are involved in inspection?
    Mr. Friedman. Well, the last review we did of that program 
was about a 1\1/2\ or 2 years ago, and we found weaknesses in 
the way the program was being implemented in the fact that all 
of the money that was being appropriated by the Congress was 
not achieving what we thought were the goals of the Congress 
when the money was appropriated.
    Mr. Kucinich. Are the weaknesses in effect oversight 
weaknesses, or are they weaknesses in the way the programs are 
being managed? Are they weaknesses in the sense of we're not 
seeing an effective diminishment of the role of nuclear weapons 
in these former states?
    Mr. Friedman. No. If I recall correctly, really there were 
three or four components. One was that the government at the 
time was siphoning off tax money from the money that was being 
appropriated, which reduced the amount of money that was 
actually achieving the goal for which the program was 
established.
    Second, the U.S. Government Federal oversight of the work 
that was being done, the management of the work that was being 
done was inadequate.
    But we thought there was progress being made in a general 
sense.
    Mr. Kucinich. So do you then, in connection with the work 
in the former Soviet states, help to keep track of the weapons, 
themselves?
    Mr. Friedman. We do not. No. To the extent that the U.S. 
Government and the Department of Energy is involved in that 
process, we would review the actions from time to time of----
    Mr. Kucinich. Storage of such materials?
    Mr. Friedman. It includes storage. The basic program was 
designed to ensure that nuclear devices that were in those 
states were protected from terrorist or rogue states obtaining 
them as an anti-terrorism move around the world.
    Mr. Kucinich. Now, does your directive include chemical and 
biological weapons?
    Mr. Friedman. It does.
    Mr. Kucinich. Do you have anything to say about that? I 
guess that could wait until the next----
    Mr. Shays. You can continue.
    Mr. Kucinich. OK. I had a discussion with the former 
Russian premier, Serge Kurienko, recently. He is now Governor 
of one of the largest areas in the old Soviet Union, in Russia. 
He was expressing to me concern about the condition of 40,000 
tons of chemical weapons which exist in Russia which present, 
as he called it, the potential for a world ecological disaster. 
He has asked for attention to be paid to this, and I wondered 
if, you know--and since Russia has these large stockpiles of 
chemical and biological weapons materials, what is being done 
with respect to the policy of the United States in trying to 
re-engage Russia and assist them in an effective disposition of 
these chemical weapons?
    Mr. Friedman. Mr. Kucinich, I misunderstood your question 
and I didn't answer appropriately, so let me clarify what I 
intended to say.
    The Department of Energy, to the best of my knowledge, does 
not have responsibility for overseeing or participating with 
the Russian program.
    Mr. Kucinich. OK.
    Mr. Friedman. What we do, though, through our Defense labs 
and other labs, is undertake for the Department of Defense and 
others a comprehensive program to work with biological select 
agents, including anthrax and others, to find ways to detect it 
before it is used and to prevent its use and to treat soldiers 
in the field, or whatever the case might be, in the event it is 
used.
    Mr. Kucinich. OK.
    Mr. Friedman. And we have looked at that within the last 2 
years.
    Mr. Kucinich. OK. I will save that for another hearing, 
then.
    Mr. Lieberman, we've heard some of the record associated 
with the Department of Defense's financial management, much of 
it put forth by your own Department, and last week we heard Mr. 
Walker of the GAO give the Department of Defense a failing 
grade in terms of financial management and indicated that 
they're probably worse than any other agency in this regard.
    What is your assessment of those--of the financial 
management and inventory practices?
    Mr. Lieberman. I believe there are profound problems in the 
financial management area, not only with financial reporting 
but, as I said, with providing useful decisionmaking 
information, which includes inventory information, to those 
people who need to manage our supply chain.
    Mr. Kucinich. One of the things that Mr. Walker said that I 
thought was noteworthy was he said that the Department of 
Defense's strategic plan ``is not tied to desired mission 
outcomes.'' Would you agree with that?
    Mr. Lieberman. We've not really looked at that. I am aware 
of a very extensive set of performance measures and goals that 
Defense has put into place in response to the Results Act. GAO 
has criticized that list of measures for the last few years, 
but the IG has really not been involved in it.
    Mr. Kucinich. OK. You also indicated that the Department of 
Defense ``Employs overly optimistic planning assumptions in its 
budget formulation; thus, all too frequently has too many 
programs for the available dollars, and tough decisions in 
tradeoffs between needs and wants are avoided.''
    Would you agree or disagree with that statement?
    Mr. Lieberman. Well, it is a sweeping statement, but I 
think I would basically agree that there are too many programs 
chasing too few dollars.
    Mr. Kucinich. Right. Well, what he told us then is that the 
Pentagon--and these are points that were made--not only doesn't 
fully know what it buys with its money, and where those 
purchases are, but also assumes it has as much money to spend 
on whatever it wants without considering what it needs to 
fulfill its mission.
    That was, in essence, what I got out of that hearing, Mr. 
Chairman.
    I just wondered if you would have any comment on that 
possibility.
    Mr. Lieberman. I don't quite understand the last part of 
that formulation. Did he say that Defense assumes it has enough 
money to do anything?
    Mr. Kucinich. Well, I'm making an interpretation that it 
has as much money to spend on whatever it wants. That is kind 
of an assumption. There seems to be very little control there 
in terms of standard budgeting practices, and their wants seem 
to propel far ahead of what the needs of any particular 
department might be.
    Mr. Lieberman. Well, I wouldn't go quite that far. Defense 
does have a very sophisticated, complicated budget formulation 
system, and the Congress intensively reviews proposed Defense 
budgets, at least as intensively as it reviews any other 
department's proposed budgets annually.
    Projecting Defense requirements is not an easy business, 
and it is true that the military services are constantly 
pushing for more-advanced technology. I don't think it--it's 
certainly not fair to say that Defense assumes that it is 
always going to get enough money to catch up with whatever 
requirements it postulates. On the contrary, a lot of the 
inefficient behavior I think we see in program execution is 
caused by chronic under-funding--that is, too many programs 
chasing too few dollars--and therefore you get a lot of 
programs being run, for instance, at inefficient production 
rates because they are not fully funded.
    I think that the ongoing review of the basic assumptions 
about what we need to buy is going to straighten out a lot of 
the current imbalance here between stated requirements and what 
is actually program.
    Mr. Shays. Thank you. Thank you, Mr. Chairman.
    If we have another round, I'd like to get back into some of 
these accounting questions. Thank you.
    Mr. Shays. OK. Thank you.
    Butch Otter, you have the floor.
    Mr. Otter. Thank you, Mr. Chairman.
    I apologize for not being here for both of your formal 
remarks, but I have had a chance to scan them. I just have a 
couple of questions, and I think most of them are relative to 
national policy rather than any specifics. But it concerns me, 
reflecting back on Mr. Friedman--you mentioned the Manhattan 
project. One of the greatest failures of an otherwise 
successful program, the Manhattan project, was that, while 
everybody was enthusiastic and very aggressively working to 
make sure that Manhattan project worked and was successful, 
nobody was working on the circumstances of what would happen if 
it was successful, and so consequently we ended up in a cold 
war for a long, long time because we failed to control and 
failed to understand the aspects and the costs of stand-down of 
that same project.
    It seems to me that we really lack any kind of 
institutional memory and institutional discipline for some of 
that, because I take a look at some of the nuclear power plants 
that were begun and built, never operated, shut down, cost a 
lot of money, still costing a lot of money. I know up in my 
country in the Pacific Northwest we built one that never got 
started. It never started up and still had billions of dollars 
price tag on it.
    When we put the economy at risk, I think we risk the 
national security.
    I'm wondering if we are developing, along with the aspects 
of--it seems now we have a very enthusiastic time to develop a 
national energy policy and what it means to the economy, what 
it means to national security, what it means to our lifestyle 
and our values system.
    Are we also in the process of that, Mr. Friedman, in 
developing a national energy policy? Do we have the capacity to 
also measure the stand-down costs and the costs of what if our 
national energy policy works, No. 1?
    And, No. 2, when we have these problems of shutting these 
facilities down and scrapping them, it seems like the largest 
and long-term cost of cleaning them up, whether it be through 
EPA's Superfund sites or stockpiling of strategic and dangerous 
materials, what happens to those costs, as well?
    I know that is kind of a general cornucopia of problems, 
but I'd like you to speak to the national policy of standing 
down our strategic energy requirements some day.
    Mr. Friedman. Well, I want to give you as precise a 
response as I possibly can. Our responsibility in terms of the 
Department's responsibility, I should say--and I'm not here 
speaking for the Department, per se--the Department's 
responsibility with regard to the commercial nuclear plants--
and I assume that's what you are referring to, at least in 
part--clearly is to ultimately accept the waste from those 
plants at Yucca Mountain in Nevada or at some other site 
hopefully at some point in the future.
    With regard to the--my area of expertise, if you will, 
deals more directly with the nuclear facilities that were 
created as part of the weapons program and the stand-down 
associated with those plants. But I do have some personal views 
about the overall process. And I hope I am being responsive to 
your question.
    Mr. Otter. Yes, you are.
    Mr. Friedman. Right now, as I understand the numbers, we 
depend upon nuclear energy for about 20 percent of our 
electricity needs. That number may be not quite right, but it 
is pretty darned close. And those plants clearly are--there is 
a trend that they are going offline because of age.
    One of the issues that I understand that is being addressed 
under the task force that the Vice President is heading is how 
do we fill the gap, the void that exists when those plants do, 
in fact--when they are, in fact, shut down and we have a 
shortage of electricity as a result of that power plant not 
being in existence.
    So I think that, as I understand the charge from the 
President to the Vice President and what the Vice President has 
done with regard to the Department of Energy is to address 
broadly all of the issues that exist, both in terms of fossil 
fuels and nuclear and the rest, and what will happen as we move 
forward into the future.
    I don't know if that is responsive to your question. I hope 
so.
    Mr. Otter. I think that is responsive to my question, Mr. 
Friedman.
    I guess I have one followup right now. Is there any way--
scrap that. How many production plants, nuclear power plants, 
do we have shut down today, not as a result of antiquated 
technology and exhausting their productive capacity, but for 
any other reason other than the plant is no longer able to 
produce energy? How many megawatts of electricity?
    Mr. Friedman. On the commercial side?
    Mr. Otter. Yes.
    Mr. Friedman. I really don't have the answer to that.
    Mr. Otter. Who would have the answer to that? Is that an 
important answer for you to know?
    Mr. Friedman. Oh, absolutely. Well, it's an important 
answer in the interest of public policy. It's an important 
question to ask and it's an important answer to know. That 
information is absolutely critical, and should be critical, I 
think, to the Vice President's task force.
    Mr. Otter. Wouldn't you agree that the general comfort of 
the population is also in the interest of national security, 
and the comfort that they would have with a potential energy 
supply, or lack of same?
    Mr. Friedman. Well, absolutely.
    Let me give you one statistic that is not on the nuclear 
side. Our daily consumption of petroleum in this country is in 
the neighborhood of 17 million barrels a day, or 18 million 
barrels a day. And worldwide demand is about 70 million to 71 
million barrels a day.
    So you can see that, in terms of the security of this 
country, the financial strength of the country, the way of 
living in this Nation, energy policy is absolutely critical in 
terms of the disproportionate amount of worldwide supply that 
we utilize in this country to sustain our economic strength and 
our ability, if you will.
    Mr. Otter. OK.
    Mr. Lieberman, the same question relative to the stand-down 
aspects. Have we got somebody working on what happens if our 
national defense policy does work?
    You know, you talked about shutting down some of the 
defense plants, whether it's a base or whatever. Do we have a 
life expectancy? You know, in the private sector--I come from 
the private sector--when I build a potato french fry plant that 
produced 350 million pounds a year, I knew exactly how long the 
life of that plant was going to last. I knew exactly at what 
point I've got to quit adding equipment and just shut it down 
and order the tombstone. Do you do the same thing with our 
national defense plants?
    Mr. Lieberman. As far as industrial facilities are 
concerned, most of that is private sector now. The old arsenal 
system was basically dismantled after World War II. There are 
still a few naval shipyards and Defense facilities that do 
maintenance and things like that.
    I would say that on the average, nowadays the physical 
plant, age-wise, is far beyond whatever projections would have 
been made originally. It's very over-aged. The average of any 
building on a DOD base, whether it be a barracks, a mess hall 
or whatever, is over 40 years. Many of these facilities are 
antiquated. And there really is no systematic replacement 
policy, such as you would find in the private sector.
    Mr. Otter. Should there be?
    Mr. Lieberman. Yes, I think so, but that is a concept that 
is very hard to implement in practice.
    Mr. Otter. Mr. Chairman, is my time up? No?
    Let me just ask you one question. Relative to some stuff 
that you said before, that you've got too many project demands 
and, I understand, many of those are congressionally inspired, 
many of those are beyond your scope. I'm the new kid on the 
block here, but I still understand that.
    If, indeed, you had a life expectancy of every program that 
you put into place, and the cost of taking it out of 
production, private sector today, many antiquated plants, any 
energy inefficient, people inefficient, regulation 
inefficient--are kept going because they have with them a 
historical right to produce. And to open a new plant, you may 
not get the permits to produce.
    So is the Department of Defense in that same trap, between 
shutting down an old project and getting permission to start a 
new one, and so subsequently we run terribly inefficient, cost-
ineffective operations?
    Mr. Lieberman. Generally, yes. If you look at the base 
structure, the Department's own studies say that we have, like, 
23 percent excess capacity. The same thing holds true for 
industrial capacity.
    In the aerospace industry or whatever, we are paying 
contractors their overhead costs for maintaining facilities 
that we don't really need at the present time.
    But it's very difficult to shut things down. To shut a 
base, we need to have special authorization from Congress, the 
base closure process, which is very painful. The department has 
put forward a request with this year's budget for another round 
of base closures. And certainly, there is not universal 
consensus that's going to happen, because nobody wants their 
base closed in their state or their district. Everybody says, 
``Yes, you should reduce the number of bases, but don't close 
mine.'' So, it is difficult.
    And also, when we field weapons systems, if we're talking 
about capital equipment, who would have ever thought the B-52s 
would still be flying today? I read an article just the other 
day about mechanics working on Navy F-14 Tomcat fighters that 
are 29 years old. They're older than the mechanics. Originally 
when that system was fielded, no one ever imagined that those 
airframes would be called upon to still be in service after 
they're, say, 20 years old.
    But that's the name of the game nowadays is to deal with 
systems and facilities that are clearly over-aged and very 
maintenance intensive, very costly to operate. That F-14 
requires 40 hours of maintenance team work for each hour that 
it flies, and it eats up spare parts at a horrendous rate.
    Mr. Shays. Let me use that to go to my question.
    Your statement on page 6, Mr. Lieberman, you say, ``Despite 
some successes and continued promises from ongoing reforms, the 
business of creating and sustaining the world's most powerful 
military force remains expensive and vulnerable to fraud, 
waste, and mismanagement.'' And this is the point I'm 
interested in--``in fiscal year 2000, the DOD bought about $150 
billion in goods and services, with $15 million purchasing 
actions.'' Excuse me, this is the part--``The Department 
currently is attempting to stretch its acquisition budget 
across 71 major programs, at an estimated cost of $782 billion, 
and 1,223 smaller programs worth $632 billion.'' That adds up 
to $1.4 trillion. Over what period of time is that looking to 
be spent?
    Mr. Lieberman. In some cases that would stretch out 8, 10 
years into the future for a large system with a very long 
production life.
    Mr. Shays. Are we over budget, based on that number? In 
other words, given the budget we have today, I mean, is that 
just--is that like a balloon that just doesn't have the money 
to pay for it?
    Mr. Lieberman. Those are costs that may or may not 
ultimately get funded, depending on how much money Congress 
appropriates for procurement in the future.
    Mr. Shays. Well, what I'm going to ask you to do, I want to 
know how over-subscribed are we, you know, using this last 
sentence with the 71 programs and 1,223 programs. My 
understanding is that we are billions and billions of dollars 
over-subscribed, given that--you know, if you were just to add 
the cost of living to the programs for the budget that we would 
add each year, if we did that for the next 10 years how much 
more would we need to pay this? We have about $60 billion a 
year, I think what we do. So that's $600 billion over 10 years. 
And yet you're saying we have $1.4 trillion. Is that correct?
    Mr. Lieberman. Well, $60 billion is increasing. That's in 
future years. Even in your terms of future years it would be 
more than that.
    Mr. Shays. So if you do $60 billion and you add cost of 
living each year--I mean, in other words, the budget basically 
rises by the--should, ideally, unless we're just looking to 
expand.
    Mr. Lieberman. Well, but, Mr. Chairman, there have been 
real increases above inflation in----
    Mr. Shays. Well, I know there have.
    Mr. Lieberman [continuing]. The procurement budgets for----
    Mr. Shays. And we'll go bankrupt if that continues. I mean, 
the fact that it has happened can't keep the--I mean, I could 
make the same argument and say we haven't had proper accounting 
in the Department of Defense for years, so that doesn't mean I 
want to have it continue. I don't want to see us keep adding 
well beyond the cost of living every year to any budget, as a 
general rule.
    But you have answered my question. If I took and factored 
in a cost of living to $60 billion, you're telling me that in 
the next 10 years we'd need $1.4 trillion to do all these 
programs.
    Let me ask you, is that a 10-year? Over 10 years is that 
accurate?
    Mr. Lieberman. Ten years is just a guess.
    Mr. Shays. OK.
    Mr. Lieberman. I would imagine a few----
    Mr. Shays. Let's do this.
    Mr. Lieberman [continuing]. Of those programs----
    Mr. Shays. I don't need the answer today, but that's a 
project I'm interested in. I'm requesting that you give us a 
sense of, given all the different programs that are on the 
books and anticipating one or two that are going to be coming, 
what would we need to fund them over a cycle that makes sense, 
not stretched out so they become even more expensive. Well, 
either way.
    Let me just ask you, what did you mean by ``logistics death 
spiral'', that's very catchy phrase?
    Mr. Lieberman. It is, and the former Under Secretary of 
Defense for Acquisition, Technology and Logistics coined that 
phrase. I didn't.
    Mr. Shays. What does it mean?
    Mr. Lieberman. It means that the equipment that we have in 
the hands of the forces right now is becoming more and more 
costly to maintain, harder to maintain, breaks more often, is 
more frustrating for the mechanics to deal with, and these 
logistics costs are steadily rising, which is unfortunate 
because the Department needs to save money in the logistics 
area so that it can apply those savings to modernization of the 
equipment, buying new equipment.
    So we're caught in a trap. In order to maintain what we 
have out there in operational status, we have to spend an awful 
lot of money; therefore, we can't afford to replace it with new 
equipment.
    The new equipment always costs more than the old equipment. 
In the case of aircraft, for example, several times more. 
That's----
    Mr. Shays. I understand. What are the most significant open 
Office of Inspector General recommendations DOD has not 
addressed?
    Mr. Lieberman. I'd like to go back and think about that a 
bit, Mr. Chairman, and give you a list.
    Mr. Shays. Yes. That's important to us. If you've made 
recommendations that are being ignored or they haven't made any 
progress, we'd like to know.
    Mr. Lieberman. We did provide a list of some of those in 
our December 1st letter to the congressional leadership, but 
that's a few months out of date, so I want to update it.
    Mr. Shays. Why don't you. So you'll followup on that?
    Mr. Lieberman. Yes, sir.
    Mr. Shays. Mr. Kucinich. And then we'll get to the next 
panel.
    Mr. Kucinich. Thank you very much, Mr. Chairman.
    As the chairman was speaking, I was handed a page out of 
the December IG report, which says, ``There needs to be a far-
reaching re-balancing of acquisition programs to match 
available funding. That sounds like a modest statement. And it 
also goes on to say that, ``We reported in June 2000, that, of 
17 major weapons acquisition programs approved, the key 
development milestones between March 1996, and July 1999, 14 
programs lacked clearly defined open system design objectives 
of strategy for achieving such objectives.'' That's the IG 
report. That seems to coincide with what Mr. Walker said before 
this committee, this subcommittee, last week.
    Now, because I understand that GAO and the IG office have 
distinct missions, and sometimes you don't always--you may work 
parallel, but you don't always know what each other is doing, I 
wanted to share with you some of the observations that he made 
that may reflect, Mr. Chairman, on the issue of a logistics 
death spiral, because he said, ``For example--'' and this is a 
direct quote--``in the logistics area they may have the item. 
They may not know where it is or they may not know how many 
they have. Now, what's the result of that? They may order it 
when they don't need it. They may not be able to access it when 
they need it for operational purposes. We're not talking about 
small sums of money; we're talking about significant sums of 
money here. With regard to financial management, it is a basic 
tenet of accountability. The Department of Defense is provided 
over $300 billion a year. That's taxpayer money. There needs to 
be accountability over the use of that money, and there is a 
fundamental problem at DOD with regard to that.''
    He also went on to state something that I think needs to be 
reviewed, and that is with respect to the accounting system, 
itself, and how it is very difficult to be able to keep track 
of the equipment, and also that it is very difficult to be able 
to keep track of $1 out of every $3.
    He showed us an accounting schematic which was fairly 
incomprehensible, and he talked about how the Department of 
Defense could not match $22 billion worth of expenditures to 
the items they purchased.
    He talked about how the Navy had no financial information 
on $7.8 billion of inventory aboard ships and that it wrote up 
as lost $3 billion worth of in-transit inventory.
    He also mentioned that in May 2000 a GAO report found that 
the DOD had nearly $37 billion of equipment it didn't need. In 
March 2000, the DOD Inspectors General reported that, of $6.9 
trillion in Pentagon accounting entries, $2.3 trillion were not 
supported by enough evidence to determine their validity.
    Now, sir, respectfully, that doesn't square. Those reports 
do not square with statements that suggest that the Department 
of Defense just needs more money to handle all the programs 
that it has.
    Mr. Lieberman. I've never made such a statement. I hope 
nothing I have said has been interpreted as saying all the 
Department needs is more money.
    The Comptroller General's particulars there draw heavily 
from our reports. And I do agree, in general, with the GAO 
testimony.
    In the list of the top 10 problems that I just ran down, I 
included, for example, not only financial management, but 
supply inventory management. When I talk about poor supply 
chain management, I'm talking about not knowing what we have 
where and not getting it to whoever needs it in an efficient 
manner.
    There has been a chronic problem for years in keeping track 
of the many millions of different types of parts and supplies 
that Defense uses. We're not talking about a small operation 
that only has a few hundred different types of inventory items; 
we're talking about many millions of just spare parts, many 
million different kinds of items. It is a tough problem, and 
Defense has a long way to go.
    You are absolutely right. For instance, inventory accuracy 
is a serious problem.
    Mr. Kucinich. Mr. Chairman, is that----
    Mr. Shays. That's it. We have two----
    Mr. Kucinich. OK. I just had one final comment, if I may.
    According to information staff has provided, it says that 
the Department of Defense has ignored the Inspectors General 
based on recommendations and completed recommendations, that 
your recommendations are ignored about 82 percent of the time.
    Mr. Lieberman. That's absolutely wrong.
    Mr. Kucinich. What percent of the time are they ignored?
    Mr. Lieberman. It's 4 percent.
    Mr. Kucinich. OK. So then if they are ignoring it only 4 
percent of the time, how do you end up with not being able to 
keep track of $1 out of every $3? That's my question.
    Thank you, Mr. Chairman.
    Mr. Shays. The answer to the question is that some are 
bigger than others. Some are much bigger.
    Mr. Lieberman. That's certainly part of it. And also the 
Department agrees to do things that everyone agrees will take a 
while to get done. There are not instant fixes to a lot of 
these problems.
    Mr. Shays. So, in other words, some are totally ignored and 
others are attempted to be dealt with, but----
    Mr. Lieberman. Let me clarify exactly----
    Mr. Shays. No. I don't want----
    Mr. Lieberman. The 96 percent means they agree with our 
recommendation.
    Mr. Shays. OK.
    Mr. Lieberman. And agree to try to implement it. Some of 
those are implemented immediately because they are easy. Others 
take years because the recommendation may be, for example----
    Mr. Shays. Let me----
    Mr. Lieberman [continuing]. We need a whole new system.
    Mr. Kucinich. Mr. Chairman, I just have, for the record, 
some analyses of financial management recommendations and 
acquisition and security concerned recommendations that were 
made, and which ones were followed and which ones weren't.
    Thank you, Mr. Chairman.
    Mr. Shays. Yes. And the bottom line is their financial 
management is worse than bad, and you would acknowledge that. 
And it is pretty deplorable that we, as a Congress, haven't 
demanded that they make better progress, and I know that you 
have been eager to see that happen.
    I'm just going to quickly mention that you did a report on 
the blood supply and pointed out that next year over 50 percent 
of the blood supply will be over 20 years old and we don't 
allow blood over 10 years old in the commercial marketplace, so 
we obviously have a double standard there.
    The other concern I would just say to you is that, given 
this committee's staff when we were a different committee did a 
great deal on the safety of the blood supply. If we're going 
back 20 years some of that could be infected blood supply. I'd 
just raise a point of concern to you.
    Just one last question to you, Mr. Friedman. Why is DOE 
doing chemical biological defense research?
    Mr. Friedman. Well, it primarily is part of the non-
proliferation efforts that are within the Department's mission. 
It is also doing a great deal of work under work for other 
programs for the Department of Defense and other Federal 
agencies.
    Mr. Shays. So are you saying it's a Federal mandate, or 
they just began----
    Mr. Friedman. No, I wouldn't say it is a Federal mandate. 
What I'm saying is that the Department's laboratories--the 
Department of Energy, Mr. Chairman, does about $6 billion----
    Mr. Shays. Let me be more blunt.
    Mr. Friedman. Yes?
    Mr. Shays. Are they being asked to do it in part so we keep 
these labs operating? I mean, is this somewhat of a make-work 
effort?
    Mr. Friedman. The total amount of money being expended in 
this area in biological select agents, as I understand it, is 
about $7 million a year or $8 million a year. It is an 
insignificant amount of the $1 billion a year budgets of the 
large defense labs, so I don't think that's the case.
    Mr. Shays. OK.
    Well, Mr. Friedman, it is nice to have you here. You are 
kind of a new Inspector General to this committee and I 
appreciate your being here.
    Mr. Friedman. Thank you very much.
    Mr. Shays. I know you have other committees to report, as 
well.
    Mr. Lieberman, always good to have you back. We appreciate 
the work that both you and your staff do. Thank you.
    Mr. Lieberman. Thank you.
    Mr. Shays. Our next panel is comprised of three Inspectors 
General: Richard Griffin, Department of Veterans Affairs; Ms. 
Roberta Gross, National Aeronautics and Space Administration 
[NASA]; and Mr. Richard Skinner, Federal Emergency Management 
Agency [FEMA].
    If you'd come and remain standing we'll swear you in.
    If you'd raise your right hands.
    [Witnesses sworn.]
    Mr. Shays. Note for the record all three of our witnesses 
have responded in the affirmative.
    It is very nice to have you here. I think it worked well to 
have summaries of your testimony. At least the first two 
panelists did it quite well.
    So I guess, Mr. Griffin, we'll start with you.

STATEMENTS OF RICHARD J. GRIFFIN, INSPECTOR GENERAL, DEPARTMENT 
   OF VETERANS AFFAIRS; ROBERTA L. GROSS, INSPECTOR GENERAL, 
 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; AND RICHARD L. 
SKINNER, DEPUTY INSPECTOR GENERAL, FEDERAL EMERGENCY MANAGEMENT 
                             AGENCY

    Mr. Griffin. Mr. Chairman and members of the subcommittee--
--
    Mr. Shays. Let me just interrupt to say I have a meeting 
with the Speaker, so I am going to go out for a little bit and 
come back. Mr. Kucinich I will have working the hearing, and 
then I'm going to get back in time, I think, to ask some 
questions, as well. But please don't be offended if I leave for 
a little bit.
    Thank you.
    Mr. Griffin. Mr. Chairman and members of the subcommittee, 
I am pleased to be here today to discuss major performance and 
management challenges facing the Department of Veterans Affairs 
and to highlight the contributions of the Office of Inspector 
General in combating crime, waste, fraud, and abuse in the 
Department.
    Last November I responded to Chairman Burton's request for 
the Office of Inspector General views on the top 10 most 
serious management problems in the Department. Today I will 
discuss and briefly highlight recent activities of my office, 
focusing on four of these issues: quality health care, claims 
processing, inappropriate benefit payments, and VA consolidated 
financial statements.
    Monitoring the quality of health care continues to be a top 
priority for my organization. To monitor the quality of VA's 
evolving health care delivery system, we developed combined 
assessment program reviews in 1999. A CAP review combines the 
skills and abilities of our major components to provide 
collaborative assessments of medical facilities. CAP review 
findings provide facility managers recommendations to improve 
the quality and delivery of care.
    In fiscal year 2000, we completed 18 medical center 
reviews. Some of the CAP findings include inadequate staffing 
in nursing and pharmacy, lack of secure medication storage, 
lengthy waiting times, and patient safety issues. There is a 
direct correlation between quality of health care and patient 
safety. All of these issues contribute to increased patient 
risk.
    Unfortunately, we have investigated incidents where health 
care providers have violated their sacred trust to care for our 
veterans. One specific case was the successful investigation 
and prosecution of Dr. Michael Swango for the murder of three 
veterans. Swango was hired by the State University of New York 
and worked as a resident in the Northport VAMC. Following a 
long and complex investigation, Swango was charged with three 
murders. He subsequently pled guilty and was sentenced to three 
life terms without the possibility of parole.
    While successful criminal prosecutions are critically 
important, they reflect only one aspect of our mission. The 
strategic focus of our proactive health care reviews is to 
identify both best practices and vulnerabilities and to make 
recommendations for change to prevent incidents from occurring.
    A second issue is claims processing. VBA continues to 
struggle with timeliness, accuracy, and quality of claims 
processing, particularly in the compensation and pension 
program. VBA faces high workload backlogs, unacceptable claims 
form processing times, and a high error rate.
    Now, if we recognize that VBA's backlog was impacted by 
legislation mandating the duty to assist, the presumptive 
rating for diabetes, and an increase in the number of 
disabilities claimed by each veteran, which increases the time 
to adjudicate claims.
    With the pressure to improve timeliness and reduce the 
backlog of claims, the potential is great for overlooking or 
ignoring appropriate internal controls; however, the purpose of 
these controls is to reduce the incidents of waste, fraud, and 
abuse.
    We've worked closely with VBA to identify internal control 
vulnerabilities. Based on our findings, we have launched an 
initiative to do reviews of all the VBA regional offices on a 
cyclical basis.
    A third issue involves the need for VBA to take a more 
active and aggressive role to identify inappropriate benefits. 
OIG audits and investigations have identified situations 
indicating that the appropriateness of compensation and pension 
payments is not always adequately addressed. For example, we 
have identified $61 million in over-payments to VA 
beneficiaries who were receiving dual compensation for 
compensation and training and drill pay as reservists; $170 
million to incarcerated veterans whose benefits have not been 
cut; and to date $3.9 million in benefits that have been paid 
to deceased beneficiaries.
    On a final note, we recently issued our report on the VA 
consolidated financial statements for fiscal year 2000. For the 
second consecutive year, the VA has received an unqualified 
opinion on the consolidated statement. This year's report, 
however, continues to identify information technology security 
controls as a material weakness and adds integrated financial 
management system and control issues as a new material 
weakness.
    Mr. Chairman, this concludes my statement. I will be 
pleased to respond to any questions you or any other Member may 
have.
    Mr. Shays. Thank you.
    [The prepared statement of Mr. Griffin follows:]

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    Mr. Shays. Ms. Gross.
    Ms. Gross. Good morning. Thank you for the opportunity to 
be able to comment on the management challenges facing NASA.
    Our audits, investigations, and inspections cover the full 
range of NASA activities, and that covers exciting, unique 
programs like the international space station, to the more 
mundane but important areas of fiscal control and procurement, 
and, likewise, the key challenges to NASA's well-being range 
from very unique challenges to get low-cost launch vehicles so 
that we can explore space and make it common, like flying 
across the country, to more common, everyday tasks that need to 
be attended to--again, fiscal management and procurement.
    Today I am going to discuss some of these key management 
challenges. The first one I am going to start with is safety. 
The NASA administrator correctly established safety as the 
agency's No. 1 value. NASA programs work in a very hostile 
environment of space--high-speed technology, cutting-edge 
environments. And in those high-risk environments, safety does 
need to be a No. 1 concern.
    Many of you probably remember what happened after the 
``Challenger'' incident. NASA basically shut down operations 
for 2 years while it re-examined itself. Safety has to be a 
priority.
    Since 90 percent of NASA's dollars, or approximately 90 
percent of NASA's dollars, go to the contracting community, we 
put a lot of attention, both from audits, reviews, and 
investigations, on the contractor community. One of the things 
we found was that NASA was being very proactive in starting 
affirmative programs for its future contracts, but did not go 
back and examine earlier contracts, which are very large, 
consolidated contracts going from multi years and multi million 
dollars to make sure those contracts had appropriate safety 
clauses and oversight by our safety personnel.
    For example, when we looked at a number of contracts at 
Kennedy Space Station and Marshall, we found something like 60 
percent of those contracts did not have required safety 
provisions in them.
    Now, initially NASA had not concurred with going back and 
looking at the contracts. They said, ``We'll look to future 
contracts.'' And the NASA administrator, who set safety as the 
No. 1 priority, correctly said, ``We're going to look at those 
contracts and prioritize those.''
    In terms of our Office of Criminal Investigations, we 
prioritize safety, also. We look at contracts and we look at 
quality assurance issues that have to do with product 
substitution and false certifications, and we work with other 
agencies on those, and U.S. attorneys and the Department of 
Justice also prioritized those safety implications. Where NASA 
is at risk because of safety, we vigorously pursue those, as 
well as the Department of Justice.
    The second priority challenge for NASA is information 
technology security. It has been a priority for my office. I 
was the first Inspector General to have the computer crimes 
unit. We also have a very aggressive audit program, as well as 
inspection group.
    It is also a congressional priority--that is, we just 
recently have enacted the Government Information Security 
Reform Act, whereby there's a lot of prioritization put on OMB, 
heads of agencies, and CIOs, as well as Inspectors General to 
prioritize IT security.
    One place where we see it doesn't seem to be such a 
priority at all times is at NASA, and so we continuously have 
placed that as a high risk material weakness.
    There's often a lot of no-cost, low-cost management 
techniques that NASA could use and does not use to help protect 
its critical infrastructure, as well as its information 
techniques.
    We have found major problems in fragmented 
responsibilities. There's 10 NASA centers. There's 10 NASA 
CIOs. They don't report to the agency CIO. So you have people 
doing things without accountability.
    We also have a lack of basic controls to protect mission-
critical information systems, and we have many, many audits on 
that.
    We have problems in hiring and training employees with 
specialized IT skills, including missing background checks when 
we do hire people to make sure that, in fact, No. 1, they are 
Americans, and, No. 2, if they are not, that they have had a 
background check.
    We find weaknesses in very basic physical security 
controls--that is, just the environments. Are doors closed? Are 
locks implemented? Are passwords locked? That's No. 2.
    No. 3 challenge is our international agreements. Knowledge 
and space have no boundaries, and they both continually expand, 
and that's what is exciting about working at NASA. And 
international agreements--NASA has something like 3,500 
international agreements--bring a lot of capacity and a lot of 
opportunities for NASA, but it also brings some risks in all of 
how it does business.
    For example, if you have critical paths, like with the 
international space station, and you are relying on 
international partners, that can create some problems. We did 
have cost overruns and we had delays because of issues 
associated with Russia and its internal politics and its 
ability to have funding for some of the commitments that they 
made.
    We also have found in both our audits and reviews that we 
have a lot of foreign visitors, and that is important for NASA. 
NASA is a civilian space agency. It has both a national and 
international mission. We work with universities. We work with 
international companies.
    On the other hand, we also have a lot of interesting 
technology that needs to be protected, and the NASA 
administrator has responsibilities under the Space Act to make 
sure of protecting national security interests.
    Some of our audits have found that we can do better in 
foreign visitors and the security of that and making consistent 
policies. We can do better on our export control program.
    To NASA's credit, they have stood up to the plate when 
we've made these recommendations and pointed these out.
    One area of interest, I think, to the committee is we had 
looked at funding of some space research. NASA had funded a lot 
of Russian space research in order to give some employment to 
some of these scientists that were no longer working under the 
state. We don't want them working for other countries doing 
things that could be hurtful to our own national security.
    One of the projects that was identified was funding for 
researchers associated with labs called Bioprepret. They used 
to do the biochemical warfare research for Russia. While the 
State Department is aware of this--we informed them of that, 
and one of the things they recommended is that NASA take 
vigilance on how we watch to see that that research is not 
being used in a dual manner, and we found that, in fact, we 
didn't put enough internal controls in there. NASA then has 
concurred that they will be much more vigilant when they give 
grants to foreign countries, particularly those that may not 
have always been aligned with our interests.
    Another big issue for NASA, of course, is launch vehicles. 
Probably most people's memory of NASA is the space shuttle 
going up in a launch, one of the most dramatic views, I think, 
that we can see on television. It got reinforced, I think, by 
John Glenn's historic flight. I think that made Ohio very 
proud, I'm sure.
    Indeed, we renamed the center after Glenn. It is now, 
instead of Lewis Center, the Glenn Center.
    But one of the problems for NASA is that the space shuttle 
is very expensive because it is a human rated system. It is 
also very old. I mean, previous comments have been about old 
systems in the military. It is well over 25 years, and we are 
projecting it to go for another 10 to 12 to 15 years. We need 
to have cheaper, more accessible access to space, and that's a 
major problem for NASA and for the commercial launch industry.
    We've had difficulties in some of the technologies applied 
for experimental launch vehicles, and that's a major problem 
for NASA--how it does its procurement and its oversight on 
launch vehicles.
    Finally, in terms of program project management, one of the 
things I think that is important and is a key project 
management indicator is whether we have an independent cost 
assessment capability. If you don't have somebody you can look 
to as the managers, not always look to the IG or GAO or 
Congress, you have got to have an independent estimation and 
assessment capability to tell you whether or not you are being 
realistic in your cost projection, in your milestones, whether 
you are meeting your milestones, and whether or not you need to 
reevaluate whether you need to de-spoke or shut down a project. 
That's a major concern.
    We've done a number of reviews, but we don't think that 
NASA has created truly an independent cost assessment 
capability, and that's a major concern, from our perspective.
    I thank you for the opportunity and would welcome any 
questions.
    Mr. Shays. Thank you. Thank you, Ms. Gross.
    [The prepared statement of Ms. Gross follows:]

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    Mr. Shays. Mr. Skinner.
    Mr. Skinner. Thank you. Good morning.
    Mr. Shays. Good morning.
    Mr. Skinner. I've provided this subcommittee with our 
written statement for inclusion in the record. I will summarize 
it briefly now.
    Mr. Shays. Thank you.
    Mr. Skinner. Just 8 years ago, Congress actually introduced 
legislation to abolish FEMA, due, in a large part, to its poor 
performance after Hurricane Hugo and Hurricane Andrew. Today, 
FEMA is being called a model of Government success. I don't 
think anyone could deny that FEMA has made a remarkable turn-
around. With all its success, however, FEMA is not free of 
problems.
    Earlier this month, FEMA's financial statement received a 
clean opinion from our office. What our report doesn't show, 
however, is that FEMA still does not have the capability or 
procedures in place to track its financial status on a routine 
basis. FEMA needs to work on keeping track of its 
appropriations on a regular basis, not just once a year.
    Furthermore, FEMA is not providing the oversight that is 
needed to ensure that billions of dollars in grant funds that 
it awards each year are being adequately safeguarded; 
consequently, our audits continue to find millions of dollars 
each year that are being misused or wasted.
    In the information technology arena, FEMA will be very 
hard-pressed to pursue its e-government agenda in the future 
and provide adequate security over its cyber-based assets. 
Currently, FEMA is very limited, has very limited resources, 
both staffing and funding, to invest in new initiatives and new 
improvements and new requirements.
    Also, as with most Federal agencies, FEMA is having a 
difficult time measuring and reporting on its performance, as 
required by the Government Performance and Results Act.
    Our ongoing audit in this area is revealing that FEMA 
management may not be using the GPRA process as a tool to make 
decisions, and FEMA staff may not be receiving the support and 
direction they need from top management to implement the GPRA.
    Now, regarding some program issues, the disaster response 
and recovery program has been and continues to be the 
cornerstone of FEMA's operations. Improvements in FEMA's public 
image can be directly attributed to the success of disaster 
response and recovery system. With all of its accolades, 
however, FEMA's disaster assistance program is constantly being 
challenged. The number of federally declared disasters has 
reached a record high over the past 10 years, making it 
critical that FEMA find ways to reduce costs, manage its 
disaster work force, ensure integrity of its programs, and 
improve the delivery of services.
    Also, Presidential Decision Directive 39 designates FEMA as 
the lead Federal agency for consequence management in domestic 
terrorism events.
    In recent reports and testimony, GAO has reported that 
domestic consequence management exercises were not well 
developed, and terrorism preparedness training programs are 
sometimes duplicative and not well coordinated among the 
various Federal agencies, including FEMA, with those agencies 
with the terrorism preparedness responsibilities.
    With regards to FEMA's preparedness overall 
responsibilities, FEMA still does not include all the data that 
is needed, in our opinion, to fairly evaluate the capabilities 
of the States to respond to any particular type disaster, 
manmade or natural.
    Specifically, they do not--FEMA's assessments don't include 
local governments and all the applicable State agencies that 
would be involved in a Federal/State/local response. They do 
not identify State disaster assistance programs, and they do 
not assess State and local government response capabilities to 
handle disasters without Federal intervention. In other words, 
FEMA doesn't always know when it is time to go in.
    In our opinion, these elements are important in order to 
take a true picture of a State's capability in their ability to 
respond to disasters.
    In the mitigation arena, FEMA's success depends almost 
entirely on the commitment of State and local communities to 
embrace mitigation as doing--as a way of doing business, not 
just waiting for a disaster and not just as an afterthought to 
a disaster.
    The recently enacted Mitigation Disaster Act of 2000 offers 
the potential to make mitigation a sustained effort, but its 
success still is dependent on non-Federal resources.
    FEMA's largest mitigation programs, the hazard mitigation 
program and the national flood insurance program--over the past 
10 years FEMA has awarded over $2.6 billion into the hazard 
mitigation grant program. A major component of that program is 
buy-outs, which is aimed at removing homes located in 
repetitive flood hazard areas. Last month, the OIG issued a 
report that highlighted significant problems with the manner in 
which FEMA is implementing that program.
    Given the significant role of buy-out in FEMA's mitigation 
program, it is critical that the program be effectively 
executed and addresses national mitigation priorities.
    Concerning flood insurance, only about 4.3 million of the 9 
million structures in special flood hazard areas throughout the 
country have flood coverage, and 40 percent of structures that 
are in the flood program are still subsidized by taxpayer 
dollars.
    Furthermore, of the estimated 200 million in repetitive 
losses each year--that is, those policyholders who file claims 
again and again, year in, year out--about 96 percent of them 
are subsidized structures.
    Finally, it should be pointed out approximately 50 percent 
of FEMA's 100,000 flood maps are 10 years old. Due to the 
importance of current flood maps to emergency managers at all 
levels of government, including FEMA's mitigation initiatives, 
it is important that FEMA find ways and means to update its 
maps in a more-timely fashion.
    Mr. Chairman, this concludes my prepared statement. I've 
tried to limit my remarks to those critical areas of greatest 
concern to the OIG. You can be sure that our office will 
continue to place particular emphasis on those issues.
    Again, I appreciate your time and attention and welcome any 
questions that you might have.
    Mr. Kucinich [assuming Chair]. I thank you very much.
    [The prepared statement of Mr. Skinner follows:]

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    Mr. Kucinich. Mr. Shays has asked me to continue to move 
the proceedings along here, so I want to introduce Mr. Clay, 
who is also a member of our committee, and go into the 
questions phase.
    Mr. Griffin, what are the most significant open OIG 
recommendations that have not yet been addressed within your 
purview?
    Mr. Griffin. Well, off the top of my head I would say that 
our audit on incarcerated veterans, which I alluded to in my 
testimony, which represents over-payments in the amount of 
about $170 million. Unfortunately, we're the subject of a 1986 
audit that was not properly implemented. We did the work again 
in 1998 to come up with the current dollar value of payments 
that continue to be made. To this date, there hasn't been 
action taken on those.
    We have another audit that had addressed the need for 
quality standards in nursing homes that veterans are placed in, 
which is 2 or 3 years old at this point and there has yet to be 
a set of quality standards.
    Mr. Kucinich. Do you want to comment further on the 
combined assessment program?
    Mr. Griffin. Well, the combine assessment program is 
something that we initiated as a proactive project to get out 
to these medical centers in VHA to try to do a quality control 
check prior to an incident occurring.
    As I alluded to, we had a case involving a murder up at the 
Northport VAMC. It doesn't do any good to learn about these 
things after the fact, so we wanted to get to these facilities, 
identify problems, share with the medical center directors 
those problems that have been identified at the other 
facilities in the system, and try and get the proper fix in 
place before an incident might occur at their facility.
    Mr. Kucinich. OK. I would like to now move to Ms. Gross. 
Thank you very much for being here.
    What are the most significant open OIG recommendations that 
have not been addressed at NASA?
    Ms. Gross. What we find oftentimes is that what NASA does 
is they will concur and agree with the recommendations. What is 
the problem is the lag time between saying yes and actually 
doing the implementation.
    We have more of a problem of what we call 
``dispositioning.'' We keep them open until we actually get 
proof that they are actually implementing the recommendations.
    There would be things, like in the area of communications 
security. There have been a number of inspections that we have 
done. Communications security has to do with both the uplink or 
command control to destroy a vehicle if it is on a bad path or 
something like that. We want to make sure that either the 
commands are--if appropriate, should be encrypted, and also 
that you have some mechanism to make sure that the commands 
that it receives are authentic. That took about 3 years of 
talking and talking with the agency, despite the fact that 
safety was its No. 1 priority and that included assets.
    I think that probably the biggest area of non-concurrence 
has been on the pricing policy for the shuttle, and commercial 
uses and DOD uses. NASA basically fundamentally disagrees with 
our interpretation of the law. They think that you don't need 
to have a specific pricing policy; that you can do it case by 
case. In some sense they are correct in the sense that if you 
read down the statute it says that you can put in incentives, 
but that doesn't mean that you can't sort of display what the 
basis of your incentives are.
    This is an area where we really had a total nonconcurrence 
on our audit, on their pricing policy. We think, particularly 
if you are ever going to have a commercial space policy, the 
private sector would want to know basically so they can plan 
and help negotiate. That doesn't mean you can't put in 
incentives, but you really do need a pricing policy if you want 
to encourage a commercial vehicle.
    Mr. Kucinich. Thank you.
    Ms. Gross. Policy. Not vehicle, policy.
    Mr. Kucinich. Do you have any comments on the faster, 
better, cheaper philosophy that has formed a basis of some 
missions?
    Ms. Gross. Yes. We recently gave the agency an audit. NASA, 
as a result of two Mars mission failures, NASA went to re-
evaluate its faster, better, cheaper philosophy and is looking 
to see if that, in fact, contributed in some ways to these 
mission failures.
    We did an audit to try to examine what is faster, better, 
cheaper and whether or not the agency has an understanding of 
it, and, if not, does that contribute to mission problems.
    It is a philosophy, but nobody was able to exactly define 
what it means. I think that was also echoed in one of the 
independent reports that NASA commissioned on the Mars 
failures.
    We also made recommendations that if that's going to be 
your philosophy, basically it means don't have long-term 
missions, do shorter-term missions with more focus so that you 
don't have a catastrophic failure that eats up 10 years of 
research, and also to have an infusion of technology.
    All of that is very, very good, but you need to have a 
definition so people know what does that mean in terms of 
project management, what does that mean in terms of human 
capital, what does that mean in terms of communication.
    So we made recommendations, as well as people in the 
private sector did. Particularly I'd want to point out the 
human capital issue.
    One of the problems that was highlighted was at the jet 
propulsion lab. They didn't--we had so many missions we may not 
have mature project managers on them. You know, when you only 
had one 10-year, multi-billion-dollar project, you had a 
project manager that was on it from the beginning. That's a 
human capital issue that NASA needs to address, particularly in 
the light of the current freezes that are going on.
    We have a Government-wide freeze on 14s and 15s and SESes 
at a time when NASA has been downsizing, and so it has to be an 
evaluation. Are you going to make it to be a disrespect to the 
Government that nobody gets promotions, that nobody values 
their 14s and 15s and SESes, when, in fact, we have a problem 
with program managers. That was a safety issue.
    Mr. Kucinich. Are you saying, then, that the downsizing 
could be counterproductive to NASA's mission?
    Ms. Gross. Downsizing can be if it is not done in the right 
priorities, if it is not also done with watching your projects, 
and if it is also done when you have--unless you are also 
allowed to have promotions and recruitments at a level 
commensurate with the complexity of your projects.
    If you have a hold, basically, on 14s and 15s and SESes--
and that's a Government-wide hold until there is more 
reevaluation. Meanwhile, projects are going on, money is being 
spent. These are projects that have occurred before and are 
continuing to go on. We need project managers.
    Mr. Kucinich. Thank you. Thank you very much.
    I'd like to turn the question to Mr. Skinner. Could you 
indicate what are the most significant open OIG recommendations 
that FEMA has not addressed?
    Mr. Skinner. Right now I would have to say it is their 
attitude toward their financial management systems. I believe 
FEMA is in a stage of denial. For the last 9 years, we have 
continually and repeatedly reported that the financial 
management system is not producing reliable data, timely data, 
and data that the project managers can use to operate and 
project their expenditures and run their programs. The people 
in the Office of Financial Management within FEMA has made 
improvements over the years, but they've reached a plateau, and 
I think they are intent to operate without making any 
additional improvements, and that is going to present a problem 
for us down the road.
    Mr. Kucinich. Thank you.
    As a followup to that--and if you said this, I apologize if 
I didn't hear you--what steps should FEMA take to improve 
financial management?
    Mr. Skinner. First they have to recognize they have a 
problem. That's the difficult problem we are facing.
    Mr. Kucinich. This is a 10-step program. [Laughter.]
    Mr. Skinner. And so we are going to start using different 
techniques and approaches to demonstrate and recruit the 
project managers and to demonstrate to them that the systems 
that they do have in place are going to get--are fraught with 
problems. They can produce a financial statement once a year, 
but beyond that it is not much real value.
    Mr. Kucinich. OK. Thank you. The questions that I have just 
asked were at the request of Mr. Shays, who is in a meeting 
with the Speaker.
    Mr. Weldon is here to Chair the meeting, and I'm grateful 
for that.
    Mr. Weldon [assuming Chair]. And I believe I am going to 
yield to you so you can ask your questions.
    Mr. Kucinich. Right. And then we'll get to Mr. Clay.
    Thank you very much. We all work together here.
    Of course, one of the things that Mr. Weldon and I worked 
closely together on is issues relating to NASA. We are both co-
chairs of the Aerospace Caucus. And I just had a few questions 
that relate to NASA.
    In your prepared remarks, Ms. Gross, you say, ``The 
pressure is rising for Government agencies to outsource 
activities currently performed by civil servants.'' What kind 
of activities are you speaking about where the pressure is 
being made to outsource those activities?
    Ms. Gross. Well, one large project that NASA was engaged 
in--and I think it is probably across the Government--is in 
your information systems, your desktops, your laptops, the 
whole management of those systems. People do that to save money 
and consolidate contracts.
    The issue that we have on that is who is controlling your 
data. Who are the employees that they are hiring? Have they 
done their security checks?
    Mr. Kucinich. Security issues.
    Ms. Gross. Yes.
    Mr. Kucinich. Yes.
    Ms. Gross. Absolutely. When you have a criminal intrusion 
and we go to--it is no longer at NASA. It is at a different 
site, because that's where they are managing the operation. All 
of the sudden, if it is on your site you're not trespassing, 
but you may have to--it is harder to get onto a site that is 
not your own.
    Mr. Kucinich. Have there been criminal intrusions in trying 
to interfere with launches?
    Ms. Gross. We don't have any direct evidence of that. You 
can have, by accident, by--we've had actually a youth who was 
doing an intrusion. I believe it was in Marshall. He was doing 
a denial of service of a computer that secondarily had a 
support to a computer that was communicating with a computer 
that was talking to astronauts during the MIR docking. Now, 
what it did because it was a denial of service, it just 
interfered with it. The communication eventually went through. 
We also had backup.
    This is just to illustrate that you can have unintended 
consequences because of the interdependencies of computers.
    Mr. Kucinich. In your remarks you talk about concern about 
the use of space shuttles to launch payrolls that do not 
require the shuttle's unique capabilities.
    Ms. Gross. Yes.
    Mr. Kucinich. What do you mean?
    Ms. Gross. By statute, by congressional legislation, NASA 
is supposed to be using expendable launch vehicles to encourage 
the commercial launch industry, unless it needs to use the 
unique capabilities of the shuttle. The shuttle is a very 
expensive way to launch payloads because you have manned space 
and you have to have all the safety precautions. So unless you 
need to have a manned space or you need to make sure, because 
of the security or the timing, by law you are not supposed to 
be using the shuttle. You're supposed to use the commercial. 
And there are times when NASA said something might be a 
secondary--a very undefined term, but it may be a secondary 
payload, and that's fine, it can just go along. But if, in 
fact, they are not defining the term, they may not be carrying 
out congressional legislation to use commercial launches.
    Mr. Kucinich. Thank you. And then if you could provide this 
committee, with the permission of the chair, some definition of 
the Government's involvement of assignment of technology rights 
to industry partners with respect to, you know, what the 
interests of what the Government might be.
    Ms. Gross. Yes.
    Mr. Kucinich. I know in your report you have some statement 
there.
    Ms. Gross. Yes.
    Mr. Kucinich. It might be helpful to the committee----
    Ms. Gross. OK.
    Mr. Kucinich [continuing]. To be able to get some 
definition of that, which programs you were talking about.
    I have one final question, and that is for Mr. Skinner.
    Is the Government involved in any kind of--are you 
beginning to interact with any Government policy with respect 
to global climate change?
    Mr. Skinner. No, sir, I'm not aware that we are involved in 
that. Certainly the OIG is not aware of it or not involved.
    Mr. Kucinich. In other words, any possible effects of 
global climate change, you're not really involved?
    Mr. Skinner. Not to my knowledge, sir.
    Mr. Kucinich. OK. Thank you.
    I yield back to Dr. Weldon, and I guess Mr. Clay at some 
point.
    Mr. Weldon. Yes. I just had a couple of questions.
    Mr. Griffin, the Department of Veterans Affairs' budget for 
health expenditures was increased, I think, $1.6 billion in 
fiscal year 2000 and $1.4 billion, or in that range. It's about 
$3 billion over 2 years, which represents a sizable percentage 
increase for that agency.
    I realize they had been flat for many years and there were 
a lot of needs. From your position as Inspector General, have 
you seen that their ability to properly utilize all those 
additional funds is proceeding as the taxpayers would want to 
see? Has that placed a lot of stress on the Department of 
Veterans Affairs in terms of properly managing that kind of a 
huge influx of new money?
    Mr. Griffin. I would say that in recent years, as you know, 
they have switched their focus from inpatient care to 
outpatient care, and in that regard they have established some 
600 outpatient clinics that supplement the 172 medical centers 
that previously existed around the country.
    I think those clinics have been very well utilized by 
veterans in the outlying areas who previously would have had to 
travel great distances to go to a VA medical center, but I'm 
not confident that the systems are in place to properly 
allocate money to the areas that might necessary have the 
greatest demand.
    I say that based on an audit that we did. It has been 
probably 18 months since we issued this audit report, but the 
Veterans Health Administration created a decision support 
system which was supposed to capture incidents of patient care 
and it was supposed to be the basis for their knowing where the 
demand is, what type of health care problems are we dealing 
with throughout the system, and then allow them to allocate 
their money accordingly.
    What our audit showed was half of the facilities roughly 
had adopted the DSS methodology, the other half didn't embrace 
it, weren't made to embrace it by the administration, and, as a 
result, you've got a system that was not properly implemented, 
and it made the results--the partial results that were obtained 
to be without value.
    So I think the VHA could show impressive increases in the 
number of veterans served, but I'm not sure that there is a 
well-conceived plan for every dollar that they have been given 
in those increments that you've----
    Mr. Weldon. Was your budget given an incremental increase 
to allow you to properly monitor the influx of those funds as 
part of that whole package, your staffing?
    Mr. Griffin. No. I can say unequivocally that's not the 
case. In 1989----
    Mr. Weldon. Well, let me just followup with that to ask 
you, do you feel like the Office of Inspector General is 
adequately provided for the resources to monitor those new----
    Mr. Griffin. No.
    Mr. Weldon [continuing]. Enterprises that the Veterans 
Administration is engaged in?
    Mr. Griffin. I don't feel that we are adequately budgeted. 
What I was going to mention is that in 1989, when the 
Department achieved Cabinet-level status, Congress passed a 
bill which created a statutory floor for the OIG. That floor 
was 417 FTE. We have not been at the statutory floor in 10 
years.
    Mr. Weldon. Where are you now?
    Mr. Griffin. At 365. In 1989, when that law was passed, 
VA's budget was slightly under $30 billion, and at that time 
the OIG organization had about 375 FTE. Today the VA's budget 
is slightly over $50 billion and we have 10 less FTE. There are 
600 additional health care facilities out there that need 
oversight. Frankly, it is obvious that there has not been a 
proportionate growth compared to what has occurred in the 
Department.
    I think you pay for that in the end. Final analysis.
    Mr. Weldon. Thank you very much. Your testimony has been 
very helpful to me.
    My time has expired. Maybe we can get into this further, 
but I'd like to yield to the gentleman from Missouri, Mr. Clay, 
for questions.
    Mr. Clay. Doctor, if I may, I'll forego an opening 
statement and submit it for the record, if that's OK.
    Mr. Weldon. Without objection.
    Mr. Clay. I'd like to first ask Mr. Griffin about 
procedures that you mentioned in your testimony.
    You mentioned that procedures to terminate benefits when 
veterans die is not working correctly. Did I understand you 
correctly that one problem is that VA thinks veterans have died 
when they have not died? Is that correct?
    Mr. Griffin. That is part of the problem. What is supposed 
to happen is there is supposed to be a data match performed by 
VBA with the Social Security Administration. Social Security 
Administration is the keeper of the death records, if you will, 
for the Federal Government. They have an even greater number of 
payees that they have to keep track of.
    The problem is that there have been some problems with 
accuracy in the Social Security data base. Social Security has 
another data base, if I may, that is supposed to track 
incarcerated payees, which they use for purposes of suspending 
supplemental income payments. The Department needs to match 
against that data base also because we know that there are a 
number of incarcerated veterans who also are to have their 
benefits reduced when they are incarcerated, and there hasn't 
been the type of precision in both of those matches that would 
serve the taxpayers' interests.
    Mr. Clay. OK. So Social Security Administration incorrectly 
reports a death to you, or----
    Mr. Griffin. Deaths get reported to them by people all 
around the country. There's no Federal agency that goes out 
and, you know, personally picks up a death certificate every 
time somebody in this country dies, so you are dependent upon 
that information being sent to Social Security.
    What we have experienced is that the matching agreements 
have existed, but they haven't always been done, so we started 
doing some of that work ourselves with our investigators, 
working with individual regional offices in VBA, trying to get 
death certificates locally.
    It is a very labor-intensive proposition, but it is just 
that activity during the last 18 months that has identified 
$9.5 million in over-payments just in the cities we have been 
able to work in so far.
    Mr. Clay. I guess your computers could talk to Social 
Security and they could probably talk to the different States 
that compile the death certificates, correct?
    Mr. Griffin. Well, I think, for purposes of efficiency, 
rather than have 15 different Federal departments getting MOUs 
with 50 different States, it was established that the 
repository for that information would be Social Security 
because they have the largest pool of payees.
    Mr. Clay. I see. All right. Thank you.
    Ms. Gross, you mentioned that the Boeing Corp. had severely 
under-estimated its cost estimates for the international space 
station. I think you said that their estimate has grown by $708 
million over the course of 2 years. We seem to have a similar 
problem at DOD with weapons systems acquisition. Do you feel 
that NASA leadership is playing an insufficient oversight role 
in this respect?
    Ms. Gross. I think so. I think that one of the problems 
that we pointed out in the audit that we had issued last year--
and actually the audit was at the request of Dan Golden, the 
administrator of NASA--they found that the GNA rates have gone 
up so high, he wanted to know why was that. And, in looking at 
just that, he looked at----
    Mr. Weldon. Excuse me. The what rates?
    Ms. Gross. It's the overhead rates, basically. And it was 
as a result of the consolidation of McDonnell-Douglas, Boeing, 
and we found that NASA absorbed a large percentage of that 
consolidation as opposed to the private sector and DOD, and 
partially that was because NASA wasn't aggressive about 
watching that and partially because DOD had a very favorable 
statute that said they get a two-to-one advantage of the 
consolidation.
    But what we also found was, during that period of time, 
Boeing's prices were going up and schedule was going down, and 
the program people were aware of that but didn't communicate 
with the contracting officials and, nevertheless, Boeing got a 
fee award and they got to have something like--I believe it was 
$16 million. And then NASA said, ``Oh, wait a minute. They are 
over budget. We take back that award.''
    How they ever got that award when the program officials 
were aware that they were over budget and beyond schedule shows 
some inefficiencies in the program oversight.
    We also think another deficiency in the program oversight 
that probably is going to come to fore in the recent issue on 
the overrun--which nobody quite has a handle on. I think Dr. 
Weldon is probably going to be grappling with this in another 
hearing in another setting--is what is the overrun. It goes 
anywhere from $4 billion to multi hundreds of millions, and 
nobody has a sense of what is this overrun that is about to be 
announced and looked at.
    Mr. Weldon. If the gentleman would just yield for a second 
on that issue.
    Mr. Clay. Sure.
    Mr. Weldon. Not meaning to be contentious with you, where 
were you in all this picture?
    Ms. Gross. I think we----
    Mr. Weldon. Were you----
    Ms. Gross. Yes.
    Mr. Weldon [continuing]. Throwing up red flags? Was that a 
problem? Do you have the resources to monitor this program 
properly? It has been a shock----
    Ms. Gross. No.
    Mr. Weldon [continuing]. To all of us in the Congress to 
hear this kind of a discussion.
    Ms. Gross. I think I would----
    Mr. Weldon. Were you aware that this was on the horizon?
    Ms. Gross. Not to the extent that it was. But let me say 
where I was. I was in front of your committee last year is 
where I was, and gave testimony that, on the very audit that we 
just talked about, and specifically stated to the committee 
that there was an overrun, that NASA procurement officials 
nevertheless gave a fee award, that we didn't believe that NASA 
was applying techniques like earned value management, which 
would measure how much you are spending with how much you are 
accomplishing, and we made a recommendation, and that, again--I 
testified to that--that they would have an independent 
assessment team evaluate the next year.
    We did the evaluation in 1999 to 2000. NASA needed to do 
its own evaluation from an independent source.
    They had the Shabro group look at it. If you recall, 
because I believe Shabro also testified before your committee, 
probably at the same time I was, Shabro had said, ``It's going 
to be much, much more, much, much more than NASA was already 
projecting.'' They were doing it as an independent cost 
assessment.
    We recommend NASA has to have an independent cost 
assessment group be able to tell its managers--that is, Dan 
Golden, Rothenburg, the Program Management Councils--when these 
kind of overruns are happening.
    What happened is they concurred about having an independent 
assessment and it didn't happen.
    So we made very, very strong recommendations because we saw 
a problem, and what we did is say, you know, ``We are currently 
following up on it, but no, I don't have the staff to followup 
on it every year.'' But NASA has got to manage its programs. 
That's what its responsibility is to do in order to have 
internal controls.
    It shouldn't be always responding reactively to the 
Inspector General's office or to Congress. It has to have its 
own capacity. And that was a recommendation we met--we also 
said.
    But, in terms of the flags, the flags were right up there 
in terms of Shabro's estimate was much, much closer than 
NASA's, and that was testified before your committee. I also 
testified before your committee that there were problems. I was 
there.
    Mr. Weldon. Thank you for that accommodation. Sorry to step 
on your time.
    Mr. Clay. I yield back the balance.
    Ms. Gross. I appreciate the question.
    Mr. Weldon. I'm sure we are going to be hearing more about 
this issue in the months ahead.
    Ms. Gross. Yes.
    Mr. Weldon. Before we adjourn this section of today's 
hearings, I just had a few more questions for Mr. Skinner.
    What steps has FEMA taken to prepare for its role as the 
lead agency for consequence management in domestic terrorist 
events? I think you were getting at a little of this earlier.
    Mr. Skinner. Yes.
    Mr. Weldon. If you could elaborate on that in a little more 
detail for me, please.
    Mr. Skinner. Fortunately, FEMA had a jump start because of 
its role in preparedness and disaster response and recovery for 
all types of disasters, and that would include terrorist-type 
acts.
    Just last year we--FEMA has hired or brought on board John 
McCall to be our chief of terrorist activities. Under his 
direction and still with a small staff and still growing they 
have developed a strategic plan. They have defined what FEMA's 
roles and responsibilities will be with regard to training, 
exercising, grants, and assistance to States and locals.
    They are now beginning--for a couple of years we stumbled 
because it wasn't real clear where the programming was going to 
go. Was it going to be under DOD? Was it going to be under 
Justice? Was it going to be under FBI? We really didn't know 
who we had to start coordinating with.
    Now that has been defined and clear lines of responsibility 
have been set up, there's still some policy issues whether it 
should be in Justice, but that's another issue altogether.
    FEMA now has someone that they can work with, sit down 
with, and start coordinating with. GAO over time has--over the 
last 2 or 3 years has been very critical of the lack of 
coordination at the Federal level, people stumbling on one 
another with regards to delivery of training programs and that 
type of thing. That is now starting to clear up.
    I think FEMA has made tremendous progress here. I don't 
view it as one of the--it is a problem. It is a challenge. It 
is something it's going to have to stay on top of. But, as far 
as consequence management, FEMA is, I think, headed in the 
right direction.
    Mr. Weldon. Has the scope of what your agency is going to 
be doing been properly defined yet?
    Mr. Skinner. Yes. It is going to be consequence management. 
It is going to be after the fact, and we're going to be 
involved in working with State and local governments and others 
and getting them prepared. The Federal Government--if an 
incident occurs, the Federal Government is going to be the last 
people there because of our mere location. We have to get the 
locals and the States prepared to respond--the local fire 
departments, the local police, get them the right equipment, 
get them the right training, get them an understanding of what 
they have to do until Federal assistance can arrive, and 
generally that can be anywhere from 4 to 10 hours later.
    Mr. Weldon. And is it going to be FEMA or another agency 
that will be training local governments in dealing with 
nuclear, chemical, biological----
    Mr. Skinner. It is going to be a variety of people. FEMA 
will be, I think, more involved in just the response 
mechanisms. The Department of Justice will have a training 
role; the police departments, as far as protecting a crime 
scene, for example; I believe other Federal agencies may have 
an involvement in training. HHS may have a--be involved in 
training the locals and States to recognize what type of 
chemical they may be dealing with, and that type of thing, so 
it is going to be a variety of people that will be providing 
the services.
    Ours will be how do we develop a command and control 
operation to respond to the consequence of what happened.
    Mr. Weldon. Well, I want to thank each of our witnesses. 
The hearing is in recess until 1, when we have the third panel 
coming in.
    [Whereupon, at 11:30 a.m., the subcommittee was recessed, 
to reconvene at 1 p.m. the same day.]
    [Additional information submitted for the hearing record 
follows:]

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VULNERABILITIES TO WASTE, FRAUD AND ABUSE: INSPECTORS GENERAL VIEWS ON 
     NATIONAL SECURITY, INTERNATIONAL RELATIONS, AND TRADE PROGRAMS

                              ----------                              


                        THURSDAY, MARCH 15, 2001

                  House of Representatives,
Subcommittee on National Security, Veterans Affairs 
                       and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1 p.m., in 
room 2247, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Putnam, Platts, Otter, and 
Kucinich.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Kristine McElroy and Thomas Costa, professional staff 
members; Alex Moore, fellow; Jason M. Chung, clerk; David 
Rapallo, minority counsel; and Earley Green, minority assistant 
clerk.
    Mr. Shays. The Government Reform Subcommittee on National 
Security, Veterans Affairs and International Relations will 
come to order. This is a continuation of our hearing on 
Vulnerabilities to Waste, Fraud, and Abuse: Inspectors General 
Views on National Security, International Relations, and Trade 
Programs.
    We have one panel this afternoon. It is technically a new 
hearing, but we have one panel this afternoon of four people. I 
will introduce them. We had very eloquent statements by the 
Members this morning, so we won't put you through that again.
    Mr. Kucinich, do you have anything you would like to say?
    Mr. Kucinich. No, thank you, Mr. Chairman.
    Mr. Shays. We have Ambassador Anne M. Sigmund. She is the 
Acting Inspector General of the Department of State. We have 
Mr. Everett L. Mosley who is Inspector General for the U.S. 
Agency for International Development. We have Mr. Charles D. 
Smith, Inspector General with the Peace Corps. We have another 
Acting Inspector General, Mr. Dev Jagadesan, for the U.S. 
International Trade Commission.
    We will have you give your statements and then we will have 
some questions. I would now ask you to stand so we can swear 
you in.
    [Witnesses sworn.]
    Mr. Shays. I will note for the record that all have 
responded in the affirmative.
    Ambassador, you may proceed.

  STATEMENTS OF AMBASSADOR ANNE M. SIGMUND, ACTING INSPECTOR 
  GENERAL, DEPARTMENT OF STATE; EVERETT L. MOSLEY, INSPECTOR 
GENERAL, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT; CHARLES D. 
   SMITH, INSPECTOR GENERAL, PEACE CORPS; AND DEV JAGADESAN, 
 ACTING INSPECTOR GENERAL, U.S. INTERNATIONAL TRADE COMMISSION

    Ambassador Sigmund. Thank you, Mr. Chairman. Distinguished 
members of this subcommittee, thank you for the opportunity to 
discuss the major management issues confronting the Department 
of State. However you chose to define these challenges, in 
reality they can be distilled to three things: people, 
security, and technology.
    Their successful resolution requires sustained commitment 
on the part of senior managers, strategic planning and adequate 
resources. State is making real progress in meeting some of 
these challenges.
    I would just note that Secretary Powell, in his testimony 
on the President's fiscal year 2002 budget for the Department 
of State identified these issues as his priorities. In the past 
the Department has been criticized for a reluctance to change.
    Today, the Department is aggressively re-examining itself 
with a view to finding new ways to do its job better. Let me 
take a moment to highlight a few of the Department's management 
vulnerabilities. Protecting our people, our buildings and 
information are formidable challenges. A number of our 
facilities are falling down around our ears. Many need security 
upgrades to make them safer.
    In the wake of the 1998 bombings in Nairobi and Dar es 
Salaam, the Department has moved rapidly to take advantage of 
the Emergency Supplemental Appropriation to improve security 
for our staff and buildings.
    At that time it was important to move swiftly to deal with 
the immediate threat of global terrorism. In OIG's view, the 
Department now has an opportunity to re-examine these programs 
and to tailor them to the specific security requirements of 
individual countries.
    The Department is developing an ambitious construction plan 
for replacing sub-standard embassies and renovating new ones. 
Senior managers must monitor these projects carefully if the 
mistakes of the past are to be avoided.
    While OIG does not have the resources to evaluate each 
project with the same level of scrutiny, we are in close 
consultation with the Department to focus our efforts where 
they can do the most good.
    The Department's information systems are antiquated. This 
makes them even more susceptible to penetration attempts. 
States financial systems, for example, may be vulnerable to 
cyber-base disruptions and have inadequate internal access 
controls.
    States needs the connectivity Internet provides, but must, 
at the same time, protect sensitive information. OIG plans to 
consult closely with the Department and the Congress on how 
best to address this challenge over the next few years.
    Financial management remains a significant problem for the 
Department. For the last 4 years, OIG has given the 
Department's yearly financial statements a clean opinion. This 
year State even filed its financial by the required March 1 
deadline.
    Nevertheless, there are significant deficiencies to be 
dealt with. For example, problems related to the administration 
of Foreign Assistance Programs. The Department is keenly aware 
of these problems and is working with us to deal with them. OIG 
will be tracking the Department's progress in addressing these 
questions.
    Another important management challenge is Chief of Mission 
authority. As the President's representative, the Ambassador is 
responsible for the direction, coordination and oversight of 
policy and programs for his country. Whether the issue is 
intelligence operations, foreign assistance or law enforcement 
activity, including narcotics, the buck stops at the 
Ambassador's desk.
    In a growing number of our embassies around the world, 
State operations are dwarfed by the aggregate of new U.S. 
Government players in the international arena. Yet, the 
Ambassador has responsibility for coordinating and directing it 
all.
    OIG believes that we need to find more effective ways to 
empower our Ambassadors so that they can do their jobs.
    With respect to strategic planning, the Department has made 
some progress. However, OIG believes that the Department needs 
to develop overall priorities for its strategic goals and to 
devise a better process for linking resources with these 
priorities.
    Recruitment, retention, and professional training for 
Department Foreign Service and Civil Service employees are 
critical issues. The Department's Foreign Service is 
significantly short of the numbers needed to do the job.
    While the Department is beginning to develop the work force 
planning needed, it has a long way to go in this area. These 
human resource questions directly affect the Department's 
ability to carry out its goals.
    Finally, we are also OIG for the Broadcasting Board of 
Governors. As with the Department, BBG's efforts to plan 
strategically fall short of what is required. In the post-
consolidation period, BBG and the Department are working hard 
to develop and define their new relationship. But agreement has 
still not been reached on several key issues.
    OIG strongly believes that it is in the interest of those 
organizations to find solutions to these problems and to 
resolve the remaining operational differences as quickly as 
possible.
    Mr. Chairman and members of the subcommittee, thank you for 
your time. I will be happy to answer your questions at the 
appropriate time.
    Mr. Shays. Thank you. Let me just ask you. How do you 
become an ambassador as an Inspector General? Can all these 
guys become Ambassadors, too, or do they have to work in State 
to get that opportunity?
    Ambassador Sigmund. I was an ambassador before I became 
Acting Inspector General.
    Mr. Shays. So, being State Department Inspector General 
does not make you an ambassador?
    Ambassador Sigmund. No, it doesn't carry with it. No, it 
doesn't.
    [The prepared statement of Ambassador Sigmund follows:]

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    Mr. Shays. OK.
    Mr. Mosley.
    Mr. Mosley. Chairman Hays, members of the subcommittee and 
subcommittee staff, good afternoon and thank you for the 
opportunity to appear before the subcommittee today.
    I have entered my full statement for the record, but I 
would like to give you a very brief description of what OIG 
considers the two most important challenges facing the U.S. 
Agency for International Development and actions taken to 
address these challenges.
    The top management challenge that USAID currently faces is 
improving its financial management systems so that they can 
provide accurate and timely information with which to manage.
    As you know, that is right a series of legislative 
initiatives since the 1990's beginning with the CFO Act, the 
Government Management Reform Act and the Federal Financial 
Information Act, the Federal Government is supposed to produce 
and audit financial statements each year.
    Unfortunately, USAID cannot currently meet these 
requirements. Reliable, timely information has not been 
something that USAID is able to produce at this time. USAID 
managers have therefore established programs where they can 
implement their systems and devise systems that will produce 
this type of information.
    In the past 3 years, USAID has made considerable progress 
toward resolving these problems. USAID has dedicated resources 
toward additional improvements. As a result, financial 
management procedures are no longer considered a serious 
management challenge.
    However, USAID still faces the following management 
challenges: Implementing an integrated financial management 
system; reconciling financial data; reporting accounts 
receivables; and implementing new procedures for direct loans.
    USAID's goal is to implement an entire suite of integrated 
financial management and mixed financial systems in accordance 
with requirements by the end of fiscal year 2005. To attain 
this goal, USAID established the Office of Financial Systems 
Integration to plan for and acquire USAID's financial systems. 
This office, under the direction of the Chief Financial 
Officer, is also preparing an overall plan to modernize USAID's 
legacy systems as components of its integrated financial 
system.
    USAID is in the process of implementing an integrated 
financial management system using commercial off-the-shelf 
software that will comply with Federal financial management 
systems requirements.
    Because USAID's integrated system will include legacy 
system information, USAID will need to convert and move data 
from its existing systems to the new core financial management 
system.
    This new system is being implemented in several phases. The 
first phase, development of an integrated financial management 
core system, called PHOENIX, began December 15, 2000. The 
second phase will concentrate on integrating various sub-
systems that will feed procurement and financial information 
into the PHOENIX system.
    USAID projections estimate that this phase will be 
completed by fiscal year 2001. During the third phase, USAID 
will develop a secure interface to allow the transfer of data 
from overseas missions to Washington, DC. System security will 
be enhanced through the use of risk assessments, technology 
upgrades, expanded training and data encryption. This work is 
scheduled for completion by the end of fiscal year 2002.
    The final phase will enable the capability of an integrated 
cost accounting function into the PHOENIX financial system. 
This phase is estimated for completion by fiscal year 2003.
    The OIG had identified several concerns with the PHOENIX 
implementation before its scheduled implementation on October 
1, 2000. These included: Compressed and limited software 
testing of functional requirements and a decision not to begin 
operation in a parallel mode; delays in migrating data from the 
old to the new system; an incomplete and untested contingency 
plan. Such plans would allow the system to continue operation 
in the event of serious problems; deferral of some system 
functionality; uneven attendance at user participation 
training; and no process to document showstoppers and the final 
decision to implement the system. Showstoppers are critical 
problems that prevent proper functioning of the system.
    The OID worked very closely with USAID management on these 
concerns and recommended that USAID thoroughly test PHOENIX and 
resolve any operational problems.
    To address these concerns, USAID delayed the deployment, 
took action to conduct more testing, increased user 
participation and designed a project tool to assess the 
operational readiness of PHOENIX.
    The OIG continues to monitor USAID's progress in 
implementing PHOENIX.
    Human capital management is also a major challenge facing 
USAID. Continued staff reductions and limited hiring can 
greatly affect USAID's capability to operate effectively. 
According to institutions fiscal year 1999 Accountability 
Report, USAID staffing levels have declined by 38 percent over 
the last 10 years.
    In fiscal year 2000, USAID's total work force attrition was 
225, compared with projected attrition of 180. Like all public 
and private industry, USAID is faced with a maturing work 
force. USAID's current figures show that the average age of its 
work force is about 48. This is a particularly acute problem 
for USAID because about 50 percent of the staff is Foreign 
Service. The Foreign Service officers are eligible for 
retirement at age 50 with 20 years of service versus 
eligibility of Civil Service staff at age 55 with 30 years of 
service.
    USAID currently has about 100 authorized but unfilled 
positions. Many of these unfilled positions are in critical 
high-turnover areas such as information management, financial 
management, and procurement.
    According to its fiscal year 1999 Accountability Report, 
USAID has developed new and innovative training courses 
stressing management, procurement operations and technical 
skills.
    In addition, it has delivered the framework for a new 
course in leadership and program operations. Through these 
courses, USAID plans to target certain key personnel categories 
in its effort to address its human capital capabilities.
    Accordingly, USAID was conducting training and workshops to 
train staff in strategic planning activities, information 
implementing, performance monitoring and evaluation, and 
acquisition planning.
    We have begun an audit of USAID's staff training and 
development activities to determine whether USAID provides its 
employees with sufficient training to accomplish the agency's 
mission. The scope of this audit includes USAID's training 
activities conducted during fiscal years 1999 and 2000.
    The audit is reviewing controls over the establishment of 
core competencies, using those competencies to identify 
training needs and evaluating the contribution of staff 
training and development activities.
    We will also evaluate the strategy that USAID has designed 
to deal with the rapid loss of its most important asset, human 
capital.
    Thank you.
    [The prepared statement of Mr. Mosley follows:]

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    Mr. Shays. Thank you very much, Mr. Mosely.
    Now, we will call on Mr. Charles Smith, Inspector General 
with the Peace Corps. Welcome to the committee.
    Mr. Smith. Thank you, Mr. Chairman and members of the 
subcommittee. I appreciate the opportunity to appear before you 
today. I am pleased to report that the Peace Corps is in good 
health.
    Today, there are 7,800 Peace Corps volunteers and trainees 
in 76 countries. Most volunteers serve 2-year tours. Their 
average age is 29; 11 percent are over 50; 14 percent are 
minorities; 61 percent are female and 39 percent are male.
    The newest program is the Crisis Corps. 380 former 
volunteers have served as Crisis Corps volunteers for up to 6 
months in 26 countries. Their projects principally focus on 
natural disasters, refugees, and HIV-AIDS. Soon they will be in 
Bosnia and Herzegovina working on small business and 
agribusiness and inter-ethnic reconciliation for youth.
    The Peace Corps conducts programs with former volunteers in 
the United States as well. Peace Corps fellows in the Paul 
Coverdell World Wise Schools Program help introduce children 
around the Nation to many Peace Corps countries.
    One exciting project brings this home. It is the Paul 
Coverdell World Wise Schools Water in Africa Project. In this 
interactive Web site designed for classroom use, volunteers in 
Africa tell how water is important to them and their African 
communities. It is located at www.peacecorps.gov/wws/water/
Africa.
    We direct major attention to overseas posts because that is 
where problems affecting volunteers and their work can be most 
pronounced. While the agency's decentralization limits the 
potential dollar cost of fraud, it also increases opportunities 
for carelessness and failure to adhere to agency rules and 
standards.
    Our auditors focus on rule compliance, administrative 
procedures and the role of managerial and oversight systems. 
Our evaluators focus on volunteers themselves, their training, 
jobs, living conditions, safety and security and staff support.
    Our investigators examine post safety and security, 
investigate allegations of fraud and abuse. Although 
fortunately infrequent, they also work on cases of assault, 
rape and murder of volunteers.
    Three very important developments will modernize the Peace 
Corps' communications and financial controls. They will greatly 
improve our ability to examine the agency's activities.
    First, 3 years ago the Peace Corps established in 
headquarters the International Financial Office, taking over 
many of the functions previously carried out by Embassy 
Financial Officers.
    Second, a year ago the Peace Corps began migrating to a 
standard personal computer network system through a contract 
with a private firm. It has completed domestic migration and 
will begin overseas installation this year with completion in 
fiscal year 2004. Our work in this area will include 
implementing the requirements of the Government Information 
Security Reform Act.
    Third, by the end of this fiscal year, the Peace Corps will 
implement a new financial management system. It will modernize 
our core accounting system and will link the overseas posts 
with the headquarters International Financial Office through 
our personal computer network system.
    We find that the Peace Corps submits better detailed 
Government Performance and Results Act plans each year. Goal 
one merges health and safety and security. We have urged that 
they be presented as separate distinct goals in the GPRA. 
Health on the one hand, and safety and security on the other.
    We are especially interested in the Peace Corps' changing 
gender profile. In the agency's first decade, approximately two 
out of three volunteers were male. Today the reverse is true. 
Almost two-thirds are female.
    Volunteers are assigned to countries where girls are not 
equally educated. Women are accorded few rights. American women 
may be harassed and possibly endangered. This suggests that the 
agency should explicitly recognize that female volunteers are 
subjected to special and increased risks.
    Through the Secure Embassy and Counter-Terrorism Act of 
1999, Congress directed that all government employees in 
overseas missions be co-located within the Embassy Compound. 
The Peace Corps believes co-location will compromise separation 
from the day-to-day conduct and concerns of foreign policy. 
This, they contend, would seriously jeopardize the safety of 
all volunteers because they would be identified as part of the 
American foreign policy for intelligence functions.
    The act includes a waiver provision and the Peace Corps is 
discussing this matter with the State Department in order to 
achieve the waivers necessary for proper Peace Corps function. 
I bring this to your attention as a high priority of the Peace 
Corps and to the safety and security measures that are part of 
the OIG's concerns.
    In closing, I would like to report that 2 weeks ago the 
Peace Corps celebrated 40 years of service. President Bush 
issued a proclamation urging all Americans to honor the Peace 
Corps's 40th anniversary on March 1, 2001. He described Peace 
Corps volunteers as exemplifying the great and longstanding 
American tradition of voluntary service. He spoke of their 
dramatic and far-reaching effect around the world.
    His proclamation continued,

    Since its inception, more than 161,000 have served as Peace 
Corps volunteers in 134 countries. Peace Corps volunteers have 
not only helped to fill immediate and direct human needs, but 
also have helped promote sustainable long-term development in 
agriculture, business, education, urban development, health 
care and the environment.
    In many countries of the world there exists an intense 
hunger for peace, hope and opportunity, for genuine social and 
economic development that is rooted in respect for human rights 
and a belief in human potential.
    Recognizing the dignity and worth of all peoples and 
determined to help individuals help themselves, Peace Corps 
volunteers serve as our nation's emissaries of hope and good 
will. Accordingly, their generous efforts have helped to foster 
mutual understanding and respect between the people of the 
United States and the citizens of other countries.

    Thank you, Mr. Chairman and members of the subcommittee for 
the opportunity to testify today. We look forward to working 
with you and the subcommittee. I will be pleased to answer any 
questions you have.
    Mr. Shays. Thank you, Mr. Smith.
    [The prepared statement of Mr. Smith follows:]

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    Mr. Shays. Mr. Jagadesan, welcome to the committee.
    Mr. Jagadesan. Mr. Chairman and members of the 
subcommittee, thank you for the opportunity to testify today to 
discuss the major management and performance challenges facing 
the International Trade Commission.
    A brief introduction of the agency is needed for background 
purposes. The ITC is an independent, quasi-judicial, Federal 
agency with a wide range of trade-related mandates. The ITC has 
six commissioners appointed by the President and confirmed by 
the Senate.
    In fiscal year 2001, the agency had a $48.1 million 
appropriation. Approximately 73 percent of the ITC's budget is 
for personnel, 12 percent for space rental, 8 percent for 
contract services and 7 percent for other support.
    The agency does not expend any of its funds for grants or 
other non-operating expenses. The fiscal year 2001 staffing 
plan consists of 390.5 permanent positions and 11 term 
positions. The agency rents one building at 500 E Street, SW.
    The major management challenges currently facing the ITC 
are: Human capital management, performance management, 
information resources management and improving business 
processes.
    In regard to human capital management, the agency's work 
force demographics are in line with the rest of the Federal 
Government. Thus, in the near future the ITC will need to 
replace the knowledge and skills of a large percentage of its 
work force.
    For example, in calendar year 2006, 31 percent of the ITC's 
current non-supervisory employees and 50 percent of the ITC's 
current supervisory employees will be eligible to retire.
    On the positive side of this trend, this presents a 
significant opportunity for management reform in the next few 
years. For example, this affords the ITC a choice not to 
replace some retiring supervisors as a part of any management 
reform efforts.
    Possibilities for reform include moving more toward using 
multi-disciplinary teams instead of vertical management 
structures and more direct alignment of its organizational 
structure with its strategic operations.
    The second management challenge is to go beyond 
performance-based management as a goal and toward performance 
based management as an actual day-to-day management culture 
that is interwoven into all aspects of its operations.
    There appears to be more recognition on the part of ITC 
management that if properly implemented performance management 
can contribute to a more effective, more results-oriented 
agency.
    The ITC has moved from GPRA being a paperwork exercise to 
fully embracing the concepts of performance-based management in 
certain areas such as performance budget. Clearly the ITC is 
improving the quality of its performance management as it 
learns from its previous efforts.
    Performance management presents a challenge to the ITC 
because of the agency's quasi-judicial functions, which do not 
readily fit into the GPRA mold.
    Information resource management is a major challenge for 
the ITC because of the rapid evolution of IT and the 
significant cost of IT. IT solutions bring about new 
opportunities as well as new security issues. In many areas, 
the agency has been able to leverage IT opportunities.
    The challenge is to adequately define its future IT 
requirements and to effectively manage the acquisition of 
hardware and software to meet those requirements. Recently the 
ITC has begun to implement some management reform in this area.
    In line with an OIG audit recommendation, the agency has 
agreed to establish a Chief Information Officer position that 
will elevate the priority and attention given to IT.
    Most importantly, the CIO may be able to further improve 
the management of the agency's limited IT resources as well as 
improve business processes with the proper application of IT.
    Improving its business process also presents a major 
management challenge for the ITC. Current business processes 
are still largely paper-centric in regards to receiving public 
filings and dissemination of information inside and outside of 
the agency.
    For example, the ITC currently does not accept electronic 
filings. However, the agency is working to add this service, 
which is an important part of its GPEA plan.
    Additionally, while ITC reports are published on its Web 
site, the ITC continues to expend significant resources to 
print and distribute hard copies of its reports. While some of 
these paper-centric processes such as electronic filing require 
additional investments to improve, a significant amount of 
paperwork reduction could be achieved without any additional 
investment.
    The challenge here is to critically self-evaluate ITC's 
business processes to improve them in light of advances in IT 
instead of merely applying IT to existing business processes.
    We note that the ITC, if benchmarked against other Federal 
agencies would be an upper echelon agency in terms of 
efficiency of its business processes, however, we maintain the 
appropriate benchmark should be the private industry which 
provides a higher standard to achieve in improving ITC's 
business processes.
    Once again, thank you for the opportunity to testify this 
morning. Mr. Chairman, that concludes my oral statement.
    Mr. Otter [assuming Chair]. Thank you, Mr. Jagadesan.
    [The prepared statement of Mr. Jagadesan follows:]

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    Mr. Otter. The importance of this panel coming before the 
subcommittee this afternoon, I think, is demonstrated a great 
deal by the testimony that they have just given.
    Being a participant in that world theater, I have been to 
all 42 countries as a businessman, but also as a politician 
because as Lt. Governor of Idaho, I led many trade delegations. 
But I spent most of my time working in the field in an effort 
to build business in foreign countries.
    So, I am getting off the hook right now. Here comes our 
chairman. Well, I am still at the bottom of the food chain 
here.
    Anyway, I just wanted to say that I as a participant, both 
as a businessman in the world, and my company was the one who 
supplied MacDonald's all over the world. I can tell you how 
important it was when I went to work for the company that 
supplied french fries to MacDonald's, how important our image 
was around the world.
    The State Department is very important from that standpoint 
and how that country feels about us and how we feel about that 
country. The first one we put in was in Canada. That was a 
drop-dead success. The last one I remember participating in in 
the open house was next door to the Kremlin, which we didn't 
think you would ever see, the largest symbol of capitalism, the 
Golden Arches, casting a shadow on the wall of the Kremlin. So, 
that was very important.
    USAID, Mr. Mosley, brings that image to the ground with the 
development, with the seeking of opportunities, fulfilling 
peoples' dreams in these foreign countries, sometimes through 
the eyes of experts from the United States. It is terribly 
important.
    I work with farmers in order to get through USAID, to get 
them to build farming communities and eventually processing 
plants so that we could utilize their renewable resources for 
the business that we wanted to build in those countries.
    Certainly, the Peace Corps continues to offer, not only on 
an academic level, but I think equally important, on a level 
that makes a community of the world for us from many different 
aspects. Some of the programs that the Peace Corps has taken 
on, I think, Mr. Smith, have done us proud and done us well in 
the world.
    Of course, finally, Mr. Jagadesan, your organization has 
continued to operate on a very important level simply from the 
standpoint that it fills out the need that is required around 
the world.
    So, with that, I would probably turn my attention, Ms. 
Sigmund, to the image that we want around the world. One of the 
images that I want around the world is that I don't necessarily 
want to be the toughest kid on the block, although most people 
would suggest my nickname, ``Butch,'' would suggest that.
    But I do know that we have to be strong and act with that 
strength to confirm the values that we have and the values that 
we built. I don't want to be part of the huddled masses. I 
don't want to be afraid to walk the streets of these foreign 
countries where we have an opportunity to engage, not only in 
keeping the peace, but also in expanding market horizons and 
value horizons.
    So, tell me a little bit more, if you would, about how not 
only brick and mortar FE and I know brick and mortar and fences 
and all that are important FE but it seems to me that the image 
and the attitude is equally important.
    If we build the right image and the right attitude, it 
seems to me, maybe the brick and mortar isn't as necessary as 
we may think it is.
    Ambassador Sigmund. I agree with you, Congressman. One of 
the challenges for the State Department and its embassies 
overseas is to meet the new needs of Americans working and 
traveling overseas.
    Embassies become advisors, consultants, sources of 
protection and safeguard for Americans who are trying to pursue 
a variety of interests overseas.
    I think image is terribly important and with the 
consolidation of----
    Mr. Otter. Excuse me. I apologize.
    Ambassador Sigmund. No, that is all right. Am I too loud or 
not loud enough?
    Mr. Otter. No. I was trying to find out if I am done. I 
don't know all the rules here yet.
    Mr. Shays [resuming Chair]. Let me just say, when we have 
two or three Members we just go on 10 minutes or so. We are not 
as strict unless we have more Members. So, you are doing fine.
    Mr. Otter. Thank you.
    Ambassador Sigmund. Image is very important. With the 
consolidation of USIA with the State Department there has been 
a recognition that public diplomacy which can contribute to a 
positive image for the United States overseas can advance our 
interests and our foreign policy goals is going to be more 
carefully grafted to the development of policy and its 
implementation.
    I think one of the things that is detrimental to our 
embassy overseas is the often shabby, dilapidated state of our 
embassies. Not only are they eyesores in many cases, but they 
are not safe places to work.
    The Department has recognized this and is developing a 
construction plan that will address some of these issues. But 
it is going to require sustained commitment on the part of the 
Department and it is going to require a partnership with the 
OIG to identify problem areas before they become costly 
mistakes.
    Mr. Otter. Mr. Mosley, I am very aware of many of the good 
things that USAID has done mostly in a physical sense, the 
construction, if you will, the building of programs and those 
sort of things.
    I served under President Reagan for 17 months as sort of an 
ambassador-at-large at the U.S. Task Force on International 
Private Enterprise. Resulting from that, we brought to Congress 
a report called the Andres Report because it was chaired by 
Dwayne Andres of Archer, Daniels Midland.
    I brought the agricultural aspect, I felt, coming from 
Idaho, to that. I found an alarming thing, a thing that sort of 
alarmed me. USAID was looked on more as a universal or an 
international, I guess I should say, ``welfare agency'' as much 
as it was looked on in some of the countries and invited in as 
a welfare agency rather than as one that was there to really 
establish not only the brick and mortar of private enterprise, 
but more importantly the concepts, the idealism of private 
enterprise, of market discipline and those kinds of things.
    I know that the Inspector General, when the Inspector 
General looks at things, it is easy to assess the value and the 
effectiveness of brick and mortar. It is a little more 
difficult the more esoteric, but the esoteric in this case, and 
especially your case, is a lot more important.
    I would like to have an expression of how you assess that, 
the more esoteric, the image of whether we are there for 
welfare purposes. Let me speak directly to a couple of 
instances. When I was in Turkey, in an operation just South of 
Izmir, USAID was very, very effective, because the Turks wanted 
free enterprise.
    When I was in Manila, I saw just the opposite. They were 
sort of there as a welfare agency rather than an agency that 
was going to leave a foundation, not only of concrete, but also 
of a belief that the marketplace should be the ruler.
    Mr. Mosley. You are absolutely right, Congressman. USAID 
has to be more than just a welfare agency. I think the agency 
has embraced that fully over the last several years. The agency 
is working toward what is considered to be sustainable 
development, whereas you go into a country and not only do you 
help them out of a situation that they are in, but you help to 
provide, where they have the technical abilities, to work and 
sustain themselves once the U.S. Agency for International 
Development has moved on to some other countries.
    Hopefully, there will be something called graduation by 
these countries. The image of the U.S. Government is never a 
problem as long as people understand that the Agency for 
International Development is a part of the U.S. Government.
    I think they are doing a lot of things these days. For 
example, in some of the micro-enterprise programs where they 
help people start businesses, including small businesses, help 
them manage those businesses and move on and they grow to 
graduate from the need to have AID programs.
    In addition to that, the Office of the Inspector General is 
involved in that same process. We work with a lot of the 
supreme audit institutions around the world and those are 
comparable to the General Accounting Office in the United 
States.
    The agency provides funds to those supreme audit 
institutions so they can go to training, they can learn what 
the requirements are. We provide OIG the technical support to 
help them learn the standards and learn how to audit the 
dollars that come from not only the U.S. Agency for 
International Development, but all the U.S. Government agencies 
as well as other donors into their countries, help them account 
for those dollars and be able to report and assure that the 
funds went to accomplish what their intended purposes were. 
That, we consider, to be sustainable development.
    Mr. Otter. Thank you, Mr. Mosley. I would agree.
    I would like to recognize the presence of Congressman 
Platts, who just arrived.
    My time is up and so I will turn it over to the ranking 
member, Mr. Kucinich.
    Mr. Kucinich. Thank you very much, Congressman Otter and 
thank you, Mr. Shays, and members of the committee.
    First of all, I want to welcome all the Inspectors General 
to his hearing. I look forward to working with each and every 
one of you in my capacity as the ranking Democrat.
    I am looking at the prepared statements here. There are a 
couple of questions that I have beginning with Mr. Mosley. On 
page 2 of your prepared statement you talk reports identified 
approximately $87 million in questioned costs or funds which 
could be put to better use.
    Would you be able to provide this committee, with the 
permission of the Chair, with that information in terms of what 
you are talking about in terms of those costs?
    Mr. Mosley. Yes, sir. I certainly could.
    Mr. Kucinich. With respect to page 20 of your very 
comprehensive statement where you speak of accountability in 
the international environment, which I think is a principle 
that has to apply across the board to government everywhere, 
and that, of course, is the nature of this committee, you speak 
of the serious management challenge and its vulnerability to 
fraud and corruption.
    You illustrate it by speaking about this publication by 
Transparency International. In it you cite that there are 36 
countries in this report that have been getting assistance who 
have a rather low rating in terms of issues relating to fraud 
and corruption.
    Could you provide a list of those countries and also, with 
the permission of the Chair, if you have such a list available, 
and I imagine you do, of what the major challenges are in those 
countries?
    Mr. Mosley. Yes, sir. I could certainly provide that. In 
addition to that, if you would like, we have established what 
we call a fraud awareness program where we are in those 
countries. We assess the vulnerabilities at an early point, 
when AID goes in to start a program operation. Then we give 
them intelligence in terms of contractors or others who have 
had problems in the past.
    We provide our Fraud Awareness training courses to the 
government officials, to the AID officials, the contractors and 
grantees so that they know what things to look for where there 
might be problems and we make sure they are advised of how they 
can advise us when there are problems and we can then followup 
to determine where there is a need for an investigation.
    I could also provide you a copy of our Fraud Awareness 
Program that we put together.
    Mr. Kucinich. Thank you.
    This question would be for Mr. Jagadesan. You mentioned in 
your background material that was provided to this committee 
with respect to the description of the powers of the ITC, its 
broad investigative powers on matters of trade and its 
adjudicative role in making determinations with respect to 
unfair trade practices.
    I am new to this subcommittee, so I wonder if you have any 
kind of publication where you have listed or you have a flow 
chart available of the unfair trade practices that are 
currently under investigation country by country.
    Mr. Jagadesan. I am confident I could provide that to the 
committee.
    Mr. Kucinich. I am particularly interested in what is going 
on with respect to the dumping of steel. I come from a 
district, Mr. Chairman, that is being decimated by steel that 
is being dumped. It is costing us thousands of jobs. This is in 
violation of the trade laws.
    Notwithstanding whether an administration asks for an 
action under Section 201 of the 1974 Trade Act, I would like to 
know what you have in the pipeline with respect to active, if 
you can do that. Because most of these are generated, I think, 
by public process. Am I correct?
    Mr. Jagadesan. Yes.
    Mr. Kucinich. I would appreciate it if you could provide 
that information.
    Mr. Jagadesan. Sure.
    Mr. Kucinich. That is it. Thank you, Mr. Chairman.
    Mr. Otter. I would ask that the reports or lists that were 
requested by the ranking member, that you would supply him FE 
you meant that for the permanent record for the committee?
    Mr. Kucinich. I would like to have a chance to look at 
them, with permission of the Chair, of course. I am not working 
unilaterally on anything. I think it would be valuable for the 
committee to receive it.
    Mr. Otter. I would request that it be made part of the 
permanent record of the committee.
    Mr. Shays. Thank you, Mr. Otter. Actually, it is probably 
fitting that you have control of the floor right now because I 
have to confess I have a blatant conflict of interest when it 
comes to Mr. Smith, being a former Peace Corps volunteer and 
given that my wife works in the World Wise School Program.
    So, I have this deep affection for the Peace Corps and it 
is hard for me to imagine the Peace Corps could do anything 
wrong, that they would even need an Inspector General.
    I was fascinated by your testimony, I wasn't here, but your 
written testimony that the mix of male to female was 60-40 and 
now it is the other way around with 60 percent of the 
volunteers being women.
    I would say at first pass, and I don't mean this 
facetiously in any way, but based on my experience that some of 
the best volunteers were women. I am in awe of the women who 
could be in some of the most difficult places in the world and 
do so well.
    In fact, I almost have a standard policy that if a Peace 
Corps volunteer, female, comes and is looking for a job, I hire 
her because I know that she would be extraordinarily competent.
    But it does raise some interesting questions as it relates 
to the kinds of countries we are going into. I wonder if you 
could just speak to that. A number of the countries we are 
going into do not always treat women with the same equality 
that they would treat men. I am wondering if that is something 
you are looking into and I am wondering if that is something 
the women know about before they join the Peace Corps.
    Mr. Smith. First, I would draw to your attention that this 
proportion between men and women is tending more and more 
toward more women. This is what we see on college campuses 
today.
    Mr. Shays. Do you mean just in terms of the number of 
people who go to college?
    Mr. Smith. Yes. I think it is like 55-45 now in colleges. 
Again, it is growing the direction of more women. I think that 
is reflected in the Peace Corps. I expect that the Peace Corps, 
will it is 61 percent now, over the next few years we will be 
moving up toward 70 percent.
    At that point it does seem to me that Peace Corps 
management should be asking, first one question. The question 
is: What would I do differently if the Peace Corps were all 
female? Is there anything that I would change in the way it 
operates. I think the answer would be yes. I think that there 
would be very explicit changes made, perhaps, in the medical 
services.
    They would look much more closely and explicitly at the 
security questions and the safety questions facing women. The 
countries that the Peace Corps is in, there are many countries 
where it is difficult for women. They are out in villages and 
so forth and they are harassed. Many of these issues, of 
course, come through our office. So, it is highlighted more 
from the point of view that we bring to it.
    Also, the Peace Corps, as part of its training, has 
training for women on how to deal with these cultural aspects 
of working in countries that are quite different from ours. 
They deal with questions of dress and demeanor, of where 
volunteers live, whether they live with families, for example, 
or alone.
    So, there are many things that they really are looking at. 
I think it needs to be looked at even more.
    Mr. Shays. Now, I am sorry to deal with something I am more 
personally involved in, but let me deal with this first. We 
love the State Department interaction, but we didn't want to be 
part of the State Department.
    When we lived in a village, when we spoke their language, 
we didn't want them to feel that we were an extension of the 
government, though we were proud as can be to be Americans 
there. Congress has legislated that during times of crisis, 
Ambassador, we need to bring people into the embassy or into a 
safe haven.
    Do we have that same requirement for Peace Corps 
volunteers?
    Ambassador Sigmund. The State Department understands that 
the Peace Corps is unique and that its ability to function 
effectively often requires a certain amount of psychological 
and physical distance from the Chancery and the people working 
therein.
    The coordination between the Peace Corps Director and the 
Ambassador is always very close. The safety of the volunteers 
is paramount.
    Mr. Shays. Do you technically need a waiver, though, to 
ignore the mandate of Congress?
    Ambassador Sigmund. I am not sure.
    Mr. Smith. With respect to the new building program, the 
Anti-terrorism Law? It is my understanding there needs to be an 
explicit waiver.
    Mr. Shays. You see, if you were in Congress, you would have 
asked if the gentle lady would yield.
    Mr. Smith. Excuse me, Ambassador.
    Mr. Shays. I would never interrupt an ambassador. Why don't 
you finish, Mr. Smith? I am just having fun.
    Ambassador Sigmund. I am sorry, Mr. Chairman, I am not as 
familiar as I should be with this.
    Mr. Shays. I am not that familiar either. It was just 
raised and so I guess it is something we need to look at. But 
your point has been that the State Department has traditionally 
been very conscious of the distinctions of that.
    What I am hearing from your testimony, Mr. Smith, your 
written testimony, is that the possibility of needing some kind 
of waiver to make sure it is fairly clear that there should be 
a little more discretion there. Is that correct?
    Mr. Smith. Yes, and that these waivers should be looked at. 
But, granted, I would think in all cases, and perhaps placing 
some review on the Peace Corps as to how they are handling the 
security requirements they face.
    But, it would be very dangerous in the Peace Corps to have 
volunteers coming in and out of the embassy and being watched 
by the intelligence services of the host countries, that they 
will be identified there.
    Mr. Shays. Are you a former Peace Corps volunteer?
    Mr. Smith. I am, yes, sir.
    Mr. Shays. You speak like one.
    Mr. Jagadesan, let me ask you a question. You are a new 
party to our oversight. We wanted very much to have that 
oversight because we realize that trade is very much involved. 
We are getting involved in chemical and biological agents and 
with biological agents, we have to look at what businesses are 
doing. We have trade agreements between countries.
    There is a whole host of issues that relate to our 
committee. So, it is delightful to have the commission be a 
part.
    You are a fairly small entity. How many basic employees are 
we talking about with your total jurisdiction?
    Mr. Jagadesan. Our fiscal year 2001 staffing plan has 390.5 
permanent positions. But I think we are at somewhere in the 
360's of permanent employees on board.
    Mr. Shays. What I meant was your total oversight for the 
commission.
    Mr. Jagadesan. Currently, I think it is about 360.
    Mr. Shays. OK. So, it is fairly small.
    Mr. Jagadesan. Yes, we are small.
    Mr. Shays. So, your office is about how large?
    Mr. Jagadesan. Three point five staff, but actually three 
on board.
    Mr. Shays. How many years have you been doing this?
    Mr. Jagadesan. I have been counsel for about 3\1/2\ years. 
I have been in the Acting Inspector General for about 2 years.
    Mr. Shays. OK, so you have had some history here. Where 
would be the area where you have had the biggest disagreement 
with the commission where they are the least receptive to your 
suggestions and your recommendations and your findings?
    I am going to ask each of you that question, but you get it 
first.
    Mr. Jagadesan. To be honest, we have not had very 
significant disagreements. Where we have, we have been able to 
come to FE I wouldn't say ``compromise'' FE but come to an 
understanding.
    Mr. Shays. Would you give me an example?
    Mr. Jagadesan. One of our most recent recommendations was 
that the commission should establish an office of CIF.
    Mr. Shays. Did you say CFO?
    Mr. Jagadesan. CIF, Chief Information Officer.
    Mr. Shays. OK.
    Mr. Jagadesan. There were significant discussion amongst 
the Commissioners and the office directors on whether that was 
a good recommendation. Ultimately, they have decided that it is 
a good recommendation and they intend to implement it.
    Mr. Shays. When do they intend to do that?
    Mr. Jagadesan. Well, right now, sir, they have decided that 
the most appropriate level would be a Senior Executive Service 
position. For the agency to obtain a Senior Executive Service 
position that is allocated by OPM, they have sought the 
approval to have an additional position.
    Mr. Shays. When would they do that?
    Mr. Jagadesan. My understanding of it is that it has been 
sent to OPM for approval.
    Mr. Shays. OK. When did you end up with this dialog? When 
did you first make the recommendation?
    Mr. Jagadesan. Probably about a year ago.
    Mr. Shays. Maybe a little longer than a year ago, probably; 
right?
    Mr. Jagadesan. It is not in the recommendation that is over 
a year old yet. It is not in that category.
    Mr. Shays. Mr. Chairman, if you don't mind, if I could just 
go through each of them and then we will go back.
    Mr. Otter. The gentleman has the floor.
    Mr. Shays. Mr. Smith, what would be the biggest area where 
you have made recommendations and haven't had a receptive 
audience?
    Mr. Smith. I would point to two areas. One is when we have 
made recommendations about the weaknesses in the actual 
programs, what volunteers do. We have had some resistance from 
the management staff.
    Mr. Shays. I am not clear. Where you had what? I am sorry.
    Mr. Smith. When we have made recommendations about the work 
of volunteers, we have found volunteers, in our view, 
inadequately employed.
    Mr. Shays. OK. So, there have been occasions where you have 
seen a volunteer and you are saying, listen, they are there but 
they are not being fully utilized.
    Mr. Smith. Exactly.
    Mr. Shays. I know from my own experience that we saw that 
happening. We almost became an instrument for the government to 
say they had seven volunteers here. Sometimes they didn't want 
to move them from one district because they didn't want to 
offend the country. That kind of thing still happens?
    Mr. Smith. Sure it does. We have had some resistance from 
the management to change that. The other area is that when we 
have found on a few occasions that, in our judgment, the posts 
were not prepared to receive new trainees and we have 
recommended that they not send a training group, which would 
be, let us say, 30 trainees going into a country.
    We have had some difficulty in their accepting that.
    Mr. Shays. Well, I could say that problem has been there 
for years. You answered my next question.
    Mr. Mosley.
    Mr. Mosely. Well, Mr. Chairman, I think probably the most 
significant area where we have had disagreement is our 
involvement in the establishment of the financial management 
system. Their first attempt at setting up an integrated 
financial management system was call the New Management System.
    We tried to be involved very early. We were first resisted 
and they did not want to provide us information in terms of 
systems documentation. Their reaction was, ``We are not ready 
for review.''
    We were trying to explain, ``We need to review now and let 
you know the things you should be aware of before you make 
mistakes.''
    They basically did not listen to us. That system was a 
failure. It received a lot of attention up here in Congress and 
they were severely criticized.
    With the current system that they are implementing FE 
basically, their response was that they didn't think that we 
were qualified to give them recommendations in a technology 
area FE we were able to show them that we could do those 
reviews and provide solid information, that we did have the 
expertise on staff to provide that information.
    With the current system they are implementing they work 
with us very closely. As I have indicated, they even backed off 
of their initial implementation date for the PHOENIX system.
    Mr. Shays. I have gone almost 15 minutes, so let me just 
quickly inquire of Ambassador Sigmund.
    Ambassador Sigmund. Let me first say that the OIG's 
relationship with the Department, I would characterize it as 
critical constructive rather than contentious. The Department's 
record of implementing our recommendations is a good one.
    Where the Department hasn't implemented those 
recommendations tends to be areas where there is a lack of 
adequate resources. That being said, I would have to say that 
our biggest frustration has been with the Department's slowness 
to understand the importance of strategic planning.
    The Department has been traditionally reactive. The need to 
develop plans for long-term construction, the need to develop 
work force plans, the Department has been slow to understand 
the importance of these issues.
    Mr. Shays. I know the gentleman has to leave. Do you have 
any questions before you have to go?
    Mr. Otter. I just have one for Mr. Mosley. Let us go back 
to my statement relative to sometimes I felt like 
philosophically we were exporting more welfare than we were 
true business principles under USAID.
    Is there anything in your investigations and oversight that 
would tell you that we do have a major problem there and that 
we should correct that? Then, how should we do that?
    Mr. Mosely. I can't say that we have anything right now 
which would indicate that. I think the programs the agency has 
moved toward, Democracy in Government, is trying to help the 
people in those foreign countries try to set up democracies and 
improve their operations so that they are sustainable. I think 
that has changed tremendously over the years. So, we do not 
have anything to indicate that is a problem at this time.
    Mr. Otter. I see. I have one followup with that, you know, 
USAID, through the World Bank and many other organizations and 
then within their own budget generally supplies capital that 
can become available for startup entrepreneurs. What is the 
rate of success under USAID?
    Mr. Mosely. The rate of success in those programs is very 
high. I can't give you a percentage, but based on our audit 
work, they normally make loans to groups and those groups 
monitor themselves and each other. There is embarrassment if 
they fail.
    Their rate has been very high in terms of success. There 
have been very few failures.
    Mr. Otter. Is there an area of the world that has a higher 
rate of failure?
    Mr. Mosely. I can't answer that at this time, sir. I could 
find out and let you know.
    Mr. Otter. That is all I have, Mr. Chairman.
    Mr. Shays. Thank you very much. I appreciate your help 
today.
    Mr. Otter. Well, you are quite welcome.
    Mr. Shays. I think I have about ten more minutes of 
questions.
    Ms. Sigmund, let me just say this. I am very impressed with 
the young State Department employees that we have. I think I 
actually applied and didn't get accepted. I applied to CIA and 
the State Department and I didn't make the grade.
    Ambassador Sigmund. It was our loss, sir.
    Mr. Shays. You mentioned unfilled positions. You didn't say 
``unfilled positions.'' You actually just said you had a 
shortage of staff. Is that because we don't create the 
positions, we aren't funding the positions or we can't hire for 
positions that are out there?
    Ambassador Sigmund. In the mid-1990's, for budgetary 
reasons, the State Department stopped hiring young officers.
    Mr. Shays. Even though they had the slots, but they didn't 
have the dollars.
    Ambassador Sigmund. They have what are called the ``FTEs'' 
but they didn't have the dollars. They chose to deal with 
reduced levels by not hiring. That clearly has been a mistake 
and it has had an impact on a number of our operations 
overseas.
    Mr. Shays. Give me an example of a negative impact.
    Ambassador Sigmund. Well, an impact on our consular 
operations, for example. Traditionally, young officers or new 
officers come in and their first assignment is with consular 
services. A number of our positions have gone unfilled overseas 
because we have not had the officers to put in those positions.
    The Department understands its mistake, however. In the 
last year or two the Department has aggressively started 
recruiting and is trying to develop the kind of work force 
planning it needs to ensure that doesn't happen again.
    Mr. Shays. But there has been talk, there was a suggestion 
made, and I don't know who made the suggestion, so I don't want 
to attribute that, that in some countries we combine and have 
regional offices or at least regional administrative offices.
    Is that something you have given thought to?
    Ambassador Sigmund. We have given thought to it. In fact, 
as a result of some of our work, regional consular positions 
have been established. One most recently is for African posts 
where in fact there is a shortage of consular offices to staff 
sections in those embassies.
    Clearly, looking at how we might use regional 
administrative capabilities is something that the Department 
needs to consider and in fact has begun to consider. For 
example, administrative services for the new independent states 
is provided on a regional basis out of Germany.
    I think we are going to be seeing more and more serious 
study of just what might be handled regionally in order to free 
up space and positions in individual bys.
    Mr. Shays. Let me just ask these questions because they are 
questions that particularly staff and I want to make sure are 
on the record.
    Is the State Department exercising proper management 
controls over funds Congress has allocated for embassy 
upgrades?
    Ambassador Sigmund. Yes. Their record has been very good. 
We have looked into that issue.
    Mr. Shays. How do you think the U.S. overseas presence 
should be restructured to address security operational and 
foreign policy interests?
    Ambassador Sigmund. Well, I think one thing that needs to 
be done is to increase the Chief of Missions authority to 
direct and define what agencies will be working and operating 
within his country. He is charged by the President, as his 
representative, to provide oversight and policy direction. He 
has the responsibility. He needs the authority to run the 
operations and agencies.
    Mr. Shays. We have visited a number of embassies. At first 
I was surprised by the number of different operations we had. 
When we spoke to the employees, not in the State Department but 
in the State Department domain, about utilizing facilities they 
felt their first allegiance was to FE if they were Commerce, 
the Secretary of Commerce. They did acknowledge that the 
Ambassador has tremendous oversight, but their first response 
was to their long-term employer.
    Are there opportunities that exist to reduce overseas 
staffing at some posts to reduce costs and security 
vulnerabilities or is that just simply not possible, not 
likely?
    Ambassador Sigmund. Clearly, I think, because it is a 
security issues as well as a resource issue, the size of our 
overseas missions needs to be examined. The work done in that 
area is only very preliminary.
    Frankly, it is a challenge to get other agencies working in 
the international arena to work with the State Department to 
right size our embassy.
    Mr. Shays. Mr. Mosley, we covered most of the issues that 
we wanted to ask about. I may come back on something separate. 
But let me to go Peace Corps and just ask this question.
    How does the 5-year rule affect the agency and the Office 
of Inspector General? The 5-year, I think, is unique to the 
Peace Corps. You work for 5 years and then you are out.
    Mr. Smith. Yes, the 5-year rule sets a 5-year limit on 
employment.
    Mr. Shays. You can come back 5 years later, right? But you 
can't work continuously for more than that?
    Mr. Smith. That is right. You can't extend it every 5 
years. There are exemptions to that. You can get a 1-year, 
additional 1 year or an additional 2\1/2\ years. It is a 
maximum of 8\1/2\, but that 2\1/2\ year extension is very 
limited.
    What it does to the Office of Inspector General is that it 
makes it difficult to develop the expertise that you need that 
you get over time with familiarity with the operations of an 
agency.
    Mr. Shays. You come under that. You are not under the 
Inspector General?
    Mr. Smith. The Inspector General Act in Section 8(d) 
provides for the designated Federal entity, OIGs, that the 
personnel policies and rules that the agencies where they work 
apply to them. It was in response to the fact that Title V 
didn't apply to all of the new agencies being brought in by the 
1988 Amendments to the Inspector General Act.
    So, for us, we have a 5-year limit. If I want to extend 
someone beyond that for 1 year or 2\1/2\ years, I need to go to 
the Director of the agency and ask. So, my independence is 
limited in that respect.
    Mr. Shays. But you could utilize, you can find very 
competent employees from other offices who can move in, who 
have had experience. They just wouldn't have had experience in 
the Peace Corps.
    Mr. Smith. From other Peace Corps offices?
    Mr. Shays. No.
    Mr. Smith. From Inspector General offices?
    Mr. Shays. Yes.
    Mr. Smith. Sure, sure. They just wouldn't have the Peace 
Corps knowledge, but they would have the IG knowledge.
    Mr. Shays. Right.
    Mr. Jagadesan, let me ask you this question: What is the 
current state of ITC's information technology systems? What 
must ITC do to modernize these systems and what are the costs 
and benefits of such modernization?
    Mr. Jagadesan. I would report that the current state is 
very good, but I think we are at a point in the commission's 
history where we can do some significant improvements that 
would affect and improve the agency dramatically.
    The issue that is going to be an impediment to this is 
going to be funding. In a broader sense it is funding how 
smaller agencies are funded in general. What I mean by that is, 
if you look at our appropriations over the last several years, 
they are pretty much in line with the pay raise.
    So, for us to embark on a significant IT project, and 
significant for our level is probably a $1 to $2 million 
project, when we come up and ask for that in Appropriation, it 
looks as though we are asking for a significant increase in our 
appropriations. It essentially makes its way to the chopping 
block pretty quick.
    But, a $1 million investment in an agency of our size can 
go a long way in improving our IT infrastructure. When you look 
at the way our budget is broken out, the bulk of our expenses 
are tied up in personnel and rent.
    So, our discretionary funds are very limited and our 
ability, even if implementing all OIG recommendations, we are 
not going to squeeze a lot of dollars out of there for some of 
these big ticket items. When I say ``big ticket items,'' I mean 
like electronic filing before the agency and things like that, 
which are really very important because some of the other 
agencies we deal with are going to be accepting electronic 
filing.
    If we are not on a par with that, for instance, an attorney 
who is filing with the Patent and Trademark Office is going to 
file his application electronically. The same supporting 
documentation may be forced to come to us on paper, which is 
really a backward step in the process.
    For instance, when we are appealing our cases to the Court 
of International Trade, we are going to be required, because of 
the way the administrators of the courts are, to file 
electronically. We may have received those supporting documents 
on paper in the first place.
    So, projects like that have significant price tags. For us 
to fund projects like that is going to be crucial in the future 
I would hope we have some creative solutions in the Congress to 
help us with that.
    Mr. Shays. Are the IGs invited to make presentations before 
the Appropriations Committee when the agencies go? Are you ever 
invited before Appropriations?
    Mr. Mosely. Most of the times we do not. I happen to be 
testifying before a subcommittee of House Appropriations next 
week on the hurricane mix activities and the use of the 
supplemental, but normally not for our budgets.
    Mr. Shays. That is interesting. I would think that would be 
of tremendous importance to the appropriators to have you all 
testify. But as a general rule the testimony you all are giving 
me is that you don't.
    Mr. Mosely, I would like to know what AID has done to 
address its recruiting and retention problems.
    Mr. Mosely. Basically, they have implemented a new program 
where they are trying to hire a lot more people. They call it 
the new entry program. They are trying to hire people who are 
not necessarily at the entry level, people with some experience 
and various skills. They are hiring people at this point. They 
put them through an extensive training program. Then they even 
send them to the field at some point on a temporary basis.
    That is what they are working on most of all. Then, from a 
Civil Service standpoint, they are going through the normal 
Civil Service rules when they are trying to hire. But it gets 
very difficult now to hire people specifically in the areas of 
the information technology and some of the financial management 
areas. That is just a difficulty that everybody is facing. It 
takes time.
    Mr. Shays. You could almost have a boilerplate for all IGs. 
You print it in your document. We just give it out to all IGs 
and they can all print it as something that is not unique to 
any agency.
    Mr. Mosely. That is correct.
    Mr. Shays. I am going to close with my specific question 
with you, Ambassador, and just ask you the same basic question. 
I realize I asked you the question if you have a problem. But I 
don't know how you are solving the problem.
    Ambassador Sigmund. In fact, we are more aggressively 
recruiting. We are also looking at retention and Director-
General Grossman has instituted some real improvements in 
making Foreign Service more attractive.
    Mr. Shays. But you have up and out. You can be out real 
quick if you have not moved up in a certain period. It is 
somewhat like the military, I guess. I met some employees in 
their early 50's who are no longer working for the Department 
and yet they are very capable people.
    Ambassador Sigmund. That is true. OIG hasn't looked at 
that. I am a Foreign Service Officer, so I guess I would have 
to say that personally I understand, if not always sympathize, 
with the up and out approach.
    It has served DOD and, I think, the State Department well 
in testing officers for both management and policy skills for 
the Senior Foreign Service.
    Mr. Shays. But think about it. We all can think of somebody 
who is ideal for that position, but not necessarily ideal for 
the position above. Yet, you lose them.
    Ambassador Sigmund. I think that the time has come for us 
to re-examine all of those sacred cows and shibboleths.
    Mr. Shays. That is something you can examine; correct?
    Ambassador Sigmund. We can examine it, yes.
    Mr. Shays. Let me just ask you, is there a question that 
you had stayed up all night preparing for that we didn't ask 
that you wish we had asked? Then ask yourself the question and 
then answer it.
    I am being, obviously, a little more facetious than I need 
to be.
    Is there a question that I should put on the record that 
you need to answer? We are going to close up, so I am just 
going to give you the opportunity to respond to any particular 
question that you really think we should have asked and you 
wanted on the record. I am asking that of all of you. Do you 
want to start?
    Ambassador Sigmund. You could have asked if we have 
sufficient to do our job.
    Mr. Shays. Do you have sufficient resources to do your job?
    Ambassador Sigmund. No, Mr. Chairman, we don't. The 
Department is about to embark on a very ambitious embassy 
construction project. We will be giving it close scrutiny, 
particularly the major building projects such as Beijing.
    The problem is that our ability to provide oversight for 
those projects is very limited.
    The other area where we are in as much disarray as the 
Department itself is in the area of information technology. We 
are dealing with the same problem of antiquated, antediluvian 
information systems that make our work very difficult.
    Mr. Shays. Thank you. Is there any question you wanted on 
the table, Mr. Mosley?
    Mr. Mosely. Mr. Chairman, I would just like to agree with 
my distinguished colleague from the Department of State. We do 
not have sufficient resources to do all the things that we 
really do need to do.
    I think the one thing that I would like to emphasize, and 
this is not necessarily the question, but we have in the Office 
of Inspector General at AID, we have embarked on a vigorous 
program of proactive activities rather than the traditional 
audit and investigative work at the end of projects.
    That has taken a lot of our resources. Yet, we still have 
to do our traditional work. So, we certainly could use some 
additional resources to do that.
    Mr. Shays. So, the traditional work gets done, but there 
are lost opportunities in some other areas.
    Mr. Mosely. There are lost opportunities simply because we 
involved early on with the programs that the agency is doing 
and trying to give them input for corrective action before the 
money is out the door.
    Mr. Shays. Mr. Smith, I realize I said that we don't need 
an IG because the Peace Corps does everything perfectly. But 
what I realize is that your job is not a gotcha, so you can 
always make an agency more efficient.
    What question should I have asked you?
    Mr. Smith. The same. There is always a resource issue. In 
our case we have a total staff of 15.
    Mr. Shays. Fifteen out of how many employees?
    Mr. Smith. We have a total of 15 staff in the IG's office.
    Mr. Shays. You are talking about how many, 7,000 plus?
    Mr. Smith. 7,000 volunteers in 76 countries.
    Mr. Shays. Yes, when you think about that, you clearly 
can't be out there.
    Mr. Smith. It is very difficult. When I started working in 
the IGs office, the goal was to visit every country in some 
fashion every 3 years. We now aim every 5 years because we just 
don't have the staff to do that.
    Mr. Shays. And once you are there, you don't have much time 
to spend, obviously.
    Mr. Smith. That is the other issue.
    Mr. Shays. You only have 15 employees?
    Mr. Smith. Fifteen employees. I have tried to hire people 
at mid and late career levels because we don't have the time to 
train people. When you have a 5-year period, you really can't 
spend that time. So, we have an excellent staff, but they are 
spread very thinly.
    The impact, I think, affects our ability to examine larger 
issues that affect the agency as a whole, particularly 
headquarters issues.
    Mr. Shays. It could have tremendous pay-back.
    Mr. Smith. I think so.
    Mr. Jagadesan. When we are fully staffed, I think our 
resources are right for the size of our agency. However, if you 
encourage Mr. Smith to take our most seasoned people, we would 
be in trouble.
    Mr. Shays. Thank you. I am going to conclude. I would just 
point out that in the back of the room we had students from, I 
think, Monroe, Stamford, New Canaan and Fairfield participating 
in the Congress Youth Leadership Council Program. They stayed 
and listened to a great deal of this, which surprised me. Some 
students come in and out.
    This is the kind of technical conversation isn't always 
interesting, though the work you are doing is fascinating.
    I thank you all for being here. Please stay in touch. You 
are our right arms. You are very important to the agencies and 
you are very important to the work of this committee. We enjoy 
the good working relationship we have with all of you.
    Thank you for what you do and for what your staff does as 
well.
    With that, I thank our recorders. We will hit the gavel and 
end this hearing.
    [Whereupon, at 2:25 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [The prepared statements of Hon. Bernard Sanders, Hon. Wm. 
Lacy Clay, and additional information submitted for the hearing 
record follow:]

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