    [House Hearing, 108 Congress]
    [From the U.S. Government Publishing Office]

      25th ANNIVERSARY OF THE INSPECTOR GENERAL ACT--WHERE DO WE GO FROM
                                     HERE?

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

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
                            AND FINANCIAL MANAGEMENT

                                     of the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCOTBER 8, 2003

                                   __________

                               Serial No. 108-110

                                   __________

           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

                                     ______

    92-126              U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                         COMMITTEE ON GOVERNMENT REFORM

                         TOM DAVIS, Virginia, Chairman
    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
    CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
    MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
    RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
    JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
    TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
    CHRIS CANNON, Utah                   DIANE E. WATSON, California
    ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
    EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
    JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
    JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER,
    NATHAN DEAL, Georgia                     Maryland
    CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of
    TIM MURPHY, Pennsylvania                 Columbia
    MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
    JOHN R. CARTER, Texas                CHRIS BELL, Texas
    WILLIAM J. JANKLOW, South Dakota                 ------
    MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont
                                             (Independent)

                           Peter Sirh, Staff Director
                     Melissa Wojciak, Deputy Staff Director
                          Rob Borden, Parliamentarian
                           Teresa Austin, Chief Clerk
                  Philip M. Schiliro, Minority Staff Director

         Subcommittee on Government Efficiency and Financial Management

                  TODD RUSSELL PLATTS, Pennsylvania, Chairman
    MARSHA BLACKBURN, Tennessee          EDOLPHUS TOWNS, New York
    STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
    JOHN SULLIVAN, Oklahoma              MAJOR R. OWENS, New York
    CANDICE S. MILLER, Michigan          CAROLYN B. MALONEY, New York
    MICHAEL R. TURNER, Ohio

                                   Ex Officio

    TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                         Mike Hettinger, Staff Director
                     Larry Brady, Professional Staff Member
                              Amy Laudeman, Clerk
              Mark Stephenson, Minority Professional Staff Member

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on October 8, 2003..................................     1
    Statement of:
        Gianni, Gaston, vice chair, President's Council on Integrity
          and Efficiency and Inspector General, Federal Deposit
          Insurance Corp.; and Barry Snyder, vice chair, Executive
          Council on Integrity and Efficiency and Inspector General,
          Federal Reserve Board......................................    62
        Walker, David M., Comptroller General, U.S. General
          Accounting Office; and Clay Johnson III, Deputy Director
          for Management, Office of Management and Budget............    16
    Letters, statements, etc., submitted for the record by:
        Cooper, Hon. Jim, a Representative in Congress from the State
          of Tennessee, prepared statement of........................    10
        Gianni, Gaston, vice chair, President's Council on Integrity
          and Efficiency and Inspector General, Federal Deposit
          Insurance Corp., prepared statement of.....................    66
        Johnson, Clay, III, Deputy Director for Management, Office of
          Management and Budget, prepared statement of...............    46
        Platts, Hon. Todd Russell, a Representative in Congress from
          the State of Pennsylvania, prepared statement of...........     3
        Snyder, Barry, vice chair, Executive Council on Integrity and
          Efficiency and Inspector General, Federal Reserve Board,
          prepared statement of......................................    81
        Towns, Hon. Edolphus, a Representative in Congress from the
          State of New York, prepared statement of...................     6
        Walker, David M., Comptroller General, U.S. General
          Accounting Office, prepared statement of...................    19

      25th ANNIVERSARY OF THE INSPECTOR GENERAL ACT--WHERE DO WE GO FROM
                                     HERE?

                                  ----------

                           WEDNESDAY, OCTOBER 8, 2003

                      House of Representatives,
    Subcommittee on Government Efficiency and Financial
                                            Management,
                                Committee on Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 2 p.m., in
    room 2247 Rayburn House Office Building, Hon. Todd Russell
    Platts (chairman of the subcommittee) presiding.
        Present: Representatives Platts, Blackburn, and Towns.
        Also present: Representative Cooper.
        Staff present: Mike Hettinger, staff director; Dan Daly,
    counsel; Larry Brady, Kara Galles, and Tabetha Mueller,
    professional staff members; Amy Laudeman, clerk; Mark
    Stephenson, minority professional staff member; and Jean Gosa,
    minority assistant clerk.
        Mr. Platts. With the belief that a quorum will very
    presently be established, we are going to begin this hearing of
    the Subcommittee on Government Efficiency and Financial
    Management, and the hearing will officially come to order.
        Twenty-five years ago this month, Congress created
    Inspectors General throughout the Federal Government in
    response to serious and widespread internal control breakdowns
    that resulted in significant monetary losses and reduced
    effectiveness and efficiency in Federal activities. Since their
    creation, IGs have been largely successful in carrying out
    their mission, reporting billions of dollars in savings and
    cost recoveries, as well as thousands of successful criminal
    prosecutions.
        There are currently 57 Inspector General offices with
    11,000 employees and a total budget of nearly $1.5 billion.
    Twenty-nine IGs are appointed by the President and confirmed by
    the Senate, and 28 are appointed by agency heads in Designated
    Federal Entities [DFEs]. Inspector General offices are
    responsible for conducting and supervising audits and
    investigations, promoting economy, efficiency and effectiveness
    and preventing and detecting fraud and abuse in their agencies'
    programs and operations. IGs serve an important function in our
    system of separation of powers. Their autonomy and independence
    provide a crucial balance between the executive branch and the
    Congress.
        In August 2002, the General Accounting Office issued a
    report that explored the options consolidating some IG offices
    and changing the status of others. GAO surveyed the IG
    community to determine how consolidation would affect
    independence, quality of work and the best use of resources.
    Today, we will look at the progress that has been made in the
    past 25 years since the IG Act was passed and what, if any,
    legislative changes are needed to help the IG community ensure
    efficiency, accountability and effectiveness within the Federal
    Government.
        We are greatly honored here today to have before the
    subcommittee the Honorable David Walker, Comptroller General of
    the U.S. General Accounting Office, and the Honorable Clay
    Johnson III, Deputy Director for Management at the Office of
    Management and Budget; and they will be part of our first
    panel.
        On our second panel we will have the Honorable Gaston
    Gianni, vice chair of the President's Council on Integrity and
    Efficiency and the Inspector General of the Federal Deposit
    Insurance Corp.; and Mr. Barry Snyder, vice chair of the
    Executive Council on Integrity and Efficiency and Inspector
    General at the Federal Reserve Board. We appreciate all the
    witnesses being with us, and we all appreciate your fine
    service to our Nation, day in and day out.
        I am now pleased to yield to the ranking member of the
    subcommittee, the gentleman from New York, Mr. Towns.
        [The prepared statement of Hon. Todd Russell Platts
    follows:]

    [GRAPHIC] [TIFF OMITTED] T2126.001

    [GRAPHIC] [TIFF OMITTED] T2126.002

        Mr. Towns. Thank you, Mr. Chairman.
        Last week, the Government Reform Committee reported out a
    resolution commending the work of the Inspectors General on the
    occasion of the 25th anniversary of the act. I strongly
    supported that resolution and am proud to be an original
    cosponsor.
        The Government Reform Committee has a long history of
    working with the Inspectors General to eliminate waste, fraud
    and abuse in Federal programs. Indeed, the Government
    Operations Committee drafted the original statute establishing
    the Inspectors General in the executive branch 25 years ago.
        The close working relationship between the Inspectors
    General and our committee is entirely appropriate. The
    Inspector General community is one of the Congress' principal
    watchdogs in the executive branch. There is much we can learn
    from each other as we work to ensure that our government
    operates in the most effective and efficient manner possible.
        The IGs have a very difficult job. They are appointed by
    the President, but report to the Congress as well as the head
    of the agency. As independent investigators within the Federal
    agencies, they are often the last person a manager wants to
    hear from. Yet, in many instances, the toughest jobs are the
    ones that need to be done the most.
        During fiscal year 2002, IGs returned over $4.5 billion to
    the Federal Government in restitution and recoveries, and their
    audits identified another $72 billion in funds that could be
    used more effectively. They also had more than 10,000
    successful criminal prosecutions. Similar accomplishments are
    made year after year. The IGs have more than proven their
    usefulness to Congress and the American public.
        The 25th anniversary of the Inspector General Act is also a
    logical point in time to examine whether any improvement could
    be made to the act. Several suggestions have been made to help
    enhance the independence of the IGs, adjust certain reporting
    requirements, and codify in statute the existing IG Council.
        I am pleased to hear that my good friend Representative Jim
    Cooper is drafting legislation on these and other issues. And I
    am ready to work with him and the chairman and anybody else
    that is concerned about this to try and see what we can do to
    strengthen the act in every way.
        On that note, Mr. Chairman, I yield back.
        Mr. Platts. Thank you, Mr. Towns.
        [The prepared statement of Hon. Edolphus Towns follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.003

        [GRAPHIC] [TIFF OMITTED] T2126.004

        Mr. Platts. I now would like to recognize Jim Cooper from
    Tennessee. Representative Cooper is a member of the full
    Government Reform Committee, and while he is not a member of
    this subcommittee, he certainly has a strong interest in
    improving government accountability and has drafted legislation
    that proposes a number of changes to the IG Act.
        I am now pleased to recognize Mr. Cooper for the purpose of
    making an opening statement.
        Mr. Cooper. Thank you, Mr. Chairman, and thank you to my
    friend Ed Towns. I appreciate your kind words and appreciate
    your letting me sit in on this hearing.
        My purpose is to try to draft consensus legislation with
    the help of the IGs themselves, with the help of experts in
    this area, and with the help of both parties in Congress, so we
    can do what we can to strengthen what is already a great
    government institution.
        The draft bill, as proposed, is called the Improving
    Government Accountability Act, and it would do several things.
    One, it would try to increase the independence of each IG by
    creating a fixed term of office and eliminating any possibility
    of arbitrary or politically motivated dismissals. Right now,
    IGs currently serve at the pleasure of the appointing
    authority, whether it is the agency they serve or the President
    of the United States. And while it is indeed rare, IGs have
    occasionally been dismissed for less than cause.
        My bill would set a 7-year term for every IG and have
    dismissal procedures for cause as is common in the private
    sector. That standard for removal would be the same one that
    applies currently under the statute for the Comptroller General
    for permanent disability, malfeasance, inefficiency, neglect of
    duty, conviction of a felony, or conduct involving moral
    turpitude. That was our best thought for really ensuring IG
    independence.
        Second, the bill would ensure that IG offices have access
    to sufficient resources from Congress. And here what we are
    thinking of is, although IG funding is ultimately determined by
    Congress through the appropriations process, IG budget requests
    are often submitted as part of an agency's overall budget
    request.
        We have heard several anecdotal reports of agencies
    punishing IG offices by dramatically shrinking or by reducing
    the IG budget; and we were thinking that it would be good for
    Congress to have copies of their funding requests sent directly
    to Congress, so we could know how much the IGs were cut back,
    and also require the President's budget to provide a comparison
    of budget requests submitted by IGs and the budget requests
    submitted by the agency involved. This provision would
    partially free the IGs from being captured by the agency
    appropriations process. And it would, I think, provide more
    transparency.
        Next, we would like to codify the current governing
    councils for the IGs, which seem to work in an excellent
    fashion, but now they are a creature of Executive order. This
    would allow dissemination of best practices on an even better
    basis and, I think, a unified institutional voice for the IGs,
    both the Presidentially and agency-appointed ones. It would
    combine both of the current councils into a single council,
    codify the council and also authorize about $750,000 a year in
    operating funds through the year 2009 to ensure their
    organization and efficiency.
        And finally my bill would improve direct access of IGs to
    Congress. Under current law, IGs submit semiannual reports to
    their agency heads, who then have 30 days to transmit the
    report to Congress. Many IGs have argued that this process
    diminishes their access to Congress and undermines their
    ability to draw attention to an agency concern. This is
    particularly true due to the filing dates for these reports
    which oftentimes, in fact, almost invariably fall during a
    congressional recess, which limits their impact.
        So what we would like to do is allow IGs to report directly
    to Congress and to bypass agency intercession. I think that
    would enable Congress to exercise its oversight
    responsibilities more effectively. And we would change the IG
    reporting dates to January 31 and July 31, when we are more
    likely to be in session.
        So, in sum, Mr. Chairman--and I appreciate your
    indulgence--we would like to applaud the IGs for their terrific
    work for the American taxpayer these last 25 years. It is
    incredible the efficiency and effectiveness of this group of
    internal monitors in these agencies. So I would like to do what
    we can, Mr. Chairman, to further enhance their ability to serve
    the American taxpayer.
        [The prepared statement of Hon. Jim Cooper follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.058

        [GRAPHIC] [TIFF OMITTED] T2126.059

        [GRAPHIC] [TIFF OMITTED] T2126.060

        [GRAPHIC] [TIFF OMITTED] T2126.061

        [GRAPHIC] [TIFF OMITTED] T2126.062

        [GRAPHIC] [TIFF OMITTED] T2126.063

        Mr. Platts. Thank you, Mr. Cooper. We appreciate your
    participation here today. I would like also to recognize that
    we have the vice chairwoman of our subcommittee, the gentlelady
    from Tennessee, Mrs. Blackburn.
        Would you like to make an opening remark?
        Mrs. Blackburn. Mr. Chairman, I have no opening remarks,
    but as always, I have plenty of questions and will just take
    advantage of the time at that point.
        Mr. Platts. We will proceed with our first panel and ask
    our witnesses for the first panel to stand and raise their
    right hands and prepare to take the oath together.
        [Witnesses sworn.]
        Mr. Platts. The clerk will note that both witnesses have
    affirmed the oath, and we will proceed now directly to
    testimony from our first panel.
        Mr. Walker, we will begin with you, followed by Mr.
    Johnson; and after the conclusion of your testimonies and Q and
    A with our first panel of witnesses, then we will proceed to
    Mr. Gianni and Mr. Snyder.
        We do have your written testimonies and appreciate the time
    and effort that went into preparing those for both members and
    staff and would ask that you somewhat limit your oral
    statements here today to about 5 minutes. We are not going to
    be a real stickler on that, because we appreciate your time and
    the wisdom you will share with us.

       STATEMENTS OF DAVID M. WALKER, COMPTROLLER GENERAL, U.S.
        GENERAL ACCOUNTING OFFICE; AND CLAY JOHNSON III, DEPUTY
        DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

        Mr. Walker. Mr. Chairman, Mr. Towns, other Members, I
    appreciate the opportunity to be here to be able to review the
    25-year experience of the IG Act. I would ask, Mr. Chairman,
    that a copy of the full statement be entered into the record so
    I can, just now, summarize.
        Mr. Platts. It will be done.
        Mr. Walker. Thank you, Mr. Chairman.
        There's no question that the Inspector General community
    has made a significant difference in Federal performance and
    accountability during the past 25 years. As indicated by their
    many reports, they have saved billions of dollars for the
    public. They have made thousands of recommendations and
    thousands of criminal and civil referrals.
        Notwithstanding the accomplishments of the past, however,
    the Federal Government as a whole, and including the
    performance and accountability community of which GAO and the
    IGs are a part, face continuing challenges to be able to meet
    increasing demand with available resources.
        One of the challenges that face us in the performance and
    accountability community today is how we can do more with less
    and how we can improve our own economy, efficiency,
    effectiveness, transparency and accountability, because I am a
    strong believer that we should lead by example, since we are
    the ones holding others accountable. It's not just GAO, but
    also the Inspectors General, whether part of the PCIE or the
    ECIE.
        Although both GAO and IGs have efforts in place to identify
    major risk and challenges within the Federal Government, there
    really is no current formalized mechanism in place for us as a
    community to carry out a strategic and integrated planning and
    coordination process, which I think is necessary in order to
    maximize the return on the collective investment in the
    performance and accountability community. There is a provision
    in current law that requires some coordination by the IGs with
    the GAO, but that has really been more ad hoc in the past, and
    it is one of the areas that I think we need to figure out how
    we can work together more in a complementary fashion for the
    benefit of not only the Congress but the American people.
        With regard to the consolidated financial audit, as you
    know, IGs have a number of different roles and
    responsibilities. One of the areas that the GAO works on with
    the IGs, among others, is in the conduct of the audit of the
    consolidated financial statements of the U.S. Government. And
    most of that is going well.
        As you know, 21 of 24 CFO Act agencies have clean opinions
    on their financial statements, while a number have internal
    control challenges and various compliance issues. But as we
    look ahead to the day where, hopefully, GAO will be able to
    initially express a qualified opinion on the consolidated
    financial statements of the U.S. Government and, hopefully,
    leading to a full opinion--I hope before the end of my 15-year
    term--the fact of the matter is, we are going to have to do
    things differently.
        There have been some issues with regard to the agency
    financial statement audits. We're going to have to have access
    to records and other information a lot earlier in the process,
    and certain steps are going to need to be taken in order to
    assure the quality and consistency of audits throughout
    government. I am happy to answer questions in that regard or
    any other areas.
        With regard to this--one of the things I would point out
    is, through working with OMB in a constructive fashion, the
    Secretary of the Treasury, the Director of OMB and myself as
    Comptroller General have agreed to accelerate financial
    reporting, accelerate auditing on those financial reports and
    to really try to raise the bar on what acceptable performance
    is in the financial management area. I think that is a major
    step in the right direction, but it will place additional
    challenges on all of us as we try to meet these new
    requirements.
        One of the other issues that I think is important is to
    keep in mind is that, in the private sector, when an entity is
    audited, the audited entity typically bears the cost of that
    audit. I think that's something that needs to be considered for
    public-sector entities as well, that the entity that is being
    audited bear the cost of that audit, at least as it relates to
    departments and agencies.
        We also believe that it's appropriate for consideration to
    be given for selective implementation of financial management
    advisory committees or audit committees, at selected Federal
    agencies, based upon value and risk. This is a private-sector
    best practice, and we think it's something that needs to be
    considered for the public sector as well, as well as certain
    other aspects of the Sarbanes-Oxley Act such as certifications
    by agency heads and CFOs with regard to financial reporting.
        As you mentioned, Mr. Chairman, GAO issued a report last
    year dealing with a number of IG offices. There are 57 IG
    offices. About half of the IG's are Presidential appointees and
    about half of the IG's are appointed by their agency head. We
    recommended that the Congress consider consolidating the number
    of IG offices. We did this for a variety of reasons: economy,
    efficiency, effectiveness, flexibility, accountability and
    independence.
        The fact of the matter is, there are real independence
    questions when the agency head selects the IG. Furthermore,
    there are real issues as to economy of scale and whether or not
    there is adequate critical mass with regard to some of the
    smaller IG offices.
        We believe it is possible to accomplish consolidation of IG
    offices in a manner that would not dilute the coverage for some
    of the agencies that currently have their own IG if it's
    properly designed and properly implemented. Obviously we will
    be happy to answer any questions on this matter.
        As you might imagine, when we solicited the opinions of
    ECIE members, which are the agency-appointed IGs and the PCIE
    members, their opinions tend to diverge based upon where they
    sat. All the parties have a vested interest in the outcome.
    Candidly, we don't have a dog in this fight, and we're just
    trying to make recommendations to Congress. Reasonable people
    can differ, and will differ, but we think it's an area you need
    to consider.
        On page 16 of my testimony, I outline several other areas
    where we think consideration should be given for possible
    legislation dealing with the need for a coordinating mechanism,
    the possibility of elevating certain current IGs to
    Presidential appointee, Senate confirmation status, and the
    possibility of consolidating certain IG offices.
        And by the way, what we put in our report was an
    illustrative example; it wasn't a formal recommendation. It was
    illustrative of how you might be able to consolidate offices,
    not necessarily the way to do it.
        And last, also, as Mr. Cooper mentioned, my written
    testimony supports the idea of formalizing, through the
    statutory process, coordinating councils within the IG
    community, and among the Federal performance and accountability
    community as well.
        Thank you, Mr. Chairman.
        Mr. Platts. Thank you, Mr. Walker.
        [The prepared statement of Mr. Walker follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.005

        [GRAPHIC] [TIFF OMITTED] T2126.006

        [GRAPHIC] [TIFF OMITTED] T2126.007

        [GRAPHIC] [TIFF OMITTED] T2126.008

        [GRAPHIC] [TIFF OMITTED] T2126.009

        [GRAPHIC] [TIFF OMITTED] T2126.010

        [GRAPHIC] [TIFF OMITTED] T2126.011

        [GRAPHIC] [TIFF OMITTED] T2126.012

        [GRAPHIC] [TIFF OMITTED] T2126.013

        [GRAPHIC] [TIFF OMITTED] T2126.014

        [GRAPHIC] [TIFF OMITTED] T2126.015

        [GRAPHIC] [TIFF OMITTED] T2126.016

        [GRAPHIC] [TIFF OMITTED] T2126.017

        [GRAPHIC] [TIFF OMITTED] T2126.018

        [GRAPHIC] [TIFF OMITTED] T2126.019

        [GRAPHIC] [TIFF OMITTED] T2126.020

        [GRAPHIC] [TIFF OMITTED] T2126.021

        [GRAPHIC] [TIFF OMITTED] T2126.022

        [GRAPHIC] [TIFF OMITTED] T2126.023

        [GRAPHIC] [TIFF OMITTED] T2126.024

        [GRAPHIC] [TIFF OMITTED] T2126.025

        [GRAPHIC] [TIFF OMITTED] T2126.026

        [GRAPHIC] [TIFF OMITTED] T2126.027

        [GRAPHIC] [TIFF OMITTED] T2126.028

        [GRAPHIC] [TIFF OMITTED] T2126.029

        [GRAPHIC] [TIFF OMITTED] T2126.030

        Mr. Platts. Mr. Johnson.
        Mr. Johnson. Thank you. As the Deputy Director for
    Management at OMB it is my privilege to be the Chair of the
    PCIE and the ECIE. What that calls for me to do is to work with
    the leadership of these two groups to make sure that, in
    addition to being a tough watchdog and in addition to being the
    last person management wants to hear from, these groups of the
    IG community are also--as their charter or as their mission
    statement calls for them to be, that they are agents of
    positive change, that they are finding ever more effective ways
    to work with Department leadership to help better accomplish
    each agency's mission, and that they are working as effectively
    as possible to prevent waste, fraud and abuse in addition to
    discovering it and eliminating it.
        Also, it is my responsibility as the Deputy Director of OMB
    to be the senior person in this administration that drives the
    President's Management Agenda. So I work closely with the IGs
    to look for additional ways for them to be involved in that as
    their--as the IGs' mission and the stated goal of the
    President's Management Agenda, those goals are the same and
    that is to create--to cause the Federal Government to become
    even more focused on results, to become even more effective and
    to allow us to spend and account for the people's money ever
    more wisely.
        It's my privilege to work with Gaston and Barry and their
    groups, and I find that the primary value that I bring to that
    group is, I can help them work even more effectively with
    agency leadership and administration leadership to accomplish
    their goals and the administration's goals.
        Thank you.
        Mr. Platts. Thank you, Mr. Johnson.
        [The prepared statement of Mr. Johnson follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.031

        [GRAPHIC] [TIFF OMITTED] T2126.032

        [GRAPHIC] [TIFF OMITTED] T2126.033

        Mr. Platts. We'll proceed right to questions and again
    shoot for about a 5-minute question period for each of our
    panel or each of the members and then have subsequent rounds as
    time allows and members have interest.
        Mr. Walker, if you could start, and you touched the
    recommendation you have made about consolidation of the
    department-appointed IGs with the Presidential appointees and
    you identified a number of areas--the independence, efficiency,
    effectiveness.
        In your opinion, what's GAO's position, the most important
    reason for that? Is it because they're not as effective as they
    could be or is it more about saving dollars? Is there one of
    those issues that really jumps out?
        Mr. Walker. This is in no way intended to say that the
    individual IGs aren't doing a good job. That's not the case at
    all. The question is, what is the best way to go about ensuring
    the independence of the IGs? Independence is really an issue
    with regard to the agency-head-appointed IGs. There's a
    fundamental, at a minimum, appearance of a conflict of interest
    when the agency head appoints the IG and can remove the IG.
        It's obvious. It's recognized in independent standards with
    regard to generally accepted auditing standards.
        Second, the fact of the matter is there's also an issue if
    you've got an IG shop that has less than 5 or 10 people. Do you
    really have enough of a critical mass in order to get the job
    done? Do you have access to things that otherwise you might be
    able to achieve if you were part of a larger organization?
        There's also an issue of flexibility in reallocating in the
    areas of highest risk and highest value.
        My personal view, Mr. Chairman, is, I believe that the
    government as a whole--not just the IG community and the
    performance and accountability community--needs to review and
    reassess the number of silos that it has. I think government
    has too many silos and too many stovepipes. The more silos that
    you have, the more potential duplication and inefficiency you
    have; furthermore, the more you have to rely on coordination of
    activities rather than integration of efforts. I might note
    that we basically did this at GAO where we went from 35
    individual units down to 13, and it along with other actions,
    has enhanced our capability quite a bit over the last several
    years.
        Mr. Platts. It's fair to say--kind of summarizing your
    approach, what is the mission here and is there a problem with
    how--what is the best way to fulfill the mission?
        Mr. Walker. That's correct. This is not an indictment or a
    complaint in any way, shape or form with regard to any
    particular IG.
        The question is--as you know, Mr. Chairman, we face large
    and growing budget deficits. We face serious challenges. The
    question is, how can we get as much done with the resources we
    have? How can we improve economy, efficiency, effectiveness,
    flexibility, and how can we assure independence. That's really
    where we're coming from.
        Mr. Platts. In your survey and making recommendations, you
    talked to the Presidentially appointed IGs, the department-
    head-appointed and the consensus and kind of a turf battle, in
    a sense, that drove the general positions.
        Were there any independent voices with Presidentially
    appointed IGs or the department-head-appointed IGs that stood
    out from their colleagues that--maybe start with the Department
    appointees--that said, actually, I do think this will be a good
    idea, that jump out as more the exception?
        Mr. Walker. There were some exceptions and without talking
    about specific individuals, I guess what I would say is that we
    did the survey as a supplement to our work. Obviously, we're
    not in the business of just doing polls and making
    recommendations based on poll results. This is not referendum
    government.
        So the fact of the matter is, we wanted to be able to get a
    sense from where the IG community was coming from, first from
    the Presidentially appointed, the PCIE and then the ECIE, the
    agency-head-appointed, because that's important input not only
    for us but for the Congress to consider.
        Not surprisingly, as you can imagine, reasonable people can
    and do differ on the issue of consolidation, and not
    surprisingly the Presidentially appointed IGs who might end up
    gaining additional resources and authorities and scope
    generally supported it by a wide margin. Not surprisingly, the
    ECIE members many of which, not all of which, would be merged
    into a PCIE, expressed concerns, some of which were very
    legitimate concerns, as to what the impact might be on them,
    their offices or the agencies that they have responsibility
    for. However, we believe those issues can be effectively
    addressed.
        Mr. Platts. Was there followup, though, with the ones in
    the Presidential-appointed IGs, the ones that didn't recommend
    or favor consolidation? Was there followup with them? Because
    they were not--I mean, it's human nature, kind of, to protect
    turf; but because they were not doing that to expand their
    area, did you followup with them--and same with the other
    side--to give a little more weight to their opinions because
    they did stand out from their peers?
        Mr. Walker. We did have formal and informal dialog to try
    to help understand why people felt the way that they did.
        I also might say that one of the things that happened this
    past year, which I am very appreciative of, is, I was given the
    opportunity to attend the Inspector General's Planning
    Conference for the PCIE and ECIE to be able to talk about areas
    for coordination and cooperation and also to talk about this
    consolidation report.
        I also had an opportunity to speak one on one with a number
    of Inspectors General from both the PCIE and EICE about their
    views. And you know and as I said, reasonable people can
    differ. We gave one example of how you could consolidate. We
    still stand behind our recommendation and we believe the pluses
    outweigh the minuses with regard to consolidation and, also,
    elevation of some of the current ECIE members to Presidential-
    appointee status.
        Mr. Platts. Mr. Johnson, from the administration's
    perspective, what is seen as the most important priority of IGs
    auditing financial statements, guarding against waste and
    fraud? It's kind of that priority mission, in the opinion of
    the administration; and based on that, what do you look for as
    you are looking to fill IG positions? What are you looking for
    as most important, whether financial accountability,
    investigative background?
        Mr. Johnson. IGs themselves say that they are agents of
    positive change; and that is a big umbrella, but I think the
    right umbrella. It talks about prevention versus ``gotcha,''
    talks about partnering--with being independent of agency
    management, but also partnering with agency management in
    helping agencies accomplish their missions. And I think that
    collaborative, but yet independent relationship is what I
    consider to be my highest priority in terms of working with the
    IG community.
        In terms of what we look for, it depends. We ask the same
    questions of IGs that we ask of Assistant Secretaries or Deputy
    Secretaries or Secretaries: What do we want the person to
    accomplish in the next 2 to 3 years?
        There are large investigations that need to take place, or
    large financial management matters or audit matters. The nature
    of the primary task in the 2, 3, 4, 5 years that a person is
    likely to hold a position would determine what kind of person
    we look for. If it is investigative, we would look for
    investigative background. If it is financial management and
    audit management, that's the kind of background we look for
    also. So it depends on what we deem--what the financial
    community, what the comptroller at OMB use to be the primary
    challenge in that agency; and also we partner with the
    Secretary in terms of determining whether the person--what kind
    of person we are looking for in that position.
        And also the same thing is true, is the person in that
    position doing a good job? This administration has been
    involved in the removal of, I think--in the point of terms, I
    think it's three or four or five, I think, IGs. And the feeling
    was, they were too oriented to prevention and not enough to
    investigation or vice versa, or they didn't have the financial
    background. Whatever the feeling was, they were not the best
    fit for what the job called for at that agency at that time,
    and so we went through the process of making those changes.
        So again it is very specific and targeted to what the
    nature of the past, what the nature of the objective is.
        Mr. Platts. I want to yield to the ranking member, Mr.
    Towns. But I do appreciate the kind of umbrella message, or
    approach, trying to promote independence, but in a cooperative
    way. Because that is something, as a subcommittee Chair with
    oversight responsibilities, that we're independent as we look
    at executive departments and agencies. We are not here to play
    ``gotcha,'' but it is to be supportive and a partner in serving
    the public well.
        So independent but cooperative. And that approach you are
    trying to espouse throughout the IG community is, I think, very
    appropriate.
        Mr. Towns.
        Mr. Towns. Thank you, Mr. Chairman.
        Mr. Walker, I listened to your comments and, you know, Mr.
    Snyder makes the point in his written testimony that this would
    likely sacrifice some of the local preventive presence which
    having an IG onsite ensures.
        How would you respond to this point?
        Mr. Walker. It would be very easy to make sure that you
    deployed certain resources decentrally. In other words, if
    certain ECIE-IG shops were consolidated into a PCIE IG shop,
    that does not preclude the responsibility of their still having
    certain IG members at that individual agency.
        We have people at GAO in more than just our headquarters in
    Washington, DC. We have people in 11 cities around the country.
    We have certain audit sites in various major departments and
    agencies where we have people there on a full-time or part-time
    basis.
        So I believe it's possible to deal with that issue even if
    these functions are consolidated.
        Mr. Towns. They could place somebody there?
        Mr. Walker. Sure.
        For example, if there's enough work or enough concern about
    agency X, then I would argue that the Inspector General,
    whoever he or she might be, consider whether or not there ought
    to be people physically at agency X on the front line engaging
    in activities with regard to that on a day-to-day basis. That's
    part of the IG's leadership and management responsibilities. If
    the Congress was particularly concerned to make sure that there
    was a full presence at agency X; then Congress has the ability
    to deal with that in a variety of different ways.
        So I think that's a legitimate point, though I think it can
    be dealt with very easily.
        Mr. Towns. Would you please elaborate a bit more on your
    proposal for a Federal Accountability and Performance Council
    to improve coordination between the IG and GAO.
        Mr. Walker. Thank you, Mr. Towns. This is a concept we
    would like to be able to work or with the IG community, as well
    as the Congress, because we haven't formally formulated it yet.
    The concept I would give you is this: Clay Johnson does a very
    good job chairing the PCIE and ECIE. There is a mechanism
    within the executive branch for there to be coordination within
    the executive branch among the performance and accountability
    community. However, I would respectfully suggest that the IGs
    really have dual reporting responsibilities.
        They report to the agency head; they also report to the
    Congress. A dimension that is not adequately addressed, I
    believe, is the need for there to be some type of ongoing
    coordination within the performance and accountability
    community. That means members of the PCIE and members of the
    ECIE and with the GAO.
        I think there is a lot that we can and should do and, in
    fact, are doing to try to work in a constructive and
    cooperative fashion to leverage our resources, to minimize
    duplication of effort, and to work in a complementary rather
    than competing fashion. And yet, right now, the way it works
    is, that it is based upon the individual good-faith efforts of
    myself and other IGs and our respective staff, rather than
    there being a requirement to do something.
        So I think we need to explore what would make sense for the
    Congress, for the IG community and for GAO.
        Mr. Towns. You're not suggesting that the GAO exert control
    over IGs?
        Mr. Walker. No, I'm not. I am not talking about that at
    all.
        What I'm talking about is that we have a mechanism whereby,
    from a strategic planning standpoint and from an engagement
    execution standpoint, that we have more of a formalized,
    ongoing process, to coordinate our efforts.
        No, I do not believe that the IGs should report to the
    Comptroller General or the GAO. Absolutely not. I do, however,
    believe, as one example, that the IGs can play an important
    role, for example, in determining who the external auditor for
    agency financial statement audits is going to be. And the IGs
    are going to end up coordinating the effort with GAO with
    regard to who that external auditor is going to be.
        I do believe that it is imperative that the Comptroller
    General be consulted with regard to those decisions because in
    the final analysis, we are the party who has to end up signing
    the opinion on the consolidated financial statements, and we
    have to be comfortable with regard to whether or not the work
    that's being done is adequate.
        Mr. Towns. You suggested that the agencies pay for the
    audit. How would that work?
        Mr. Walker. Most do that now. And let me clarify what I
    mean by that.
        A significant majority of the audits of departments and
    agencies right now are performed by independent certified
    public accounting firms--PriceWaterhouseCoopers, KPMG, Ernst &
    Young, Deloitte & Touche, for example. Those are the big four
    that are still left after consolidation in the accounting
    profession.
        There are other firms that do audits. To the extent that
    those firms do the audits, they are obviously not doing it for
    free, so they have to be paid. And I think it's important that
    the entity that is being audited be charged with the cost of
    that audit.
        And so the issue is, it's not a matter of whether or not
    somebody is going to pay, but who should pay and how should the
    cost be allocated for that.
        By the way, I am not proposing that for the consolidated
    financial statement audit. We have the responsibility for the
    consolidated financial statement audit, and I would
    respectfully suggest that Congress appropriates money for us to
    do that audit. And so I'm not asking--I am not going to send
    OMB a bill for the consolidated financial statement audit. I
    do, however, think that consideration ought to be given as to
    whether for instance, the IRS should have to bear some costs
    for its audit, just as the FDIC does and just as the SEC does,
    who are two other audit clients that we have.
        Mr. Towns. I see the light is on--we'll get another round.
        Mr. Platts. Now recognize vice chairwoman of the
    subcommittee, the gentlelady from Tennessee, Mrs. Blackburn.
        Mrs. Blackburn. Thank you, Mr. Chairman. And I want to
    begin by apologizing to all of you. I have been up and down
    twice as you were giving your comments, and I do apologize for
    that. It just seems like this is the day constituents have
    decided to all come and all come at the same time, and not when
    we have expected them. So I have been spending my time in the
    hallway, up and down.
        Mr. Platts. Mrs. Blackburn, how would you like to be 96
    miles from the Capitol?
        Mrs. Blackburn. When I was in the State senate in
    Tennessee, I was 12 miles from the Capitol. And we love to have
    them come and visit and appreciate their interest so much, but
    I do feel as if the up and down is very inconsiderate of the
    fact that you all take the time to prepare your testimonies and
    come over here to us and talk with us.
        I did want to provide that explanation.
        Mr. Walker, I think I will begin with you. And, first of
    all, I enjoyed the article that was in Wall Street Journal or
    somewhere, your comments from the Press Club; it was excellent.
    And I--it was one of those that I made a lot of notes as I read
    it, and I appreciate that.
        In your testimony, you had mentioned going through--having
    a top-to-bottom review of Federal policies and programs that
    would be conducted to make the Federal Government more
    sustainable, and I think also to make it effective for the 21st
    century.
        My question to you is, do you think this should be handled
    by an independent commission that would go in and look at
    resources and programs and reallocations and such, or is that
    something that could be handled through activity by the
    Inspectors General?
        Mr. Walker. Well, I think it needs to be handled through a
    cooperative effort and the combined efforts of a variety of
    parties.
        First, I don't think the issue is ripe yet for an
    independent commission. Let me try to elaborate on what I
    intended by that.
        GAO is the third Federal agency I have headed. I have
    headed two in the executive branch and one in the legislative
    branch, and I have had the good fortune to have leadership
    responsibilities in both the public and private sector. And I
    hae found that government, especially at the Federal level, is
    an amalgamation and accumulation of various policies, programs,
    activities and functions over decades. We have this
    amalgamation and accumulation that occurs over all these
    decades, and there's a tremendous amount of time focused on
    whether we are going to end up getting a little bit more or a
    little bit less, or tweak this here or tweak this there.
    However, there's not enough of a fundamental review and
    reassessment of whether or not this policy, program, function
    and activity makes sense today and whether or not it will make
    sense tomorrow.
        I think it is critically important that we engage in that
    process because the world is fundamentally different today.
    It's changing very rapidly and we have very serious budget
    deficits, a structural deficit that we are going to have to
    deal with. And to do that, it takes combined efforts.
        For example, one of a number of positive things----
        Mr. Johnson. One of a number of very important things.
        Mr. Walker [continuing]. One of the number of positive
    things that Clay is doing is, through the President's
    Management Agenda, this issue of linking resources to results.
    That is part of the concept. What are we trying to accomplish?
    What's the mission? How do you measure success? How can you
    demonstrate you're making a difference?
        That's something that I think that OMB and the agencies
    have a responsibility to do. The IGs can play a constructive
    role; GAO can play a constructive role and Congress, I think,
    must play a constructive role not only through the oversight
    process, but the authorization process and, frankly, the
    appropriations process. Because if there aren't consequences
    for not doing a good job, then why should people pay any
    attention? If people who do a good job aren't somehow rewarded,
    then what kind of incentives are we providing?
        I think there is a lot that can and should be done in the
    context of the current system. At some point in time, there
    might be the need for a commission, but I don't think we're
    there yet.
        Mrs. Blackburn. Looking at going forward with that thought
    pattern, if we had an independent commission or a council,
    would we have members of the GAO, the PCIE and ECIE on the
    commission; or should a comprehensive review by a completely
    independent council?
        Mr. Walker. First, I think you have to have qualified
    people that have the time and the ability to get the job done.
    Without knowing what it would be, it's difficult for me to
    respond. Let me just say, I have seen different models work.
        For example, one model could be--is that you would have the
    GAO and the IGs provide support, testify and provide some type
    of support to that commission.
        Another model which has worked, but in a very different
    context, is that the Congress decided about a year and a half
    ago that there were problems in the area of competitive
    sourcing; and they decided that they wanted to create an
    advisory council, and actually had the Comptroller General head
    that council to make recommendations to the Congress that
    involved OMB, OPM, various unions and other parties.
        There are different models that can work, and I think we
    would have to discuss what you are trying to accomplish and
    therefore what alternatives might make sense.
        Mrs. Blackburn. Thank you, Mr. Chairman.
        Mr. Platts. We'll come back around again.
        Mr. Cooper.
        Mr. Cooper. Thank you again, Mr. Chairman and madam vice
    chairwoman and Mr. Towns for allowing me to participate.
        Strikes me as a good news/bad news situation. I think most
    Americans would be delighted that IGs have saved us nearly $72
    billion and prosecuted some 10,700 bad guys. But the bad news
    is there is that much waste out there and that many bad guys.
    So I don't think we will ever know how much more there is to be
    done, but I am thankful that they're working, as you all are,
    to police that fraud and abuse.
        Mr. Johnson, first question I had on the councils that you
    already are the head of, what's your opinion of an idea to
    codify those councils, to put them together into one group and
    give them a minimal $750,000 annual operating budget? Would
    that help in the sharing of best practices?
        Mr. Johnson. I think they take it upon themselves now to
    improve their standards and look at what their recommended
    codes of conduct are and so forth. I think they do a good job.
        If they were codified, they could perform that function
    more readily. I think it depends on what you codify. I think
    some of the CIO council and the CFO council are both codified
    by statute. We have a Federal Acquisition Council that exists
    by neither statute or Executive order. We just created it. I
    think it can work either way. I am not opposed to codification,
    but that alone will not ensure its effectiveness.
        I think it's very important that the IG community be
    codified by statute or by Executive order--do tie into OMB. I
    think the Deputy Director for Management can be a tie to
    management, and a tie to the budgets can be a most effective
    tool for getting agencies to listen to what the IGs are
    recommending for that agency.
        I think we represent--we work with agencies all the time on
    budget matters and general management issues, and to work on
    matters that are brought to light by the IG community is just
    an extension of that. So we are already set up to do that, to
    work with the agencies, to drive them to better performance for
    the American taxpayer; and to do that with the IG community is
    consistent with what we already do.
        Mr. Cooper. I appreciate your views on that, and I look
    forward to working with you to make sure we do that.
        Mr. Johnson. We will work with you on the language.
        Mr. Cooper. Mr. Walker, on the point of IG independence, it
    seems like there are a couple of ways to enhance their
    independence. Consolidation may be one way so that an agency
    head is not directly responsible for picking their own IG. The
    way that we were looking at it in our draft legislation--and it
    is just a draft form--is to have a 7-year term and then
    dismissal for cause.
        I am open-minded about consolidation. Can you be open-
    minded about a term and dismissal for cause?
        Mr. Walker. Absolutely. I think they're not mutually
    exclusive.
        My personal view is, I think it would be desirable to have
    statutory criteria for Inspectors General. I think it would be
    a good idea to consider term appointments.
        I do think that you need to have some criteria for removal.
    Who am I to argue with the criteria for the Comptroller
    General? I think that the term needs to be reasonably long
    enough for them to be able to make a difference. And as I
    understood, what you are proposing is 7 years. I think that's a
    reasonable term.
        I do think the President has to play a role, but if you had
    fewer PASs with a term appointment and specified grounds for
    removal and statutory qualification requirements, I think that
    would be a major plus for the independence of the IGs.
        Mr. Cooper. I welcome your views on that.
        Mr. Johnson. Mr. Cooper, may I add a comment to that?
        I am not sure that anybody has indicated that there's not
    already sufficient independence. My understanding is that the
    independence level that exists now in the IG community is more
    than adequate. I can understand there's potential--that we are
    addressing potential here, but I think the way it's set up now
    creates a significant amount of independence.
        I personally would be opposed to a term. There were four,
    five IG changes that we made at the beginning of this
    administration that had nothing to do with malfeasance. We
    thought the person had the wrong set of skills for what the
    nature of the job was at that point in time. And having terms
    would have prevented us from getting somebody better suited for
    the job at that time.
        The reasons you gave for just cause don't include matters
    such as that. Wonderful people, they have all the right
    statutory and education and experience requirements; they are
    just investigative rather than financial, or vice versa; and I
    think the administration's ability to deal with that is limited
    if you put a term on it.
        Mr. Cooper. Mr. Johnson, it strikes me that your concern is
    not with the term, but the definition of ``dismissal for
    cause.'' And if we define that to include a wrong fit for the
    agency, that might alleviate your concerns.
        Mr. Johnson. But that is so broad. We could do that, but in
    effect, I think you have no term.
        Mr. Cooper. My concern now, having talked to a wide number
    of IGs, is that they feel considerable pressure as individuals
    when they support sensitive areas and a more regular, private-
    sector-like situation might be helpful. Most people in the
    private sector kind of know what ``for cause'' is, and maybe we
    can adjust that slightly for government contacts because we do
    want the right fit and we need an appropriate balance between
    prevention and ``gotcha.''
        Mr. Johnson. Of course, maybe the pressure they feel is the
    pressure to get it right, which is a good pressure to have.
        Mr. Cooper. Well, we live in a political world, and there
    are a lot of folks who know that there are certain things that
    they will be in trouble if they investigate. And wouldn't it be
    wonderful if we lived in world when they could investigate
    wherever waste, fraud or abuse occurred?
        So let's work on a way and see if we can't do that.
        Mr. Walker. I think both of you made good points. Mr.
    Johnson is talking about the fact that maybe you could end up
    doing something on the basis for removal, but it would have to
    not be so general that it really didn't have much significance.
    If you look at the criteria and the reporting requirements,
    they could be another check and balance.
        Mr. Cooper. I look forward to working with you gentlemen on
    that.
        Mr. Platts. Thank you, Mr. Cooper. Our ranking member has
    to leave shortly, so we will go to Mr. Towns next.
        Mr. Towns. Thank you very much, Mr. Chairman.
        I just want to ask Mr. Walker, you mentioned that IGs must
    abide by the GAO government auditing standards, the so-called
    ``yellow book'' that, among other things, governs government
    auditors' professional qualifications, the quality of the audit
    effort and the characteristics of professional and meaningful
    audit reports.
        I understand that every IG must undergo a peer review every
    3 years by another IG to determine compliance with these
    standards. Can you please tell us what GAO's own experience has
    been with peer review? Has there ever been an independent
    review of a GAO compliance with its own audit standards?
        Mr. Walker. Good point, and let me tell you what we have
    done and what we are doing.
        No. 1, we are subject to an external audit and have been
    for a number of years--a financial statement audit. We have
    gotten a clean opinion, no material control weaknesses, no
    compliance problems for several years.
        Second, we have a peer review conducted every 3 years by a
    major accounting firm, one of the big four firms of our work in
    conjunction with our financial statement audits: the audit of
    the consolidated financial statement of the U.S. Government,
    the IRS, the Bureau of Public Debt, the FDIC.
        However, when I became Comptroller General, it became
    evident--and we do have our own Inspector General, but it did
    became evident that the scope of that peer review did not cover
    program evaluations, policy analyses and other types of work.
    So, therefore, I have worked with my colleagues from around the
    world. We have now formed a consortium of auditors general from
    around the world, and GAO will have a peer review done, led by
    the Auditor General of Canada, next year for the rest of our
    work.
        So we've always had a peer review for part of our work, but
    I want to make sure that we have a peer review for all of our
    work.
        Mr. Towns. Mr. Johnson, last year the IG community achieved
    one of its main legislative priorities in the Homeland Security
    bill, gaining statutory law enforcement authority. Would you
    elaborate on how this authority has been implemented. Have
    there been any significant problems that we should know about?
    Has there been any resistance to the implementation?
        Mr. Johnson. I'm sorry. I'm not familiar with the
    situation, but I'll be glad to find out the answer to that
    question and get back to you, yes, sir.
        Mr. Towns. I'd like to make that----
        Mr. Johnson. I apologize.
        Mr. Towns. Thank you very much. I'd be delighted if you'd
    do that.
        I yield back, Mr. Chairman.
        Mr. Walker. Mr. Chairman, if I can, we also have a very
    extensive and elaborate internal quality assurance process as
    well. I'd be happy to brief you on it at some point in time. We
    have our own office of quality and continuous improvement, but
    I appreciate your question about the peer review. It's a very
    good one.
        Mr. Towns. Thank you very much. And Mr. Johnson--for the
    record I'd like for Mr. Johnson to respond to my question in
    writing.
        Mr. Platts. Sure. We'll be keeping the record open for that
    followup.
        What we're going to try to do, because we do have votes on
    the floor, and it's going to be a series of five, so a lengthy
    period of time, is try to push through as many questions here
    for our first panel, and then we break, then that will conclude
    with our first panel, followup with my questions that we don't
    get included in writing to include in the record your
    responses, and then start with the second panel when we come
    back so we're not keeping two of you here while we're over
    for--and for our second panel witnesses, we apologize. You'll
    have to wait until we come back over.
        Let me jump into the issue of the consolidation, and, Mr.
    Johnson, the administration's position on the GAO
    recommendation in a broad sense about consolidating the ECIE
    positions into the Presidentially appointed positions. Are
    there certain ones that the administration is especially
    concerned about or has a position that you don't think it would
    be a good idea?
        Mr. Johnson. No. We have not looked at it by a specific
    agency. Our focus has been on if we're going to change
    something, let's understand specifically what it is we're
    trying to accomplish. Are we trying to accomplish--create an
    independence that doesn't exist? Are we trying to save X amount
    of money? What do we think the opportunity is and at what cost,
    what interaction or communication cost is that, but just be
    real clear about what the goals are, be real clear about what
    we think the risks and opportunities are before we actually
    decide to proceed.
        Mr. Platts. And making that type of risk assessment, cost
    benefit assessment, is there a position today on the
    recommendation of the broad consolidation?
        Mr. Johnson. Well, I support what Barry Snyder said,
    which--I think what they have now is working fine, but I think
    we'd be perfectly open to studying that and understanding what
    the opportunity for savings are. I don't believe there is a
    need for additional independence. I think there's about as much
    independence as there can be, but perhaps the savings, the
    efficiency thing, is an opportunity that exists.
        Mr. Platts. One specific consolidation that the
    administration has supported or recommended, and it seems to
    deal more with efficiency, not independence but cost benefit,
    is with Treasury and the tax administration IG. Do you want to
    expand on that?
        Mr. Johnson. Seventy percent of the Treasury's duties and
    responsibilities were transferred to Homeland Security, and so
    they have the leadership there to oversee a much larger
    operation than they have to oversee, and it seemed like there
    was an opportunity to combine those two for almost exclusively
    efficiency reasons. There are large operations, like the FBI
    does not have a separate IG from Justice Department, and the
    FAA does not have a separate IG from Transportation. So there's
    plenty of precedent for large seemingly independent operations
    not having separate IGs, and I think the same case might apply
    here.
        Mr. Platts. In this year's April semiannual report to
    Congress from the Treasury IG, the last sentence in that
    transmittal letter said that, ``We no longer have the resources
    necessary to provide timely audit and investigation services to
    the Department.''
        Were you aware of that statement and have you looked into
    the accuracy and how has that been addressed that they do have
    the resources?
        Mr. Johnson. Well, the way we addressed it was Linda
    Springer, who is the Comptroller, talked to Homeland Security
    and identified additional resources that had been moved--OIG
    resources that had been moved to Homeland Security that--new
    audit issues at Treasury that could be detailed back to
    Treasury to deal with audit matters. So they addressed very
    specifically the concerns that the Treasury Inspector General
    identified, and that's one of Linda's responsibilities, is to
    make sure that if there's some temporary adjustments to be made
    to deal with these kinds of things that it's taken care of.
        Mr. Platts. Thank you. I want to allow Ms. Blackburn, did
    you want to get another question or two in?
        Ms. Blackburn. You know, we're going to submit all of ours.
    I do have several, and I know we do need to go vote.
        Mr. Platts. And I apologize for the timing. Mr. Cooper, did
    you want to----
        Mr. Cooper. As I understand it, Fannie Mae and Freddie Mac
    don't have IGs today. Would that be an appropriate use of the
    surplus Treasury IG talent to look into some of their
    activities?
        Mr. Johnson. Of the surplus--I don't think there is surplus
    IG talent at Treasury.
        Mr. Cooper. I thought you said a great deal of the Treasury
    activities had been transferred to the Department of Homeland
    Security.
        Mr. Johnson. Right, along with the IG personnel.
        Mr. Cooper. So that went with them too. OK. Well, what
    about the general topic of Fannie or Freddie having IGs,
    because they're viewed as government-sponsored entities that--
    --
        Mr. Johnson. I did not know until you just said that they
    don't have IGs. Should have, but don't.
        Mr. Walker. OHFEO is the body right now that has the
    responsibility. There is a proposal, I understand, to transfer
    responsibility for oversight of Freddie Mac and Fannie Mae to
    Treasury, but I don't believe it deals with this issue.
        Mr. Cooper. A final question. Your idea about getting each
    agency to pay for its own audit is part of the reasoning behind
    that, to encourage an agency to be more auditable once they're
    having to bear the costs? Because the DOD may take a generation
    to be fully auditable unless we find another incentive for them
    to bear down.
        Mr. Walker. I clearly think it is an incentive. I mean,
    it's an incentive for people to be able to make sure they have
    the right type of controls and systems in place. I also would
    respectfully suggest that you wouldn't even want to try to
    audit DOD until you believe that they're in a situation where
    in fact they are auditable, because otherwise it would be a
    waste of taxpayer resources.
        Mr. Cooper. Thank you, Mr. Chairman.
        Mr. Platts. Thank you, Mr. Cooper. I'm going to try to
    squeeze in two more specific areas before we break and run
    across. One is on--a kind of followup on the consolidation, Mr.
    Johnson, and a specific position is when we look at the Postal
    Service and the size of the IG at USPS, and I think the fifth
    largest from a budget standpoint of all the IGs; yet, it's a
    department head, agency head appointee versus Presidential.
    Does the administration support that one being elevated to a
    Presidential because of the size and responsibility of it?
        Mr. Johnson. Well, they think an IG being Presidentially
    appointed or not ensures independence. The IG at the Postal
    Service I understand is primarily focused on internal auditing
    of contracts as opposed to the general responsibility of an IG,
    and when there are general audit issues, other groups get
    involved.
        So I think the issue is what is the role of the IG, what is
    the responsibility, is it expanded in scope. I don't think the
    issue at the Postal Service is the lack of or presence of
    independence of the IG, given what their current
    responsibilities--the current responsibilities are.
        Mr. Platts. Is it fair then to say that really the
    administration, whether--when it comes to adding more--
    consolidating or having more Presidential appointed IGs really
    is not in the administration's position kind of relevant. It's
    more the independence of those IGs, the resources given them,
    not whether Presidential appointed or not.
        Mr. Johnson. Well, I think we would like--the
    administration likes to be able to reserve the right to change
    IGs if they think they are not appropriate for the task at
    hand. Now, whether they are Senate-confirmed or not is another
    matter.
        Mr. Platts. Mr. Walker, do you want to answer?
        Mr. Walker. Mr. Chairman, just because somebody is a PAS
    doesn't mean they're going to be independent. I think the issue
    is to what extent does the appointment mechanism involve a
    party independent of who they're supposed to be auditing,
    investigating, evaluating and reporting on; and the fact is,
    that if you look at the Postal Service, there is a degree of
    independence, because the Inspector General is appointed by the
    Board of Governors. The Inspector General is not appointed by
    the Postmaster General, and so there is a degree of
    independence. But if you look at most of the other ECIE
    members, I'm not saying they're not acting in an independent
    manner, but what I'm saying is there's absolutely no question
    that at a minimum there's a major appearance of an independence
    problem. There's just no question about it. And, if the person
    you're supposed to be auditing, and investigating and
    evaluating is the one that appoints you and has the authority
    to remove you, it's hard to say there's not an issue there.
        Now, whether or not in fact it manifested itself is a
    different issue versus whether or not it could manifest itself
    and whether or not as a matter of integrity and public
    confidence you wanted to try to deal with a problem before it's
    a problem. We've seen some things that have happened in the
    private sector. I would respectfully suggest we want to be
    ahead of the curve, not behind the curve.
        Mr. Platts. Final question and then we will recess till
    approximately 3:45, based on how quickly the votes go. To both
    of you, seeing the number of the 2002 fiscal year--savings of--
    or projected savings in the area of $72 billion, how would you
    quantify that savings in the sense of what does that mean to
    the taxpayer when we talk that amount of money that is
    identified as projected savings, money recovered, not spent,
    how would you best quantify that?
        Mr. Walker. I'll address GAO. I would respectfully suggest
    that Mr. Johnson or the IG should address what they do. For us,
    we have financial benefits. What financial benefits are, part
    of them are savings, absolute cost avoidance and additional
    recoveries. Some of it is where people adopt our
    recommendations and it frees up additional resources for
    redeployment to better use, and either the agency or the
    Congress may decide to do that.
        In our view our job is to look for economy, efficiency,
    effectiveness, and accountability. If somebody adopts our
    recommendation and it results in savings or somehow recovering
    resources or freeing up resources that can be redeployed to
    higher use, that's what we call a financial benefit. Our number
    for fiscal 2003, because we've closed the books, it could go
    up, it won't go down, is about $35 billion, which is a $78
    return for every dollar invested in GAO.
        Mr. Platts. Mr. Johnson.
        Mr. Johnson. I know that the IG community has looked at
    trying to remove all duplication of this benefit reporting,
    which is good, and we can always find--look for better ways of
    reporting the benefits of this activity. There's--in addition
    to the different categories of benefits that David talked
    about, there's real money saved versus potential money saved.
    Was that money really, really saved, implemented, did it really
    happen, or was it the possibility of savings? And so, again,
    that would call for post-activation audits and so forth. Then
    you get into the question of do you want to spend the money on
    the audits--you know, it's those kinds of issues, but we ought
    to be looking for real savings. And every new program we
    develop and every old program we audit, we cannot spend enough
    time on what real results are being accomplished with all the--
    --
        Mr. Platts. That defectiveness--you know, the efficiency
    aspect of the IG responsibility, is what is the mission, how
    are we doing it and is it the best way.
        I do apologize. We need to run, but I thank both of you for
    your participation today and we'll followup with some other
    specific questions. Thank you.
        We stand at recess till approximately 3:45.
        [Recess.]
        Mr. Platts. We're going to reconvene our hearing, and I
    want to first thank our witnesses and all who have been very
    patient while we took care of our votes and kind of get started
    here again. We need to start with swearing in our witnesses. If
    you'll raise your right hands, and if there are any staff who
    will be part of it.
        [Witnesses sworn.]
        Mr. Platts. And the clerk will reflect that both witnesses
    answered in the affirmative. And we're going to jump right into
    your testimony, Mr. Gianni.

    STATEMENTS OF GASTON GIANNI, VICE CHAIR, PRESIDENT'S COUNCIL ON
    INTEGRITY AND EFFICIENCY AND INSPECTOR GENERAL, FEDERAL DEPOSIT
       INSURANCE CORP.; AND BARRY SNYDER, VICE CHAIR, EXECUTIVE
      COUNCIL ON INTEGRITY AND EFFICIENCY AND INSPECTOR GENERAL,
                         FEDERAL RESERVE BOARD

        Mr. Gianni. Thanks, Mr. Chairman. I'm pleased to be here
    today to recognize the 25th anniversary of the Inspector
    General Act. On behalf of the IG community, we sincerely thank
    you for calling this hearing and your support of the IGs over
    the years. In the last Congress the entire House Committee on
    Government Reform was instrumental in helping the IG community
    achieve our No. 1 legislative priority, providing most
    Inspector Generals with statutory law enforcement authority. We
    appreciate your efforts in getting this important tool enacted
    into law.
        Over the next few minutes I would like to highlight
    important events leading up to the enactment of the IG Act and
    the impact that the act has had on our government and possible
    legislation refinements to the act.
        I addressed the GAO consolidation report in my written
    statement. I would ask that my entire statement to be included
    in the record, and will defer to my colleague Barry Snyder to
    address those issues.
        For the last 25 years IGs have served as independent voices
    to their agencies and to the Congress. Early in the 1960's this
    subcommittee of the House Government Operations Committee began
    to highlight the need for independent statutory IGs. In 1974
    further work by this same committee revealed that the
    Department of Health, Education and Welfare lacked effective
    processes for investigating program fraud and abuse. In 1976
    this resulted in a statutory IG at HEW. Then on October 12,
    1978, the IG act was created. Twelve IGs were bestowed with
    powers and responsibilities modeled after HEW IG. The House
    passed the act with strong bipartisan support, while the Senate
    passed it without opposition. The IG Act was signed into law by
    President Jimmy Carter.
        Mr. Chairman, nearly 40 years ago the Congress was clearly
    looking to shine the light on the Federal programs and
    operations and to provide a mechanism for independently
    reporting the results. This desire produced the IG Act, a
    unique piece of legislation that has stayed the test of time.
    The act gives the IGs authority and responsibility to be an
    independent voice for economy, efficiency, effectiveness within
    the Federal Government. These basic tenets of the act remain
    constant and strong today.
        In response to changes in our government, the act has been
    amended several times. The most extensive amendment occurred in
    1988, when reporting requirements were clarified and IGs from
    designated Federal entities were added, more than doubling the
    size of the community. Today there are 57 of us.
        I believe the act has had a profound impact on our
    government, which can be seen in improved Federal operations,
    sharper focus on governmentwide initiatives, and increased
    attention from our colleagues abroad. Impact is also evident in
    the fact that the IGs are being repeatedly asked by their
    agencies and the Congress to conduct audits, evaluations and
    investigations. Congress has seen fit to expand the duties of
    the IG by assigning new responsibilities through general
    management laws like the CFO Act, Reports Consolidation Act and
    FISMA, the Financial Information Security Management Act.
        It has been talked about today what our accomplishments
    were last year--$72 billion in potential savings from agency
    actions on current and prior investigations and through our
    investigative efforts. We had nearly 10,700 successful
    prosecutions and suspensions or debarments of over 7,600
    individuals or businesses. We had 2,200 civil or personnel
    actions. The IG community in total had over 234,000 complaints
    which we processed. More than 4,600 reports were issued, and we
    testified before Congress 90 times collectively as a community.
        In addition to focusing on unique issues in our individual
    agencies, IGs have been attentive to matters that transcend
    agency lines and impact the government as a whole, such as
    accelerated reporting on our audited financial statements,
    annual independent IT--i.e., information technology--security
    evaluations, critical infrastructure protection programs,
    erroneous payments, purchase card fraud and abuse and controls
    over Social Security numbers.
        In addition, we are continuing to host foreign delegates
    who are hoping to replicate the basic IG principles in their
    government.
        Mr. Chairman, one of the many issues that the House
    subcommittee wrestled with many years ago was the lack of
    effective coordination and communication between departments
    and agencies. The IG Act and the Executive order creating the
    PCIE in 1981 sought to resolve these issues. The PCIE and the
    Executive Council on Integrity and Efficiency subsequently
    created several years later once the DFE IGs were established
    serve this community. We currently have an executive committee.
    We have six standing committees that deal with coordinating and
    processing our work. We have five roundtables and working
    groups that delve down into topical issues that help various
    IGs working in these areas do their work.
        We actively coordinate with other Federal management
    councils such as the CFO, CIO, as well as maintaining ongoing
    dialog with the GAO.
        We maintain two professional training facilities and
    promulgate standards for our community to ensure that our work
    is of the highest quality and integrity. We oversee a peer
    review process to ensure that our audits and investigative work
    is done in accordance with professional standards. We maintain
    an IG community Web site, and we publish semiannually a
    professional journal.
        It is important to note that the two councils do not
    receive any funding to support these items and rely on
    individual IGs to absorb the costs. Codification and funding
    support of the two councils, which is one of our legislative
    proposals, would help to eliminate these funding issues and
    provide opportunities to enhance our initiatives.
        As I mentioned before, we believe that the act's provisions
    have worked quite well; however, in anticipation that the
    Congress might revisit the act for our 25th anniversary, we
    developed four proposals which are summarized in my written
    statement. These proposals, which are still under review by the
    IG community, include codification of the PCIE and ECIE,
    creation of statutory terms of office and removal for cause
    protection, personnel flexibility for inspectors general, and
    changing the reporting periods of our semiannual reports.
        As I mentioned, these proposals are still under review
    within the IG community and will need to be thoroughly
    discussed with our oversight committees as well as with OMB
    before we can endorse them.
        We understand, as Congressman Cooper has discussed, that he
    is planning to introduce legislation on improving government
    accountability. We look forward to working with him and your
    subcommittee to refine these proposals.
        As far as the future direction of the community, I agree
    with Clay Johnson's written statement that the future of the IG
    community is bright, but speaking as a former auditor, in order
    to keep that future bright we need to be constantly looking for
    ways to improve our operations and to ensure that our nearly
    11,000 employees are adequately trained and well-equipped. We
    must also remain ever mindful that our integrity and
    credibility is of the utmost importance to remain effective in
    our unique position as IGs and as agents of positive change in
    our agencies.
        IGs have been operating in a changing environment for many
    years. We remain flexible and ready to mobilize as new issues
    emerge, such as accelerated financial statements, erroneous
    payments, and IT security. Twenty-five years ago IGs were given
    the authority to be independent voices for assuring economy,
    efficiency and effectiveness and promoting integrity,
    accountability and transparency in the Federal Government. We
    take this authority and responsibility very seriously.
        Mr. Chairman, in closing, I would like to again thank you
    and members of your subcommittee for having this hearing. We
    would also like to express our sincere appreciation to you, Mr.
    Chairman, and to Mr. Towns, Congressman Cooper and to House
    Government Reform Committee chairman, Tom Davis, and the
    committee's ranking member, Henry Waxman, for your involvement
    and your support of H.J. Res. 70, a joint resolution in
    recognition of our 25th anniversary.
        Mr. Chairman, that concludes my remarks, and I will be
    happy to take questions when you're ready.
        [The prepared statement of Mr. Gianni follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.034

        [GRAPHIC] [TIFF OMITTED] T2126.035

        [GRAPHIC] [TIFF OMITTED] T2126.036

        [GRAPHIC] [TIFF OMITTED] T2126.037

        [GRAPHIC] [TIFF OMITTED] T2126.038

        [GRAPHIC] [TIFF OMITTED] T2126.039

        [GRAPHIC] [TIFF OMITTED] T2126.040

        [GRAPHIC] [TIFF OMITTED] T2126.041

        [GRAPHIC] [TIFF OMITTED] T2126.042

        [GRAPHIC] [TIFF OMITTED] T2126.043

        [GRAPHIC] [TIFF OMITTED] T2126.044

        Mr. Platts. Thank you, Mr. Gianni.
        Mr. Snyder.
        Mr. Snyder. Thank you, Mr. Chairman. Let me also express my
    appreciation on the opportunity to meet with you today to
    discuss the 25th anniversary of the IG Act. I'm here today as
    the vice chair of the ECIE. A lot has been talked about the
    ECIE already, so I'm sure we'll have a lot of questions on
    that.
        Let me just say that the 28 members of the ECIE represent
    agencies that are a bit different, in that they are regulatory
    entities, Federal commissions, independent corporations, and
    boards and foundations. They also have different types of
    funding, administrative authority, and practices. They have
    different congressional oversight and funding processes and
    separate governances and oversight structures. They perform
    regulatory and other missions and have significant impact on
    the private sector and the public.
        I'm going to paraphrase from my written statement today,
    but just wanted to give you a feel for what the agencies are
    that make up the ECIE--and I ask that my written statement be
    put into the record.
        Mr. Platts. Without objection, it will be.
        Mr. Snyder. Gaston has talked a little bit about the
    history of the Inspector General Act leading up to the passage
    of the act in 1978 and some of the things that have happened
    since that time. I think the one thing to look at is the
    success of the act that led Congress to expand the provisions
    to other major departments and agencies and eventually to
    smaller Federal entities. During the 10-year period following
    the passage of the act, the legislative history reflects that
    Congress gave careful consideration on how best to address
    audit and investigative coverage in these smaller agencies.
    Studies and analyses were conducted, bills were introduced and
    hearings were held, and stakeholder reviews were collected and
    considered.
        In 1984 and again in 1986, GAO issued reports which
    uncovered many of the same problems in these smaller agencies
    that prompted Congress to establish the IGs in the original 12.
    Specifically, GAO found a lack of audit independence because
    auditors were supervised by officials who were directly
    responsible for the programs and activities under review,
    inadequate audit coverage of important and vulnerable agency
    operations, lack of evaluation of significant fraud problems by
    internal audit or investigative staffs, and audit resolution
    and followup systems that did not meet government requirements.
        I think Gaston as well as other presenters here today have
    also given you an overview of the accomplishments that have
    been attributed. I won't go into those. Let me just add that as
    full-time and onsite, the DFE IGs have contributed
    significantly and tangibly to enhancing programs and activities
    within their agencies. Over the years, DFE audits and
    inspections have addressed their agency's various program
    activities as well as wide-ranging administrative and
    management issues and concerns such as human capital
    management, procurement, financial management, budgetary
    processes and electronic government.
        Also, our investigations have uncovered program fraud and
    addressed travel card abuses, conflict of interest, procurement
    irregularities and other essential organizational and employee
    integrity issues.
        I would also today say that the DFE IGs are continuing to
    have a substantial impact on many of the critical and topical
    challenges facing our government, including financial
    management, information technology, and emergency preparedness.
    For example, the Accountability of Tax Dollars Act of 2002
    brings the CFO Act concepts of annual audited financial
    statements to a number of smaller agencies. Some of these
    agencies are for the first time now preparing financial
    statements that will be subject to year-end audit. The DFE IGs
    are playing a key role to meet the act's requirements of
    conducting or overseeing these financial statement audits in a
    timely manner.
        Similarly, the IT area has been the focus of IGs not only
    from an operational point of view but also from a security
    perspective. Like our Presidentially appointed counterparts,
    DFE IGs are performing and reporting independent security
    evaluation and agency compliance with the Federal Information
    Security Management Act. Emergency management and continuity of
    operations have also continued to be a focal point of DFEs as
    they address how their agencies can enhance security after
    September 11th.
        Gaston has also talked about the IGs and the councils and
    committees. I will just add that the ECIE are members on the
    PCIE committees so that we don't duplicate effort, and the
    various roundtables and working groups that we have look at a
    wide range of issues such as government performance,
    information technology and misconduct in research.
        One of the key reasons I think I'm here today is to talk
    about the GAO consolidation report. Let me say that while each
    DFE IG probably has a unique perspective on the report, the
    formal comments in the report that were incorporated reflect
    the general comments from 26 of 28 DFEs regarding GAO's
    conclusions in matters for consideration in the report.
        First and foremost, the DFE IGs emphasize that
    consolidation would likely sacrifice providing a local
    preventive presence and oversight and focus at individual
    entities in favor of potentially fragmenting the attention of
    larger IGs across a broader, more diverse spectrum of programs
    and operations.
        From the history, it's clear that Congress took a very
    measured and careful approach in deciding to provide an onsite,
    accountable IG presence specifically dedicated to carrying out
    the IG Act mandate at those agencies selected as designated
    Federal entities. Therefore, DFE IGs indicated that care should
    be taken to avoid making a change as significant as
    consolidation without compelling evidence that a consolidation
    approach in fact would foster better government.
        We believe that the simple organization and operation
    structure that comes with being a smaller DFE is well suited to
    the organizations covered by the 1988 amendments, and that
    congressional wisdom in taking this approach was well placed.
    By virtue of being onsite and knowledgeable of an entity's
    legislative backgrounds, operating environments, cultures and
    policies and procedures, DFE IGs are able to act quickly to
    bring about positive change in entity operations.
        Increasingly DFEs are leveraging their limited resources
    and contract dollars to respond to legislative requirements for
    specific audit and evaluation work, such as FISMA, and
    reporting on their agency's progress in a number of areas of
    interest governmentwide, such as the President's management
    agenda.
        We note that alternatives to consolidation, such as the use
    of consultants and memorandums of understanding with other IGs
    that have developed specialized expertise, have been used
    successfully in the past to augment scarce resources and may
    offer a way to further strengthen the resources across all IGs.
        As a result of this analysis, the DFE IGs expressed concern
    that GAO proposed significant and far-reaching changes to the
    IG Act and to IG organizations largely based on subjective
    responses to one survey without providing sufficient supporting
    evidence that indicates changes in the current IG structure are
    truly warranted and without views of the entity management,
    customers and key stakeholders.
        Absent more detailed information regarding the existence
    and magnitude of problems with the current structure, the DFE
    IGs question whether conversion or consolidation would bring
    about more cost-effective value-added IG operations and
    results.
        Almost all of the DFE IGs commented that GAO's proposed
    consolidation scenarios were a bit overly simplistic given the
    diversity of the unique agencies that comprise the designated
    Federal entities. In fact, the end result of consolidation
    could bring an unprecedented level of complexity to the long-
    standing IG concept and framework and may serve to only
    distance the Congress, the public and agency management from
    the central, dedicated IG at key entities.
        As far as the future, I think Gaston has highlighted four
    legislative proposals where we are getting a consensus from the
    IG community. I would discuss a couple of those in a little bit
    more detail, particularly the concept of removal for cause and
    establishing the term limit. Under GAO's recently updated
    government auditing standards, DFE IGs are in fact
    organizationally independent to report externally. The original
    IG Act provided a number of safeguards to allow that.
        However, there continues to be a perception that DFE IGs'
    independence is hampered because the IG is appointed by the
    agency head. If this is indeed the concern, then I think the
    two provisions that are here, removal for cause and term
    limits, could go a long way to help remove that perception.
        I also would want to add one other item that has not been
    discussed, and that would be to extend the Program Fraud and
    Civil Remedies Act authority to DFE IGs. That act, when it was
    passed in 1986, enabled agencies to recover losses resulting
    from false claims and statements when claims were less than
    $150,000.
        Executive departments, the military establishments and
    agencies defined by the original IG Act, and the U.S. Postal
    Service have this authority. It's our understanding that
    Congress intended to provide all IGs with the authority under
    the Civil Remedies Act when it was enacted, but the DFE IGs
    obviously came along 2 years later.
        The legislative committee that we have in the PCIE notes
    that this proposal has received virtually unanimous support
    from the entire IG community and could be achieved with a very
    simple adjustment to that act.
        Mr. Chairman, this concludes my prepared statement and in
    closing I would like to again thank you and members of your
    subcommittee for having this hearing and allowing us to focus
    on the 25th anniversary of the IG Act and to reflect upon our
    past accomplishments and future direction. We appreciate your
    interest in and support of the IG mission and the community and
    welcome an ongoing dialog going forward.
        I join Gaston in expressing our appreciation to you,
    Congressman Towns, Congressman Cooper and committee Chairman
    Davis and Ranking Member Waxman for sponsoring the joint
    resolution in recognition of the 25th anniversary.
        I agree with Gaston that the IG community takes its mission
    and authority very seriously and remains committed to promote
    integrity, accountability and efficiency and effectiveness in
    operations within the individual departments and agencies and
    across government. At this time, I would be happy to respond to
    questions.
        [The prepared statement of Mr. Snyder follows:]

        [GRAPHIC] [TIFF OMITTED] T2126.045

        [GRAPHIC] [TIFF OMITTED] T2126.046

        [GRAPHIC] [TIFF OMITTED] T2126.047

        [GRAPHIC] [TIFF OMITTED] T2126.048

        [GRAPHIC] [TIFF OMITTED] T2126.049

        [GRAPHIC] [TIFF OMITTED] T2126.050

        [GRAPHIC] [TIFF OMITTED] T2126.051

        [GRAPHIC] [TIFF OMITTED] T2126.052

        [GRAPHIC] [TIFF OMITTED] T2126.053

        [GRAPHIC] [TIFF OMITTED] T2126.054

        [GRAPHIC] [TIFF OMITTED] T2126.055

        Mr. Platts. Thank you, Mr. Snyder, and my thanks again to
    both of you for not just being here today but for your service
    day in and day out in your respective agencies.
        Let me begin maybe with a broad approach with the--we
    talked a lot today with both panels about communication between
    Congress and the administration, between the IGs and their
    respective agency heads or the administration. Between the two
    councils, if I understand the written testimony here today, the
    training program is shared by both councils and operated
    together for the benefit of all IGs.
        Mr. Gianni. That is correct, sir.
        Mr. Platts. What type of interaction occurs between the
    councils and the IG members on the council on a monthly basis,
    you know, as far as kind of sharing ideas or what's, you know,
    working, what's not working and your respective duties?
        Mr. Gianni. We have multiple forms of coordination. I sit
    on the Executive Council on Integrity and Efficiency. Barry
    sits on the President's council. So we have both opportunity to
    be knowledgeable of what each council's concerns are. As Barry
    indicated in his time, our various committee structure is
    comprised of both PCIE and ECIE members. So those people who
    are addressing audit issues, for example, represent the entire
    IG community. Those people who are dealing with investigative
    issues, we have an investigative committee, represent the whole
    IG community. So we go at length to ensure that there is
    collaboration and communication.
        In addition, we meet jointly twice a year. And then in
    addition to that, we have a number of our working groups that
    have both PCIE and ECIE members, who are addressing a focused
    issue, such as erroneous payments or accelerated reporting.
        In addition to that, we have meetings from time to time to
    discuss mission-related issues. For example, Barry and I are
    IGs of regulatory agencies. There are seven IGs that have
    regulatory responsibility. We get together on a monthly basis
    to talk about financial regulatory issues.
        Mr. Platts. And regardless whether PCIE, ECIE?
        Mr. Gianni. Right. We have a common mission where our
    missions come together. So we coordinate, we look for
    opportunities where we can do work together on common issues
    and have done that in the past. We look at how we're
    communicating with the Congress and how we're working with our
    agency. Also when we have, let's say, an issue that we're faced
    with within our respective office or agency, we have our peers
    who act as a sounding board to exchange ideas and seek advice
    on some common answers.
        Now, this happens elsewhere within the IG community.
        Mr. Snyder. I would only add that we also have an annual
    planning conference that we go to where all of us get together
    as well, in addition to all the ones that Gaston mentioned.
        Mr. Platts. Given these extensive interactions with IGs in
    both type of departments, agencies, is it safe to assume that
    pretty unanimously the IG community would support a
    consolidation of the two councils into one council, and the
    second part then, and making it statutory as opposed to
    Executive order?
        Mr. Gianni. I do believe there would be support for that
    within both councils.
        Mr. Snyder. I agree.
        Mr. Platts. Because it seems that you're doing that, you
    know, in every instance you can while also maintaining the
    official separation.
        Mr. Gianni. The councils are administrative bodies created
    by Executive order. I think that the idea of codifying the
    council would be to also recognize that we do have a reporting
    relationship with the Congress and that it gives us some
    credibility as a council to the Congress. And as David Walker
    was talking about, it also would give us an opportunity to
    build on the working relationships that we have with GAO right
    now to deal with some of the issues that the Comptroller
    General was talking about.
        Mr. Platts. The other aspect, codifying a single council,
    that would also be the funding of that council directly, you
    know, from an appropriations as opposed through--because
    currently your efforts--if I understood you correctly, the cost
    of your efforts come out of your IG offices, your individual
    agency budgets, that somehow you take a part of your individual
    office and put it toward that joint effort. Is that----
        Mr. Gianni. That is correct, sir.
        Mr. Platts. There's no funding for the council per se?
        Mr. Gianni. There is no funding at all. We're very
    appreciative of Congressman Cooper's thinking of a funding
    allocation.
        A couple of things when it comes to funding. We have two
    training academies. These training academies are training our
    investigators. They're training our auditors. We spend over $6
    million as a community to operate these training academies.
    Funding comes from our operating budgets.
        There is a certain amount of opportunity costs, if you
    will, that are constant, and to the extent that Congress was
    willing and saw fit that they would be able to help support
    those academies in some way, I think that would be certainly
    beneficial and helpful.
        When the Congress created the TVA as a Presidential IG
    office, they also created the authority for us to have an
    investigative academy and a forensic academy, and for funds to
    be appropriated accordingly. We have never received any
    appropriations for those. We have operated our investigative
    academies from our own budgets by--in the investigative matter,
    it's an allocation based on the number of investigators that we
    have within the community. On the audit side it's a cost per
    training activity. So if you use it, you pay; if you don't, you
    don't have to pay.
        But because of those different funding mechanisms, it kind
    of stifles our opportunities to improve our academies to where
    they need to be.
        Mr. Platts. Walk me through from a funding standpoint
    typical nonPresidential appointed office, as far as how you
    come up with your annual budget request, and by what you
    determine how many personnel you think you need to do your job
    and that translates to salaries and benefits and all related
    expenses. How does that happen on an annual basis in your
    respective agencies, you know, with your agency head, and what
    type of give and take in it, you know? And if you can give me a
    general idea of what you ask for, what you typically get in
    response.
        Mr. Gianni. I'll take a crack at it. I've been in my
    position for over 7 years. So if the Congressman's bill were to
    pass, I'd have to leave.
        Mr. Platts. Now, he may grandfather in----
        Mr. Gianni. No. I'm just bringing in a little levity here.
        The point on budget, when I--my budget has been reduced
    over the past 8 cycles. I've done this----
        Mr. Platts. Every cycle for----
        Mr. Gianni. Every cycle for the past 8 years. I had an
    office that consolidated two IG offices. We had to do some
    downsizing. We did that accordingly. We entered into----
        Mr. Platts. That downsizing was dictated to you by agency
    head or internal; you said we have the opportunity to do this?
        Mr. Gianni. It was dictated by the circumstances in our
    corporation. As the corporation was downsizing we also felt
    that we had to be a part of that downsizing. We were the
    destined--so we created plans for our downsizing. And the
    corporation bought into it, certainly supported it. I present
    my budget to my chairman. The chairman basically agrees on two
    things, my staff size and the total dollars. He says, I agree
    with that. We send it to OMB. OMB forwards it to the Congress,
    and the Congress reviews it as part of its normal appropriation
    process.
        Mr. Platts. When you say the chairman agrees, you know,
    there's a give and take every year, or is it basically he
    tells--says here's what we'll accept, and that's the way it is?
        Mr. Gianni. He has accepted what I've put forward every
    year.
        Mr. Platts. Mr. Snyder.
        Mr. Snyder. It's different at the Federal Reserve, in that
    we are a nonappropriated agency, so we don't go through the
    congressional budget process. However, we do have a separate
    budget within the board related to IG activities. When the IG's
    office was established in 1987, the Board felt that something
    less than 10 positions would be enough to do the job. So we
    started with nine people. That's less than 10.
        Over the years we--well, it wasn't long after we were there
    that it was clear that number was not going to be sufficient to
    get the job done, and we made a request to the board to have
    our resources increased. There was a good bit of give and take
    at that meeting. Unfortunately, at the time I was the Assistant
    Inspector General for Audit. The IG was in the hospital. I got
    to go and defend the budget. So we had a significant large
    discussion about the duties and responsibilities of IG,
    particularly me and one Governor. But ultimately, our budget
    was increased to 32 positions.
        In 1997, we cut back 10 percent, or 3 positions,
    recognizing that the Board as a whole was also trying to hold
    its budgets down, and we complied with their direction to all
    divisions that were there.
        We've felt free, though, to ask for something additional if
    need be. We've kind of held our budget at that level since that
    time.
        Mr. Platts. A lot of our focus today is independence and--
    --
        Mr. Snyder. I will say I'm a bit unique in having my own
    budget I think as far as the DFE community goes. A lot of their
    budgets, I believe, are incorporated in their agency's budgets.
    They do have to--they are probably in competition with other
    programs within the agency in terms of funding, and there's
    probably not another level of review that particularly takes
    place to any great degree at OMB or here at the appropriations
    process, unless somebody requests what that level is going to
    be.
        Mr. Platts. With the absolute, you know, agreement that
    independence is critical for IGs being able to do their job
    well, both in reality and in perception, that perceived
    independence, the fact that the norm is that IG budgets go
    through and are really decided by those that you're supposed to
    be kind of watching over seems one of the most problematic
    aspects of the existing structure, and if we were to
    statutorily create the council for all IGs as one, that maybe
    then presents an avenue where Congress in appropriating the
    funds works directly with the IGs through that entity as
    opposed to the individual departments and agencies.
        A related question, then, is in the amount of money you
    get, your auditing of your respective departments, agencies
    comes from those funds that you're--you talked about you
    approved, how many positions and total dollars. Of that total
    dollar, your auditing expenses come from that, correct?
        Mr. Gianni. Yes, sir, audit and investigative expenses.
        Mr. Platts. So the amount you devote to the audit--and this
    kind of--I think, Mr. Snyder, in your comments you talk about
    the new requirement pursuant to 2002 with more agencies having
    to do that----
        Mr. Snyder. Correct.
        Mr. Platts [continuing]. As those agencies--were they given
    more money?
        Mr. Snyder. I think it varies from agency to agency that's
    out there. I----
        Mr. Platts. Because if not, to fulfill the audit
    requirement they've obviously got less to do in the other
    investigative, whatever it may be, aspects of your mission?
        Mr. Snyder. That's true. I believe most of them have taken
    the route that we have, though, and that is to contract with an
    independent public accounting firm to do the audits and leave
    the IG's operations to oversee and to judge the quality of
    those audits.
        Mr. Platts. But the cost of those contracts still comes out
    of the IG's budget?
        Mr. Snyder. It would come out of the IG's budget and I
    think many of them had their contract dollars increased to do
    this.
        Mr. Gianni. Mr. Chairman, one point of clarification on my
    part. I misinterpreted your question. The financial auditing
    for my agency is paid for by the corporation, and it's paid to
    the General Accounting Office, who is the auditor of record for
    the financial audits.
        Mr. Platts. Separate from the budget for IG's budget?
        Mr. Gianni. Separate from my budget.
        Mr. Platts. That's probably the exception, though, for
    the----
        Mr. Gianni. That is the exception. That is the exception.
    There may be one or two other IG offices where the department
    is paying for the audit out of their revenues as opposed to the
    IG budget, but I think for the most part it's coming out of the
    IG budget.
        Mr. Platts. Because the--and my staff will correct me if
    I'm wrong in this. When we did a hearing regarding Homeland
    Security this year for their auditing, there really was no
    funds for their financial auditing, and the IG office I think
    came up with 4.5 million, which obviously takes from their
    ability, and that department, because of, you know, the
    consolidation of 22 different agencies, we really want that IG
    to be as active and effective as possible, and that is an
    example where their ability to fulfill some important parts of
    the mission probably has been diminished because they weren't
    given money, but yet they had to come up with money for that
    financial audit aspect.
        Mr. Gianni. When the CFO Act was passed over 10 years ago,
    many of the IGs had to take the cost of conducting the audits
    out of their budgets, and during that time, I mean, you factor
    a lot of things in. We've gone through cycles where many of the
    IGs were in a period where they were competing for resources
    within their agency, and it had an impact. My personal opinion
    is the more that we can create a system that allows for
    openness of what is being transpired and that then the Congress
    can say we either agree or we don't agree with what's going on,
    the more we can create that type of transparency to the
    process. Because of our unique nature I think it would go a
    long way in helping us be successful.
        Mr. Platts. What would be--if you--in looking as part of
    that 25th anniversary, what, if any, statutory changes should
    be addressed? If you had to focus--you know, I'm always asked
    this, and I hate being asked this, but one specific change,
    what would be the most important thing we could do, whether it
    be for the PCIE member IGs or ECIE IGs, the one thing that
    Congress could do to allow you to be more effective, more, you
    know, efficient in your mission assignment?
        Mr. Gianni. My personal opinion would be the codification
    of the PCIE and ECIE with some funding. I think that would be
    the primary one from my perspective, and I can prioritize the
    others accordingly. I think that's what the community would
    suggest also, but, you know, I leave that open for future
    discussion.
        Mr. Platts. OK.
        Mr. Snyder. I would agree on the codification. I think the
    Program Fraud Civil Remedies Act is an easy one to do for the
    DFE IGs. Related to the question of independence, though, as I
    stated in my testimony, it could be that the removal for cause
    and the term limit would be right up there.
        Mr. Platts. On the GAO report and the recommendations of
    consolidation--and, Mr. Snyder, with your IG members being
    maybe most dramatically impacted, and you've given us some good
    reasons why it's not just about turf, it is about the
    effectiveness of the IG operations in your members' offices--
    are there any of those now, you know, DFE IG offices that you
    would maybe collectively--ECIE members collectively say would
    make sense? Like, I'm going to say Amtrak with DOT. Are there
    any, you know, that specifically because of the circumstances
    make greater sense than collectively consolidation?
        Mr. Snyder. I think my answer would be none of them, but
    let me clarify as we go along here. I think the big concern is
    if the Congress wants oversight at a particular agency, then
    the staff needs to be onsite and working at that agency, and
    that's truly, I think the question.
        We've talked a lot about size and efficiencies and
    independence and what have you, but it really comes down to do
    you want a presence that understands programs and activities of
    that agency and can provide oversight of that agency? Because
    absent forcing that--in which case I would ask then why are we
    consolidating--but absent forcing the level of resources at
    that agency, then there is the probability and likelihood that
    the agency--that the DFE resources that would be transferred or
    somehow moved to the consolidated entity, thus creating some
    savings I guess would not necessarily be sent back. A number of
    the scenarios that were there, the DFE agencies and operations
    that would be consolidated wouldn't even come close to some of
    the major programs and activities of the departmental agencies
    that are there. The size is just too different.
        I don't think it's unreasonable to think that the size of
    the DFE IGs are small because of some actions to keep them that
    way. I think what we're looking at is the size of the agencies
    are small. If you compare DOD and it's 1,000 staff in the IG
    versus another agency that only has 100 people and there's only
    3 or 4 people in the IG office, you could understand why this
    size is there.
        Personally, I'm not sure if there isn't a need for a
    critical mass as we've talked about to be effective as an IG
    and to carry out all the mandates that are there, particularly
    with respect to the new programs and activities that have come
    to these agencies, but I think----
        Mr. Platts. So there would be some that maybe are so small,
    that their ability to fulfill all the requirements is more
    challenge----
        Mr. Snyder. I'm sure it's more difficult and a challenge
    today. But I would ask the question if we're looking at
    efficiencies and we're looking at the level of oversight, then
    maybe we need to look at whether or not an agency needs the
    level of oversight that was contemplated when that particular
    agency was designated as a Federal entity for this purpose.
        If that's still there, then I think it only makes sense to
    have the IG onsite there so they can respond.
        There are a number of implementation considerations that
    also would make this fairly complex to do. You could have
    situations--or you would have situations where the consolidated
    IG would be under the, ``general supervision of more than one
    agency head.'' Having two bosses is somewhat difficult today
    from an IG perspective of the agency head and the Congress.
    Giving them three or four bosses--I think in the one scenario
    the Department of Commerce got a lot of the DFEs. They might
    have 8 or 10 people that the IG would be under the general
    supervision of.
        Next, I think there's some complexity about the oversight
    committees here on Congress. The IG would be subject to
    multiple oversight and potentially to multiple appropriation
    committee oversight as it relates to the different activities
    that it might be dealing with.
        So there's some practical implementation considerations
    that I think that are out there.
        From my perspective, if you want oversight, they should be
    onsite.
        Mr. Platts. I want to give Mr. Cooper a chance to have some
    questions. Just one followup. Conversely with the GAO's
    recommendations being that the PCIE membership was more
    supportive of consolidation, are there any ones that you would
    specifically think should not be consolidated versus opposite
    that, you know, should be?
        Mr. Gianni. I think my colleagues and I approach this as a
    purely theoretical issue, that because we have--we are larger
    and tend to have an infrastructure to support both
    administrative, statistical perhaps, or technical
    infrastructure, that we would be better able to support these
    other functions.
        Whether we consolidate or not is really a congressional
    decision. The issue of whether we can consolidate has been
    answered. We did it at Homeland Security. We had four different
    IG offices folded into Homeland Security. So it's not an issue
    of that it can't be done. It's an issue of do we want to do it.
    And if we want to do it for the reasons that the Comptroller
    General put forward or for other reasons, such as we're
    beginning to streamline our government agencies and refocusing
    the mission of our government, I believe that, those are very
    large, complex issues. We're not going to solve them by just
    merging a couple IG offices.
        Mr. Platts. On a specific----
        Mr. Snyder. If I could add to that, I think the DFE
    community would concur that if the agencies are being
    consolidated, then it only makes sense for the IG's offices to
    be consolidated. Same would hold true for Treasury and Tax
    Administration.
        But I think in many of the instances, the agencies were
    separated out. For example, NARA was taken out of GSA. Federal
    Maritime was taken out of Transportation. And now you're going
    to have the IG go back and really supposedly undo what that
    separation was all about, and that's where to them it didn't
    make a lot of sense.
        Mr. Platts. Mr. Gianni, on that theoretical approach of
    having the infrastructure, would one of the agencies that you
    propose for elevation, is the Postal Service, and their
    independence, and Mr. Walker talked about how they really have
    independence--to answer to the governing board, not the
    postmaster and the type of work and given their size, they have
    the significant infrastructure ability out there for their
    mission. Would that be one that the PCIE members would maybe
    agree should be consolidated, or should it need to be changed
    from its existing format in any sense?
        Mr. Gianni. Clearly the postal IG is an anomaly as being a
    DFE when you look at the rest of the DFE organization. As I
    understand it, there was debate at the time that the Postal
    Service Inspector General office was created as to where and
    how that IG would be appointed.
        It was subsequently agreed that the IG would be appointed
    by the board of Governors. Whether making that IG a
    Presidentially appointed IG would make them more efficient,
    more effective, I don't think that's the issue there. There
    would be other issues, other considerations that would go into
    making that judgment.
        Clearly, if one were to say are there agencies as large as
    the Postal Service IG that are Presidentially appointed and we
    want to have some degree of consistency about which ones are
    Presidential and which ones aren't Presidential, then they
    would fall in the Presidential category, assuming that both the
    board of Governors and the Congress could agree that that's
    what they want to occur.
        Mr. Platts. I want to give Mr. Cooper a chance for
    additional questions.
        Mr. Cooper. Thank you, Mr. Chairman. You have been very
    kind. I appreciate that.
        Consolidation as a way of achieving independence is not the
    only way of achieving independence. Of course, I, in my earlier
    remarks, was pushing the idea of terms and dismissal for cause;
    and I could understand and I wasn't surprised by the
    administration's reaction. They wouldn't mind if everyone could
    be reappointed on their watch, all Federal judges, too, I would
    imagine. But terms, to me, ensure an insulation and
    accountability and also expectation on the part of the
    professional employee, as long as he or she does their job,
    they are going to have a 7-year term of office. So to me it's
    an essential part of professionalism, not the status of being
    an at-will employee where you just blow with the wind.
        There are so many issues to discuss, I understand from my
    staffer, when asked to prioritize the elements of the bill that
    I am putting together, that codification of the professional
    councils would be the No. 1 priority. Is there a No. 2 priority
    in the list of things?
        Mr. Gianni. I would think, from my constituency in the
    PCIE, that codification and removal for cause would be a high
    priority. As was discussed earlier with David Walker and Clay
    Johnson, the issue is how do you define what the removal
    criteria would be remains.
        Again, I don't want to minimize the importance of
    compatibility in this position. If personalities aren't
    compatible, then what could happen is that you have a
    dysfunctional IG office or a dysfunctional relationship that
    causes the IG to be less effective than he or she could. So
    compatibility is very important to getting the job done. It's
    not the only thing, but it is important to making sure that the
    job gets done effectively.
        Mr. Cooper. I look forward to working with you to sort of
    craft the right language there.
        Efficiency is the goal of everyone, I believe. What's the
    best way to evaluate the quality of an IG's performance? You
    have 57 of them out there, some large, some small. How do you
    spot a great IG versus someone who may be headed toward
    retirement and not as active as perhaps he could be, and he
    might have a marvelous personality, but perhaps the job isn't
    being done. As I understand, when you are trying to catch
    fraud, you never know when it's good news or bad news, but you
    catch because it could be an indication there's a lot more to
    be found. So what's the best way for really evaluating IG
    performance among IGs?
        Mr. Gianni. I think that's a very good question that hasn't
    been answered.
        Now I can attempt to give you some ways of looking at the
    performance of an IG. Clearly, I believe that many of my
    colleagues, if not all, are trying to operate in accordance
    with the spirit and intent of the Results Act, developing
    strategic plans, sharing those strategic plans as they develop
    them with both the Congress and their agency, coming up with
    annual performance plans as to what they expect to accomplish
    with their budgets, showing how their funds are being allocated
    among the various functions that they are performing and then
    reporting on an annual basis back to both their agency and the
    Congress about how well they have done. That gives at least
    some transparency of what an IG is accomplishing.
        The accomplishments between and among IGs vary greatly
    depending on their mission, depending on the mission of their
    agency. If you have an agency that has a lot of contract money,
    you have an opportunity for having high dollar savings or
    findings of fraud. On the other hand, if you are a regulatory
    agency, you might not have as much of an opportunity.
        In my particular institution, when banks fail, oftentimes,
    fraud is associated with the banks that fail. My investigators
    will work with the Justice Department to pursue the people who
    committed the frauds. From a criminal standpoint, we get
    judgments, we get restitution orders from the courts. Those are
    financial measures that show we are doing something.
        Now will all that money return to the government? Probably
    not. Some of it has been spent, some of it has been hidden, and
    it is very difficult to trace back. But these are the types of
    measures.
        On the other hand, much of our audit work deals with
    improving systems, making recommendations for strengthening
    internal controls. It's very difficult to put costs on that.
    Even GAO has that as one of their measures, number of
    recommendations that an agency acted on; and there may not be
    any dollars associated with it or it's difficult to quantify.
    So we use that as a measurement for our performance. So there's
    a variety of measures out there, and we hope we're doing a good
    job.
        Mr. Cooper. Perhaps if we are able to codify the
    professional council of the IGs themselves maybe they will get
    together and vote on those individuals who are considered to be
    truly outstanding, and maybe there's an IG hall of fame. I am
    sure there's a spot for you in heaven somewhere. But maybe
    that's a way of evaluating true quality performance.
        Mr. Gianni. We as a community this year have--we have our
    annual awards ceremony. This year we developed three new
    awards: one, service to the Congress; one was a good
    governments award; and the other was service to the
    administration. As for the award for service to the
    administration, after the nominations were vetted within the IG
    community, they were presented to Clay Johnson and the
    President's Management Council to review those actions by the
    Offices of Inspector General to decide which one, in their
    judgment, was the most significant accomplishment. So we're
    trying to get other input into our assessments of how well
    we're doing.
        Mr. Cooper. That sounds very helpful.
        Mr. Johnson mentioned that Federal acquisition officers
    have no codified council, and he implied at least that might be
    something we could look at or a step we could take. I'm not
    even sure this committee has jurisdiction over those folks--we
    do. Are you familiar with their professional group?
        Mr. Gianni. They were just recently reorganized, and I
    haven't--I think they were reorganized for a reason, and their
    effectiveness goes in peaks and valleys. The CFO, I believe, is
    codified. The CIO may not be codified as far as the three
    councils, and I know that the President's Management Council is
    not a codified council. But I think--and I said this
    previously--the reason why we are seeking codification is
    because of our dual role both with the administration and with
    the Congress, and we want to bring that congressional element
    as a part of our council activities.
        Mr. Cooper. To me it's an essential part of preserving your
    independence not as individuals but as a professional group so
    that you are not subject to the whim of an administration who
    may find fault with one of your members or may have a political
    vendetta. I think this administration has been very fair. It's
    good to have things set.
        Mr. Gianni. I agree with you, and I would like to take this
    opportunity to again thank you for your interest in the
    community and your interest in fostering some legislation to
    help us as a community. We certainly look forward to working
    with you, sir.
        Mr. Cooper. I am honored by your hard work. To find $72
    billion in a year for taxpayers in potential savings is
    amazing; and to catch over 10,000 bad guys, I wish some of our
    other agencies could be as effective.
        Thank you, Mr. Chairman.
        Mr. Platts. Thank you, Mr. Cooper.
        I think your earlier point, that it's kind of a good news,
    bad news story, it's good we are catching them but bad that
    there are many out there that have to be caught.
        I want to maybe just touch on two more areas before we wrap
    things up here. One is, I didn't get to ask the Comptroller
    General about a recommendation that was made 5 years ago. Given
    I have been here 3 years and it was prior to my time on this
    subcommittee, but GAO recommended that the IGs be more thorough
    in developing their strategic plans for each of their
    individual offices. I wonder if you could tell us your
    respective offices, where you are with strategic plans and what
    your mission is and how you are pursuing that mission and your
    evaluation of the effectiveness of your efforts.
        Mr. Snyder. It's one that we do. We have a 4-year horizon.
    We update it every year. We even use it to report in our semi-
    annual report our goals and objectives so both the board and
    the Congress can see what our plan is, where our objectives
    are, and what we are doing under each one.
        Mr. Platts. Do you share that with GAO as you are
    developing it to get their comments?
        Mr. Snyder. We seek their input in various forms in terms
    of where their priorities are going to be, what things you may
    be asking them to do. The IG Act requires us to coordinate with
    them, so it's part of that coordination that we do. It is
    somewhat informal.
        As part of the working group that Gaston alluded to
    earlier, the IGs or the regulatory agencies get together I
    think every quarter or so. We invite the gentleman from GAO who
    has responsibility for this area to meet with us, and we talk
    about what's going on and the future direction and what the
    congressional interest is, and we share what we're doing.
        So I think there's a dialog that goes on. It's not that
    formal, but I think there is a dialog that's there.
        Mr. Gianni. Mr. Chairman, I would like to take perhaps a
    different approach on this. Clearly, we are mandated to
    coordinate with GAO; and many of my colleagues do that. I would
    classify our coordination as passive coordination, that we make
    our decisions and we share our decisions with GAO for
    informational purposes.
        What the Comptroller General was talking about in his
    testimony was having some more active participation and dialog
    before decisions are made so when GAO and the IG, as
    accountability officials, decide what needs to be addressed
    from an auditing standpoint that we have, at least from our
    decisional basis, the same knowledge and understanding of the
    issues. The idea being that the dialog occurs before decisions
    are made. Then after you have that common understanding and
    that discussion of what the issues are, what the risks are
    within the respective areas, then GAO will make their decisions
    and the IGs will make their decisions as to what they're going
    to do, and certainly those decisions should be complementary.
        I agree that coordination is occurring. I would be the
    first to say that we, as a community and GAO working together,
    can improve the level of communication; and I think the
    community will respond to the CG's request that we work
    together to try to decide how best to accomplish this. We might
    not get 100 percent buy-in, but we're going to move in that
    direction because I think it makes good sense.
        Mr. Platts. I didn't think at the time to ask the
    Comptroller General, but I would be interested, has he come
    before your respective councils and kind of made that direct
    request or, you know, plea to have more communication; and, if
    not, would you be interested in extending invitations to him?
        Mr. Gianni. Barry and I both have served and a number of
    our colleagues have served with GAO in a number of capacities.
    We have served on the Comptroller General's advisory board for
    the audit standards, and a number of our colleagues serve on
    that panel. The intergovernmental audit form that was initiated
    by GAO has many of our members from our respective IG community
    participating in it.
        Now it might not be the Inspector General. It might be the
    head of their audit organization that participates in that
    organization. But there is that dialog within the audit
    community.
        As far as this strategic area that the Comptroller General
    put forward before, he has come before us and talked about
    conceptually the need for us to work better together. Because
    we--GAO and the IG community--have limited resources and the
    challenges are great, we need to work together and work smarter
    so our resources are better used. He has put that forward. We
    need together, GAO and the IG community, to begin to work that
    through.
        One of the observations that I made was that GAO has a
    protocol for working with the agencies and they have a protocol
    for working with the Congress. I believe that we need a
    protocol for the IGs and GAO for working together. So that's
    going to be one of the things that we're going to be working on
    in the coming year, to develop with GAO to get that formalized
    and as a best practice.
        Mr. Platts. Glad to hear that. As in so many of the
    hearings we have had, having those more regular and open
    communications occurring I think benefits all parties and
    ultimately the public at large.
        The last question I have relates to--from proposed
    statutory changes is whether there should be additional
    specific qualification requirements for IGs put in statute as
    far as minimum qualifications. Your thoughts on such a
    proposal.
        Mr. Gianni. Right now, the law says that it is based on
    someone of integrity that has a legal background or an auditing
    background or an investigative background or a management
    background; and that's pretty much it.
        Mr. Platts. Should there be more specifics to those?
        Mr. Gianni. Let me address this another way. I am an
    auditor by training, by education and by career before I got my
    position. I spent 33 years in GAO. When I assumed the position
    of Inspector General for the FDIC, I also had to have
    investigative responsibilities. The fact that I'm not an
    investigator doesn't mean that I can't have oversight over an
    investigative function. What you do is you hire people on your
    team that know what the responsibilities are, and then you
    allow them to do their job.
        So an Inspector General doesn't have to be all those
    things. I have lawyers on my team who can assist me where I
    might not have the legal background. Clearly, I have CPAs on my
    team that can amplify my expertise. One person is not going to
    have all of the expertise most likely, most likely will not
    have all of the expertise that's needed to be an Inspector
    General. What is necessary, in my opinion, is a person who is a
    good manager and a good leader and a person that has integrity.
        Mr. Cooper. Mr. Chairman, may I ask a question?
        Mr. Platts. That concludes mine, so if you have any
    followups that you would like to ask.
        Mr. Cooper. When you say they have to have legal,
    accounting, investigative or management background, does that
    mean graduate degrees in any of these fields?
        Mr. Gianni. There are no professional certification
    requirements. It's educational background. It is not degree
    oriented. So it could be undergraduate, graduate or doctorate.
    There are no specific requirements.
        Mr. Cooper. Would I have a legal background having taken
    one course in Constitutional law as an undergraduate?
        Mr. Gianni. I don't believe that would qualify from a legal
    standpoint.
        Mr. Cooper. Does it take a JD?
        Mr. Gianni. That would be an actual practicing lawyer.
        Mr. Platts. It's not spelled out and subject to
    interpretation.
        Mr. Gianni. That's correct. Generally, the community--at
    least the Presidentially appointed IGs--is generally made up of
    lawyers, accountants, auditors and investigators and some
    management-type IGs.
        Mr. Cooper. I have no more questions, Mr. Chairman. Thank
    you.
        Mr. Gianni. One point on that is healthy. The community has
    the different disciplines in the leadership roles.
    Collectively, when we get together, it does provide a synergy
    that you wouldn't get if just one discipline was being
    represented at the table.
        Mr. Platts. Well, to our witnesses, I again want to thank
    you for your preparation for today and the written statements
    you submitted as well as your testimony here today, your
    patience while we had our votes. I know that Mr. Cooper and
    myself, Ms. Blackburn, Mr. Towns, all of us who are here today
    look forward to working with you and both councils and the
    administration as we try to move forward, what, if any,
    statutory changes we are going to change, move not just through
    this subcommittee but through Chairman Davis' full committee
    and ultimately to the House floor. So look forward to
    continuing to work with you.
        I also want to thank majority and minority staff for their
    work regarding today's hearing.
        We'll keep the record open, I guess, 2 weeks as any
    material to be submitted from our witnesses and followup
    questions to our first panel that we have to ask them to
    followup in writing to us.
        This hearing stands adjourned.
        [Whereupon, at 5 p.m., the subcommittee was adjourned.]
        [Additional information submitted for the hearing record
    follows:]

    [GRAPHIC] [TIFF OMITTED] T2126.064

    [GRAPHIC] [TIFF OMITTED] T2126.065

    [GRAPHIC] [TIFF OMITTED] T2126.066

    [GRAPHIC] [TIFF OMITTED] T2126.067

    [GRAPHIC] [TIFF OMITTED] T2126.068

    [GRAPHIC] [TIFF OMITTED] T2126.069