[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
 DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND 
        INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2005

                              ----------                              


                        THURSDAY, APRIL 8, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:10 a.m., in room SD-628, Dirksen 
Senate Office Building, Hon. Christopher S. Bond (chairman) 
presiding.
    Present: Senators Bond and Mikulski.

             CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

STATEMENT OF DAVID EISNER, CHIEF EXECUTIVE OFFICER
ACCOMPANIED BY MICHELLE GUILLERMIN, CHIEF FINANCIAL OFFICER

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. The subcommittee will come to order. I 
apologize for the delay. I had to present to the Judiciary 
Committee the Missouri Supreme Court Judge who has been 
nominated by the President for confirmation to the Eighth 
Circuit Court of Appeals, and I apologize for delaying the 
start of this hearing. But this is a very important position, 
as I trust you understand.
    This morning the committee completes its budget hearing 
schedule for the year by hearing from the Corporation for 
National and Community Service on its fiscal year 2005 budget.
    It is a pleasure to welcome the Corporation's new Chief 
Executive Officer, Mr. David Eisner, who has been on the job 
for almost 4 months, a real veteran now. And we are also 
pleased to welcome back the Corporation's Chief Financial 
Officer and Acting Chief Operating Officer, Ms. Michelle 
Guillermin.
    I congratulate both of you on taking on new 
responsibilities, especially given the longstanding challenges 
that face the Corporation.
    For fiscal year 2005, the administration is requesting a 
total of over $1 billion for CNCS, of which $642.2 million is 
for programs under the VA-HUD subcommittee's jurisdiction. The 
request is $61.2 million or 10\1/2\ percent over the fiscal 
year 2004 enacted level. Further, the administration proposes 
some $452 million for the AmeriCorps program to support 75,000 
new members--the same level of participation supported under 
the 2004 enacted level.
    This is quite a healthy budget recommendation compared to 
most other domestic programs, including, regrettably, the 
programs under the VA-HUD jurisdiction. I am pleased that the 
administration provided such a strong budget for the 
Corporation and the AmeriCorps program. This year's budget, 
however, will probably be the most difficult and challenging we 
have faced, especially with record shortfalls in the budget 
request for other compelling and important programs, such as VA 
medical care, Section 8 housing, and the EPA's Clean Water 
State Revolving Fund programs. In fact, to be quite honest, I 
am not sure that the subcommittee can afford to increase 
funding for any program or activity until we have adequately 
funded these and other compelling programs.
    To say that the past year for the Corporation and its 
grantees was frustrating and stressful is, at best, an 
understatement. While I do not want to belabor the recent past 
or reopen old wounds, a lot can be learned from it and we must 
not forget these experiences so that we do not repeat them. The 
primary lesson is that management and fiscal accountability are 
important issues and have real consequences when neglected.
    Since the inception of the Corporation and the AmeriCorps 
program, the Corporation's leadership largely ignored these 
issues. While the Corporation has made efforts to address 
management failings and its leaders have made promises that its 
problems would be resolved, many of these previous efforts were 
largely window dressing and the promises mostly rhetoric. The 
sad result was that thousands of well-performing organizations 
and the communities they served suffered from mismanagement.
    Moreover, thousands of caring and compassionate individuals 
were denied the opportunity to participate in the program. I 
hope we do not repeat this lesson. I hope the Corporation and 
its supporters have learned from the history.
    But let us be clear. Not all is negative. Some good did 
result from the painful experiences of the past year. The most 
notable result was the increased awareness and support for the 
program among members of Congress and the public, which led to 
a record budget for the AmeriCorps program. The numerous media 
reports raised the profile of AmeriCorps volunteers and their 
very positive impact on the local communities throughout the 
Nation. Prior to the well-publicized problems of AmeriCorps, 
only a handful of members expressed any serious concern or 
attention to the program. Now, the program has the attention of 
most, if not all, members of Congress.
    Nevertheless, this is not the time to relax. Focus and hard 
work must continue on resolving the continuing management 
weaknesses of the Corporation. The Corporation must instill a 
culture of accountability and personal responsibility based on 
performance which is measured not in just program outcomes but 
also on sound management. For too long, the Corporation has 
been overly fixated on public relations and promoting its 
programs at the expense of management responsibility. To be 
blunt: the Corporation needs a serious paradigm shift.
    Fostering an environment where management and fiscal 
responsibility is taken more seriously must begin at the top. 
Mr. Eisner, your performance thus far has been impressive, and 
we commend you for the close attention and efforts you have 
made on management and accountability. I recognize that it 
helps to have an incredibly bright and hardworking CFO by your 
side, but I credit you for electing to be involved personally 
in these issues.
    The Corporation's Board of Directors, led by Chairman Steve 
Goldsmith, has also become actively engaged in the 
Corporation's management and policies. I especially appreciate 
the Board's approval of Resolution 2003-05, which directs the 
CEO to consult with the Board in advance of any Corporation-
wide pay adjustments or cash awards. Hopefully, this action 
will ensure that the Corporation ends the practice of rewarding 
bad behavior, as demonstrated last year when significant cash 
awards were provided to senior level staff right after the 
AmeriCorps over-enrollment problem was uncovered; a problem 
that was a serious violation of the Anti-Deficiency Act. 
Certainly, it was not an appropriate time to award staff 
bonuses.
    In general, with Mr. Eisner and Ms. Guillermin's 
leadership, the Corporation appears to be headed in the right 
direction in terms of management and accountability and, with a 
robust budget recommendation for this year, the Corporation has 
an opportunity to expand significantly the AmeriCorps program. 
Nevertheless, I believe the Corporation is at a critical 
crossroads in terms of administering the AmeriCorps program. 
And I believe the direction the Corporation chooses will have 
long-term implications for the program.
    You have recently begun a major effort to improve the 
performance of the AmeriCorps programs through a rulemaking 
process. I think that process is long overdue, since the rules 
governing the AmeriCorps program lack clarity which contributes 
to some of the questionable funding decisions. These rules 
should provide the necessary framework for better oversight, a 
responsibility the Corporation previously has ignored.
    Further, the Corporation in the past has paid little 
attention to the long-standing concerns of the Congress about 
sustainability and reducing the costs per member. The 
Corporation's rulemaking goals are designed to bring a far 
greater degree of predictability and reliability for its 
grantees and to make the program more efficient, effective, and 
accountable. I support these goals and strongly urge the 
Corporation to complete rulemaking this year. I fear that if 
the Corporation does not complete it, the Congress may get 
involved, and that's bad news.
    The issue of most interest to me is sustainability. The 
2004 VA-HUD conference report directed the Corporation to 
undertake public notice and comment rulemaking to develop a 
definition of sustainability. I advocated the inclusion of this 
directive in the conference report because of my long-standing 
concern that the Corporation was not adequately compliant with 
the statutory goal of reducing AmeriCorps grantees' reliance on 
Federal funds. As noted by the Corporation's Office of 
Inspector General in 2001, the Corporation lacked a clear 
definition of sustainability. Accordingly, the OIG recommended 
that the Corporation establish a means of clearly measuring the 
grantee's reliance on Federal funding. Further, the OIG 
recommended the Corporation consider developing a performance 
goal for reducing grantees' reliance on Federal funds.
    Now, many AmeriCorps groups have expressed concerns about 
sustainability. And I agree with some of their concerns. For 
example, I do not believe in a ``one size fits all'' definition 
of sustainability. The Corporation should develop a flexible 
approach to sustainability so that it does not unfairly punish 
good performers or small, disadvantaged organizations--
especially those in rural areas. The Corporation may need to 
consider a special set of rules for these types of 
organizations. Nevertheless, I am concerned about the 
``entitlement'' mentality of some groups regarding AmeriCorps 
funding and believe that under certain circumstances, time 
limits on funding may be warranted. For example, time limits 
should be considered for some groups that receive significant 
funding support from other Federal sources.
    The Corporation should consider time limiting some types of 
organizations so that more organizations can compete for 
AmeriCorps funds. There are clearly more volunteer groups 
requesting funds than there are funds available. I strongly 
believe that the Corporation must ensure that the playing field 
for AmeriCorps funding is fair and equitable. As Senator 
Mikulski and I have observed, there are numerous, well-
performing organizations that have approached us for AmeriCorps 
funding. I oppose earmarking the AmeriCorps account.
    I sympathize, however, with well-performing organizations 
that do not receive AmeriCorps funding. And that's why we 
created the Challenge Grants program. Not surprisingly, the 
Challenge Grants program has been popular, as demonstrated by 
the overwhelming demand for the Challenge Grants program. Last 
year, the Corporation received 52 applications requesting $31 
million out of an available pool of $6 million. In addition, 31 
of those organizations were first-time applicants to the 
Corporation. Further, the ability of the applicants to meet the 
program's 2 to 1 match requirement demonstrates that groups can 
successfully obtain private matching funds.
    If we assume flat funding or minor funding increases in the 
future for AmeriCorps, it is obvious that new groups in the 
future will have extreme difficulty competing for funds unless 
the rules are changed. And flat funding may be the reality for 
the next several years as Congress seeks to balance the budget 
and control deficit spending.
    In this case, funding problems may be especially troubling 
for up and coming organizations, such as those receiving Next 
Generation grants from the Corporation. The Next Gen program, 
as it is called, was created by Senator Mikulski to provide 
seed money to build the capacity of small volunteer 
organizations who have innovative ideas. This program has 
attracted a large number of applicants, as evidenced in the 
fiscal year 2003 cycle, where some 1,100 organizations applied 
for the program--more than any previous grant competition in 
the history of the Corporation. I fear that these groups may 
not be able to compete for AmeriCorps funds if the Corporation 
solely continues to fund the same organizations year after 
year.
    The other rulemaking issue of interest to me is reducing 
the costs of the program on a per member basis. I appreciate 
the Corporation's attention to this issue since its record on 
reducing the cost per member has been mixed at best. In the 
Corporation's budget justifications, it notes that its 
projected average cost per FTE for its AmeriCorps program is 
the same level as planned for fiscal year 2004. The Corporation 
also notes that its 2004 cost per member was 10 percent below 
the 2002 baseline. It was disappointing, however, to read that 
this reduction was not attributed to any program reform, but 
due to an increase in professional corps members whose costs 
are lower than the typical AmeriCorps grant.
    The last issue I raise is on performance measures. Despite 
millions of extra dollars that this committee has appropriated 
to address the Corporation's financial accounting and grants 
management system, the Corporation is still unable to provide 
data on the actual costs of the AmeriCorps program. 
Furthermore, the Corporation is unable to provide performance 
data on the impact of the AmeriCorps program.
    According to the administration's own Program Assessment 
Rating Tool or PART, the AmeriCorps program received an overall 
weighted score of 36 percent and rating of ``results not 
documented.'' The PART analysis found that the AmeriCorps 
program's current goals are neither specific nor measurable. 
The Corporation has begun a number of initiatives to address 
performance measures. And I cannot stress enough the importance 
of having this information for policy makers. And I would urge 
the Corporation to address this matter immediately.
    In closing, I support the President's Call to Service and 
believe that the Corporation can play an important role in 
improving the lives of many Americans and the communities it 
serves. Everywhere I have traveled, people have expressed a 
strong desire to volunteer and serve their communities and 
country. I strongly believe that if harnessed in the right 
fashion, the AmeriCorps program can reach new heights in 
improving the security and spirit of our citizens and 
communities.
    Mr. Eisner, Ms. Guillermin, I wish you the best and look 
forward to working with you in resolving the many challenges 
facing the Corporation.
    It is now my pleasure to turn to my colleague and ranking 
member, a longtime champion and advocate of the AmeriCorps 
program and the Corporation, Senator Mikulski, for her 
statement and comments.
    Thank you.

                STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Thank you very much, Mr. Chairman. I 
would like to welcome both Mr. Eisner, our new CEO, and Ms. 
Guillermin, the CFO of the Corporation.
    Last year, there were many things that impacted us. And at 
this very hearing a year ago, I said it was time to get 
National Service back on track, restore the shattered 
confidence of communities, volunteers, the private sector, and 
the Congress, in AmeriCorps.
    I wrote to President Bush and said out loud in the 
committee hearing that I wanted several things: First, I called 
for new leadership. I wanted reform of the Board and referred 
to it as the Enron of Non-Profits. In addition, I called for 
new accounting rules and procedures, because National Service 
had over-enrolled almost 30,000 more volunteers than it had 
money for. And I called for new funding to bridge the gap and 
also to meet the need, the number of volunteers, both America 
could use and the President wanted to do.
    I am pleased to say that we have made progress. And I 
wanted to welcome you, Mr. Eisner, and Ms. Guillermin, in a 
spirit of bipartisan partnership to exactly do that, to make 
sure that we have AmeriCorps on track and that it really 
fulfills the objectives of not like a program, but of a social 
movement.
    We really want to express our appreciation to Mr. Goldsmith 
and the Board. We believe that he did absolutely engage the 
Board and re-energized the Board. And I know that we have new 
members who could not be here today, but we look forward to 
other conversations with them.
    We want to alert you to the fact that five nominees for the 
Board continue to be at the White House. We believe many are 
ready to be returned to Congress. We would like you to work to 
expedite that, so Congress could approve the Board and you can 
have the full complement of the people that are legislatively 
required again to fulfill our mission, our mandate, and our 
desire to reform, renew, refresh our AmeriCorps effort.
    In addition to that, Senator Bond and I, on the accounting 
rules and procedures--worked to pass the Strengthen AmeriCorps 
Program Act, which gave clarification and certainty to 
accounting rules for the National Service Trust, which pays 
those education awards that got so complicated and seemed to be 
so poorly managed.
    Also, we called for new funding. And working with Senator 
Bond, we tried to get funding as part of the emergency 
supplemental, but we were not successful. We kept trying. And 
ultimately we did prevail.
    The 2004 VA-HUD bill provided the highest funding level for 
AmeriCorps. We know it is not only about resources. It is about 
reform. But it is also about re-invigoration. And so we are 
asking then for the three R's. And we look forward to 
discussion with those.
    We appreciate the fact that there has been more money 
provided, but as founder of National Service, I want to uphold 
the original principles that it was based on, of old-fashioned 
values, which was to recruit people to, No. 1, learn the habits 
of the heart, which was neighbor helping neighbor; that if they 
would learn the leadership skills to do that, they and the 
communities that they help would be forever changed; that we 
would be working directly hands-on in the community. And at the 
same time, when they finish their service, they would always 
have the commitment of service, whether they worked in public 
service or our private sector.
    We now know that there are 300,000 AmeriCorps volunteers, 
and many are exactly doing that. And I hope to discuss with you 
how to harness their power for ongoing support, looking at our 
experience in the Peace Corps as a model; that once an 
AmeriCorps member or a Civil Conservation Corps member, you are 
there forever, which could also provide much needed help out in 
local communities.
    Now that we are back on track, we must need to make sure, 
though, that we stay the course and stay sentry over the 
original principles. My goal for this year is two-fold: One, I 
want to know how the Corporation and Board are moving in terms 
of management reform. I also want to make sure that the 
Corporation is doing everything possible to prevent 
mismanagement and uncertainty, which is what happened last 
year. And I want to know the progress that is being made and 
what needs to be done and how we can help.
    Second, I want to know how the Corporation is planning to 
take the Corporation into the new century, meeting new 
challenges, with the new types of workforce we have, new 
opportunities for volunteerism. That is why I called for 
reform, renew, refresh, re-invigorate, and so on.
    We will need to take a look at rules. Senator Bond and I 
mandated that any process to write new rules must be fair and 
open, with an opportunity for advocates and communities to 
comment, while goals that all AmeriCorps supporters share to 
ensure maximum impact in communities and get greatest value for 
taxpayers' dollars. The Corporation must also acknowledge that 
conclusions are not foregone and outcomes are not pre-
determined.
    We look forward to hearing about how you intend to proceed 
on the rulemaking process. I know that the House has sent a 
letter to you calling for what they say are reforms. And I will 
comment about them later on in my questions. I believe that 
there are some of the things contained their letter that I 
could be supportive of, but there are others that I think would 
authorize by proxy through a rulemaking process. But, again, we 
are in for a spirit of reform. And I know you share that.
    Let us then go to the money. The request is for $642 
million for all National Service programs. This is a 10 percent 
increase, $61 million over 2004. This is very good news. And we 
all want to make the wisest, most prudent, most leveraged use 
of these resources, and will look forward to hearing from you.
    At the same time, what we do know, though, is the whole 
issue of Challenge Grants, the seed money, et cetera, and how 
you think we should proceed. We know that there are national 
programs. And when I had spoken to your predecessor, I said, 
``You know, when we look at National Service, if we use a 
mutual fund or a market valuation, you have large caps.''
    These are national programs that operate at the local 
level, but they have uniform recruiting. They have a way of 
screening volunteers to make sure they are appropriate in every 
single level, particularly their ability to be involved with 
children. They can duplicate and replicate leadership 
operations and so on.
    Then there is mid-cap. That came from the governors and the 
governors need to be involved, because we believe that 
ultimately problems and solutions are local. We welcome the 
Boys and Girls Club. We know what Teach for America is doing, 
but the governors were mid-cap.
    And then I always like to look ahead to what is the next 
generation of leadership. Where is the Teach for America of the 
next generation? Where is the possible concept of a version of 
a Community Development Corporation that really does transform 
urban communities or rescue kids that are heading for a dead-
end, or a prisoner return program, which I also know the 
President is interested in. So it was to be in some ways not a 
reckless set of funding, but a prudent investment in terms of 
what are some of the ideas to see if they can work at a very 
small scale before either a governor moved them to a State 
level or so on.
    So that is where we are. And we look forward to discussing 
it with you. But we do believe it is a new day in AmeriCorps, 
that it is a new day, it is new leadership, it is a new state 
of mind, and it is new money. And we look forward to looking 
for brand new progress. So, we look forward to our conversation 
with you this morning.
    Senator Bond. Thank you very much, Senator Mikulski.
    Mr. Eisner, we will accept, for the record, your full 
statement. We appreciate your giving us that extended 
discussion, and I would invite you to summarize your testimony 
for the committee.
    Thank you.

                       STATEMENT OF DAVID EISNER

    Mr. Eisner. Thank you, Mr. Chairman and Senator Mikulski. I 
have submitted the full statement for the record and will 
summarize in about 5 minutes.
    First, let me thank you for the opportunity to discuss 
President Bush's fiscal year 2005 budget proposal for the 
Corporation for National----
    Senator Mikulski. Pull up the microphone.
    Mr. Eisner. I want to thank you for the opportunity to 
discuss the President's budget proposal for the Corporation for 
National and Community Service and also to talk about the 
financial and management improvements that the Corporation has 
made over the past year.
    As you mentioned, Mr. Chairman, Steven Goldsmith, our Board 
Chair, regrets that he cannot join us this morning; however, I 
have submitted, with my written testimony, a letter from our 
Chairman, in which he provides information about recent steps 
taken by the Board to improve its oversight.
    Senator Bond. That will be accepted for the record, as 
well.
    Mr. Eisner. Thank you. And let me, finally, by way of 
thanks, thank this committee for the extra attention that you 
and your staffs have devoted to the Corporation over the past 
year. You have our deepest gratitude and appreciation for your 
leadership and helping us make things right at the Corporation, 
including your support of the President's 2004 budget request. 
This year's appropriation will enable us to reach the 
President's goal of a record 75,000 AmeriCorps members. And 
that it will also allow us to engage approximately 1.8 million 
students in service to their communities through service-
learning programs supported by Learn and Serve America is 
greatly appreciated. Those opportunities are critical to foster 
a culture of citizenship, service, and responsibility in our 
Nation.
    As you have mentioned, last year's budget hearing came in 
the midst of what could be called a tumultuous year for the 
Corporation. There were very serious questions raised by 
members of this committee and others about our financial 
management.
    And a year later, I am pleased to report that a new level 
of fiscal and operational integrity today marks the way that 
the Corporation operates, thanks in part to your leadership, as 
well as to a number of other factors. We have financial and 
grants management policies that have been implemented by our 
CFO and Board of Directors. And I am so grateful to have 
Michelle Guillermin, our CFO, here beside me to help in this 
testimony and also grateful for her adoption of the role of 
Acting Chief Operating Officer.
    Another factor was the Strengthen AmeriCorps Program Act, 
which for the first time set into law a fiscally prudent method 
for determining how we record obligations in the National 
Service Trust.
    Another factor is the increased oversight role by our Board 
of Directors in the Corporation's grant-making.
    And finally, we have made significant progress in 
implementing three management priorities that I have stressed 
since coming to the Corporation in mid-December. These three 
priorities that all members of the Corporation have invested in 
are: Restoring trust and credibility among our stakeholders, 
managing to accountability, and keeping the focus on our 
customers, which are our grantees in the field, as well as the 
participants, volunteers, and members in our programs.
    Through attention to these priorities, we have been able to 
reform many elements of our operations. We have reformed our 
grant-making process, our operational management, our budgeting 
and forecasting capabilities. We have reformed the Alternative 
Personnel System. We have reformed our technology and data 
management systems. And through the rulemaking that you have 
mentioned, we are also well on our way to reforming the 
AmeriCorps program.
    All of that results in a Corporation today that is in a far 
stronger position than we were a year ago. The GAO, our 
Inspector General, and the independent auditing firm, Cotton 
and Company, despite citing a few remaining management 
weaknesses, have all issued positive reports. And taken 
together, those reports reflect that we are in compliance with 
the requirements of the Strengthen AmeriCorps Program Act; that 
we are following fundamentally sound management accounting 
practices; and our ongoing management reforms are effectively 
addressing the identified weaknesses.
    In addition, two recent developments: An Executive Order on 
National and Community Service, which President Bush signed in 
February, and the beginning of the AmeriCorps rulemaking 
process on such issues as sustainability of grantees and 
Federal share of costs, promise to accelerate the reform 
process.
    The goals of both the Executive Order and rulemaking are to 
make our programs more efficient, effective, and accountable. 
And from what I have heard in public meetings on rulemaking in 
Columbus, Seattle, Boston, Dallas, here in Washington, and on 
many conference calls, I am confident that we can in fact 
arrive at fair and equitable solutions to these very difficult 
problems and that we will be able to make our program more 
consistent, stable, and predictable.
    I should note that as we reform our programs the 
Corporation is striving to ensure that National Service works 
more intentionally to broaden, deepen, and strengthen the 
ability of our Nation's 63 million community volunteers to 
contribute to their communities and of America to capture that 
strength of community volunteerism.
    As noted in the Executive Order, the Corporation should 
serve as an engine of volunteer mobilization. And we are 
finding ways for an increasing number of AmeriCorps members to 
devote more of their time to helping charities recruit, train, 
and supervise volunteers.
    The President's 2005 budget includes several targeted 
investments in programs and initiatives that are designed to 
leverage volunteers and private dollars. It also includes an 
initiative to increase outreach to new groups and to ensure 
that the Corporation can provide our grantees with effective 
assistance and monitoring.
    Some, like the Challenge Grants that I know both of you are 
champions of, accomplish more than one of these objectives and 
all are described in detail in my written testimony.
    Finally, because of the challenges faced by the Corporation 
over the past year, it is necessary in these comments, and I am 
sure through a lot of today's testimony, to focus on the 
financial and management reforms that we have made over the 
past year. As we strive to strengthen our management, though, 
we at the Corporation are not losing sight of our main mission 
of our--and the mission of our programs, which is to engage 
people of all ages and backgrounds in meaningful service that 
meets critical local needs, to strengthen community 
organizations, and to change participants' lives, as well as to 
promote the ethic of good citizenship across our Nation.

                           PREPARED STATEMENT

    Thank you, Mr. Chairman. This concludes my remarks. And Ms. 
Guillermin and I are happy to answer any questions you might 
have.
    Senator Bond. Thank you, Mr. Eisner.
    [The statement and letter follow:]
                   Prepared Statement of David Eisner
    Mr. Chairman and Members of the committee, thank you for the 
opportunity to discuss President Bush's fiscal year 2005 budget 
proposal for the Corporation for National and Community Service, as 
well as the financial and management improvements that our agency has 
made during the past year.
    To begin, I want to thank this committee for all the extra 
attention you and your staffs have devoted to the Corporation over the 
past year, and to express my deepest gratitude and appreciation for 
your leadership in helping to make things right, including your support 
of the President's 2004 budget request for the Corporation. That 
appropriation will enable us to support a record 75,000 AmeriCorps 
members and will allow us to engage approximately 1.8 million students 
in service to their communities through service-learning programs 
supported by Learn and Serve America. Those opportunities are 
critically important in helping to foster a culture of citizenship, 
service, and responsibility in our Nation.
    As you all know, last year's budget hearing came in the midst of a 
tumultuous year for the Corporation, with serious questions raised by 
members of this committee and others about our financial and 
operational management. Twelve months later, I am pleased to report 
that the Corporation is in a far stronger position, thanks to your 
leadership and a number of other interrelated factors.
    First, the agency's Chief Financial Officer, Michelle Guillermin, 
who joins me here today, and her expanded financial team have been 
extremely busy over the past year implementing a comprehensive new set 
of policies regarding both the awarding of grants and the enrollment of 
members. The aim is to ensure that last year's problems with the 
National Service Trust are never repeated, and to foster decision 
making that is based on timely and credible data. The team has also 
spent considerable time and effort applying its financial and budgetary 
expertise to the general finances and operations of the Corporation.
    Second, in June, Congress passed the Strengthen AmeriCorps Program 
Act, which President Bush signed in early July. The legislation 
establishes for the first time a clear set of budgeting guidelines for 
the National Service Trust, including when to record an education award 
obligation and in what amount. It also establishes a reserve fund to 
protect members in the event that the estimates used to calculate the 
obligation are incorrect.
    Third, our Board of Directors, under Chairman Steve Goldsmith, has 
taken on a more active role and increased its oversight 
responsibilities. Last year, the Board's Grants Management Task Force 
examined the procedures we use to solicit, review, award, and monitor 
grants and recommended that the Corporation set clearer priorities and 
eliminate barriers for faith-based and new applicants to receive 
Corporation funding. The recommendations led to the establishment of a 
new Office of Grants Policy and Operations to oversee the Corporation's 
grant-making activities. Last fall, the Board, along with Congress, 
directed that AmeriCorps undertake rulemaking to resolve several key 
issues, such as sustainability of grantees and Federal share of member 
costs, that in the past have created inconsistency for grantees--a 
process that is now under way. Several new directors, including Cynthia 
Boich Burleson and Henry Lozano, have come on board, adding experience 
and fresh perspectives. And, to increase its oversight of Corporation 
operations, the Board has required the CEO to certify that approved 
grants are consistent with the Board-approved application guidelines.
    Unfortunately, Chairman Goldsmith could not be here to testify in 
person. However, I have submitted with this testimony a letter from 
him, addressed to Senators Bond and Mikulski, in which he provides 
additional information about other recent actions taken by the Board.
    Finally, since coming to the Corporation in December, I have worked 
closely with the Board to stress three management priorities to guide 
the way the Corporation conducts its business, both internally and 
externally. These management priorities are: (1) restore trust and 
credibility; (2) manage to accountability; and (3) keep the focus on 
the customer.
    In my 4 months at the agency, we have made significant progress on 
each of these priorities, and I expect to continue to make significant 
progress in the months ahead. I never cease to be impressed by the 
dedication, professionalism, and resourcefulness of the employees at 
the Corporation, who strive on a daily basis to make our programs and 
our service opportunities as meaningful--and as accountable--as 
possible.
    As a result of all of these efforts--the actions of the CFO, the 
Strengthen AmeriCorps Program Act, increased Board oversight, and the 
commitment of myself and Corporation staff to the management priorities 
I have just noted--I am proud to report that a new level of fiscal and 
operational integrity marks the way the Corporation operates. Indeed, a 
number of recent outside reviews of the Corporation's management--by 
the GAO, our Inspector General, and the independent auditing firm 
Cotton and Company--have found that: (1) we are in compliance with the 
requirements of the Strengthen AmeriCorps Program Act; (2) we are 
following generally sound business and accounting practices; and (3) 
management reforms are effectively addressing the identified 
weaknesses.
    On March 12, as directed in the Omnibus Appropriations Act, the 
Corporation submitted to this committee a comprehensive report 
detailing implementation of corrective actions and future plans for 
achieving management reforms and increased accountability. Because 
these improvements are of considerable interest to the committee, I 
would like to highlight some of them:

Trust Management
    After the problems with the National Service Trust were discovered 
in late 2002 and before the AmeriCorps enrollment pause was lifted in 
March 2003, the Corporation instituted a set of strict new procedures 
regarding the awarding of grants and the enrollment of members, many of 
which were explained to this committee last year. The Corporation also 
enhanced its management of the Trust by improving internal 
communication between departments and by clearly identifying those 
persons responsible for Trust operations and oversight. That area was 
cited in several reports as having been a major weakness in the way the 
Trust had been managed.
    The Strengthen AmeriCorps Program Act of 2003 determined that the 
National Service Trust obligation should be recorded at the time of 
approval of an AmeriCorps position. This change provides extensive 
safeguards against potential difficulties. In addition, as I mentioned 
earlier, the Act established a reserve fund to serve as a safety net in 
case actual education award usage varies from our estimates, and 
specified the accounting practices to be used for determining the 
liability for education awards. This marks the first time that a 
detailed procedure for recording Trust obligations has been set into 
law.
    We are institutionalizing broad reforms to ensure that the 
budgeting, planning, recording, and reporting practices associated with 
the Trust comply with all legal requirements and meet the highest 
standards of management. This includes establishing fund control 
regulations as required by OMB Circular No. A-11. CFO Guillermin and 
her staff also have developed new certification procedures designed to 
systematically control the approval of education awards and to monitor 
enrollments and other indicators related to Trust liabilities.
    In addition, under the leadership of a new Chief Information 
Officer, we have made good progress in upgrading and integrating our 
technological capabilities. In particular, we have begun to incorporate 
the capability of our Web-Based Record System (WBRS)--the system that 
tracks information associated with an enrolled AmeriCorps member--into 
eGrants, the system through which organizations apply for grants and 
issue compliance reports. These improvements allow the Corporation to 
get a much better snapshot of member enrollments at any given time, and 
prevent grantees from enrolling more members than have been allotted to 
them in their grant. We will continue to monitor these processes, 
improve our technological capabilities, and work with our Inspector 
General, the Office of Management and Budget, and the General 
Accounting Office to ensure responsible stewardship of the National 
Service Trust.

Grants Management
    The new Office of Grants Policy and Operations is charged with 
overseeing the daily operations of the grant review process and with 
improving the Corporation's grant-making activities. A new, streamlined 
peer review process has been implemented, and the CIO has begun to make 
improvements to the eGrants system, through which all grant 
applications funded by this committee are submitted and reviewed.
    The Internet-based eGrants system allows our grantees to go to one 
place to apply for grants, submit progress reports, and complete 
financial status reports. The applications are evaluated by Corporation 
staff using the system, and once a grant is awarded, the current status 
and any changes are also tracked through the system. Use of eGrants has 
significantly reduced the paperwork and time needed to process a grant. 
This and other IT enhancements allow the Corporation to make timelier 
grant awards, monitor grants more effectively (including enrollment and 
expenditures), and be more responsive to the needs of grantees.

Performance Measurement
     Performance measurement is a key area of grantee and program 
accountability. By fiscal year 2005, the Corporation will have fully 
implemented an ambitious, multi-year performance measurement program in 
which we: (1) require each grantee to submit information on 
performance, documenting the actual impact of the program on the people 
and communities it serves; (2) provide ongoing training and technical 
assistance to grantees in establishing and collecting performance-based 
information; (3) develop national outcome-oriented performance measures 
and indicators for all our programs; and (4) collect annual performance 
data from participants, grantees, sub-grantees, and end beneficiaries 
in all Corporation programs.
    Currently, all programs that apply for funding from the Corporation 
(except in the Challenge Grant category) must submit applications that 
propose at least three self-nominated performance measures--one output, 
one intermediate-outcome, and one end-outcome. Learn and Serve America 
applicants are required to submit performance measures in at least one 
of four program impact areas: promotion of civic responsibility; 
improved academic performance; reduction in risky behaviors; and 
institutionalization of service-learning and civic participation. In 
2003 and 2004, AmeriCorps revised its program guidance to require 
grantees to develop a performance indicator on ``volunteer leveraging'' 
(grantees that are unable to incorporate volunteer leveraging 
activities into their program must provide an explanation.) The 
measures developed by the grantees must be approved by Corporation 
staff. All negotiated performance measures are included in grant 
awards, and grantees must meet proposed performance measurement targets 
or explain and address any performance deficiencies. Through 
performance reporting, the Corporation is committed to rewarding 
successful programs with continued or increased funding, while holding 
poor-performing programs accountable for their results.
    The Corporation also has worked closely with State service 
commissions to develop a set of administrative standards by which to 
assess their performance in overseeing national and community service 
programs. Commissions have been established in every State except South 
Dakota. In addition, the District of Columbia, Puerto Rico and American 
Samoa each have active commissions. Currently, 44 of the 52 commissions 
have met all administrative standards. Of those outstanding, two are 
new commissions and will be reviewed for the first time this year. In 
fiscal year 2005 we expect at least 50 commissions to meet the 
standards. Our program officers and State administrative standards 
project manager are providing technical assistance to assist in 
resolving outstanding issues.

Other Improvements
    Our efforts to improve management of the Trust were designed to 
foster a management culture that relies on credible data in awarding 
grants and in setting program goals. Through a variety of new systems 
and procedures, we have also applied this mindset to other operations 
of the Corporation. For example, we have implemented a new budget 
process that links financial requests to performance measures, and an 
expanded staff of budget analysts is supporting our programs while 
striving to improve financial analysis and implement performance 
management. In addition, we have increased efficiency and thoroughness 
and have made great strides toward eliminating a significant backlog of 
outstanding audit matters and grant closeouts.
    The challenges of last year spurred a number of other changes. We 
have reorganized and flattened the Corporation's management reporting 
structure and assembled a new executive management team that is 
responsible for overseeing a broad slate of management reforms in 
program and personnel management. In addition to the new Office of 
Grants Policy and Operations, we have added a Senior Advisor on Faith-
Based Initiatives, housed in the CEO's office, to conduct outreach to 
faith-based organizations, especially those with no previous history of 
Corporation funding. And, after a thorough review and in close 
consultation with our employees and their union representatives, we are 
implementing significant changes to the Alternative Personnel System, 
through which the great majority of our employees serve. Of greatest 
importance, we are ending the term-appointment system, which worked as 
a disincentive to creating a stable, high-performing workforce.
    To continue this progress, we are contracting with the National 
Academy of Public Administration to study and make recommendations 
about our leadership structure, operations, management, and grants 
programs. In addition, we will be conducting a Business Process Review 
of several key functions in the effort to become a more efficient and 
effective organization.
    As an indication of the Corporation's commitment to the highest 
levels of management and financial accountability, the agency obtained 
an unqualified independent auditors' opinion on our financial 
statements for fiscal year 2003, with no material weaknesses and only 
one reportable condition. The development of measures for financial 
accountability for both internal Corporation operations and our 
grantees will continue to be a priority in the current and upcoming 
fiscal years.

                     EXECUTIVE ORDER AND RULEMAKING

    Two recent developments--an Executive Order on National and 
Community Service Programs and the AmeriCorps rulemaking process, which 
is currently under way--will help accelerate our management 
improvements in fiscal years 2004 and 2005.
    Executive Order 13331 on National and Community Service Programs, 
signed by the President on February 27, 2004, directs the Corporation 
to adhere to four fundamental principles in the administration of its 
programs: (1) support and encourage greater engagement of Americans in 
volunteering; (2) respond more effectively to State and local needs; 
(3) be more accountable and more effective; and (4) increase 
involvement with grassroots faith-based and community organizations. 
The Executive Order further directs us to review our policies and 
programs for consistency with the principles; to change inconsistent 
policies so that they maximize support from the private sector and 
leverage Federal resources to build the volunteer infrastructure of 
faith-based and other community groups; to institute management reforms 
that comply with all budgetary and fiscal restrictions and that tie 
employee performance to fiscal responsibility, attainment of management 
goals, and professional conduct; and to report back to the President 
within 180 days on the actions the Corporation proposes to undertake to 
accomplish these objectives.
    Many of the above issues are being addressed as part of the 
rulemaking process, which we currently are undertaking to address a 
number of issues that have proven to be particularly difficult to 
resolve, including sustainability, Federal share of costs, match 
requirements of grants, and volunteer leveraging. Over the past 4 
weeks, the Corporation has conducted public meetings on rulemaking in 
Columbus, Seattle, Boston, Dallas, and here in Washington, as well as 
having held a number of conference calls. At each of those sessions, we 
have heard the opinions of the Corporation's various stakeholders in 
advance of publishing proposed rules for public comment. We have taken 
this extra step because we understand the complexity of the issues 
involved and we are committed to building trust and credibility through 
an open and honest exchange with our stakeholders.
    Our grantees, members, State commissions and other partners all 
have legitimate and varied points of view about the rules governing the 
future of the program. The issues at hand are complex and do not lend 
themselves to easy answers. However, these stakeholders also have a 
wealth of experience, knowledge, and new ideas that we can harness--
that we must harness--to get rulemaking right.
    The goals of both the Executive Order and rulemaking are: to make 
our programs more efficient, effective, and accountable; to ensure that 
national and community service programs add value to traditional 
volunteering and the nonprofit world; and to bring a far greater degree 
of consistency, predictability, and reliability for our grantees.
    While the rulemaking process continues, the Corporation has taken a 
number of steps to move AmeriCorps in the direction indicated by the 
President, Congress, and the Board for the 2004 program year. As we 
strive to reach 75,000 members, the Corporation has issued grant 
guidelines for 2004 that call for a lower average cost per member 
(average cost per FTE includes the Corporation's share of member 
support, other than the education award and child care costs, and 
program operating costs). We also expect to increase the percentage of 
AmeriCorps members participating in the Education Award Program, in 
which the Corporation is responsible for the education award and a 
small administrative fee but is not responsible for paying members' 
stipends or other costs of the program, from 37 percent to 40 percent. 
And, we are working to increase the number of professional corps 
grantees within our portfolio.
    As a result, we anticipate that the projected average cost per 
full-time equivalent (FTE) of AmeriCorps*State and National stipend 
programs for fiscal year 2004, not including EAP Grants, will be about 
$9,450--or about 10 percent below the fiscal year 2002 baseline level 
of $10,507. This reduction is consistent with the 2004 Omnibus 
Appropriations Act, which directs the Corporation to reduce the total 
Federal costs per participant in all programs.

                               WHAT WE DO

    The Corporation's programs are an integral part of President Bush's 
effort to create a culture of citizenship, service, and responsibility 
in America.
    AmeriCorps members help build the capacity of the nonprofit 
community and leverage thousands of volunteers to serve with nonprofit 
organizations, public agencies, and faith-based organizations in rural 
and urban communities throughout the Nation. AmeriCorps members and 
volunteers tutor and mentor youth, build affordable housing, help close 
the digital divide, clean parks and streams, run after-school programs, 
and help communities respond to disasters. In 2003, AmeriCorps members 
also focused their efforts on helping to meet the Nation's homeland 
security needs--a priority that will continue in 2004 and 2005. 
AmeriCorps*NCCC (National Civilian Community Corps) is a team-based, 
residential program designed specifically for those between the ages of 
18 and 24. Through the program, about 1,250 young men and women serve 
with nonprofit groups to provide disaster relief, preserve the 
environment, build homes for low-income families, tutor children, and 
meet other challenges. In 2003, AmeriCorps*NCCC members responded to 36 
requests for emergency relief, including Hurricane Isabel along the 
mid-Atlantic coast; fires in California, Colorado, Wyoming and Arizona; 
tornadoes in Kansas, Mississippi, Oklahoma and Missouri; floods in 
Texas, Kentucky, Alabama and Tennessee; and the recovery of debris from 
the Space Shuttle Columbia.
    Learn and Serve America serves as an ``on ramp'' to a lifetime of 
civic engagement for approximately 1.8 million students who participate 
in service-learning projects supported by the program. Service-learning 
can bring together many youth development strategies--including 
character education, civic education, and career education--that 
schools and other youth-serving organizations use to help young people 
navigate childhood. It also helps meet local needs, creates community 
ties, increases academic achievement, and spurs civic awareness.
    We have just announced and will soon be issuing Learn and Serve 
continuation grants for the second year of 3-year grants to schools, 
colleges, and community organizations in all 50 States. Many of these 
grants will be awarded to programs that link the teaching of history 
and civics with service. The grants support educators' efforts to help 
their students understand the meaning of civic participation in 
American democracy. This time next year, we will have a full year of 
progress reports on these programs, and I look forward to giving you a 
more comprehensive report then.
    To a great degree, all our programs are about fostering the ethic 
of good citizenship and putting into practice the democratic ideals of 
self-government and service to others. Other initiatives under the 
Corporation's umbrella include the President's Council on Service and 
Civic Participation, which sponsors the President's Volunteer Service 
Award; the National Conference on Community Volunteering and National 
Service, the premier gathering of those who work in volunteer 
management and the voluntary sector; Presidential Freedom Scholarships, 
which provide matched scholarships of $1,000 to high school students 
who have demonstrated exemplary leadership in community service; and 
the Martin Luther King, Jr. Day of Service, which seeks to transform 
the MLK holiday into a day of community service honoring Dr. King's 
memory, as exemplified by the United Way of Southeastern Pennsylvania's 
use of its $6,500 grant to support a city-wide day of service in 
Philadelphia involving more than 40,000 volunteers. All these programs 
have the goal of increasing the numbers of Americans of all ages 
involved in their communities.
    From a Bureau of Labor Statistics survey that the Corporation 
helped initiate, we know that in 2003, 63.8 million American adults 
volunteered through formal organizations--up 4 million from a year 
earlier and still strong some 2 years after September 11. As we reform 
our programs, the Corporation is striving to ensure that national 
service intentionally works to broaden, deepen, and strengthen the 
ability of these 63 million volunteers to contribute effectively to 
society--and of America to capture this strength.
    As I noted earlier, one important role for national service is to 
serve as an engine of volunteer mobilization, and we are finding ways 
for more and more of our AmeriCorps members to devote more of their 
time to helping charities recruit, train, and manage volunteers. The 
President's Executive Order will facilitate this process.
    The value of this volunteer-leveraging role to the nonprofit world 
is highlighted in a recent comprehensive study of volunteer management 
capacity at charities and congregational social service outreach 
programs across the United States commissioned by the Corporation, USA 
Freedom Corps, and the UPS Foundation. The study found that these 
groups valued their volunteers for these important reasons:
  --they were instrumental in reducing costs;
  --they improved the quality of services provided; and
  --they raised awareness of the organization in the community.
Moreover, the study also found that the strongest predictor of 
achieving high value from volunteers was having a person on hand to 
manage volunteer activities.
    Our members can provide an extremely valuable resource to 
charities, and we are going to continue to strengthen relationships 
with grantees that use members effectively to recruit and manage 
episodic volunteers. What is more, we are looking for other ways to use 
AmeriCorps members to help build the capacity of nonprofit groups, both 
faith-based and secular. Building capacity broadens charities' reach 
and helps them to become more efficient, effective, and, ultimately, 
self-sustaining.
    This does not preclude national service participants from 
continuing to provide direct service. It stresses those areas where 
national service can add value to the millions upon millions of 
volunteers who serve their communities every day through traditional 
volunteer networks and nonprofit organizations.

                          2005 BUDGET PROPOSAL

    In our 2005 budget proposal, the Corporation is asking for a total 
of $642.2 million from this committee. This includes $442 million to 
support reaching our target of 75,000 AmeriCorps members; $27 million 
for the National Civilian Community Corps; and $46 million for Learn 
and Serve America.
    The President's 2005 budget request largely parallels the 2004 
enacted budget, but with a few added investments in targeted programs 
and initiatives. These new investments are designed specifically to 
further our goals of leveraging the numbers of volunteers engaged in 
service activities, increasing outreach to new groups, and ensuring 
that the Corporation is accountable for results while providing 
adequate assistance to our grantees. They include:
  --A $3 million increase for Learn and Serve America, specifically to 
        fund a program to educate teachers about service-learning 
        techniques. The training program is designed to increase both 
        the quality and the quantity of educators, who will then engage 
        thousands more students in meaningful service to their 
        communities. If passed, this would be the first increase in 
        funding for Learn and Serve America in a decade.
  --A $2 million increase for the AmeriCorps*NCCC program to provide 
        much-needed capital improvements to the five regional campuses 
        across the country, located in Charleston, South Carolina; 
        Denver, Colorado; Perry Point, Maryland; Sacramento, 
        California; and Washington, DC. The capital projects include 
        vitally important roof repairs, accessibility upgrades, and 
        fire safety enhancements.
  --A $7.6 million increase for Challenge Grants, an innovative grant 
        program that requires a two-for-one private match for every 
        Federal dollar offered. For the first Challenge Grant 
        competition in 2003, we received 52 applications requesting a 
        total of $36.8 million and awarded a total of $5.9 million in 
        grants to eight nonprofit organizations. The Notice of Funds 
        Available for 2004--for $2.4 million in grants--is to go out 
        shortly. In fiscal year 2005, the minimum Challenge Grant award 
        will be reduced from $500,000 to $100,000, and the maximum will 
        be reduced from $1 million to $500,000, enabling us to support 
        many more grantees. We estimate that up to 30,000 citizen 
        volunteers will be supported through this program, that many 
        previously unfunded groups will apply, and that it will serve 
        as a powerful catalyst to bring new private supporters of 
        service to the table in many communities.
  --A $3 million increase for Next Generation Grants. Because 
        prospective grantees in this competition cannot have received 
        prior funding from the Corporation and must have organizational 
        budgets of $500,000 or less, this program is an important part 
        of our outreach to faith-based and other community 
        organizations. In the first of these competitions, for which a 
        total of $5 million ($4 million from fiscal year 2003 and $1 
        million from fiscal year 2004) had been appropriated, we 
        received more than 1,150 proposals requesting more than $280 
        million. From those, we have asked 23 ``finalist'' 
        organizations to submit a full application, and we expect to 
        select roughly half for funding by mid-June. We believe that 
        both Challenge Grants and Next Generation Grants will decrease 
        the pressure for earmarked appropriations.
  --Twenty million dollars to fund a ``Silver Scholarship'' program to 
        provide transferable scholarships of $1,000 each to nearly 
        10,000 senior volunteers who, through a special grant program 
        run by the Corporation, dedicate 500 or more hours tutoring or 
        mentoring a child over the course of the year. The program will 
        support organizations that help meet President Bush's goal that 
        every child be able to read by the third grade. Approximately 
        half the request is for program grants, and the other half is 
        for the National Service Trust to fund the scholarships in a 
        model, pioneered through the AmeriCorps program, with 
        tremendous potential to mobilize the aging baby boomer 
        population.
  --An increase of $5 million for training and technical assistance to 
        help grantees successfully manage their programs, including 
        providing necessary assistance for grantees to attract and 
        manage additional volunteers, and to raise funds from other 
        sources. Grantees will receive training in how to build their 
        organizational capacity and become more sustainable.
  --An increase of $3 million for evaluation to help ensure that our 
        programs are efficient and effective, as well as to develop new 
        and more effective tools to measure the impacts and outcomes of 
        our programs. The Corporation currently is in the midst of 
        implementing a leading-edge performance measurement system. 
        These funds will support continued collection and analysis and 
        support scientific evaluations of program impacts, cost-benefit 
        studies, and other projects that inform our program design and 
        management.
  --A $6.7 million increase for program administration to ensure that 
        the Corporation and State service commissions have sufficient 
        operating funds. At a time when the Corporation has been called 
        on to increase effectiveness, performance, accountability, and 
        performance measures and to expand outreach to small community 
        and faith-based organizations--when the AmeriCorps program has 
        grown by 50 percent--we must have resources to continue to 
        maintain a sufficient level of support and oversight. Following 
        a reduction of 18 employee positions in 2003, our request would 
        restore key staff, provide for adjustments to current services, 
        increase employee training, and fund badly needed updates to 
        the material we use to promote national and community service.

                               CONCLUSION

    Because of the challenges faced by the Corporation last year, it 
has been necessary to focus a good deal of this testimony on the 
financial and management improvements that we have made over the past 
year. It has also been necessary to work to rebuild the trust and 
credibility of the Corporation with many its stakeholders, from 
grantees and their private supporters to AmeriCorps members and Members 
of Congress.
    In the past 4 months, we have seen significant progress in this 
area. I am committed to working with all our constituencies in an open, 
honest, and above-board manner. We are working to be more open and 
responsive to Congress, informing you in advance of significant 
developments concerning our agency, including grant awards and the 
decision to begin the rulemaking process, as well as meeting with your 
staffs on a regular basis to report on progress. And, embarking on the 
rulemaking process has been very helpful in demonstrating to our 
grantees and to the field of potential grantees that we are committed 
to a new level of open and inclusive communication.
    Of course, one of the best ways to build trust is to meet 
expectations--to do what we say we are going to do, and do it well. And 
that means managing to accountability, one of my management priorities. 
As noted earlier, we have made significant strides in that direction, 
and I look forward to working with you to continue to strengthen 
national and community service in America.
    In sum, because of your leadership and our commitment to management 
excellence, the Corporation for National and Community Service is far 
stronger than it was last year. We have heard Congress' concerns about 
our management weaknesses and are committed to achieving the highest 
levels of accountability, efficiency, and effectiveness in all our 
operations. Furthermore, we share with Congress the common goals of 
developing strong, high-quality national service programs; of 
attracting a diverse set of grantees; and of leveraging taxpayer funds 
to the greatest extent possible.
    Mr. Chairman, this concludes my remarks. I would be happy to answer 
any questions that you might have.

                                 ______
                                 
 Letter From Stephen Goldsmith, Chairman of the Board, Corporation for 
                     National and Community Service
                                                     April 8, 2004.
The Honorable Christopher S. Bond,
Chairman,
The Honorable Barbara A. Mikulski,
Ranking Minority Member,
Subcommittee on Veterans Affairs, HUD, and Independent Agencies, 
        Committee on Appropriations, United States Senate, Washington, 
        DC 20510.
    Dear Senator Bond and Senator Mikulski: I regret that a teaching 
commitment prevents me from appearing at the Committee's hearing. 
However, I am pleased that the Corporation's Chief Executive Officer, 
David Eisner, and our Chief Financial Officer, Michelle Guillermin, 
will be on hand to answer your questions and to thank you on my behalf 
for your steadfast support during the 2004 budget process.
    Management of the Corporation is far stronger today than it was a 
year ago. We have instituted a number of significant management reforms 
in the areas of grant making, grant review, data management, budgeting, 
organizational structure, and personnel policies. In addition, in a 
short period of time our new CEO has made great strides in rebuilding 
trust in the agency, in part by working tirelessly to oversee the first 
stage of the AmeriCorps rulemaking process, through which we are 
reforming the AmeriCorps program. Having witnessed his ability to 
engage Corporation stakeholders in discussion of difficult issues and 
balance competing points of view, I have complete confidence that he 
can lead national and community service to the next level.
    Despite the progress of the past year, our efforts are far from 
over. Indeed, we are striving to create a deeply rooted and lasting 
commitment to accountability and performance-based management 
throughout the organization. To ensure that the information we use to 
make decisions is timely, accurate, and reliable and that the 
Corporation is accountable, we will need to modernize our technological 
systems, under the direction of our new Chief Information Officer.
    Last year, this Committee expressed concern about the Board's 
oversight of Corporation operations. The Board has taken significant 
steps over the past year to increase and strengthen our oversight 
responsibilities, as well as to ensure that we have a more active role 
in guiding Corporation policy.
    The Board now requires that it approve guidelines issued by the 
Corporation for upcoming grant competitions and that the CEO certify to 
the Board that grants recommended for funding meet its priorities. The 
Board also requires that the CEO consult with the Board prior to 
issuance of cash awards and pay increases. In addition, the Board has 
developed and submitted to Congress a Comprehensive Management Reform 
Plan, and we have reorganized the Board's committee structure to more 
appropriately reflect and provide oversight to the various functions of 
the Corporation. In short, we have heard your concerns, taken steps to 
address our shortcomings, and remain committed to the highest levels of 
organizational accountability and responsible governance.
    Please let me know if you require any further information, and I 
would be happy to provide it to you.
            Sincerely,
                                         Stephen Goldsmith,
                                             Chairman of the Board.

                     ACCOUNTABILITY AND MANAGEMENT

    Senator Bond. I appreciate your responding to some of the 
points that Senator Mikulski and I raised. I also appreciate 
your emphasis on leverage, using AmeriCorps volunteers on a 
wholesale basis. In other words, maximizing their impact by 
enabling them and directing them to assist in recruiting other 
retail volunteers, which I think gives a lot more impact to the 
AmeriCorps program.
    Going back to our discussion of the need to change the 
culture at the Corporation to make management and 
accountability a top priority, which I think is your biggest 
challenge, what steps specifically do you intend to take to 
avoid the mistakes of the past, to hold personnel accountable, 
and to make the conscious decision not to reward with pay 
increases or cash awards the ineffective action of those who 
may not perform to standards in AmeriCorps administration?
    Mr. Eisner. Thank you for that question. And let me answer 
it in a few parts. First, I would like, when I am completed 
with the rest of the answer, to ask Michelle to spend some time 
talking specifically about the reforms relating to the Trust 
that will prevent those kinds of challenges from happening 
again.
    Secondly, I want to talk generally about the accountability 
measures that we are putting in place in the Corporation. And 
then specifically I want to talk about how we are changing our 
personnel management to enforce greater accountability at an 
individual level.
    Across the Corporation, we have been focusing on 
accountability, which means that no major activity, or even 
minor activity that is happening in the Corporation, happens 
without a specific individual being responsible. Across the 
Corporation, my direct reports, their managers and individuals 
are now used to within every meeting, asking the question: Who 
is responsible for this specific outcome?
    In a deeper way, we have also flattened the organization. 
We had many different levels of hierarchy. We have flattened 
the organization so that the people who are where the rubber 
meets the road, working with our grantees, working with our 
State commissions, working with the national direct, are not 
engaged in our policy-making and our executive-making decisions 
so that we are no longer making decisions at a high level that 
do not include the appropriate input from the folks that are 
engaging in the actual behavior.
    And then finally we are working as quickly as we can to 
begin to use data more effectively to inform our decision-
making so that we are specifically looking at the data that we 
are getting back from our early focus on performance measures 
that our grantees are now being required to input as means for 
us to make decisions about how we implement our programs. Upon 
receiving grant applications now, before we move into the peer 
review process, we are using the information about the grants 
that have come in to determine that we are using the right 
process to compare apples to apples so that we can be 
accountable for the outcome.
    As far as our personnel management system goes, our CHCO, 
Joyce Edwards, has really, in a few months, done an amazing job 
of dramatically changing our performance culture. First of all, 
we are moving from a pass-fail basis--all of the employees of 
the Corporation used to be measured on literally whether they 
passed or failed, without deep appreciation for what 
performance goals they have achieved. We have now moved into a 
more sophisticated measurement. Prior to each new year, 
performance measures are being expected from each employee. 
There are mid-year reviews for each employee. And then, at the 
end of the year, we are assessing performance against those 
measurements.
    We have also reformed the Alternative Personnel System 
internally, so that we are moving from an indiscriminate use of 
term appointments to a more permanent use, which means that we 
are already seeing as we open positions we are having a higher 
level of candidate applying, because they are not limited by 
the terms. And we are seeing internally the beginnings of what 
we expect will be stronger retention of our key employees.
    Let me ask Michelle to quickly talk about the solutions we 
have made in the area of the Trust.
    Ms. Guillermin. Thank you. I will very quickly sum up some 
of the major changes we have made. For every grant award that 
is made or any amendment to a grant that is made, a 
certification process takes place in my office, and I 
personally certify that funds are available before they are 
awarded to a new grantee.
    We are in the process of implementing funds control 
regulations. We have modified our systems to better enforce 
some of the member enrollment controls that were lacking. One 
of the major changes we have made is we look at the way we plan 
and execute against plans differently than we have in the past. 
We have a plan that estimates how our grant cycle will roll out 
during the year. We not only execute against that plan, but as 
those estimates now become actual numbers, we re-forecast the 
full-year plan on a regular basis.
    Senator Bond. Thank you very much, Mr. Eisner and Ms. 
Guillermin.
    I will turn now to Senator Mikulski.

                       CHAIRMAN GOLDSMITH LETTER

    Senator Mikulski. Thank you, Mr. Chairman.
    I am going to pick up on the whole idea of reform. Mr. 
Eisner and Ms. Guillermin, I appreciate the remarks that you 
made. I want to now go to the engagement of the Board and Mr. 
Goldsmith, which I think is heartening.
    In his letter to Senator Bond and myself, Mr. Goldsmith 
explained he could not be here today, but he is, first of all, 
complimentary to you, Mr. Eisner, and of course then to your 
team, about engagement and reform. I think he outlines a 
roadmap that is part of my reform thinking. He talks about how 
he wants whatever reform is to be lasting, that this is not a 
one-shot deal where administrators come and go.
    We really appreciate the fact that what you are instituting 
with your team is going to take root in the part of not only a 
rule book for an operating plan, but a culture of an agency. We 
believe there is momentum and really wind at our back.
    He also talks about the need to modernize technological 
systems and having a new Chief Information Officer. I support 
that while you have a CFO and a COO, we believe in today's 
modern world you do particularly when you are also managing 
such a diverse set of grantees, the numbers, volunteers, and so 
on. So we want to work with you to ensure that we modernize 
that technological system and that you have the right brain 
power to do it so we do not have another boondoggle. And the 
world that you come from, Mr. Eisner, we believe that you will 
bring that.
    In addition, he talks about other reforms that the Board 
does in terms of the Board insisting that the CEO certify to 
the Board that grants recommended for funding priorities 
requires the CEO to consult with the Board prior to the issuing 
of cash awards and pay increases. And he has a whole set of 
other issues.
    One, that we have Mr. Goldsmith's viewpoint. And then 
second, I think he has a good roadmap of the Board and working 
with you, Mr. Eisner, and the leadership.
    So we feel this is good news and there is momentum.
    I would like to go to the rulemaking. And there were 
certain principles that I had. First of all, it had to be open, 
it had to be transparent, and it had to provide the opportunity 
for timely comment by advocates, grantees, as you would say, 
sir, the stakeholders and the customers.
    Could you tell us, now, what are your mechanisms for 
rulemaking? Then I want to go to the questions of 
sustainability. And then, third, I want to go to Mr. DeLay's 
recommendations, some of which I agree with and others I do 
not.

                               RULEMAKING

    Mr. Eisner. Thank you. Rulemaking is one of the most 
important activities that we are undertaking this year. And we 
are just concluding the first public comment period. As you are 
aware, rulemaking normally includes an agency issuing draft 
regulations, then a comment period on those regulations, and 
then issuing a final.
    We have added a pre-rulemaking comment period so that our 
agency could capture the ideas and the concerns of folks that 
have been making this program strong for 10 years. And now upon 
concluding that, we have received 423 written comments, and 
they are still coming strong. We have had more than 700 people 
participate in our five public meetings and four conference 
calls, more than 140 individuals providing testimony, 23 hours 
of testimony that I have personally participated in, not to 
mention, innumerable meetings.
    So I believe that the process has been fair and open. And 
we--to your point in opening comments have made the point over 
and over again, that there is no pre-determined outcome here. 
We know that we are going to meet the requests that we have 
received from Congress, from our Board, and from the President 
to build greater efficiency and accountability, to address the 
issue of sustainability, to address the issue of Federal share 
and matching requirements, as well as a host of other issues. 
But how we are doing that has not been pre-determined. And we 
are only now focusing on which options we are going to pursue.

                      CRITERIA FOR SUSTAINABILITY

    Senator Mikulski. Well, we appreciate that. And we want to 
be kept apprised.
    I would like to ask one more question this round, if I 
could. But could you give me the criteria that you have or the 
direction that you think you have on the issue about 
sustainability?
    When we created AmeriCorps or National Service, we wanted 
programs to be sustainable, but in our minds sustainability was 
both money--in other words, we could not deal with--when I say 
shaky, I do not mean morally shaky, but from a management or 
fiscal point, something that made a public investment for no 
outcome.
    But in us it was that it would be--sustainability was that 
there was a quality of the program, that it could be 
financially maintained over time, and that it could be also--
have the potential for replication, perhaps, in another State 
or whatever. Could you tell us what you see as sustainability?
    Mr. Eisner. Let me start off by noting that one the 
important things that we are going to do in the context of 
rulemaking is define sustainability. Sustainability has been 
used extremely broadly to mean many different things.
    Senator Mikulski. Yes.
    Mr. Eisner. And we received dozens of comments with 
suggested definitions of sustainability.
    Directly to your question, I think that there are many 
potential aspects to sustainability. There is the 
sustainability in leverage of our overall programs to ensure 
that we are not simply taking the same resources each year and 
plugging different holes. We want to say that over a period of 
years, as we invest, that investment expands. And so there has 
to be a sustainability every place that we go that carries 
these programs forward.
    There is an issue of organizational sustainability, which 
in many ways can be characterized in the negative, that Federal 
funds should not harm the ability of a program to remain 
independent and strong, that we should not be fostering over-
reliance on Federal funding.
    I think there is also an issue of sustainability relating 
to our members. When an AmeriCorps member serves for a year or 
2 years and then leaves the program and continues to be engaged 
in service--in public service or volunteerism--that is also 
potentially a strong element to sustainability.
    And then finally, sustainability can be measured in 
leverage. When a program increasingly uses the same amount of 
Federal funds and becomes more and more productive, more and 
more impactful, engages more community members and volunteers, 
and deepens its partnerships with the community, that's another 
way of thinking of sustainability. And our job is to work 
through these different definitions and come up with a 
definition that is responsive to you and that also helps the 
field understand where they are trying to go in sustainability.
    Senator Mikulski. Well, I appreciate that, Mr. Eisner. My 
time is up. I am going to come back to some of the other 
aspects in a second round.
    What I want to be clear about is that sustainability is not 
only about money and not a desire to be a micro-manager. As you 
proceed in your rulemaking, which was to go to public comment 
and therefore it should not be like a conversation with just 
you and I. I am a public commenter, a heavy public hitter 
commenter, but nevertheless, that we look at sustainability in 
a broader sense.
    And we look forward then to what you will be arriving at as 
the criteria.
    Thank you, Mr. Chairman.

                          RULEMAKING TIMELINE

    Senator Bond. Thank you, Senator Mikulski.
    Mr. Eisner, you have had the same experience now that we in 
the Senate have, with 23 hours and hundreds of thousands of 
comments. And we can sympathize with you.
    Very quickly, can we get your commitment to complete the 
rulemaking this year?
    Mr. Eisner. You have my and my organization's commitment to 
do everything we can to do that. We will have draft comment--
drafts moving forward. We need to submit it to OMB. And we need 
to, then, move that forward.
    Senator Bond. We understand that things can happen at OMB 
that take time. I am from the Show-Me State. And I would like 
to see that rulemaking this year.
    Mr. Eisner. We are very focused on it. And your earlier 
comment that if we do not have it, we are likely to see a 
challenge in the fall as we deal with our appropriations. We 
understand very clearly.

                           PROFESSIONAL CORPS

    Senator Bond. Let me move to the Professional Corps. The 
President has directed the Corporation to develop separate 
guidelines and recognize the importance of a Professional Corps 
in the AmeriCorps program and proposed $10 million for the 
Challenge Grant program.
    Can you describe the types of organizations that would 
qualify as Professional Corps? For example, would Teach for 
America be considered a Professional Corps organization. Have 
any Professional Corps organizations received Challenge Grant 
funds or AmeriCorps grant funding?
    Mr. Eisner. As far as a definition of Professional Corps, 
Professional Corps have been defined for us as organizations 
that receive--where the members receive their stipends or the 
member support from a third-party organization and where the 
Corporation provides the education award and a small amount of 
administrative or program support.
    So with that definition, Teach for America certainly does 
count as a Professional Corps. There are many other 
organizations that focus on teaching, that focus on health care 
professionals, that focus on crisis professionals. We are 
currently considering whether organizations that train and 
certify volunteer managers might constitute Professional Corps. 
It will depend on the level of professionalism there.
    One of our challenges that--some Professional Corps are 
actually quite expensive. And those are Professional Corps 
where the member cost is picked up by the third-party, but 
where the program expenses are huge. For example, if you have a 
corps of surgeons that provide service, the oversight and 
training would be enormous. And we are currently not including 
that within our internal understanding of Professional Corps.
    So we look at Professional Corps as lowering the overall 
cost by having a small administrative and program cost, having 
a level of certification that means that these are 
professionals, and where the third-party is picking up the 
member cost.
    Senator Bond. Given the facts that the Corporation is 
developing a set of guidelines for Professional Corps and that 
Professional Corps, such as Teach for America, have 
successfully competed for Challenge Grant AmeriCorps funding, 
the administration request for a $4 million earmark for Teach 
for America is puzzling.
    Further, given the huge earmark demands that the committee 
receives every year, funding this earmark would open the flood 
gates to other earmarks, which are opposed by the 
administration and OMB.
    Do you see if we start going down this road, we invite all 
of those 23 hours of comments and hundreds of contacts to come 
into our offices? And we think that you are better equipped to 
handle those, perhaps, than we are.
    Let me turn to the Learn and Serve activities. I am a big 
supporter of child literacy, mentoring and tutoring programs, 
and appreciate the Corporation's activities in these areas. I 
notice in your budget justifications that two of the primary 
activities are mentoring and literacy. I also noticed that 
conflict resolution and community gardening are two other 
primary activities.
    As a senator, I get involved in conflict resolution almost 
every day. And I enjoy gardening. It is one of my hobbies but I 
am a bit puzzled by the Corporation's support for these 
activities.
    Can you explain why the Corporation funds these types of 
activities? What are the benefits and impacts on a local 
community and students? Did you fund these activities because 
local communities identified them as high-priority needs? How 
did you choose them?

                            LEARN AND SERVE

    Mr. Eisner. Yes. We fund those as local communities 
identify them as high-priority needs. In many ways, the 
activities of the Learn and Serve programs are geared to what 
is the most important set of activities to engage the students. 
In certain high poverty areas, conflict resolution can be a 
lifesaving activity and can help students achieve an 
understanding of service that is different than what you might 
find in a suburban community. And it is very important.
    As far as gardening goes, that is the--it is more likely to 
be a focus on environment and a focus on the importance of 
serving one's broader community. I visited a program in Seattle 
where Learn and Serve participants were doing gardening, but 
what they were in fact doing was refurbishing a community park 
that had lain fallow for two decades. And by engaging the 
students in revitalizing that park, the students were learning 
about biology. They were learning about botany at the same time 
that they were experiencing the importance of supporting their 
community and building something that was destroyed into 
something beautiful.
    Senator Bond. I hope they have greener thumbs than I do. My 
efforts are not always successful.
    Senator Mikulski.

                PROFESSIONAL CORPS AND RULEMAKING LETTER

    Senator Mikulski. Thank you. Mr. Chairman, I just want to 
make a comment about the Professional Corps. We encouraged the 
concept in the 2004 appropriations.
    I would like to share with you what I had in mind as I 
again continue the bipartisan efforts with Senator Bond, that 
the Professional Corps wasn't for every profession. It was to 
be in those areas where there is a workforce shortage and where 
there are other, as you indicated, third-party groups that 
would be able to work on this.
    One, of course, was in the area of education. The flagship 
one we are all familiar with is Teach for America. The other 
was where there were workforce shortages or where there would 
be a community crisis of some kind, almost like a reserve 
Professional Corps.
    That is all a work in progress, but it was initially around 
where there was a workforce shortage. It was not to create a 
legal aid program. It was not in that category or a surgeon's 
program, as wonderful as that might be. We have physicians in 
this own institution who volunteer, and we salute their 
efforts. But that is not what the Professional Corps was all 
about.
    And when we originally created AmeriCorps, one of the 
things we talked about was people had to do hands-on work in 
the community, that it was not to be an accountant sitting in 
doing accounting for a non-profit. It had to be hands-on or 
direct engagement with the community. AmeriCorps volunteers 
were not to be bureaucrats. They were to be community people.
    So I just offer that as a comment and an insight as you are 
fleshing this out.
    Let me come back, though, to the rulemaking. And I would 
like to go to Congressman DeLay's letter to you. First of all, 
in his letter, he encourages to preserve the right in faith-
based organizations to retain their religious identity and 
their character while participating in national community 
service. I want to be on the record that I really support 
faith-based initiatives. I believe what they bring in our 
society is just unique to the American society. Church and 
State should be separated, but should not be divided or 
adversarial.
    I would encourage you, though, as you look at how to 
involve faith-based organizations, that we make sure we are 
constitutionally compliant. We have precedents in other areas 
where faith-based groups have been used so that we stay in the 
community volunteer business and we do not end up in the 
lawsuit business. We do not want to see you or our grantees all 
tied up in lawsuits.
    So as you look at this, let us really see how we can 
involve faith-based organizations, but let us stay 
constitutionally compliant. That is No. 1.
    No. 2, the aspect of controlling Federal costs. Of course 
we need to be stewards of the taxpayers' dollar, maintain 
fiscal controls, but I am concerned that our colleague, in his 
zeal for cost, is talking about reducing grants to volunteers, 
cutting daycare, and pursuing those kinds of things that I 
think are really authorizing by proxy.
    When we talk about what should be the level of funding for 
what a volunteer gets in a stipend, what should be the 
appropriate level for daycare, I believe is part of an 
authorizing process and not rulemaking. So I am ready to do 
authorizing, and I know you are ready to do rulemaking. And I 
do not want to see them confused.
    I wish we were being as hard as corporate potentates as we 
are being on our volunteers. I did not like the attitude there. 
This whole idea of limiting the living stipend, limiting the 
child care costs, limiting the number of volunteers, years a 
grantee may receive funds for full-time, we believe, is a 
function of authorizing.
    Sustainability, we have already talked about. Where we do 
agree with our House colleagues, though, is strengthening the 
financial management to ensure the effectiveness. We have gone 
over this. And establish accounting measures. And our 
colleague, Senator Bond, has really been the father of the 
Strengthen AmeriCorps accounting, and we fully support him 100 
percent.
    So know where our flashing yellow lights would be one 
criteria for sustainability. Second, involving faith-based 
organizations but be constitutionally compliant. But when we 
get into how much you should get for daycare and how long you 
can get a stipend and what that should be, we think that is a 
function of authorizing.
    So do you have any comments?
    Mr. Eisner. Thank you for laying those out. I do not 
disagree with any of the guidelines you are asking us to use as 
we make decisions.
    I would also note that you are correct that the 
Professional Corps should be about where there are workforce 
shortages that impact the communities. And that is where we are 
focusing Professional Corps.
    Senator Mikulski. Two other things. And perhaps we can talk 
about it when we do authorizing. Not to break new ground today. 
Today the ground is the momentum of reform and renewal. And 
then the other, how do we harvest the ability of these 300,000 
alumni?
    Well, we look forward to your creative and fiscally prudent 
ideas on that.
    Mr. Chairman.

                   AMERICORPS EDUCATION AWARD PROGRAM

    Senator Bond. Thank you very much, Senator Mikulski. I 
appreciate being able to share parentage with part of the 
AmeriCorps program with you, because you are recognized as the 
godmother of the AmeriCorps program.
    Mr. Eisner, the Education Award program has many advantages 
over regular AmeriCorps because of lower costs, broad reach, 
broad network of program sponsors, and its simplified 
application process, and perhaps greater program flexibility. 
Obviously, there is a huge demand for it.
    What is your opinion of this program? Is it accurate to say 
that you could find more members than originally estimated? And 
do you believe that the program should be expanded?
    Mr. Eisner. The Education Award program is a very strong 
and innovative element of the overall AmeriCorps program. We 
were delighted to see that in our first tranche of 2004 
funding, that we had very, very high numbers of requests for 
Education Awards. We have set the target for Ed Awards at 40 
percent of our members this year. And we believe that not only 
are we not going to have a problem reaching that, but it is 
going to be a very competitive process.
    So we anticipate that we could--we could go even higher. I 
think what we need to stay cognizant of is what that will do to 
the nature of the volunteers. We have seen that a higher 
percentage of the Ed Award programs tend to be more part-time 
than full-time members. So one question is: Are they getting 
the same amounts of things done as the full-time members?
    Another aspect that we need to look at is what happens to 
the demographics of memberships. It seems that with the 
stipended programs we seem to be having greater success at 
having economic diversity and racial and ethnic diversity than 
with the Education Award program. Although we are going to be 
watching that very closely.
    And so I think it is a very useful question, because it is 
such a cost-effective program, about whether it can be 
extended. But I think we need to--before I would say that I am 
in favor of that, I would really want to look to see what that 
is doing to the make up of the participants.

                      ALTERNATIVE PERSONNEL SYSTEM

    Senator Bond. Well, thank you. That is what we ask you to 
do. And I appreciate that.
    I have a concern. This is going to be my last question. I 
will submit the rest for the record. But I want to focus on the 
recent changes you have made to the Corporation's Alternative 
Personnel System by converting most term-appointed employees to 
a general or permanent appointment system. It does seem like 
the decision came out of left field. We received a document on 
March 12 that laid out some general goals. I would be 
interested in knowing how you came to your decision. What 
options did you review? And whom did you consult? Did the Board 
review and approve this decision? I will ask the second part of 
that question. Let me let you address that first one.
    Mr. Eisner. As you are aware, there have been several 
studies that have pointed out the deficiencies of the current--
of the recent past Alternative Personnel System, with one of 
the most glaring deficiencies was the use of the term 
appointments. And both the Office of Personnel Management and 
our IG asked us specifically to study what our options and 
alternatives were, and specifically to consider whether that 
program had outlived its usefulness.
    Our CHCO, who is one of the----
    Senator Bond. CHCO being--just for the record----
    Mr. Eisner. Chief Human Capital Officer.
    Senator Bond. Thank you. That might be helpful for the 
record.
    Mr. Eisner. And we--and we hired the CHCO as--in response 
to a direct recommendation from our Inspector General, who 
believed that we needed it. And we were very fortunate to be 
able to retain the services of Joyce Edwards, who is one of the 
Nation's experts in government personnel systems and with a 
deep and close relationship with the Office of Personnel 
Management.
    She reviewed the challenges and options--and frankly, upon 
my arriving at the Corporation, looking at the challenges that 
she had outlined and speaking to many of our employees, I 
realized that this was an absolutely urgent and essential first 
step in rebuilding--rebuilding our employee performance. And 
employees were from--everything from morale to the general 
sense of equity and fairness. These were Federal employees that 
were not considered by other Federal agencies to be non-
competitive applicants. What it meant was that as we set out to 
recruit additional employees, because we were term-limiting 
them, we were not getting the highest quality of applicants.
    And as--you know, I am constantly impressed with the 
creativity and professionalism of our employees, even under the 
terribly adverse circumstances of the last couple of years. But 
the most oppressive thing that we were doing to them was this 
term system. And so I accelerated the process of removing it.
    However, in accelerating that, we did--we looked at 
probably seven different alternatives of ways that we could 
parse the term system, the time frame for changing the term 
system, and we picked the one that we thought would be most 
effective and the least costly to implement.
    Senator Bond. But we would like to see those options, if 
you will submit those for the record. Is it correct to assume 
that the Board approved this change?
    Mr. Eisner. Yes.
    [The information follows:]

       Reassessing the Corporation's Use of APS Term Appointments

    Issue.--In order to build a diverse, high-performing workforce, how 
should the Corporation change its current policies and practices on the 
use of APS appointments?

                               BACKGROUND

    The APS Handbook (the primary Corporation guidance on personnel 
issues) authorizes 5 types of appointments: Temporary, Discretionary, 
Term, Indefinite, and General. Although no policy directive has been 
issued, it has generally been the Corporation's practice to use the 
term appointment authority to hire new employees.

------------------------------------------------------------------------
                                                               Non-
           Type of Appointment             Supervisors/     Supervisory
                                             Managers        Employees
------------------------------------------------------------------------
APS Discretionary.......................              15              10
APS Temporary...........................               0               2
APS General.............................              13              64
APS Term................................              57             299
General Schedule........................              25              73
                                         -------------------------------
      TOTAL.............................             110             448
------------------------------------------------------------------------

    Many Corporation employees and several independent studies have 
urged the Corporation to rethink its current practices on the use of 
term appointment.
  --The 2003 OIG/Deloitte & Touche report recommended that the 
        Corporation reexamine and reconsider its use of term 
        appointments. The report found: ``Term appointments, even 
        though nearly 90 percent are renewed, promote a short-term 
        mentality among employees and managers. Many employees begin 
        thinking about leaving 12-24 months before their appointments 
        expire. Term appointments also deter some candidates from 
        joining the Corporation, particularly those with competitive 
        Federal status.''
  --The 2003 OPM report recommended that the Corporation reexamine its 
        current use of term appointments. OPM's report noted that use 
        of term appointments has a negative impact on employee morale, 
        contributes to a high turnover rate and loss of institutional 
        knowledge, and appears to be used as a tool for dealing with 
        poor performers. OPM also states that unless we change our 
        current practice on term appointments, the Corporation does not 
        meet a fundamental criteria for approval of an Interchange 
        Agreement--a Union and MIT priority.
  --NAPA's 1999 report recommended continued use of term appointments, 
        but with exceptions for career candidates from within the 
        Federal sector, and in lieu of recruitment bonuses to non-
        Federal candidates.
  --The MIT Human Resources Committee has identified reassessment of 
        our use of term appointments as a priority.
  --At the January 6th ``Talk to Your CHCO'' session, employees again 
        expressed their frustration and disappointment with the current 
        practice. Among the problems highlighted were: 
        misrepresentation of the features of the APS system, job 
        insecurity, inability to transfer to other Federal positions, 
        the absence of policies on how appointment decisions are made, 
        and inconsistency and lack of transparency in the management 
        decision making process.
    The preliminary Strategic Human Capital Plan provides that, by the 
end of February, the Corporation will reassess our current practices on 
the use of term appointments and issue policies.
    Options.--These options are presented in an effort to stimulate 
discussion and facilitate decision making. They are not intended as a 
summary of all the possible alternatives. In fact, the Executive Team, 
employees, and their Union representatives are encouraged to suggest 
other options.
  --(1) Continue current practice, but clarify policy. (Specifically, 
        continue to use term appointments for all new hires, but 
        clarify policy so that there is consistency and transparency in 
        the length of terms and on the conditions under which the term 
        appointments will be extended or terminated.)
  --(2) Continue to use term appointments for most new hires, but 
        permit the use of general appointments for career Federal 
        employees and to attract high-quality people from the private 
        and non-profit sectors.
  --(3) Use a 2-year term appointment for all new employees 
        (paralleling the probationary period). At the end of that 
        period, convert high-performing employees to general 
        appointments. Phase in the conversion of current term 
        appointees to general appointments.
  --(4) Discontinue the use of term appointments for on-going positions 
        and phase in the conversion of current term appointees to 
        general appointments. (NOTE: Term appointments would continue 
        to be used to appoint individuals to positions of a project 
        nature or in other circumstances where it is expected that the 
        employee would leave the position after a specified period of 
        time.)
  --(5) Discontinue the use of term appointments for on-going positions 
        and seek OPM approval to convert all term appointees who occupy 
        on-going positions to general appointments.

    Senator Bond. And will the employees under the new general 
appointment system be treated the same as under the GS system, 
or will you still have the ability to hold them accountable, as 
you did under the term----
    Mr. Eisner. The term--these employees will continue to be 
under the Alternative Personnel System. And moreover, we 
believe that as a result of removing the term system, more of 
our employees will be willing to leave the GS system and move 
to the Alternative Personnel System.
    The fact that in order to move they had to embrace a term 
was one of the biggest impediments to converting our employees 
from the GS system to the Alternative Personnel System.
    Senator Bond. Thank you very much, Mr. Eisner.
    Senator Mikulski.

                            CHALLENGE GRANTS

    Senator Mikulski. Thank you. This, too, will go to my last 
round of questions. I know we will have ongoing conversation.
    I would like to go to page 9 and 10 of your written 
testimony, in which you talk about the 2005 budget proposals. 
First of all, I am so pleased that you are going to allow $2 
million to upgrade some of the facilities at the NCCC Training 
programs. We did it a long time ago. And now they are worn.
    I would like to go to the discussion, though, that you had 
with both the Challenge Grants, as well as the Next Generation 
Grants. With Challenge Grants, you talk about the tremendous 
number that you have gotten for requests, but it is your intent 
to reduce them. The minimum Challenge Grant would be reduced 
from $500,000 to $100,000, and the maximum reduced from $1 
million to $500,000. Your rationale, as I understand it, is to 
serve more grantees.
    Here then is my question: In doing that, could we end up 
with more grantees, but giving them money that really did not 
do anything to help them out. Are we spreading the money so 
thin that it does not have the traction with the groups, where 
the Federal resources are also in the partnership for 
leveraging and getting greater productivity from them? Do you 
see where I am going?
    Mr. Eisner. I do see where you are going. And I understand 
the concern. I think that a greater challenge for us is--
particularly, as we are more focused on building 
sustainability--identifying the operational and business models 
that are capable of attracting the kind of 2 for 1 match that 
we are achieving in the Challenge Grant models.
    We would hope that the Challenge Grants spawn innovation. 
And we are concerned that if we simply are able to do eight 
grants, as we were able to do in the 2003 cycle, that we are 
not accelerating the innovation of those models sufficiently. 
And we think that we can achieve many--we can have many more 
grantees and explore more models with the lower minimum and 
maximum.
    Senator Mikulski. We understand, in the Challenge Grants--
then I want to get to the Next Generation Grants--that you 
received about $36 million worth of requests. From your initial 
purview or looking at them, if you had the money, would these 
be the people desperate for money at the local level. There has 
been a cutback because of the economy; this is why we are being 
deluged with earmarks. I mean, it is an unprecedented year of 
requests for money.
    My question to you is: Is the $36 million you have gotten 
in requests, are these real organizations that could use real 
help for which we have modest resources and we are going to try 
to do our best by them? Or do you think, ``Boy, if we could do 
this, this would really help these programs that do such 
phenomenal work across the Nation?''
    Mr. Eisner. Certainly, a lot more of them are real and 
powerful than we were able to fund in 2003. I would not want to 
say that the right number is $36 million. But in 2005, we are 
looking at going to $10 million and think that that would be a 
really strong and powerful number, especially as we look at 
that $10 million would generate $20 million in private 
investment.
    Senator Mikulski. Actually, $30 million, isn't it, 2 to 1?
    Mr. Eisner. Yes. It would be $10 million Federal, $20 
million private, for a total of $30 million.
    Senator Mikulski. Well, that would be pretty phenomenal. 
Well, we want to watch this and see how you go as you then deal 
with this, because this is only the second or third year of the 
Challenge Grant?
    Mr. Eisner. That is right.

                         NEXT GENERATION GRANTS

    Senator Mikulski. Well, let us go to Next Generation 
Grants. And I understand that you got over 1,000 requests. And 
it came to $280 million. Bingo. Or it is MegaBall. I mean, this 
is bigger than those West Virginia lottery winners there. Now 
if I were one, you could see where I would be spending my 
money.
    Are we on to something, or are these just desperate little 
organizations that have practically no viability, or are there 
all of these wonderful organizations out there just really out 
of oxygen--they have a lot of oxygen, but not a lot of 
resources?
    Mr. Eisner. I think it is a combination of all of the 
above. We have in this country more than 1.5 million 501(c)(3) 
organizations, and about 300,000 of them are fairly strong 
operationally. And we are in an economic environment where 
their foundation funding, their corporate support, and their 
community funding is in a low ebb.
    So clearly----
    Senator Mikulski. Because that is why we are worried about 
some of the matching funds.
    Mr. Eisner. I think that is right. At the same time, I am 
extremely heartened to see so many organizations coming up with 
new models that can drive our AmeriCorps----
    Senator Mikulski. Were you surprised by this number?
    Mr. Eisner. I was surprised.
    Senator Mikulski. Well, first of all, we know that you are 
only going to get down to about 23, because this was not meant 
to be a new pot of gold at the end of somebody's rainbow, as 
desirable as that is.
    We hope that as you distribute these first rounds that you 
are looking also on how to leverage the Challenge Grants, 
recognize what we will call the large caps. Really, the lessons 
that will be learned as you go through this to see how we can 
then do this in other budget cycles and whether we are really 
onto something to do that.
    In addition, and I will close by this: I was really pleased 
to see that you want to spend an additional $5 million on 
training and technical assistance to recruit the volunteers and 
money. In other words, capacity-building at the local level. 
This is something really to be encouraged, and I think will pay 
long-term dividends.
    In addition, your increase to help with personnel, 
particularly for the State Commissions. We have a former 
governor here. We believe in the State programs. We believe 
that ultimately while we look at these wonderful new programs, 
the large ones, that ultimately the heart and soul of 
AmeriCorps is what goes on at the local level and goes on 
through the State Commissions, where the Utah programs are 
different than the Maryland programs, but the habits of the 
heart are the same.
    So we look forward to making sure that our State 
Commissions and the resources to be able to do what we ask them 
to do are really out there, because we are very enthusiastic 
about the creativity and applicability at a more State or 
regional level.
    So thank you.

         TRAINING AND TECHNICAL ASSISTANCE TO STATE COMMISSIONS

    Mr. Eisner. I will quickly respond to that. I agree. And 
one of my biggest enjoyments over the past 3 months has been 
getting to know the State Commissions, which are the heart and 
soul and which are the brilliance of this system and how it 
devolves responsibility into the States to meet local and 
community needs, but underscores, for me, the absolutely 
imperative nature of our ability to train those State 
Commissions.
    I think 23 of those State Commissions are new. Because of 
the changes in the governor's office, those Commissions come in 
new. If we do not have the capacity to train them, we are 
missing--the whole program does not work right. And I would 
note also that our training needs for next year are going to be 
extremely urgent, because we are now putting out 75,000 
AmeriCorps members this year, which means that there are going 
to be a whole lot of new programs operating next year. If we 
are not able to train these new programs--we know that training 
is synonymous with their ability to succeed. If we cannot get 
the funding to train these new programs, then I am worried we 
will have a very high rate of failure among those programs.
    Senator Bond. Thank you very much, Mr. Eisner. I associate 
myself with the comments of Senator Mikulski. As one who has 
done a lot of work with volunteer organizations, I can tell you 
that volunteers are great, providing they have the right kind 
of direction, support, and coordination. Without very 
thoughtful leadership, volunteers can spend a lot of time and 
not accomplish much.
    I would just note for the record, when we are talking about 
the NCCC program, you have got regional campuses--three on the 
East Coast, one on the West Coast, and one in Denver--to serve 
what we in the heartland call the Fly-Over Country. People will 
go to California and come to the East Coast. We do do volunteer 
work and other good work in the heartland, as well. So we hope 
this does not reflect any bias towards the coasts.

                     ADDITIONAL COMMITTEE QUESTIONS

    I thank you very much, Mr. Eisner and Ms. Guillermin. We 
wish you the very best. To say that you have a challenging job 
is an understatement, but that is what makes it interesting. 
And we look forward to your leadership and working with you, 
and assure you that we will be available when you have 
comments. We will have questions for the record. And we have 
already made some requests and look forward to hearing your 
response.
    [The following questions were not asked at the hearing, but 
were submitted to the Corporation for response subsequent to 
the hearing:]

   Questions Submitted to the Corporation for National and Community 
                                Service

           Questions Submitted by Senator Christopher S. Bond

                           FUNDING PRIORITIES

    Question. Given the funding constraints and competing needs under 
the VA-HUD Subcommittee, what are your top three funding priorities for 
the Corporation?
    Answer. My first priority is to effectively manage the growth of 
the AmeriCorps program. AmeriCorps grants for 2004, which are under 
review in preparation for an early summer announcement, represent a 
major increase over 2003. In 2004, we project that we will award grants 
for 67,000 State and National members, compared to about 22,000 in the 
2003 grant cycle. The majority of 2004's grantees will be new or 
recompeting. When added to our VISTA and NCCC awards, we project that 
we will award grants for a total of 75,000 AmeriCorps members. With so 
many new grantees, oversight, training and technical assistance, and 
evaluation are critical.
    Our budget request includes a $7 million (18 percent) increase over 
fiscal year 2004 for Program Administration, including support for 
State Commissions. With 50 percent growth in the AmeriCorps program, we 
have increasing staffing needs in order to meet customer service 
standards and accountability requirements.
    Our budget also includes restoration of the training and technical 
assistance funds cut from the Subtitle H appropriation in fiscal year 
2004. Our experience tells us that without this assistance from the 
Corporation, new grantees, particularly small, community based 
organizations, are at risk of failing to meet program requirements and 
performance goals.
    One of the Corporation's strengths is its evaluation program, but 
the funding cuts of the past 2 years to this part of our program are 
beginning to take a toll. Our fiscal year 2005 request of $6 million 
for evaluations would allow us to support grantee performance 
measurement, collect national-level performance information, and 
rigorously study the impact of our programs on participants, 
communities, and beneficiaries.
    My second priority is to strengthen the national service pipeline 
by expanding Learn and Serve America. Despite a growing body of 
research showing the value of service-learning both to academic 
achievement and to strengthening America's culture of service and 
volunteering, LSA remains funded at $43 million, the same level since 
fiscal year 1996. We have proposed a $3 million initiative to teach 
educators how to incorporate service-learning in their classrooms. Each 
teacher could encourage hundreds of young people to participate in 
community service and contribute to renewing the service ethic in 
America.
    My third priority is to make badly needed repairs and upgrades to 
NCCC campuses. We have requested $27 million for NCCC, $2 million above 
fiscal year 2004, to fix roofs, enhance fire safety, improve 
accessibility for persons with disabilities, install more reliable 
computer networks, and perform other major maintenance (e.g., heating 
and air conditioning, repaving and plumbing). These projects have been 
deferred for too long.

                       MANAGEMENT--ACCOUNTABILITY

    Question. Mr. Eisner, I appreciate your attention to changing the 
culture at the Corporation so that management and accountability are 
taken more seriously. I am especially concerned about ``rewarding bad 
behavior'' as evidenced by the last year's cash bonuses and salary 
increases given to employees.
    How will you hold Corporation personnel accountable for their 
actions? For poor performers, are you willing to prohibit pay increases 
or cash awards or take serious administrative actions such as firing or 
suspending personnel? What specific performance measures will be used 
in determining cash awards, bonuses, and salary increases?
    Answer. We are committed to building a performance culture within 
the Corporation--a culture where managers and employees know what is 
expected and are evaluated on their accomplishments. In a performance 
culture, only employees who significantly contribute to organizational 
success will be rewarded. Employees who do not deliver would receive 
appropriate training, be moved to a more appropriate position, or 
separated.
    To build this performance culture, we must revamp the Corporation's 
current ``Pass/Fail'' performance appraisal system. Under new 
leadership, our Human Capital Office has already designed a new 
performance appraisal system for managers and supervisors. The proposed 
new policy strengthens the link between organizational results and 
individual employee performance, and reinforces our commitment to 
customer service and employee involvement.
    Our plan is to implement the new system by June 30 and use it to 
evaluate all managers and supervisors when the appraisal period ends at 
the end of September. We are also working with our Union to design a 
new appraisal system that will increase accountability among non-
managerial employees.
    Even as we work to improve our performance appraisal systems, we 
are working within our current system to make sure that exceptional 
employees (and only exceptional employees) receive cash awards and pay 
increases. We are also working hard to deal assertively with ``poor 
performers.''
    In accordance with guidance developed by our Compensation 
Committee, 2003 cash awards and pay increases will be reserved for 
employees whose performance had a significant impact on accomplishment 
of the organization's goals and objectives: These exceptional employees 
must demonstrate performance that regularly goes ``above and beyond'' 
expectations, and is recognized outside their operating sphere. Award 
winners must always be willing to take the initiative to seek ways to 
improve themselves and organizational operations.

                          COST PER FTE/MEMBER

    Question. I remain very concerned that the Corporation continues to 
pay too much for the volunteer members in the AmeriCorps programs. I 
know the average cost per FTE is $9,450 and does not include education 
award or the cost of child care. It may not include health care costs; 
I do not know. The payments seem to exceed minimum wage.
    I would like a breakdown of the maximum Federal benefits a typical 
member is eligible to receive. How much does a member receive on a per 
hour basis and what is the annual payment to a member who is in the 
program full-time? In addition, how is healthcare provided--what is the 
cost to the government and what is the cost to the person? What does 
the government pay for childcare and is this cost shared? How are these 
costs determined since costs differ from community to community? What 
other expenses are covered by the Federal Government?
    Answer. Here is a breakdown of the maximum member benefits funded 
by the Corporation:
    Living Allowance.--$8,415 (85 percent of the minimum living 
allowance of $9,900 for 2003 grants). The grantee must provide at least 
15 percent ($1,485) with non-Federal cash match. The grantee may pay a 
higher living allowance than $9,900, but the Corporation will not pay 
any more than $8,415 of the cost.
    The AmeriCorps minimum living allowance is tied to the 
AmeriCorps*VISTA stipend, which is defined by statute as 95 percent of 
the poverty line for an individual (as determined by the Census 
Bureau). The allowance is not paid on a per hour basis; it is paid in 
equal increments over the course of the term of service, a minimum of 
1,700 hours for full-time members (some programs require more). If the 
living allowance were paid on an hourly basis, the minimum would be 
$5.82 per hour (Federal share $4.95 per hour). The Federal minimum wage 
is currently $5.15 per hour.
    The living allowance is treated as income to the member and is 
therefore taxable (both Federal and State). The member is responsible 
for reporting the amount received on his or her taxes for the year in 
which it is received. Grantees are also required to deduct appropriate 
Social Security contributions from a member's living allowance.
    Health Care Coverage.--Grantees secure health insurance locally and 
are only required to provide it for members who serve full-time. The 
maximum Federal share is 85 percent of the cost of a policy if the 
policy provides minimum benefits as stated in guidelines. The maximum 
cost per member per month is $150 per month unless there are unusual 
circumstances. The average cost is $95 per month. The Corporation 
requires justification for any amount over the maximum.
    Grantees are required to provide health insurance only if the 
member is not already covered by a policy that provides the minimum 
benefits. The Corporation does not pay any of the cost of a policy that 
does not include these minimum benefits. Federal payments cover only 
the member, no other person. Minimum benefits are:
  --Covered Services.--Physician services for illness or injury, 
        hospital room and board, emergency room, x-ray and laboratory, 
        prescription drugs.
  --Limited Coverage.--Mental/nervous disorders and substance abuse.
  --Annual Limits.--Deductible: not more than $250 per individual; Out-
        of-pocket: not more than $1,000 per individual; Maximum 
        Benefit: At least $50,000.
  --Coinsurance.--May require a co-pay from member, not to exceed 20 
        percent or alternatively, a comparable fixed fee. An exception: 
        mental illness and substance abuse coverage may require a 50 
        percent co-payment.
    Health care costs are included in the Corporation's cost per FTE 
projection.
    FICA and Worker's Comp, or other State requirements, may be matched 
by the Corporation if requested in the grant, and are included in the 
cost per FTE calculation.
    Child Care (2002 figures).--The typical AmeriCorps member does not 
use the childcare benefit. Childcare is only provided to members who 
meet specific income limits and serve full-time. In 2002, 1,834 members 
(3 percent of the total) qualified for the childcare benefit. If 
qualified, the Corporation pays 100 percent of the authorized cost. The 
Corporation manages the childcare benefit through a contractor, who 
pays the childcare provider directly.
    In 2002, the average annual child care payment per qualifying 
member was $3,420 ($2,047 per child). The payments are determined using 
the Child Care and Development Block Grant (CCDBG) authorized rates, 
which vary by State. Where the actual cost exceeds the authorized 
amount, the member pays the difference.
    Education Award.--Full time members, upon completion of 1,700 
hours, become eligible to receive a $4,725 award; part time members are 
eligible to receive a prorated award. The award is payable only to 
qualified educational institutions or lenders and is taxable to the 
member upon redemption.

    BENEFITS FOR FULL-TIME AMERICORPS*STATE AND NATIONAL MEMBER WITH
                                CHILDCARE
------------------------------------------------------------------------
                                             Federal
            Benefit                Total      Share          Notes
------------------------------------------------------------------------
Living Allowance...............     $9,900     $8,415  Fed. share
                                                        limited to 85
                                                        percent of
                                                        minimum
                                                        allowance
FICA, Workers Comp., Other.....        757        644  FICA employer
                                                        share @ 7.65
                                                        percent
Health Care....................        830        706  Based on 2002
                                                        State
                                                        Competitive
                                                        grants
Child Care.....................      3,420      3,420  Authorized costs
                                                        vary by State
Education Award................      4,725      4,725  Full value of
                                                        full-time award
                                ----------------------
      TOTAL....................     19,632     17,909
------------------------------------------------------------------------

                                  APS

    Question. Mr. Eisner, you recently made some major changes to the 
Corporation's Alternative Personnel System by converting most term-
appointed employees to a General or permanent appointment system.
    Will employees under the new General appointment system be treated 
the same as employees under the GS system or will you still have the 
same ability as you did under the term appointment system to hold 
employees accountable?
    Answer. We strongly believe in maintaining and strengthening the 
APS system, which gives us more flexibility than the GS system to 
promote accountability and deal with poor performers. Whether term or 
general appointments, the APS system gives the Corporation the same 
increased flexibility and streamlined procedures for separating poor 
performers. Under our new system, managers will have a revamped 
performance appraisal system and will be expected to deal with problem 
employees as soon as performance problems are identified.
    The revision of our appraisal systems and our appointment policies 
are both part of a strategic reassessment of our human capital 
policies. These policy changes are designed to promote employee 
accountability. In addition, we have observed or anticipate that the 
change in our appointment policies will produce several other important 
benefits:
  --We have already noted an increase in the caliber of applicants for 
        several key vacancies.
  --We will be able to invest in long-term employee development--an 
        impracticality when employees were hired for 2-, 3-, or 5-year 
        terms.
  --Employee productivity and morale has already improved, and we 
        expect this to have a positive impact on our ability to keep 
        our best employees.
  --We expect the change in the appointments policies to result in a 
        greater percentage of the workforce participating in the APS 
        system.
    As you requested in the hearing, I am submitting for the record the 
discussion document on Options in the use of APS term appointments, 
dated January 17, 2004, that was widely shared in the Corporation. On 
page 2 of the document are the five options I referenced during the 
hearing in response to your questions.
    I want to take this opportunity to thank the architect of our new 
human capital strategy, Joyce Edwards, whose detail to the Corporation 
from OPM ends in August. Joyce is truly one of the best human capital 
professionals I have ever worked with, and clearly deserves her stellar 
reputation at OPM and in the field more broadly.
    Question. Your new policy maintains term appointments for senior-
level managers to provide a ``periodic infusion of fresh leadership.'' 
Why aren't mid-level positions subject to term appointments?
    Answer. We will continue to use term appointments in a smart, 
strategic way at every level. Our goal is to have a workforce that 
combines fresh, energetic leadership with strong institutional 
knowledge and continuity.
    Question. The Peace Corps also utilizes a term appointment system 
for its employees. Did you look at the Peace Corps system prior to your 
decision in changing the Corporation's personnel system? What did you 
learn from the Peace Corps? Did you talk with former Corporation 
personnel that currently work at the Peace Corps to obtain information 
on the differences between the two agencies? Do they have the same or 
similar morale problems as the Corporation?
    Answer. We did look at the Peace Corps system prior to changing 
Corporation policy on the use of term appointments. We discussed the 
change with the Peace Corps' Human Resources Director and many 
Corporation employees who were formerly at the Peace Corps.
    Term appointments are valuable if their use can be aligned with an 
agency's strategic management priorities. What we learned from the 
Peace Corps reinforced our own experience that while term appointments 
are a valuable management tool, their mandatory or indiscriminate use 
limits management's ability to align its workforce with its strategic 
objectives as well as creating structural barriers to effective 
workforce training, succession strategies, quality improvement and 
performance management.

                             PUBLIC AFFAIRS

    Question. The Corporation's budget includes $3.4 million for public 
affairs--a $2.25 million or 197 percent increase over the fiscal year 
2004 enacted level. The Corporation justifies this increase to help 
grantees achieve rising recruitment goals and to support them in their 
efforts to attract more private support. The Corporation plans to use 
these funds to produce and distribute bilingual public service messages 
for television, radio, newspapers, magazines, and the web to more than 
40,000 media outlets. The Corporation also plans to spend these funds 
to build up the inventory of service gear and identity items used by 
members and volunteers.
    First, I did not think attracting members was a problem given the 
over-enrollment of AmeriCorps volunteers during the past 2 years. What 
am I missing?
    Answer. The 2004 appropriation supports 75,000 AmeriCorps 
positions, a 50 percent increase over last year. Achieving this target 
will require a significantly higher number of qualified applicants. 
Challenges include overcoming lingering hesitation among potential 
applicants resulting from the events of the 2003 program year and 
assisting the many new organizations--especially small, faith-based and 
community groups--that will need additional recruitment help because of 
their inexperience with the program. The volume of online applications 
for the first two quarters of fiscal year 2004 was 23 percent lower 
than the same time period in fiscal year 2003. While online 
applications represent a small part of overall applications, and many 
positions are not yet advertised online, we are closely monitoring this 
indicator. In addition to increasing volume, we are at the same time 
always seeking high-quality applicants. Increasing awareness of 
available opportunities drives competition which leads to better 
matching between applicants and programs. Finally, we want AmeriCorps 
to reflect the vast diversity of America's population, and this 
requires targeted outreach to under-represented populations, including 
producing bilingual materials.
    Attracting a large, diverse, and high-quality applicant pool 
requires investing in promotional materials to assist our programs and 
grantees in their recruitment efforts, including public service 
advertising that can be adapted with local taglines. State service 
commissions and small community and faith-based programs cannot afford 
broadcast-quality campaigns and rely on the Corporation for these 
products. The last AmeriCorps PSA campaign, which leveraged more than 
$35 million in donated media support, expired more than 2 years ago, 
and funds are needed for a new effort. In years past, the costs have 
often been spread over 2 fiscal years, but given recent operational 
budget cuts, the 2005 budget seeks funds for both creative development 
and distribution. This investment will leverage many times its cost in 
donated airtime and will assist local programs in reaching their 
recruitment goals. Such materials have an added benefit of helping 
grantees build partnerships, raise private sector support, and become 
more sustainable in their operations.
    Question. In terms of funding level, how does the fiscal year 2005 
request level for public affairs compare to the last 5 year's funding 
levels?
    Answer. Following is the budget history including payroll and 
operations for the past 5 fiscal years. Note that the Office of Public 
Affairs and the Office of Public Liaison, which had independent 
directors, staffs and budget were merged in fiscal year 2004 (that 
process began in fiscal year 2002). More importantly, the Office of 
Public Affairs has taken on significant new responsibilities in light 
of the many levels of program and management reform the Corporation is 
undertaking. If we are to succeed in driving greater accountability for 
performance measurement and management through our personnel 
management, grantmaking procedures, grantee oversight, member 
recruitment and development, training activities and overall 
operations, we must build a far greater alignment in communications on 
priorities and expectations to all of our employees, partners, 
grantees, vendors and program participants. This responsibility for 
communications agenda-setting and consistency falls to the Office of 
Public Affairs, which will manage the communications priority-setting 
and consistency for all of our program divisions and manage the 
production of materials and online information for all of our 
constituencies so that they are aligned with Corporation priorities and 
consistent with each other. These functions are particularly important 
in light of programmatic reforms that are being implemented. These 
functions underlie the increase in budget for the Office of Public 
Affairs in 2005.

                       FIVE YEAR BUDGET (INCLUDES SALARY, OPERATIONS, AND PROGRAM SUPPORT)
----------------------------------------------------------------------------------------------------------------
                                                                  Public Liaison  Public Affairs       Total
----------------------------------------------------------------------------------------------------------------
2000............................................................        $866,800        $628,000      $1,494,800
2001............................................................         720,500         395,100       1,115,600
2002............................................................         667,522         407,000       1,074,522
2003............................................................         678,500         127,400         805,900
2004............................................................  ..............       1,090,600       1,090,600
2005............................................................  ..............       3,400,000       3,400,000
----------------------------------------------------------------------------------------------------------------

    Question. Second, while the main catalyst for last year's media 
attention was the over-enrollment fiasco, it also provided a major 
outlet for publicizing the benefits of the AmeriCorps program. Further, 
the AmeriCorps community facilitated a lot of the PR by mobilizing 
letters to the media and through an active outreach effort through the 
web and other means. I also understand that some of these organizations 
continue to advertise such as television ads by City Year. Given those 
facts, why does the Corporation feel the need to fund such a massive 
public relations effort? Who is paying for City Year's advertisements? 
Can grantees use Corporation funds for advertisements?
    Answer. Please see the prior two responses as to the need for this 
increase in funding. It should be noted, however, that the vast bulk of 
the Corporation's Public Affairs funding does not go to public 
relations, but to production of documents and publications, to 
recruitment, training, grantee materials, and to managing multiple 
online and offline information streams.
    No Corporation funds are being used to pay for placement of City 
Year's public service advertisements as they are being donated by a 
cable television station. Likewise, the 2005 Public Affairs budget, 
like previous budgets, does not contemplate nor request funds for paid 
placement of recruitment ads. Unlike some Federal agencies, the 
Corporation only places its television and radio ads through donated 
airtime, and we have had considerable success in doing so.
    With regards to grantees, development of brochures and other 
materials to support recruitment is an allowable grant cost. Very few 
local programs, however, have the capacity to produce a television or 
radio campaign, which is why the Corporation produces spots that can be 
adapted for local programs.
    Question. Third, since grant applicants are required by program 
rules to bring private matching funds to the table in order to compete 
for Corporation funds, why should the Corporation assist organizations 
in meeting the program requirements?
    Answer. The Corporation has a long history of providing training 
and technical assistance to support grantees in their efforts to be 
compliant with Corporation rules. The reason for matching requirements 
is to ensure that programs maximize their leverage of Federal dollars 
and to help achieve and maintain grantee independence and 
sustainability in spite of receiving Federal funds. These objectives 
are well worth the relatively small investment we must make to help 
programs succeed at achieving the match.
    Helping local programs increase their match furthers several 
Corporation goals--improving quality, reducing reliance on Federal 
funding, and allowing more organizations to have access to Corporation 
funds. The match requirements are minimums. Most grantees provide 
higher levels that what is required because they find it beneficial and 
often necessary to raise more than the minimum match to support 
training, insurance, transportation, and other costs related to 
operating a high-quality program. As the Corporation moves to reduce 
the Federal cost per member, programs will have to raise an increasing 
share of costs if they are to maintain the characteristics of their 
programs. By helping grantees not only meet and exceed their minimum 
requirements but also raise as much as possible from private sources, 
we are helping them to create effective programs that satisfy the many 
and varied purposes of national and community service programs.
    Question. Lastly, can you explain the need for the Corporation to 
expand service gear and identity items? What are these items--hats, t-
shirts, uniforms? Do AmeriCorps volunteers pay to acquire these items?
    Answer. In October 2002, the Corporation revised its logos to 
highlight the agency's mission of service to community and Nation, show 
the connections between its three programs, demonstrate that service is 
a patriotic duty and an obligation of citizenship, and allow States and 
programs to localize the national logo. Since this change, the 
Corporation has not had dollars sufficient to update items that carry 
the logo.
    The Corporation purchases an initial quantity of items and makes 
them available for purchase by programs and members through the 
Mississippi Industries for the Blind and Disabled. After initial 
inventory purchases, dollars from sales of these items are utilized to 
replenish the stock of available items. Expected increases in 
AmeriCorps enrollment point to the need for a larger investment in 
initial stocks, particularly of service gear.
    AmeriCorps members are encouraged but not required to wear official 
AmeriCorps service gear. AmeriCorps members can purchase these service 
gear items, or programs are allowed to allocate from $35 to $70 per 
member for official gear. A standard gear package would include a $7 t-
shirt, a $7 baseball cap and a $20 sweatshirt.

                       LEARN AND SERVE ACTIVITIES

    Question. I am a big supporter of child literacy mentoring and 
tutoring programs and appreciate the Corporation's efforts in these 
areas. I noticed in your budget justifications that two of the primary 
service activities for the Learn and Serve program are mentoring and 
literacy.
    Given that AmeriCorps members also participate in mentoring and 
tutoring activities, how are you coordinating those activities with the 
Learn and Serve mentoring and tutoring activities? How do you know if 
these two programs are overlapping or duplicating each other's efforts? 
What steps do you take to verify independently whether duplication is 
occurring?
    Answer. Most Learn and Serve America (LSA) mentoring and tutoring 
activities engage older students in service to younger ones. In these 
programs, high school students, for example, after receiving training, 
read with elementary school students on a regular basis. The older 
students may provide support in phonics, letter or word recognition, 
and provide encouragement for reading through their own example. These 
mentoring and tutoring programs, therefore, are supplementary to 
services offered by AmeriCorps or other adult tutoring programs if such 
programs operate at the same sites.
    LSA Higher Education programs provide college-age tutors, who 
provide primary tutoring support. During the application process, 
programs are asked about their organizational capacity to leverage 
resources. In this section they note any efforts to work with other 
CNCS programs. All LSA programs are asked to inform State Service 
Commissions about their programs in order to avoid duplication of 
effort. In addition, both AmeriCorps and LSA programs are coordinated 
with the schools and afterschool programs they serve. The service-
learning or volunteer coordinators at the sites served by both programs 
work to ensure that the greatest number of children in need is reached. 
The need for literacy and mentoring services is widespread; the demand 
for these services is far greater than AmeriCorps and LSA programs can 
meet; few local sites are served by both programs.
    The Corporation is currently developing web-based local performance 
measurement systems that will give us the ability at the national level 
to determine local sites where both AmeriCorps and LSA programs are 
serving.

                           PROFESSIONAL CORPS

    Question. Both this Committee and the President in his Executive 
Order directed the Corporation to develop separate guidelines that 
recognize the importance of professional corps under the AmeriCorps 
program.
    How much money have professional corps organizations received from 
the Corporation's programs (AmeriCorps, challenge grants, etc.)?
    Answer. I have provided lists of the fiscal year 2003 and fiscal 
year 2004 grants for Professional Corps programs, including 
announcements from October 1, 2002 through May 7, 2004.
    Professional Corps models are eligible to apply in all of our 
competitions. Therefore, there may be additional Professional Corps 
programs announced as we announce the results of competitions 
throughout the spring and summer. We will soon issue a Notice of Funds 
Availability (NOFA) for a 2004 Professional Corps competition, with the 
goal of awarding grants for at nearly 3,000 members.

------------------------------------------------------------------------
  Professional Corps Fiscal Year   Funds Awarded/      FTE     Positions
        2003 Competitions             Approved       Awarded    Awarded
------------------------------------------------------------------------
Teach for America--National            $2,000,000     ( \1\ )    ( \1\ )
 Challenge Grant.................
Teach for America Maryland--             $311,383         175        175
 AmeriCorps State................
Teach for America North Carolina--        $40,000         100        100
 AmeriCorps State/EAP............
Teach for America Rio Grande             $155,901          71         71
 Valley TX--AmeriCorps State.....
Teach for America New York--             $120,000         300        300
 AmeriCorps State/EAP............
Teach for America Atlanta--               $92,000         230        230
 AmeriCorps State/EAP............
Milwaukee Teacher Education               $50,000         125        125
 Center--AmeriCorps State/EAP....
Marquette University Compton              $16,000          40         40
 Fellows Program Wisconsin--
 AmeriCorps Direct EAP...........
Mount Mary College Urban                  $16,000          40         40
 Education Fellows Program
 Milwaukee--AmeriCorps Direct EAP
University of San Francisco TEAMS        $210,000         525        525
 Program--AmeriCorps Direct EAP..
University of Notre Dame--ACE             $61,600         154        154
 AmeriCorps Direct EAP...........
                                  --------------------------------------
      TOTAL......................      $3,072,844       1,760     1,760
------------------------------------------------------------------------
\1\ Not applicable.


------------------------------------------------------------------------
  Professional Corps Fiscal Year   Funds Awarded/      FTE     Positions
        2004 Competitions             Approved       Awarded    Awarded
------------------------------------------------------------------------
Teach For America--AmeriCorps            $264,300      660.75      2,060
 Direct EAP......................
City University of New York NYC          $703,000     1757.5       3,215
 Teaching Fellows (balance of
 2003-2004 school year)--
 AmeriCorps Direct EAP...........
City University of New York NYC          $500,000    2,000         2,000
 Teaching Fellows (for 2004-2005
 school year)--AmeriCorps Direct
 EAP.............................
Mount Mary College Urban                  $16,000       40            40
 Education Fellows Program
 Milwaukee--AmeriCorps Direct EAP
Teacher's College Columbia                $37,200       93            93
 University, NY--AmeriCorps
 Direct EAP......................
Milwaukee Teacher Education               $70,000      175           175
 Center (MTEC)--AmeriCorps State
 EAP.............................
Teach For America Atlanta--               $78,000      195           195
 AmeriCorps State EAP............
Teach for America North Carolina--        $40,000      100           100
 AmeriCorps State EAP............
University of Notre Dame ACE--            $65,600      164           164
 AmeriCorps Direct EAP...........
University of San Francisco              $250,000      625           625
 School TEAMS Program--AmeriCorps
 Direct EAP......................
                                  --------------------------------------
      TOTAL......................      $2,024,100    5,810.25      8,667
------------------------------------------------------------------------

                       RULEMAKING--SUSTAINABILITY

    Question. I commend the Corporation for its rulemaking efforts and 
especially appreciate its efforts to define sustainability as 
instructed by the Congress. My overriding concern about sustainability 
is that we need to ensure that the playing field for AmeriCorps funding 
is level and fair. It appears that year after year, the same 
organizations receive the lion's share of AmeriCorps funding, leaving 
few opportunities for new organizations. This problem is exacerbated by 
the Corporation's mixed record on reducing the Federal share of the 
costs of the program.
    On average, how many new organizations receive AmeriCorps funding 
every year? In terms of percentage and dollars of AmeriCorps funding, 
how much money does this represent?
    Answer. Within the AmeriCorps*National Direct Program, about 40 
grants are awarded every year, and a little over 10 percent of these 
grants are awarded to organizations that have never served as a 
National Direct grantee. Within the Education Award Program, about 22 
grants are directly awarded to organizations through AmeriCorps each 
year; about 31 percent of these grants go to new organizations.
    Among organizations that receive subgrants indirectly from the 
Corporation through grantees, the percentage of new organizations is 
higher. Here are the average percentages of new subgrantee 
organizations by program:
  --AmeriCorps*State (1995-2003): 24 percent.
  --AmeriCorps*National (1995-2003): 38 percent.
  --Education Award Program (1998-2003): 44 percent.
    The attached tables give year-by-year breakdowns for all AmeriCorps 
grantees (except for State Commissions) and subgrantees. Table 6 gives 
averages for the major years in the Corporation's recent grantmaking 
cycles. Every third year after 1994-1997, 2000, and 2003--marks the 
beginning of a new grant period for many grantees. In the off-years, 
much of the awarded money goes to existing grantees who apply for 
continuations, which reduces the number of new organizations that 
receive money. (The first year of each program's existence--1994 for 
State and National, 1997 for EAP--is left out of all calculated 
averages, since virtually every grantee was ``new.'')
    The Corporation is currently engaged in the process of validating 
the organizational records in its historical grantmaking database. 
Until then, aggregate data on awarded dollars to ``new'' organizations 
will not be available for all grantees and subgrantees over the period 
1994-2004.

                                     TABLE 1.--AMERICORPS*STATE SUBGRANTEES
----------------------------------------------------------------------------------------------------------------
                                                                Total Number of   Number of New
                             Year                                 Subgrantees      Subgrantees      Percent New
----------------------------------------------------------------------------------------------------------------
1994..........................................................            378              378            100.00
1995..........................................................            392              163             41.58
1996..........................................................            431               86             19.95
1997..........................................................            518              185             35.71
1998..........................................................            530               65             12.26
1999..........................................................            501               63             12.57
2000..........................................................            588              211             35.88
2001..........................................................            625               96             15.36
2002..........................................................            612               59              9.64
2003..........................................................            442              163             36.88
2004..........................................................  ...............  ...............  ..............
Average, 1995-2003............................................            515.4            121.2           23.52
----------------------------------------------------------------------------------------------------------------


                                    TABLE 2.--AMERICORPS*NATIONAL SUBGRANTEES
----------------------------------------------------------------------------------------------------------------
                                                                Total Number of   Number of New
                             Year                                 Subgrantees      Subgrantees      Percent New
----------------------------------------------------------------------------------------------------------------
1994..........................................................            717              716             99.86
1995..........................................................            754              492             65.25
1996..........................................................            308               65             21.10
1997..........................................................            234               51             21.79
1998..........................................................            246               31             12.60
1999..........................................................            251               51             20.32
2000..........................................................            279              132             47.31
2001..........................................................            296               74             25.00
2002..........................................................            298               61             20.47
2003..........................................................            211              125             59.24
2004..........................................................  ...............  ...............  ..............
Average, 1995-2003............................................            319.7            120.2           37.61
----------------------------------------------------------------------------------------------------------------


                               TABLE 3.--EDUCATION AWARD PROGRAM: DIRECT GRANTEES
----------------------------------------------------------------------------------------------------------------
                                                                Total Number of   Number of New
                             Year                                 Subgrantees      Subgrantees      Percent New
----------------------------------------------------------------------------------------------------------------
1994..........................................................  ...............  ...............  ..............
1995..........................................................  ...............  ...............  ..............
1996..........................................................  ...............  ...............  ..............
1997..........................................................             22               22            100.00
1998..........................................................             22               16             72.73
1999..........................................................             23                5             21.74
2000..........................................................             24               10             41.67
2001..........................................................             25                5             20.00
2002..........................................................             38                7             18.42
2003..........................................................             19                3             15.79
2004..........................................................  ...............  ...............  ..............
Average, 1998-2003............................................             25.2              7.7           30.46
----------------------------------------------------------------------------------------------------------------


                            TABLE 4.--EDUCATION AWARD PROGRAM: COMMISSION SUBGRANTEES
----------------------------------------------------------------------------------------------------------------
                                                                Total Number of   Number of New
                             Year                                 Subgrantees      Subgrantees      Percent New
----------------------------------------------------------------------------------------------------------------
1994..........................................................  ...............  ...............  ..............
1995..........................................................  ...............  ...............  ..............
1996..........................................................              1                1            100.00
1997..........................................................             54               54            100.00
1998..........................................................             55               35             63.64
1999..........................................................             56               22             39.29
2000..........................................................             55               33             60.00
2001..........................................................             44               15             34.09
2002..........................................................             36                5             13.89
2003..........................................................             10                3             30.00
2004..........................................................  ...............  ...............  ..............
Average, 1998-2003............................................             42.7             18.8           44.14
----------------------------------------------------------------------------------------------------------------


                                     TABLE 5.--AMERICORPS*NATIONAL GRANTEES
----------------------------------------------------------------------------------------------------------------
                                                                Total Number of   Number of New
                             Year                                 Subgrantees      Subgrantees      Percent New
----------------------------------------------------------------------------------------------------------------
1994..........................................................             42               42            100.00
1995..........................................................             44                7             15.91
1996..........................................................             45                7             15.56
1997..........................................................             42                4              9.52
1998..........................................................             39                1              2.56
1999..........................................................             37    ...............  ..............
2000..........................................................             40                8             20.00
2001..........................................................             41                4              9.76
2002..........................................................             41                4              9.76
2003..........................................................             27                2              7.41
2004..........................................................  ...............  ...............  ..............
Average, 1995-2003............................................             39.6              4.1           10.39
----------------------------------------------------------------------------------------------------------------


   TABLE 6.--AVERAGES BY PROGRAM, MAJOR GRANT AWARD YEARS (1997, 2000,
                          2003, EXCEPT FOR EAP)
------------------------------------------------------------------------
                                                            Percent New
                         Program                             Grantees
------------------------------------------------------------------------
AC*State................................................           36.11
AC*National: Grantees...................................           12.84
AC*National: Subgrantees................................           42.54
EAP--Direct (2000 and 2003).............................           30.23
EAP--Commission (2000 and 2003).........................           55.38
------------------------------------------------------------------------

Notes
    (1) Some organizations receive more than one grant or subgrant per 
year within an AmeriCorps funding source. These organizations are 
listed once for each year within each table, regardless of how many 
programs they are operating.
    (2) Organizations can be new in more than 1 year, if they receive 
grants or subgrants from more than one AmeriCorps funding source. For 
instance, an organization got a subgrant to operate a National Direct 
site in 1996, and got a State formula subgrant in 1997. The 
organization will be listed as a ``new'' subgrantee for AC*National in 
1996, and a ``new'' State subgrantee in 1997.
    (3) Organizations that changed their names may have multiple 
entries in the Corporation database.

    Question. I am also concerned about future AmeriCorps applicants 
such as those supported under Senator Mikulski's Next Generation 
program. This program has obviously been a huge success in terms of the 
number of applications applying for funding under the program.
    At some point in the future, do you expect these organizations to 
compete for AmeriCorps funding?
    Answer. We certainly hope so.
    As you know, the Next Generation Grants competition is geared 
toward providing seed money for a small number of organizations that 
propose innovative service programs and have the potential to become 
part of one of the Corporation's regular grant programs (i.e. 
AmeriCorps*National and Learn and Serve Community-Based). Since Next 
Generation organizations are new to the Corporation (many have not 
managed a Federal grant before) and they are generally proposing start-
up activities, they represent high-risk grantees. We are working to 
provide them with technical assistance that should help them be more 
competitive in the future.
    Question. Assuming relative flat-funding for the AmeriCorps program 
into the future and the continued practice of funding most of the same 
organizations year after year, are new organizations going to have 
difficulty competing for funds? If you do not ensure opportunities for 
these new organizations to compete for AmeriCorps funding, then will 
you be setting them up for disappointment?
    Answer. We are contemplating several options to address the issue 
you highlight. One option is a portfolio approach where certain grant 
money would be set aside for new programs.
    With our current funds for the Next Generation competition, we will 
likely award a small number of grants (approximately 10-20 grants). We 
feel confident that our current program budgets would allow all 
grantees to be absorbed into one of our regular grant programs if each 
demonstrated a great degree of success operating their proposed 
program. Moreover, we are careful about the types of expectations we 
convey to Next Generation grantees by noting that it is likely that 
some grantees will gradually join our regular portfolio and others may 
not.

                          PERFORMANCE MEASURES

    Question. One of my long-standing concerns with the Corporation is 
its inability to measure the performance of its programs--primarily the 
AmeriCorps program. I appreciate the Corporation's recent efforts to 
address this matter but I would like the Corporation to respond to 
three questions.
    One, when will the Corporation be able to provide us with 
performance measure data on the AmeriCorps program?
    Answer. Data for our new, outcome-oriented performance measures 
will be collected this summer, depending upon the timing of OMB 
approval. We are hopeful that we will then be able to report results in 
the fiscal year 2004 performance report to Congress, and include them 
in the fiscal year 2006 budget submission. We also plan to conduct 
these performance surveys every year, which will provide year to year 
comparison.
    In 2002, the Urban Institute conducted a review of our existing 
performance measurement systems and made recommendations to correct 
performance measurement systems weaknesses, including a recommendation 
to modify indicators to measure more intermediate and end outcomes, 
rather than outputs. As part of a multi-year intensive effort to 
measure the impact of its community service programs upon the 
individuals and communities they serve, in fiscal year 2003 the 
Corporation awarded three performance measurement contracts, which will 
strengthen outcome reporting for AmeriCorps, Senior Corps, and Learn 
and Serve America. This action marks the second phase of the 
Corporation's performance measurement initiative and will allow the 
Corporation to shift its annual performance reporting from process-
oriented accomplishments to results-oriented outcome reporting.
    A key component of this performance measurement initiative is 
surveys of members, organizations and institutions receiving 
Corporation funding, and individuals who receive services from national 
and community service programs. This initiative will: (1) provide an 
ongoing assessment of the short- and long-term effects of community 
service on volunteers, host organizations, individual beneficiaries and 
communities; and (2) use data on program performance and results to 
inform the Corporation's budgeting process. More specifically, the 
surveys will help measure the following (Note: specific indicators will 
be in the next draft):
Members
  --The change in members' level of volunteer service and community 
        involvement during and following their service experience; and
  --The change in members' life skills--such as leadership, teamwork, 
        communications, time management, and decision-making, and thus 
        their ability to achieve their personal goals.
Organizations
  --Organizations' contribution to helping improve individuals, 
        communities, and organizations;
  --Organizations' ability to achieve their goals; and
  --The change in organizations' ability to provide and sustain needed 
        services to communities.
End Beneficiaries
  --AmeriCorps' impact on improving communities' ability to respond to 
        disaster;
  --Volunteers' perception that their personal and the programs' 
        efforts contributed to helping individuals, communities, and 
        organizations;
  --AmeriCorps' impact on improving the life of youth; and
  --AmeriCorps' impact on improving students' academic performance.
    The performance measurement survey initiative is complemented by a 
cross-program requirement that applicants for Corporation funding 
nominate at least three performance measures for their program. As part 
of its continuous improvement, the Corporation will continue to assist 
programs in adopting performance measures that help ensure 
accountability for performance and results while helping to effectively 
address community needs.
    Presently, applicants seeking competitive funds must negotiate 
their final measures with Corporation staff who then monitor grantees' 
progress toward achieving those proposed results. Program 
accomplishments and proposed measures are both taken into consideration 
when making funding decisions. In addition, the Corporation requires 
grantees to submit in their funding proposal at least one performance 
measure on volunteer leveraging and to track their progress toward 
meeting their targets. (Grantees must provide an explanation if they 
are unable to incorporate volunteer leveraging activities into their 
program).
    Question. Two, how will the Corporation verify the accuracy and 
reliability of the performance data it collects?
    Answer. For the AmeriCorps performance measurement surveys, the 
Corporation and the Urban Institute have taken various measures to 
ensure we receive reliable and accurate data. Surveys of members and 
organizations will involve random samples and will be appropriately 
weighted. The Urban Institute will directly collect data from 
respondents about their experiences with AmeriCorps and ensure 
respondents that their responses to a survey will be kept confidential. 
To ensure candor and protect privacy, Urban Institute will not provide 
to the Corporation the name of respondents, nor the organization they 
serve with, received services from or represent. Urban Institute's 
subcontractor, Princeton Survey Research Associates, utilizes the 
latest methodological and technical developments for conducting 
surveys. Princeton's Computer Assisted Telephone Interviewing (CATI) 
system is designed to ensure total flexibility in questionnaire 
administration as well as to provide data quality and accuracy checks. 
By collecting performance data through telephone, we will ensure a high 
response rate and a low likelihood of data fraud.
    For the Learn and Serve performance surveys, the Corporation and 
Abt Associates expect to receive reliable and accurate data because it 
will be a census: all institutions receiving LSA funds, including 
grantees, subgrantees, and sub-subgrantees, will complete a survey of 
their activities, experiences, and outcomes. In accordance with the 
Learn and Serve program reporting requirements, these surveys are now 
required to be submitted at the end of each program year. Data 
collection will take place through an on-line, web-based system that 
will include a data entry interface, reporting management tools for use 
by the Corporation and grantees in tracking data collection, and the 
capacity to generate on-line reports that provide aggregated results to 
all users of the system.
    The Corporation also receives self-reported data and reports from 
grantees and programs about their performance and volunteer leveraging 
accomplishments. The data reported by the Corporation is compiled from 
data and reports submitted by non-Corporation entities (grantees, 
sponsoring organizations, and service sites) in response to the 
Corporation's reporting requirements. The focus of the Corporation's 
data quality efforts has been on assessing the internal data system 
controls and their effect on the accuracy of the performance 
information. The Corporation's programs do not independently verify or 
validate data they receive from outside sources. As a result, the 
Corporation may have reservations about the accuracy of some data that 
are self-reported.
    For each accomplishment (or code), there is considerable variation 
in the units that subgrantees use to report their outcomes. For 
example, for any given activity, some programs count volunteer hours, 
some count items produced, some count people involved, and some do not 
indicate what units their numerical reports reflect. Additionally, 
several programs used ``miles'' as their way of measuring river 
cleanup, but many others may have used other measurement units such as 
hours of cleanup, acres of cleanup, or number of people involved in the 
cleanup, etc. Since only similar measurement units can be aggregated, 
the results of an analysis would likely represent just a fraction of 
all programs actually reporting outputs in that accomplishment field 
and would understate the true output and accomplishments of AmeriCorps 
programs.
    To address future data accuracy concerns, the Corporation, with the 
input of its grantees and other stakeholders, is renewing its attempt 
to develop uniform volunteer leveraging measures and develop stronger 
and more consistent performance measurement criteria. The Corporation, 
at a minimum, would like to provide advisory standards for calculating 
volunteers and their impact.
    To assist grantees in fulfilling requirements for performance 
measurement, the Corporation, through the Office of Leadership 
Development and Training, has also shifted the focus of its training 
and technical assistance from the identification of objectives to 
identifying and measuring program outputs and outcomes. Written 
materials, such as performance measurement tool kits, have been 
developed and made available to programs to assist them in this 
transition. Technical assistance is provided through one-on-one or 
small group consultations.
    Each of the steps will lead to an outcome-based performance 
measurement system, allow the Corporation to report on and aggregate 
verifiable program outcomes and outputs, and will provide information 
to foster a culture of continuous program improvement.
    Question. Three, will performance-based budgeting be used in future 
budget submissions? Does this mean that if the AmeriCorps program is 
not performing adequately, we can expect to see budget decreases in 
future requests?
    Answer. For the fiscal year 2006 budget submission, the Corporation 
plans to use logic models as a planning tool. Logic models show how 
resource requests support Corporation outcome goals through program 
activities, outputs, and intermediate outcomes. We will continue to 
organize our budget presentation around the existing account structure, 
but we will be able to demonstrate more clearly than before how 
resources (or inputs) are turned into measurable results.
    If any program consistently fails to achieve its performance 
targets, our logic models should help us to determine if the failure is 
related to management, program design, resources, or some other cause. 
Once we understand the causes of the problem, we can take appropriate 
action, which could include budget reductions.

                         NATIONAL SERVICE TRUST

    Question. It appears that the Corporation has made some significant 
strides in addressing the problems associated with the National Service 
Trust so that we do not repeat last year's fiasco with the over-
enrollment of AmeriCorps members. Nevertheless, I remain troubled 
because of the GAO's recent findings in its January 2004 report--
especially GAO's finding on the 170 AmeriCorps participants who were 
listed as deceased in the Social Security death master file. GAO also 
found that 4,400 data entries had discrepancies that could affect 
estimates of future expenditures of the Trust.
    What steps has the Corporation taken in response to GAO's findings? 
For example, have you developed a plan that would perform data 
verification? When will you conduct the next data verification process? 
Will these steps prevent the types of discrepancies found by the GAO?
    Answer. The Corporation is taking action to address each of the 
recommendations made by GAO. As noted in its report, the majority of 
the discrepancies found by GAO involved members who had exited a 
program without an award (and thus have no impact on trust balances) 
but their status had not been updated in electronic System for 
Programs, Agreements, and National Service Participants (eSPAN), the 
Corporation's database and system of record for all national Service 
Participants. In the short term, the Corporation is reviewing these 
records and will update eSPAN to reflect the proper status. In the 
longer term, the Corporation plans to integrate the functionality of 
its Web Based Reporting System (WBRS) into eSPAN, eliminating the need 
to reconcile between the two systems and enable the Corporation to 
produce more timely information.
    The Corporation is also revising the compliance testing 
requirements for the AmeriCorps programs contained in OMB Circular A-
133 to include testing of data submitted by grantees to the National 
Service Trust database and will submit the changes for inclusion in the 
next update to the Circular later this year.
    The Corporation transmitted all member enrollment records covering 
fiscal years 2001, 2002, and 2003 to the Social Security Administration 
(SSA) for comparison and certification. SSA completed its review and 
provided the results to the Corporation on April 26, 2004. The 
Corporation has begun its analysis and research of the discrepancies to 
determine the required corrections to eSPAN data. The Corporation has 
also incorporated the SSA verification into its Quality Assurance 
Review process, which will be conducted annually and cover all new 
enrollees. In addition, the Corporation is building an automated edit 
check into eSPAN system to compare Trust data to the SSA's valid number 
list at the time data is input into the system by grantees and State 
offices. This process is being performed on an ad hoc basis until the 
automated check can be placed into service. While it is not possible to 
eliminate all errors, these controls should significantly reduce the 
number of data entry errors being made.
    Out of approximately 158,000 member records reviewed, GAO 
identified 169 member records (147 AmeriCorps*State and National and 22 
AmeriCorps*VISTA), or .11 percent, as having Social Security Numbers 
(SSNs) for persons listed in SSA's death master file, the Corporation's 
research shows that for the 147 exceptions related to AmeriCorps*State 
and National records:
  --21 were a sample error, that is, the record had been counted twice 
        in the sample, the SSN was not in the eSPAN database, or the 
        death date used by GAO was not valid (00010000). No follow up 
        action is needed for these records.
  --11 related to members whose name and SSN in SPAN matched the GAO 
        sample but the member had exited the program prior to the date 
        of death in SSA's records (no follow up action needed; database 
        record to be flagged noting status);
  --7 related to members whose name and SSN in eSPAN matched the GAO 
        sample and who are in a still serving/not exited status (the 
        Corporation is following up with program on status; database 
        record to be flagged noting discrepancy);
  --4 related to members whose name and SSN in eSPAN matched the GAO 
        sample and the date of death listed in the SSA death master 
        file was prior to the exit date recorded in SPAN (3 earned an 
        award and 1 did not, the Corporation froze the Trust accounts 
        for the members earning an award and forwarded the 
        discrepancies to OIG for review);
  --104 related to members whose name and SSN do not match the GAO 
        sample indicating that there was an input error. Thirteen of 
        these members are in a still serving/not exited status, 43 have 
        earned an award, and 48 exited without earning an award (the 
        Corporation is following up to verify SSN, database record to 
        be flagged with status).
    For the 22 VISTA exceptions:
  --16 were related to members who had left the program prior to the 
        date of death indicated in SSA's records (no follow up action 
        needed; database record to be flagged noting status).
  --3 were input errors which have been corrected.
  --2 related to members whose name and SSN do not match the GAO sample 
        indicating that there was a input error (the Corporation is 
        following up to verify SSN, database record to be flagged with 
        status).
  --1 related to a member whose name and SSN match the GAO sample and 
        the date of death was prior to the exit date recorded in eSPAN 
        (the member did not earn an award, the Corporation has flagged 
        the file and forwarded this discrepancy to OIG for review).
  --The Corporation has uncovered no instances where either the member 
        or the grantee organization substituted other SSN's to generate 
        inappropriate revenues.

                            REAUTHORIZATION

    Question. Does the Corporation support reauthorization of its 
programs? If so, will the administration submit a reauthorization bill 
to the Congress this year?
    Answer. The President continues to support reauthorization of the 
Corporation and has mentioned it publicly several times. The document 
entitled Principles and Reforms for a Citizen Service Act, introduced 
by the President on April 9, 2002, continues to serve as a guide for 
reauthorization. Additionally, on February 27, 2004, the President 
signed an Executive Order implementing many of the key reforms proposed 
in the Citizen Service Act through administrative action.

                           GRANTEE OVERSIGHT

    Question. To the Corporation's credit, it has done a better job of 
reducing its backlog of overdue grantee audit resolutions. 
Nevertheless, the independent auditors continue to cite the 
Corporation's monitoring of grantee activities as a reportable 
condition. As recommended in previous years, the auditors recommended 
the creation of a risk-based monitoring system to address its grantee 
monitoring problems.
    What is the status of developing a risk-based monitoring system? 
Have you identified any grantees that were in noncompliance with 
Corporation rules? What kind of actions have you taken to discipline 
grantees that were noncompliant? For example, have you ever suspended, 
debarred, or recovered funds?
    Answer. The Corporation is implementing risk-based systems for all 
three of its program streams: AmeriCorps, Learn and Serve America, and 
Senior Corps. The new policies will be reflected in the Corporation's 
Grants Management Handbook, which is currently under revision.
    We identify grantees that are not in compliance with Corporation 
rules both through audits and monitoring activities. In program year 
2003, we disallowed a total of $508,951 through the audit resolution 
process.
    When we find grantees are not in compliance, we either suspend 
their access to grant funds or withhold issuing new funds until we 
receive the delinquent reports. In 2003, we suspended two accounts 
until we received overdue financial reports. Currently, one grantee's 
account is suspended. No grantee has had to be debarred. We have 
terminated three grants for failure to comply with grant requirements 
or for poor performance.

                          PEER REVIEW PROCESS

    Question. Last year, many applicants to AmeriCorps complained about 
the arbitrariness of the peer review process. It appears that the 
process may need to be fixed.
    Do you agree with the complaints that the peer review process is 
not working properly? If so, can you tell us what you are doing to 
repair the process and whether you see fixing peer review as a part of 
rulemaking?
    Answer. The peer review process needed major changes. Specifics on 
the needed improvements were gathered from public complaints, findings 
of the Inspector General Audit of June 28, 2001, the board of 
directors'grants management task force report issued May 12, 2003, and 
the Management Improvement Team (MIT).
    The recommendations of the MIT resulted in the development of the 
new Office of Grants Policy and Operations (March 2004) and the 
elevation of this office to a senior management status. This signaled 
to the Corporation staff, as well as the service community, the 
importance of the work of grantmaking and the need to invest resources 
in the operations that manage up to 20 grant review processes annually.
    Specific changes I have approved in the process include: securing a 
more selective and higher quality group of reviewers; instituting 
quality controls in the peer review process; greater emphasis on peer 
review scores; enhanced training of peer review and staff in 
preparation for the grant reviews; and streamlined internal processes 
that enabled us to meet tighter deadlines this year (earlier 
notification of grantees and shorter time between announcements and 
funds distribution). Last month we provided your staff with an 
approximate timetable for all of our 2004 grants. I am pleased to 
report that these changes have already been effectively implemented in 
the 2004 peer reviews that took place last month, and that the results 
exceeded expectations. I remain committed to further improving our 
customer service as well as the transparency of this process.

                          SILVER SCHOLARSHIPS

    Question. The administration is proposing again the Silver 
Scholarships program. This program was originally proposed in the 
fiscal year 2002 budget but rejected by the Congress.
    I have no objections to assisting senior volunteers but this 
program seems duplicative of the Senior Corps program funded out of the 
Labor-HHS Subcommittee. Can you explain the differences?
    Answer. The service requirements for the Silver Scholarship Program 
are more rigorous than RSVP. The minimum 500 annual hours to be served 
will require volunteers to serve an average of 10 hours a week. While 
many RSVP volunteer serve this intensively, the current average is 4 
hours per week.
    Foster Grandparents also tutor and mentor children and serve 15-20 
hours per week. However, the FGP is a means tested program with an 
average Federal cost per volunteer service year of $4,500.
    The President is very committed to both expanding service 
opportunities and to providing caring mentors and tutors for children 
and youth. He has stated ``Today's elderly are the healthiest, most 
energetic, best-educated generation . . . They have more free time and 
want to use it. They have the wisdom of years, and they want to share 
it.''
    Well run tutoring and mentoring programs have proven to be very 
effective in changing youth's life trajectories, reducing drug and 
alcohol use, and improving academic behaviors. Estimates of the current 
number of mentors in the country are less than 500,000. There are 
several million youth who would accept and benefit from adult 
mentoring.
    Findings and results of a number of senior service demonstrations 
over the past several years provide strong evidence that seniors in 
retirement will commit to serving 10 hours per week if:
  --There is a structure through which individuals can participate;
  --Projects are well run and are providing many services in 
        communities;
  --There is some modest incentive to recognize that the activity has 
        value and to cover out-of-pocket costs; and
  --There is flexibility so that seniors can participate in a variety 
        of activities and in different amounts and blocks of time.
    We believe that the structure and focus of the Silver Scholarship 
Program will be appealing to Baby Boomers and is an important part of 
our strategy to involve large numbers of this group in service during 
the third stage of life.
    Question. Under what existing legal authority does the Corporation 
have in implementing this program? Is this program authorized or 
permissible under the existing authorizing statute?
    Answer. This program, as proposed, is not authorized in the current 
statute; however, we have proposed appropriations language in the 
budget justification that would provide the authority necessary to fund 
the program grants under Subtitle C and pay the scholarships from the 
National Service Trust.
    Silver Scholarships will work just like the AmeriCorps education 
awards. Upon completion of the required 500 hours, the Silver 
Scholarship grantee will submit a Silver Scholarship Beneficiary 
Designation Form to the Corporation on behalf of the volunteer. The 
beneficiary will then be entitled to $1,000 to be paid from the 
National Service Trust directly to a lender or an education institution 
for eligible higher education expenses, including loan repayment. There 
will be no direct payment from the trust to an individual.
    Question. In its original proposal in fiscal year 2002, the 
administration proposed splitting the funding for the Silver 
Scholarships program between the VA-HUD and Labor-HHS Subcommittees. 
However, for fiscal year 2005, the budget request only includes funding 
out of VA-HUD. Please explain.
    Answer. We proposed the grant and Trust funding to one 
appropriations subcommittee because both are necessary for the program 
to work; we were concerned that working through two subcommittees 
created the possibility of only one piece being funded. We chose the 
VA-HUD subcommittee because it oversees the National Service Trust.
    Question. Given the Corporation's ongoing management challenges 
with its current program responsibilities, does the Corporation have 
the resources to administer a new program?
    Answer. Existing staff in Senior Corps will administer the program. 
We are confident that they are up to the challenge. Enrollment in the 
National Service Trust will follow the strict guidelines and procedures 
for the Trust that are overseen by our Chief Financial Officer.

                            COST ACCOUNTING

    Question. Past GAO reports have indicated that the Corporation 
lacks reliable cost information for some of its programs, which hampers 
analysis of the true cost of its programs. Further, a 
PriceWaterhouseCoopers (PWC) assessment of the Corporation's 
implementation of a cost accounting system indicated that the 
Corporation's cost accounting model should be able to calculate actual 
costs per program, but that the model needs to be refined to calculate 
cost per grant or cost per grant dollar.
    Can the Corporation now provide information on a cost per grant or 
cost per grant dollar basis as recommended by PWC? What steps is the 
Corporation taking to ensure that the cost data is reliable?
    Answer. During fiscal 2001 the Corporation contracted with 
PriceWaterhouseCoopers to assess its cost model. PriceWaterhouseCoopers 
concluded that the methodology was in conformance with the applicable 
Federal accounting standards and provided several recommendations to 
enhance the methodology. Specifically, PriceWaterhouseCoopers 
recommended that we add functionality to calculate ``administrative 
cost per grant'' or ``administrative cost per grant dollar'' that can 
be monitored over time to measure improvements in administrative cost 
management. To implement this recommendation the Corporation added a 
performance measure reporting the administrative cost per grant dollar 
awarded to its fiscal 2003 Performance and Accountability Report to 
Congress as follows:
  --AmeriCorps--15.5 cents and 15.9 cents per dollar, for fiscal 2002 
        and 2003, respectively.
  --National Senior Service Corps--5.5 cents and 6.6 cents per dollar, 
        for fiscal 2002 and 2003, respectively.
  --Learn and Serve America--9.0 cents and 8.1 cents per dollar, for 
        fiscal 2002 and 2003, respectively.
    We are currently developing an administrative cost per grant 
measure that will give a more meaningful indication of our efficiency.
    Beginning with the fiscal 2004 Performance and Accountability 
Report to Congress, the Corporation will break down costs at the 
subprogram level. For example, rather than reporting costs associated 
with the AmeriCorps responsibility segment, the schedule will have 
individual amounts for the National Direct, State, VISTA, and NCCC 
programs. The Corporation also reviews the cost accounting methodology 
and makes adjustments (such as further isolating costs by program) when 
necessary to ensure that the information is reliable and reflects the 
results of its operations. The cost accounting information used in 
developing the performance metric is derived from footnote 12 in the 
Corporation financial statements. The Office of Inspector General 
audits this information as part of annual financial statement audit 
which provides additional assurance to the Corporation and Congress on 
its reliability.

                                 ______
                                 
 Questions Submitted to the Board of the Corporation for National and 
                           Community Service

           Questions Submitted by Senator Christopher S. Bond

                         ED AWARD ONLY PROGRAM

    Question. The ``education award only'' program has many advantages 
over the regular AmeriCorps program because of its lower costs, its 
broad reach to more communities, its broad network of program sponsors 
and strategies, its simplified application process, and its greater 
program flexibility. Based on your most recent data, there is obviously 
a huge demand for the program.
    What is your opinion about this program? Do you believe this 
program should be expanded?
    Answer. The Education Award Program (EAP) has an enormous number of 
strengths and offers several flexibilities over the AmeriCorps State 
and National program. Clearly the program is highly cost effective, 
limited to $400 in administrative dollars and the cost of the education 
award. The simplified application process offers successful programs 
greater flexibility and makes these funds available to a broader pool 
of program sponsors. It is overall a more flexible program for the 
Corporation. EAP has expanded dramatically over a short period of time 
and I am excited about the opportunities it offers for the State 
commissions and for the National Direct grantees. It is one of many 
innovative, low-cost models that may make it possible to expand 
national service without a large increase in Federal spending. We need 
to continue to explore this option. However, we also must ensure the 
proper mix of low cost and traditional awards, to strengthen national 
service programs and maximize participation and results. There may be 
differing views on the optimum mix of traditional and lower cost 
program options, but we are striving to develop a broader continuum of 
options that includes EAP and low cost stipends for a better blend that 
produces more volunteers per Federal dollar spent.

                                  APS

    Question. The Corporation recently made some major changes to the 
Corporation's Alternative Personnel System by converting most term-
appointed employees to a General or permanent appointment system.
    In my opinion, this decision came out of left field. Prior to the 
announcement of the decision, we had only received a draft document on 
March 12 titled the ``Preliminary Strategic Human Capital Plan'' that 
laid out some general goals but not much analysis or discussion on term 
appointments.
    Did the Board review and formally approve this decision? What was 
the vote? What kind of analysis was provided to the Board? Did the 
Corporation provide options for the Board's review? What was the 
Board's opinion(s) of this decision?
    Answer. The Alternative Personnel System (APS) authority provides a 
well-managed organization with the ability to perform at exceptionally 
high levels on behalf of the public and to the advantage of its 
employees. APS allows good managers to do better. Unfortunately, in my 
short tenure it seemed to me generally that APS was used badly; it 
neither rewarded the right conduct nor properly reassured employees. I 
was sufficiently concerned that I requested a study of the APS by the 
Corporation's Inspector General in 2003. The results of the IG study 
and a report prepared by OPM specifically identified many shortcomings 
with the then-current APS appointment system. And both OPM and the IG 
recommended that the Corporation reevaluate APS and ensure its 
alignment with the Corporation's strategic objectives. The statute 
governing the Corporation clearly authorizes the CEO to:
  --establish an APS;
  --appoint and determine compensation in the APS; and
  --determine whether to utilize term appointments in the APS.
    The identified problems needed to be corrected by executive 
management promptly. The Board of Directors encouraged the Corporation 
to select a Chief Human Capital Officer (CHCO), a position which the 
Corporation filled with an individual who is highly regarded by OPM. 
The CHCO was tasked with, among other things, going about the detailed 
business of making the enterprise work better. The Board was generally 
informed that changes were occurring, though it took no vote since the 
issues fell under the statutory authority of the CEO. I believe that 
the CEO and his executive team are well on the way to building an 
effective, performance management culture at the Corporation and that 
their change to the term appointments policy is consistent with that 
progress.
    The board is pleased that the CEO is taking action so quickly to 
address these urgent and widely-discussed issues.

                                 ______
                                 
         Question Submitted to the Office of Inspector General
           Question Submitted by Senator Christopher S. Bond

                            ILLEGAL LOBBYING

    Question. The enacted fiscal year 2004 appropriations bill 
contained a provision that required the IG to conduct random audits of 
AmeriCorps grantees to determine if there have been any substantial 
violations of the program rules, including any illegal lobbying 
efforts.
    Mr. George, what is the status of your review and when do you 
expect to complete it? Have you found any improprieties thus far?
    Answer. In response to the Consolidated Appropriations Act of 2004, 
we expanded our audit plan for fiscal year 2004. The fiscal year 2004 
audit plan includes audits of nine State commissions and audits of 10-
15 AmeriCorps National Direct grantees. We are also auditing a 
cooperative agreement awarded under Subtitle H of the National and 
Community Service Trust Act of 1993, an area of prior Congressional 
interest, with regard to program advocacy.
    Each of these audits focuses on examining whether AmeriCorps 
grantees are complying with applicable laws, program rules, and grant 
provisions, including whether grantees have engaged in prohibited 
political advocacy or lobbying efforts. Each audit also focuses on 
whether costs charged to the Corporation's grant are allowable. If an 
audit identifies prohibited lobbying costs charged to a grant, these 
costs are referred for investigation to determine whether a violation 
of law has occurred. In addition, the OIG continues to analyze the 
results of all of our audits to identify systemic or programmatic 
issues regarding grantee compliance.
    Our work in this area is ongoing. We continually update our audit 
plan, replacing examinations of recently audited grantees with audits 
of other grantees.
    As for improprieties found thus far, an ongoing review of a 
cooperative agreement awarded under Subtitle H has raised concerns 
about the use of Corporation funding for the organization's advocacy 
initiatives. This review is currently underway and involves both audit 
and investigative staff. We will keep you apprised of this review as 
the facts warrant.

                         CONCLUSION OF HEARINGS

    Mr. Eisner. Thank you very much, Mr. Chairman.
    Senator Bond. No further business to come before the 
subcommittee today. The subcommittee is recessed.
    [Whereupon, at 11:28 a.m., Thursday, April 8, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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